AUR#904 Sep 7 Economics, EU, Moscow, Crisis in Kyiv; VP Cheney; Holodomor

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

Ukrainian History, Culture, Arts, Business, Religion, Sports,
Government, and Politics, in Ukraine and Around the World       
Mr. Morgan Williams, Publisher and Editor, SigmaBleyzer
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
UkrInform – Ukraine News, Kyiv, Ukraine, Friday, September 5, 2008 
Reuters, Cairo, Egypt, Friday September 5 2008
The former bread basket of the Soviet Union, Ukraine, saw a CAGR of 16.3%
EIU Business Newsletters Eastern Europe, Economist Intelligence Unit Limited
New York, New York, Monday, August 25, 2008

By Polya Lesova, MarketWatch, New York, NY, Friday, Sep 5, 2008
Unique pharmaceutical firm combines Ukrainian and American practices
By Jim Davis, BusinessUkraine weekly magazine, Kyiv, Ukraine, Monday, July 28, 2008
KPMG-Ukraine Opens New Office in Donetsk
U.S.-Ukraine Business Council (USUBC), Washington, D.C., June, 2008
Analysis & Commentary: By Anders Aslund, Senior Fellow
Peterson Institute for International Economics, Washington, D.C.
Financial Times, London, United Kingdom, September 4 2008
Global Market Brief: Stratfor Today, Austin, TX, Thursday, September 4, 2008 
Window on Eurasia: by Paul Goble, Vienna, Austria, Sep 5, 2008


A soft-spoken academic is described by many as the second-most powerful person in Ukraine’s government
By Toby Vogel, European Voice, Brussels, Belgium, Thursday, August 28, 2008 
By Stephen Castle, International Herald Tribune (IHT), Paris, France, Fri, Sep 5, 2008


Jamie Smyth in Avignon, Irish Times, Dublin, Ireland, Saturday, September 6, 2008
OP-ED: By Richard Holbrooke, U.S. Ambassador to the United Nations
during the administration of U.S. President Bill Clinton
The Moscow Times, Moscow, Russia, Thu, Sep 04, 2008
John Marone, Columnist, Eurasian Home website, Kyiv, Ukraine
Eurasian Home, Moscow, Russia, Monday, September 1, 2008
The EU should be thinking about how it can extend a commitment to security, democracy and prosperity to neighbours
Analysis & Commentary: Andrew Wilson, Senior Policy Fellow European Council on Foreign Relations.
Guardian newspaper, London, United Kingdom, Friday September 05 2008
The outlook for Ukraine is stormy, but the country’s not about to split apart. Instead, a complex political dance is unfolding
Analysis & Commentary: Yurii Ruban, Guardian, London, UK, Friday September 05 2008


By Mykola Siruk, The Day Weekly Digest (25), Kyiv, Ukraine, Tuesday, September 2, 2008
Noting its “intimidation” of Ukraine and the Baltic states, and a threat of attack on Poland 
Says demise of the Soviet Union was the greatest step for liberty in the last 60 years
By Guy Dinmore and John Thornhill in Cernobbio, Italy, Financial Times, London, UK, Sep 6 2008
By Tabassum Zakaria, Reuters, Kiev, Ukraine, Friday, Sep 5, 2008
By Steven Lee Myers, The New York Times, New York, NY, Fri, Sep 5, 2008
By Roman Olearchyk in Kiev, Financial Times, London, UK, Friday, September 5 2008
Press office of President Victor Yushchenko, Kyiv, Ukraine, Fri, Sep 5, 2008 (with photographs)
A Glenside resident is hoping a 9-foot-tall flower brings more than an appreciation of flowers to those who see it.
By Mischa Aaron Arnosky, Times Chronicle, Glenside News, Fort Washington, PA, Wednesday, August 13, 2008
Ukrinform, Kyiv, Ukraine, Saturday, September 6, 2008 

By Stanislav Kulchytsky, Professor, Scholar, Researcher, Historian
The Day Weekly Digest (25), Kyiv, Ukraine, Tuesday, 2 September 2008 

UkrInform – Ukraine News, Kyiv, Ukraine, Friday, September 5, 2008 

KYIV – GDP growth in July reached the highest mark and totaled 7.3% against July 2007 due to increase of the production of agrarian products, the analytical report of the Concorde Capital investment company reads with taking into account results of development of Ukrainian economics in July-August 2008.

GDP growth speeded up mostly owing to increase of production of agrarian products: volumes of agrarian production went up by 10.6% over seven months 2008 against the relevant period last year when reduction of 0.3% was registered in H1 2008.
Thus, rich yield in 2008 allowed the agricultural sector to compensate slowing down of industrial production which totaled 7.3% over seven months 2008.
According to the statement of the Concorde Capital, the agricultural investments went up by 45.3% in H1 2008. At the same time, the total investment growth reduced to 8.2% versus the relevant period last year because of high inflation level and toughened crediting terms.
For the first time over two years Ukraine registered deflation in July 2008. The prices went down by 0.5% against June. It was also caused by seasonal reduction of prices for food products by 1.3%. According to the forecast, by late 2008, inflation will total 21%, the statement of the Concorde Capital says.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Reuters, Cairo, Egypt, Friday September 5 2008

CAIRO – Egypt and Ukraine are negotiating a gas-for-wheat trade deal, Egypt’s state news agency said on Friday, quoting a Ukrainian diplomat.

“The governments of the two countries are negotiating now to reach a deal to exchange Ukrainian wheat for Egyptian natural gas which will be exported
through a pipeline which passes through Syria and Turkey to the Balkans,” MENA quoted Valerie Grygorash, head of Ukraine’s trade delegation in Egypt,
as saying.

An official at the Ukrainian embassy could not immediately comment on the report. MENA did not give further details.

High wheat prices have strained Egypt’s bread subsidy system, and riots have erupted this year over bread shortages. Egypt, one of the world’s largest
wheat importers, often buys wheat from Ukraine. It purchased 52,500 tonnes of Ukrainian wheat in a tender this week.

Ukraine faces rising prices for gas from Russia, through which half of its gas is imported. Russia halted gas flows to Ukraine for several days in a pricing dispute in early 2006 which had a knock-on effect for gas passing through Ukraine and on to European customers.

Egypt had proposed in April to grow wheat in Sudan to meet the needs of Egyptian consumers, and then in May identified an area of about 2 million acres on the Sudan border where the two countries could grow wheat in a joint project. (Writing by Will Rasmussen)

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

The former bread basket of the Soviet Union, Ukraine, saw a CAGR of 16.3%
EIU Business Newsletters Eastern Europe, Economist Intelligence Unit Limited
New York, New York, Monday, August 25, 2008
The bakery sector in Eastern Europe and Russia is in a state of flux. But compared with Western Europe, the Eastern European bakery sector is still small and fairly undeveloped.
While Europe overall dominates the global bakery products market, with an estimated share of 43.85% in 2007 according to US-based Global Industry Analysts (GIA), Eastern Europe’s contribution to the continent’s total bakery sales is barely in the double figures.
Of course, the huge discrepancy in retail prices is largely responsible, and in fact per capita consumption in terms of consumption is of a comparable level, despite increased awareness of health issues and concerns about obesity.
As the economies and currencies of Eastern Europe strengthen, the numbers are starting to catch up, however. Market watcher Euromonitor projects that the region’s bakery sector will rise in value from euro22.7bn in 2008 to euro26.6bn by 2013- a 17% increase over five years. Already, the gains this decade have been great, albeit from a low base. In 2000-06 the retail value of bakery sales in Belarus leapt 263% to euro292.9m.
The former bread basket of the Soviet Union, Ukraine, saw a CAGR of 16.3% to euro647.8m while the Hungarian market grew at a CAGR of 13.8% to be worth euro461m.
Although major corporations such as Barilla of Italy, Danone of France, US-based Kellogg, UK-based United Biscuits and Switzerland-based Cereal Partners Worldwide (a joint venture of Nestle and General Mills) head the list of Europe’s top industrial bakers, their combined sales amount to less than 10% of the market.
Indeed, Euromonitor reckons that artisan bakeries—which by definition tend to sell unpackaged products—still account for 55% of sales in Western Europe and 45% in Eastern Europe.
But the rising cost of raw materials is putting pressure on local and regional producers who struggle to compete with the manufacturing and distribution networks of bigger outfits. Exacerbating the trend, supermarket chains such as Austria’s Billa, itself part of German retail giant Rewe, have expanded their in-store bakeries in supermarkets in countries like Slovakia and Poland.
Indeed, liberalisation has opened the way for larger companies with better economies of scale to make a play for market consolidation. In August, for instance, Austrian private equity firm Capexit acquired 100% ownership of Serbian bakery Bread & Co from a domestic agricultural company, Fidelinka.
As well as opening 20 new locations in Serbia by the end of the year, Capexit plans to export the brand to Croatia, Bulgaria and Romania so that the regional network boasts more than 200 stores over the next five years.
Meantime, Czech bakery company Penam, which is part of the Prague-based Agrofert group, recently acquired local baker Pekast and flour mill Nobrs for an undisclosed sum, simultaneously offloading its pasta unit as part of its strategy to focus on the baking game.
Employing some 2,500 people, Penam owns 13 production facilities and four mills, and as well as running about 40 shops supplies most retail chains in the Czech Republic. The acquisition of Pekast extends its market share from 12% to 15%.
On another scale altogether is the strategy of Finland’s Fazer Group, currently the only significant foreign player in Russia. In March the Helsinki-based company announced plans to build a euro100m factory on a 20-ha greenfield plot on the edge of St Petersburg, where fresh and frozen bread and coffee bread is to be baked. Century-old Fazer has invested euro130m in Russia over the past decade, to acquire a string of baking facilities.
Last year, for example, Fazer acquired a majority stake in Russian bakery company OAO Volzhky Pekar, the market leader for fresh and coffee bread in the Tver region. Volzhky Pekar’s turnover is currently about euro2m, a figure Fazer reckons it can double by 2012. The company seems to have the wherewithal to achieve that goal.
Over the past three years Fazer, which operates in nine countries and earned revenues of more than euro1bn in 2007, has enjoyed an average annual rate of about 40% in Russia. Turnover there last year was euro170m, representing about 18% of group revenue.
But if bread remains the dominant product on the global bakery scene, the category is in a state of flux. In Russia, the sector continues to be affected by state control of bread prices, which has probably deterred other foreign investors from following Fazer into the market. This, coupled with the rising cost of ingredients, means the profitability of bread production is low. Not surprisingly, bakeries and bread making plants are closing all across Russia.
Despite the strength of the big players, the news for smaller bakers is not all bad. In its report, which profiled some 934 companies including Danone and German biscuit maker Bahlsen, GIA notes that while large bakeries have acquired many unproductive bakeries and invested heavily in automation, cost control and branding, small, productive bakeries are finding ways to exploit consolidation by developing niches.
Even so, it seems inevitable that local bakers will merge their businesses to strengthen their position against incomers.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
By Polya Lesova, MarketWatch, New York, NY, Friday, Sep 5, 2008
NEW YORK – Ukraine’s PFTS Stock Exchange suspended trading Friday from 12:45 p.m. local time until 3 p.m. after the benchmark PFTS index tumbled 7%, according to a statement from the exchange.
“There is somewhat of a meltdown in the Ukrainian financial markets,” said Lars Christensen, chief analyst at Danske Bank. “Politically, the situation is very, very bad in Ukraine. We have now been in a state of permanent political crisis for almost two years.”
Earlier this week, Ukraine was plunged into political turmoil after the coalition government broke up amid disagreement between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko. Yushchenko has warned he might call early general elections.
Ukraine’s latest political crisis is escalating at a time when investors are already nervous about geopolitical risk in Eastern Europe following last month’s military conflict between Russia and Georgia. Russia’s RTS stock index fell 3.7% and finished the week with a loss of nearly 11%. 
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
U.S.-Ukraine Business Council (USUBC):
Promoting U.S.-Ukraine business relations & investment since 1995.
Unique pharmaceutical firm combines Ukrainian and American practices

By Jim Davis, BusinessUkraine weekly magazine, Kyiv, Ukraine, Monday, July 28, 2008

The only US-owned pharmaceutical production facility in Ukraine is also is the largest single high-technology American investment in Ukraine to date.

The Max-Well Scientific Oncological and Cardiological Production Centre, a unique manufacturing complex producing immunobiological and
chemico-pharmaceutical products, opened on March 26 in the Kyiv Oblast town of Boryspil.

Max-Well is the largest such specialised complex project in the former Soviet Union, with production workshops for manufacturing drug products and a scientific research centre.
This innovative Kyiv Oblast venture is a subsidiary company of MaxWell Biocorporation LLC (USA), where the substances for biopharmaceuticals are
developed and produced and substance quality is controlled.

Max-Well’s primary mission lies in increasing the lifespan and improving the quality of life for Ukrainians by development and introduction into medical
practice of top quality drug products and advanced effective methods for treatment of oncological, cardio-vascular and other life-threatening diseases.

From Soviet Kazakhstan to America
Dr. Kenneth Alibek, president of Max-Well company, is an internationally known scientist and professor of biological sciences and the author of
numerous scientific papers and 10 books. Dr. Alibek, a native of Kazakhstan, was educated in the United States and became a U.S. citizen. “With my
cultural and linguistic background, I could have chosen to develop this business in any of the former Soviet states.

However, I chose Ukraine because I felt comfortable here and I saw an opportunity to have a profitable business while at the same time making a positive impact on the health and quality of life of people throughout all of the former Soviet Union,” Dr. Alibek commented of his decision to make Ukraine the centre of his operations.

Impacting on shocking health stats
As evidence of the health issues his company hopes to impact upon, Dr. Alibek pointed to statistics that show Ukrainian men with a life expectancy of 62.24 years and Ukrainian women with a much longer life expectancy of 74.24 years.

“We believe that by making top quality medications available at more affordable prices, we will be able to make a very great impact on bringing greater wellness and longer and more enjoyable lives to both men and women,” Dr. Alibek says.

National wealth is not necessarily the best indicator of national health. Russia, now the recipient of huge inflows of capital thanks to its exploitation of its natural resource wealth, still has lower life expectancies than Ukraine. In Russia, the life expectancy for men is 59.19 years and for women the number is 73.1 years.

Interestingly enough, Moldova, considered the poorest of the former Soviet states, has a life expectancy superior to both Ukraine and Russia. Moldovan
men may expect to live for 66.81 years while Moldovan women may expect to live 74.41 years.

“Our plans call for us to develop the markets for our pharmaceuticals throughout the entire former Soviet Union with the idea that this will not only make a considerable health impact, but also at a level of profitability that allows a reasonable return to our investors while at the same time pouring more money into expanding our range of drugs for our focus area of cardiovascular and cancer treatments,” Dr. Alibek says.

“The fact that 64% of our people die of cardiovascular disease at a relatively young age is a situation that we are in a position to improve today and keep making greater improvements in the future. We are here for the long haul and dedicated to making a real impact on the former Soviet health and wellness picture,” he adds.

Pumping money into an convalescent economy
According to Dr. Alibek, Max-Well is actually the most intensive international investor into integral methods of control of oncological, cardiological and critical infectious diseases. The company’s total investment in this project already exceeds USD 90 million. Company plans call for increasing the investment over time to USD 130 million and even more over the years.

Of the company’s USD 30 million investment in equipment, USD 9 million went to equipment from Ukrainian manufacturers. Construction costs of USD 39
million made an even greater impact in Ukraine with USD 32 million going to Ukrainian construction firms.

The development of funding for the pharmaceutical enterprise construction project in Ukraine was headed by Mr. Mukhtar Ablyazov, Chairman of the Board of Directors at JSC BTA Bank, a well-known businessman in CIS countries, Europe and the United States.

Dr. Alibek is emphatic in his praise for the support the company has received for its Ukrainian venture from the US embassy in Kyiv. Also, on June 4, Carlos M. Gutierrez, US Secretary of Commerce paid a visit to the Max-Well facilities along with Oleksandr Fedorovych Vosianov, President of Academy of Medical Sciences of Ukraine.

Vladimir Bugaychuk, Max-Well’s general director took the visitors on a tour of the facilities that will permit manufacture over 200 million capsules, about 150 million pills, 60 million vials, 30 million pre-filled syringes and 30 million suppositories per year.

The production facility was designed and built according to GMP standards (Good Manufacturing Practice), the world-wide regulations for the production
of drug products.

Also, both chemico-pharmaceutical and immunobiological drug products will be manufactured at the production facility, which is innovative not only for
Ukraine, but for the CIS countries as a whole.

“We have made our initial investment in Ukraine and expect to see great growth in the years ahead. I had the advantage of having language skills and
cultural knowledge that served me well. However, for other US investors, there are still great opportunities and whole fields for development,” comments Dr. Alibek.

“My advice to investors is to find a reliable local business partner who understands the language and culture. The US-Ukraine Business Council [USUBC] has also been a great help in making contacts and dealing with problems. With the right partners, it is possible for anyone with good business sense to find opportunities here.”


NOTE: Max-Well is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C.,
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

KPMG-Ukraine Opens New Office in Donetsk
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wednesday, June, 2008
WASHINGTON, D.C. –  The executive committee of the U.S.-Ukraine Business Council (USUBC), on behalf of the entire membership, is most
pleased to announce that KPMG has been approved for USUBC membership. KPMG-Ukraine is USUBC member number 81.

KPMG is a global network of professional firms providing audit, tax and advisory services. KPMG operates in 148 countries and have more than
113,000 professionals working in member firms around the world.
KPMG-Ukraine Ltd. is a company incorporated under the Laws of Ukraine and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative. 
Mason Tokarz is the Managing Partner of KPMG-Ukraine Ltd. and will represent KPMG on the USUBC board of directors.
As a member firm of one of the world’s leading professional services organizations, KPMG in Ukraine brings clients technical skills, solid practical experience and wide industry and sector knowledge which provide clients with a competitive edge over their competitors. Their goal is to help our clients not only compete, but become marketplace leaders.

KPMG in Ukraine has established multi-disciplinary teams of Ukrainian and expatriate professionals which provide focused services to Ukrainian and
foreign clients. They apply a rigorous approach to assist their clients in defining their business or investment objectives and then work with them to
achieve those objectives.

The following are some of the potential benefits KPMG provides to their clients in Ukraine: a. understanding of the local business environment; b. industry-specific focus; c. broad based experience; d. combined delivery teams; e. tangible return on investment; f. well-established assessment and implementation methodologies; g. flexibility to match client culture; h. access to KPMG’s global resources.
On May 22, 2008 KPMG in Ukraine announced the opening of its office in Donetsk. With their business expanding rapidly across Ukraine, KPMG felt
is was important to have the resources in the right place at the right time to meet the needs of their clients.

Mason Tokarz, Managing Partner, KPMG in Ukraine, said: “The Donetsk region is home to some of the largest and most recognized companies in Ukraine. It has a dynamic local economy, and is attracting considerable interest from investors all over the world. Our decision to open the office in Donetsk is aimed to better serve our existing clients in the area, and to develop relationships with potential clients in the region of Donbass”.

Anna Parkhomenko, who will direct the team in the new office, stated:  “We are looking forward to the launch of our new team in Donetsk, which consists of professionals at various levels with various specialized skills.

The team is excited about the opportunities arising as a result of the opening in Donetsk. At KPMG, we are committed to contributing as much as possible
to the development of the business environment in this important region of Ukraine”.

For more information about KPMG-Ukraine click on:

“The U.S-Ukraine Business Council (USUBC) is most pleased to have KPMG-Ukraine join the rapidly expanding USUBC membership.” said
Morgan Williams, SigmaBleyzer, who serves as President of USUBC.
“The international and domestic business community is now the main driving force regarding Ukraine’s integration into the world. It is important
for the business community to work together to influence the government to adopt more reforms that will bring Ukraine’s laws and standards more
into line with internationally accepted practices,” Williams said.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

ANALYSIS & COMMENTARY: By Anders Aslund, Senior Fellow
Peterson Institute for International Economics, Washington, D.C.
Financial Times, London, United Kingdom, September 4 2008
Russia’s invasion of Georgia has shocked the west and spurred talk about how to respond. The conventional wisdom is that the west can do little to punish Russia. True, western governments have limited leverage, but in economic terms the Russian invasion has already hit it hard, even before western governments lifted a finger. This economic blow shows the west how it can punish Russia’s leaders.
On the fateful day of August 8, Russia’s stock market plummeted 6.5 per cent. It has now fallen 36 per cent in the past two months, wiping out $500bn (euro346bn, £281bn) of shareholders’ capital, almost equal to Russia’s international currency reserves of $580bn. During the week of the invasion, capital outflow reached $16bn, causing a sudden domestic credit squeeze.
Two wealthy Russians have been identified as among the biggest sellers of Gazprom stock . They cannot have been happy with Vladimir Putin, the Russian prime minister. Indeed, Mr Putin’s boasts about Moscow as a new global financial centre and the rouble as a coming international reserve currency have become a sad joke.
These substantial losses are likely to last. In a note to investors, UBS, the investment bank, explains that the old paradigm – that investment in Russia carries high political risk – has returned. UBS cut its price targets on Russian companies by an average of 20 per cent or a market value of $300bn.
Russia’s economic strength should not be exaggerated. Its gross domestic product has jumped from $200bn in 1999 to an estimated $1,700bn this year, yet it accounts for only 2.8 per cent of the world’s GDP. Despite the Georgian success, Russia’s military is under-resourced. Official military spending is $48bn, or 7 per cent of US defence spending.
With oil and natural gas accounting for 60 per cent of its exports, Russia is dependent on world energy prices, which are falling. Its energy production is stagnant because of renationalisation and the hostile climate for investors.
Corruption is Russia’s worst scourge and the state cannot carry out infrastructure investment because of huge kickbacks. With authoritarianism, economic reforms have stalled but without them high growth rates will not be maintained.
The west faces a choice between sanctions and economic engagement. Trade sanctions would only strengthen the security elite’s hold on the economy and reinforce its dictatorship. It would be wrong to oust Russia from the International Monetary Fund or stop its membership of the World Trade Organisation, because open markets and international standards will only expose Mr Putin and his cronies.
Instead, the European Union and US should impose ethical and legal standards that make it costly for Russia to misbehave, targeting big state companies and top officials not private citizens or businessmen.
[1] First, the EU should adopt a common energy policy, imposing the rules of the energy charter – such as transparency, equal investment rights and third-party access to pipelines – on Russia. A united EU has bargaining power as all Russian pipelines outside the former Soviet Union go to Europe.
[2] Second, the European Commission should force Gazprom to unbundle production and transportation to break up its monopolies. Why does the EC pursue antitrust suits against Microsoft but not Gazprom? It would have to divest its pipeline network outside Russia’s borders, abandon blatant price discrimination and end its planned construction of the Nord Stream and South Stream gas pipelines.
[3] Third, the west should investigate Russian top officials and their trading companies for money-laundering.
[4] Fourth, Russia’s big state companies habitually woo politicians in other countries. Gerhard Schröder, the former German chancellor, is just Gazprom’s most prominent catch. Western ethical rules for contacts with Russian state companies need to be tightened and the EU should establish American rules for the disclosure of income anybody earns from lobbying. Unethical behaviour is best fought with increased transparency.
[5] Finally, if western intelligence agencies possess evidence of any corruption by Mr Putin or his cronies they should publish it. Nothing would undermine him more in Russian eyes than verified facts about corruption. Russia and its leaders are quite vulnerable, but to be effective the west needs to unite.
NOTE: The writer is a senior fellow of the Peterson Institute for International Economics. He is the author of Russia’s Capitalist Revolution: Why Market Reform Succeeded and Democracy Failed


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

Global Market Brief: Stratfor Today, Austin, TX, Thursday, September 4, 2008 

A redefinition of Russia has taken place — rather jarringly — following its war with Georgia, and the entire world is reassessing its position and relations with the resurgent power. This reassessment includes financial factors — a much more tender area for today’s Russia than for the Soviet Union, because Russia’s large economy is tied into the global economy.

During the Russo-Georgian war, Russia’s stock index declined to its lowest level in two years, the ruble registered its largest monthly decline against the U.S. dollar in more than nine years, and foreign investment flight amounted to $25 billion in just three weeks, according to French investment bank BNP Paribas.
But the flight of foreign direct investment that has resulted from deteriorating ties between Russia and the West will not hurt Russia as much as is believed.
Rather, Russia will be dealt a massive blow when the West ceases giving Russian companies the financial access they need to continue expanding or even operating. The main reason Russian companies have done so well in the past few years (and made Russia a much stronger country) is that foreign entities have been the ones financing their expansion. This is all about to change.
There are three main types of financial models in the world: Western, Asian and Russian.
[1] The Western financial model is economically based, with gaining money and profit as the end goal; such a model tends to crush inefficiency and protect the system as a whole.
[2] The Asian model is socially based. This model’s goal is maximum employment and social stability, where money is used as a political resource for nonfinancial ends despite all inefficiencies.
[3] The Russian model is politically based. In Russia, finance is a political tool to control the country and operates much like money for loan sharks or organized crime. The system is highly inefficient, but it allows a very small few to hold all the power in an enormous country.
It is the Russian model that has made it nearly impossible for Russian companies to gain access to cash outside their own earnings and has led them to look outside the country. To put it simply, a company needs money in order to grow; in its search for that money, it has three options. It can use its own money, but this limits a company in its ability to make major purchases, take on large projects, or greatly or quickly expand.
This option has been seen not only in companies’ purchases, but in most financial transactions in Russia. A good example of this in Russia is mortgages, which the country had never seen until the past few years. Previously, Russians had to use their own money to buy homes without any financing options.
The other two options involve borrowing money, either by taking out loans or by issuing bonds. A loan would have to come from a bank, and any sizable loan would have to come from a large (most likely Western) one. Issuing bonds is like dividing up pieces of a loan to a number of purchasers.
Most Russian companies cannot turn to Russian banks for loans, because the banks are either too small to finance major projects or are state- or oligarch-owned. Of Russia’s 10 largest banks, the top five are all state-owned, which means that if a company wants to finance a major project it has to develop an understanding with the Kremlin.
Traditionally, the major state banks have stayed out of financing large projects, mainly because they have no expertise in these fields. When the government does actually step into the role of financier, it is usually because of political or control issues and not because the Kremlin sees a good investment.
The other large banks in Russia are typically oligarch-run. The oligarchs are billionaires who lead most of Russia’s vital sectors, both private and state-controlled.
Most of these individuals rose to power during the Yeltsin-era “shock therapy” transition from socialist structures to capitalist ones (which more resembled a free-for-all), but the oligarchs who have remained in power are either owned by the Kremlin or have the Kremlin’s blessing to continue holding strategic sectors.
During their rise, the oligarchs basically created their banks in order to fund projects or manage their own companies. For example, Rosbank was created by the owners of Interros — oligarchs Mikhail Prokorov and Vladimir Potanin — in order to finance projects by Interros’ Norilsk Nickel, the world’s largest nickel company.
These banks typically are not able to take on any other company’s major projects and often cannot handle major financing for their own related firms; moreover, these oligarchs have no interest in funding any rival oligarch’s expansion plans.
The oligarchs also created these banks in order to keep the Kremlin from having a say in their companies and projects (though the Kremlin has since either worked its way into partial ownership of most “private” banks or placed lackeys as bank chiefs).
Russian companies cannot issue bonds to the domestic market simply because there are not enough interested people in the country with the money to buy them. Those who have money to spend are, once again, the government or the oligarchs, and all the same rules apply to their investment in bonds as to the banking sector.
The only option left has been for Russian companies to turn to foreign money and banks. This is an option Russian companies have turned to only very recently (in the last five years) after the fall of the Soviet Union and a decade of economic turmoil.
The Russian market has been so starved for capital — particularly for investment, and for nearly a century — that foreigners are seeing a lot of bang for their buck in financing Russian companies, and they have been lending cash and snapping up bonds left and right.
The potential for growth in Russia is so great that foreign cash is estimated to fund 70 percent of Russian debt. It is foreign loans and bonds that are actually making a difference in Russian companies and economic expansion.
But the Georgian-Russian war has changed all of this. It is not that the war was the proximate trigger for the massive fall in Western confidence in Russia; rather, it was a clear sign of a downfall already in progress. General perception of and confidence in Russia has now changed — especially in the West.
Russian companies (and then the Russian economy) will have to shift when the reality hits that the West simply no longer has confidence in Russia or its companies. Russia was already a risky market, given the Kremlin, oligarchs and organized crime, but when global credit conditions are poor — as they are now — investors tend to shun riskier ventures.
According to BNP Paribas, the amount of debt raised by Russian companies in August was 87 percent less than July’s levels, and the issuance of new equity nearly halted — from $933 million in July to $3 million in August. This dramatic slowdown will not lead to a Russian collapse (the country does have its own money), but Russian companies will find it very hard to raise capital and fund expansions, leading to stagnating operations.
Russian President Dmitri Medvedev is already hearing the cries of Russian companies and oligarchs over the tightened situation and restrictions from world financial markets. Medvedev will be meeting with the country’s biggest firms and businessmen at the annual Russian Union of Industrialists and Entrepreneurs summit on Sept. 19-20. Medvedev has vowed to unveil a new program for easy credit soon after the summit, once he has input from the country’s business leaders.
There are three options for Moscow.
[1] First, Russia could just take the blow, no matter how many ticked-off oligarchs it creates. This would mean that some of Russia’s most powerful companies would have to revamp their plans entirely. Such a move would definitely affect the expansion plans of nonstate firms, but it will also hit many state companies — like energy giants Rosneft and Gazprom — which have been gorging on the bonds markets.
It also means that the Russian government, which uses many of the companies as champions and tools for domestic or foreign control, would have to overhaul its future strategy as well.
[2] Second, the government could learn how to spend money. Moscow does not have a problem with cash and holds the world’s third-largest foreign currency reserve (currently just under $600 billion). The problem is that the government does not like to spend any of its reserves unless it is desperately needed.
The only time in the past decade the Kremlin has dipped into the reserves was to finance its war with Georgia. But some Russian oligarchs, like Potanin, are already calling on the Kremlin to tap its reserves to ease the crisis.
[3] The third option is the most difficult: Russia could actually set up a real large bank for real large loans. But this would change the country’s entire financial model and cut the Kremlin’s and local politicos’ abilities to control and manipulate who can borrow money and for what. The social and economic implications of this option are something that the Kremlin has never shown it is willing to risk.
Setting up a real banking structure would offer people in Russia a resource outside the government’s control, which would in turn give them the ability to have an opinion and hold economic power, and potentially rival the government in making decisions — something that Russia has never seen or allowed before.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]


Window on Eurasia: by Paul Goble, Vienna, Austria, Sep 5, 2008


VIENNA – With Iran’s declaration that it opposes the construction of any undersea pipelines in the Caspian on “ecological grounds” and thus will block any delimitation of the seabed that allows for them and Baku’s decision not to back the West’s push NABUCCO project, Moscow can claim its first major political victory from its invasion of Georgia.


These actions mean that the Russian government will now have full and uncontested control over pipelines between the Caspian basin and the West which pass through Russian territory and will be able either directly or through its clients like the PKK to disrupt the only routes such as Baku-Tbilisi-Ceyhan that bypass the Russian Federation.


That does not mean, of course, that Moscow now has effectively reestablished its control over the states of this region – all of them have other interests besides oil and gas – but it does mean that Russia has won a major victory and the West, which all too often in recent years has focused on oil and gas alone, has suffered a major defeat.


Yesterday, Mehti Safari, Iran’s deputy foreign minister, told journalists that Tehran opposes the construction of any undersea pipelines in the Caspian because “this can bring harm to the ecology of the sea.” He noted that exporting countries can send their gas out via either the Russian Federation or Iran (


Given the existence of “such possibilities,” the Iranian diplomat said, “why harm” the delicate eco-system of the Caspian?  But in making this statement, Tehran was underscoring its willingness to destroy any chance for the completion of the NABUCCO gas pipeline in the near term that the United States and some Western European countries have been pushing for.


And because Washington opposes the flow of hydrocarbons from the Caspian basin out through Iran, Tehran’s action in fact makes it likely that many of the oil and gas exporting countries in the region will now choose to send more or even all of their gas and oil through the Russian Federation, a longstanding geopolitical goal of Moscow’s.

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

A soft-spoken academic is described by many as the second-most powerful person in Ukraine’s government

By Toby Vogel, European Voice, Brussels, Belgium, Thursday, August 28, 2008 

Ukraine’s democracy is not old. Just a few years ago, the country was run by Leonid Kuchma, a Soviet-style president, until he was ousted in the Orange
Revolution of December 2004. But it is certainly vibrant.

The rivalry between the two orange leaders, Yulia Tymoshenko and Viktor Yushchenko, has gripped the country ever since they descended the stage in
downtown Kiev from which they launched their challenge to Kuchma. Since they took up the reins of government in early 2005, with Yushchenko as president and Tymoshenko as on-and-off prime minister, they have been jockeying for supremacy.

But neither a reform of the constitution nor two parliamentary elections have decisively empowered either of the two offices. Now the next presidential poll, due in January 2010, is already casting its spell and reinforcing the split between the erstwhile allies. The Russian invasion of Georgia has sharpened the divide, with the president’s associates accusing the prime minister of doing Russia’s bidding in Ukraine.

So what is a soft-spoken former academic doing in this world? And what has prompted Hryhoriy Nemyria, a former think-tanker who is now described by
many as the most powerful man in Ukraine’s government after the prime minister, to throw in his lot with Tymoshenko, by far the more colourful and
controversial of Ukraine’s leaders?

For one thing, Nemyria suggested on the BBC’s Hard Talk programme in February that Tymoshenko is “the most investigated politician in Ukraine”
and no proof has ever been found that her considerable wealth was acquired by illegal means.

Not only is she clean, in his view, but clean government is her top priority. (Ukraine ranked 118th out of 179 countries on Transparency International’s corruption perception index for 2007, squeezed between Mali and Mauritania.)

Nemyria, who is a deputy prime minister, runs Tymoshenko’s Europe policy out of a corner suite on an upper floor of the Council of Ministers’ imposing
building in downtown Kiev. It overlooks the leafy area enclosing Dynamo Kiev’s home turf, with the mighty Dnieper flowing by just behind it.

The Verkhovna Rada, the country’s parliament, is just round the corner. But the impressive location is incidental. Nemyria, though a first-rate diplomat
and effective advocate for his boss, is not primarily about representation. He is all about getting things done – and the list is long.

The most immediate concern for Ukraine’s policymakers is the negotiation of a new association agreement with the EU, which will include sweeping
free-trade provisions that could open the EU’s vast market to Ukrainian goods, while exposing uncompetitive Ukrainian firms to new challenges.

Nemyria understands this, an observer of Ukraine’s economy says. “He knows what foreign investors want and he is quite explicit about what is needed in
terms of economic reforms,” he says, adding that Nemyria “speaks the language that we want to hear.”

This is also true in a literal sense. His English is excellent and he lists travel as a hobby. Stints at Washington’s Center for Strategic and International Studies, Harvard University, the NATO Defence College in Rome and the University of Bordeaux have exposed him to different mentalities and ways of doing business – not a trivial matter for someone who spent the first 31 years of his life in the Soviet Union.

There are some who question Nemyria’s influence on events and on his boss, Tymoshenko. His amiable but reserved manner and the academic precision of
his speech suggest a thinker, rather than a decider. But the people he talks to in the EU appreciate the solidity and focus of the trained historian, qualities that will be in demand when the two sides meet for a key summit in Evian, France, on 9 September.

Tymoshenko told European Voice earlier this year that she expected “some sort of political association which would help us in our bid for EU

membership” – the one thing the EU is reluctant to offer. “The EU hasn’t changed its approach to Ukraine substantially since the revolution,” says an
observer of Ukrainian affairs, likening the EU to “a super-tanker that takes a long time to turn around”.

Nemyria concedes that not all difficulties in the relationship originate in Brussels. He concedes that EU counterparts do not always find it easy to perceive who is in charge in Ukraine. “There’s a significant dose of dualism, of duplication,” he acknowledges, alluding to the “appetite” of the presidential administration for involvement in European affairs.

Yushchenko repeatedly offers ambitious timelines and promises for closer ties with the EU, raising expectations that are inevitably disappointed. Nemyria insists that European integration properly falls under the authority of the Council of Ministers, since it is above all a domestic issue.

It is an important issue on which independent observers are more trenchant than Nemyria. One says that it does not matter whether the prime minister or
the president is empowered as long as the current dualism ends. “Someone”, he says, “needs to take charge”.

Another dualism frequently mentioned by Western diplomats is firmly rejected by Nemyria: the idea that Ukraine really is two countries, one in the west
that looks to Europe and is ethnic Ukrainian, and one to the east that looks to Moscow and is ethnic Russian.

Nemyria, himself brought up as a Russian-speaker in the industrial eastern heartland of Donetsk, is a living rebuttal of this simplistic view of his country. He warns that Russian-speaking does not equal pro-Russian.

It is a point he underlines as highly topical. There are unspoken assumptions that secessionist tendencies, especially strong on the Crimean peninsula, are being manipulated by Moscow and its allies in Ukraine. Diplomats fear that Crimea, where most of the population hold Russian passports, might be the next flashpoint after Russia’s show of force in Georgia, a point Nemyria reiterated earlier this month.

He says that the European Neighbourhood Policy, the main lens through which the EU looks at Ukraine, has failed. “The EU,” he said, “has in its Black
Sea policy looked at environmental protection, local border traffic and cultural exchanges. It should perhaps also ask itself what would happen if the oil stopped flowing.”

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
U.S.-Ukraine Business Council (USUBC)
Promoting Ukraine & U.S.-Ukraine business & investment relations since 1995. 

By Stephen Castle, International Herald Tribune (IHT), Paris, France, Fri, Sep 5, 2008

BRUSSELS: After the crisis over Georgia, new divisions have emerged within the European Union over whether to offer Ukraine a clear signal that it might one day join the 27-nation bloc.

The Russian military action in August increased pressure on the EU to increase its engagement in Georgia, Ukraine and Moldova to shore up pro-Western forces there. But the Georgian conflict has reignited a vigorous debate within the EU on whether the bloc can continue to expand to include more nations that border Russia.
A test of the EU’s commitment to its Eastern neighbors comes Tuesday in Évian, when President Nicolas Sarkozy of France, which holds the EU rotating presidency, leads talks with Ukraine on behalf of the bloc. The meeting will have an added sense of urgency following the collapse of the government in Ukraine this week. The two sides expect to reach broad consensus on a new agreement dealing with ties between the EU and Ukraine.
But several EU countries, including Germany, Belgium, the Netherlands and Luxembourg, want to make clear that this will not lead, automatically, to EU membership talks. By contrast, Poland, the Czech Republic, the Baltic States, Sweden and Britain are pressing for language stating that Ukraine has a clear European future.
Latest drafts of the text suggest that the EU will say that the agreement does “not prejudge any possible future developments in the EU-Ukraine relationship.”
One EU diplomat, who spoke on condition of anonymity due to the sensitivity of the discussions, said writing the draft required a “delicate balance” because governments “were pushing quite hard in both directions.”
The outcome could disappoint the Ukrainian president, Viktor Yushchenko, who may have hoped that the crisis in Georgia would have spurred the EU to be bolder about its ties with Kiev.
However, the EU will agree to Kiev’s suggested title for the accord – an Association Agreement – a name that Ukraine believes implies a path to membership. Recently, countries that aspire to membership in the EU, such as Croatia, negotiated Stabilization and Association Agreements before becoming candidates to join the club.
The accord with Ukraine will include similar elements, such as a free-trade agreement already being negotiated, cooperation on energy, and discussions on visa-free travel in the long term.
Tomas Valasek, director of foreign policy and defense at the Center for European Reform in London, argued that the EU risked being too timid by refusing Ukraine a clear prospect of membership. “The biggest advantage of an EU membership perspective is that it allows us to influence their decision-making and changes their political calculus,” he said.
“Countries that want to be in the EU and want a perspective of being in the EU are a lot more disciplined and focused on the political and economic reforms needed for accession. Ukraine does not have that discipline,” Valasek added.
On Wednesday, the shaky coalition that united Yushchenko and Prime Minister Yulia Tymoshenko collapsed. Opponents of giving Ukraine a clear prospect for EU membership have pointed to this as evidence of the country’s lack of readiness.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Receiving more than one copy of the AUR please contact us.

Jamie Smyth in Avignon, Irish Times, Dublin, Ireland, Saturday, September 6, 2008
UKRAINE: EU FOREIGN ministers signalled yesterday that Ukraine would not be offered the prospect of future membership of the union at a summit meeting next week in France.
They also called for an inquiry to be established to find out who was responsible for the start of the devastating conflict in the Georgian region of South Ossetia last month.
“The question of who participated, and with what motives, in the escalation to armed conflict is important as we consider future ties with the conflict parties – and I mean both Georgia and Russia,” German foreign minister Frank-Walter Steinmeier told journalists yesterday at an EU foreign ministers meeting in Avignon, France, which is discussing the crisis.
He said the Organisation for Security and Co-operation in Europe, which has monitors on the ground in Georgia, had information about the run-up to the conflict. Georgia and Russia have blamed each other for starting the conflict in South Ossetia, which erupted unexpectedly on the eve of the Olympic Games on August 7th.
Mr Steinmeier’s call for an independent inquiry was backed by Italy. Italian foreign minister Franco Frattini said he had got positive signals on it from Moscow and Tbilisi. “I spoke about this idea with both the Russian Federation and Georgia. Both told me they are not against. There are good possibilities to launch it,” he added.
Austria and Luxembourg also supported an inquiry, while British foreign minister David Miliband said Britain had always called for verification of allegations of human rights abuses. “We have always said we would follow them up without fear or favour,” said Mr Miliband, who has argued Russia must face consequences for its actions in the conflict.
EU foreign ministers will return to the Georgian crisis today when they are expected to discuss the launch of a civilian monitoring mission and aid to help rebuild the country’s shattered infrastructure following the ceasefire brokered by the EU in mid-August.
They will also discuss how to respond to an increasingly assertive Russia, which has proved in Georgia that it is prepared to use military action to exert influence in its neighbourhood.
They are also expected to focus on Ukraine, which is in the midst of a government crisis and is one of several states in eastern Europe that is in Russia’s sphere of influence. But hopes expressed by some EU states, such as Poland and the Czech Republic, that the union may offer Kiev the prospect of future EU membership at an EU-Ukraine summit next week were dashed.
France the current holder of the EU’s rotating presidency ruled out using a planned EU-Ukraine summit next week to offer Ukraine official-candidate status.
“If you have no Lisbon you have no enlargement,” said French foreign minister Bernard Kouchner when questioned as to whether Ukraine could become an EU candidate state in the near future.
Instead the summit is expected to offer the prospect of closer ties to the EU without declaring that Ukraine is eligible for future membership of the bloc.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

OP-ED: By Richard Holbrooke, U.S. Ambassador to the United Nations
during the administration of U.S. President Bill Clinton
The Moscow Times, Moscow, Russia, Thu, Sep 04, 2008
Given the tremendous damage that Russia has inflicted on Georgia, it is easy to conclude that the Kremlin has achieved its objectives. But, so far, the Kremlin has failed in its real goal — getting rid of pro-U.S. Georgian President Mikheil Saakashvili.

To be sure, Russia has tightened its control of the separatist enclaves of South Ossetia and Abkhazia. It shattered the Georgian military, grievously damaged Georgia’s economy, and stirred up discord within the Western alliance.

For three years, it has tried every conceivable tactic to bring Saakashvili down — fomenting a domestic uprising, imposing an economic blockade, beefing up its forces in the enclaves and finally a war. Yet Georgia’s president remains in power.

Russia’s invasion of Georgia has reshaped the strategic landscape. But, as the West debates how to “punish Russia,” it is vital to remember that the main front is still in Georgia. Talk about taking away the 2014 Winter Olympics or ejecting Russia from the Group of Eight may or may not have some effect on the Kremlin, but the most important thing the West can do now is strengthen the government in Tbilisi.

The equation is simple: If Saakashvili survives, Prime Minister Vladimir Putin loses.

The intense personal hatred between these men overlays two centuries of tortured history between Russia and Georgia. Many people report that Putin simply “loses it” when discussing the upstart Saakashvili, who led his country from near bankruptcy into a golden age of economic growth and the world’s highest rate of foreign direct investment relative to gross domestic product. All this has been halted by Russian tanks.

The Kremlin has probably lost its chance to remove Saakashvili by overt force, although sinister, more stealthy means cannot be ruled out. The Kremlin’s best hope now is that Georgia’s economy will crumble, its currency will collapse, and an unhappy populace, encouraged by some opposition leader (perhaps bankrolled by Russia), will force Saakashvili from power.

The Western response to this challenge must go beyond rhetoric. What matters most right now is massive economic and military assistance. Public commitments to help rebuild Georgia are the best way to prevent Russia from achieving its goal. Georgian Prime Minister Vladimir Gurgenidze estimates that rebuilding railroads, bridges, ports and other infrastructure will cost at least $1 billion.

This does not include humanitarian relief, refugee resettlement costs or rebuilding Georgia’s military. Gurgenidze also foresees negative economic growth, a huge budget deficit, and a collapse of tourism, which was just taking off in this beautiful country.

U.S. Senator Joseph Biden has called for an immediate $1 billion supplemental appropriation, a proposal quickly endorsed by presidential candidate Barack Obama. The European Union, the World Bank, the International Monetary Fund and the European Bank for Reconstruction and Development must match U.S. support.

In the long run, Georgia and Russia must coexist peacefully. Here, Georgia must do its part. Saakashvili, an immensely talented 41-year-old, saved his country from utter collapse in 2003. But he must think strategically about the future.

On occasion, he has berated the Europeans for insufficient support — not a good tactic for someone trying to join the EU — and has used rhetoric about Russia that, while understandable, only increases the danger to himself. Saakashvili cannot pick up his tiny country and move it to Mexico. He has to manage the situation with greater care.

There will be consequences, of course, for Russia’s relations with the West. (Bush’s inattentiveness to this Russian threat, dramatically illustrated by his literal embrace of Putin in Beijing as Russian tanks rolled into Georgia, may have led the Kremlin to think it could get away with its invasion.)

While the West will not risk going to war over Georgia, Russia must understand that it will pay for using force, or the threat of force, against neighbors that were once part of the Soviet space.

This is especially true for Ukraine and Azerbaijan, which are likely to be Moscow’s next targets for intimidation. The rules of the post-Cold War world are changing, but not to the ultimate benefit of Russia, which has underestimated the unifying effect its actions will have on the West. Exactly how these relationships evolve depends on what each side does in the coming weeks — especially in Georgia.


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

John Marone, Columnist, Eurasian Home website, Kyiv, Ukraine
Eurasian Home, Moscow, Russia, Monday, September 1, 2008
Ever since it was handed independence in 1991, Ukraine has sat on the fence like a country coquette with her back to her jealous ex-husband Russia, from which the country’s ‘elite’ have nevertheless continued to get rich on cheap gas, while batting her eyes at the glamorous West, which offers lots of nice gifts but never a firm proposal of marriage.
However, that fence no longer provides a comfortable seat, much less an opportunity to play off geopolitical suitors against each other.
Just down the road, little Georgia, another former Soviet possession with a mind of its own, has found itself occupied and dismembered by the Russian army, and no one is coming to its aid. Unlike the fickle Ukrainians, Georgians are united in their preference for a Western alignment. And now they are paying the price for this preference.
It doesn’t matter if one is inclined to sympathize with the Russians, who feel they are being encircled by an aggressive foreign military bloc (i.e. NATO).
Indeed, besides the allegedly broken Western promise to refrain from extending NATO to the Russian border, who’s idea was it to plant a missile defense system in Central Europe while the US is tied down in two wars? And it’s hard to argue that the leaders of Georgia and Ukraine are only representing the wills of their people when both men have Western wives.
On the other hand, Mikheil Saakashvili and Viktor Yushchenko were elected in fair, democratic elections. Georgia and Ukraine are, after all, sovereign nations, regardless of their histories or geographical locations.
If the Kremlin wants respect, as its president Dmitry Medvedev claims, it might try more seduction and less abduction. And considering the plight of Russian democracy and free speech, the country should start by cleaning up its act at home.
At the very least, there could be a more equitable distribution of the revenues from oil and gas exports. Lastly, Moscow’s insistence on the parallels between South Ossetia and Kosovo are absurd if not profane. But I guess that’s the kind of international principles the Bush administration should have expected after its truth-challenged invasion of Iraq.
Regardless, like it or not, the redrawing of borders in Europe is now in vogue, which forebodes nothing good for Ms. Ukraine. On August 26, the Kremlin made its recognition of Georgia’s secessionist regions Abkhazia and South Ossetia officially.
Next in line could be Crimea, which was a part of Russia until Soviet leader Nikita Krushchev presented it to Ukraine. Already, Moscow loudmouths like Mayor Yury Luzhkov have challenged the ownership of Sevastopol.  The Russians not only have lots of (paid) support among the local population but a fleet parked out back in case things get ugly.
And who’s going to stop them, if things go from bad to worse? The invasion of Georgia wasn’t sparked off by a hot summer or captivating Olympic contest. It was timed by the Kremlin to broadly precede the free-up of US troops in Iraq a few years down the road, and more narrowly – a meeting of NATO foreign ministers at the end of this year, during which Ukraine and Georgia might have been offered a membership plan.
In between, there is Ukraine’s presidential elections, scheduled for early 2010. None of these events are sharply defined on the calendar with specific consequences for Moscow. Nevertheless, taken together, they represent a limited window of opportunity for the Kremlin to kick the US out of its backyard.        
It’s not even clear whether the Russian move will backfire, with, for example, NATO uniting around Ukraine’s membership bid, and Ukrainians around their country.  However, such hopes ignore the geopolitical natures of Russia and Ukraine, and more importantly the relations the two states developed during all those years of marriage.
Moscow didn’t intend to scare its former bride, but to show the Ukrainian people how passionately it cares – especially in comparison to the seemingly empty gestures of security offered by Western suitors.
This type of approach, of course, wouldn’t be possible if a large percentage of the Ukrainian population didn’t already support Russia to one extent or the other: on, for example, language, culture or even Kremlin policies themselves.
Also, the Kremlin doesn’t have “to take” Ukraine, but merely keep NATO, the EU or the US from moving in. Moscow only has to play up to the most natural and to-date best demonstrated of Ukrainian characteristics: fence sitting, the reluctance to take a stand due to weak leadership as a result of internal division based largely on personal interests.
For example, no one should be surprised to hear support for Russia’s military adventurism from Ukraine’s Communist Party, who have consistently all but called for a return to the Soviet Union.  
The response from the eastern-looking Party of Regions took a little longer, but (no doubt following appropriate pressure from Moscow) also left little surprise.
“The Russian Federation’s recognition of South Ossetia’s and Abkhazia’s independence was a logical continuation of the process that was started by Western countries in relation to the recognition of the independence of Kosovo,” party leader Viktor Yanukovych told a Ukrainian news agency on Tuesday.
Following the failure of his fraud-filled grab for the presidency in 2004, which the Kremlin tellingly recognized, Mr. Yanukovych looks set to try again under the same banner in 2010.   
More surprising was the half –hearted condemnation of Moscow by Ukrainian Premier Yulia Tymoshenko, who also has presidential ambitions.
Having built her career on fiery, provocative rhetoric, in which the Kremlin has been a favorite foreign target, the supposedly pro-Western Tymoshenko has suddenly become more diplomatic if not restrained in her choice of words.    
 “We absolutely support the territorial integrity of Georgia, and all decisions taken counter to this position will absolutely not be supported by us,” she told a briefing on Wednesday.
For comparison, Ukraine’s pro-Western President Viktor Yushchenko flew to Tbilisi during the heat of the conflict to stand side by side with the leaders of Poland and the three Baltic states in vociferously condemning Russian aggression.
More recently, Mr. Yushchenko said Ukraine had become “a hostage” of Russia by hosting the Russian Black Sea Fleet on Ukrainian territory. In short, even Ukraine’s pro-Western politicians are divided on how to deal with Russian aggression for what can only be called personal reasons.
Add to this the fact that Russia can bring the country’s economy to its knees by once again abruptly raising gas prices – a lever it can also use to diffuse European support for post-Soviet democracy – and Ukraine’s predicament becomes pretty clear. The prospect of these threats in itself will be enough to cool foreign investment – one of the few things keeping Ukraine’s economy afloat.
And then there is the unrecognized Dniester Region, formally a part of Moldova but lying adjacent to Ukraine. That would be a no-brainer for the Russians, especially if the US elects a president short on foreign-policy backbone.  
The situation is such that the heroic support that Yushchenko has shown for Georgian independence can only be called a little too little and a little too late.
The window of opportunity to unite the country around strategic goals in energy, diplomacy and economics was wasted amidst infighting in Ukraine’s pro-Western camp. Even before Yushchenko, the country’s politicians were largely occupied with enriching themselves at the expense of the state instead of building a new country.
Ms. Ukraine is not going to be pushed off her fence in any way that would suggest violence or disrespect. That’s not necessary. Instead, she and her people will come to the slow and sobering realization that they are being fenced in by their northern neighbor on all sides – creating a thoroughly indefensible position.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
The EU should be thinking about how it can extend a commitment
to security, democracy and prosperity to neighbours
ANALYSIS & COMMENTARY: Andrew Wilson, Senior Policy Fellow European Council on Foreign Relations.
Guardian newspaper, London, United Kingdom, Friday September 05 2008
The war in Georgia has clearly exposed the security vacuum in the surrounding region, as well as a lot of raw nerves. Russia’s hasty decision to recognise the “independence” of South Ossetia and Abkhazia was a shot across the bows for every former Soviet country, and has intensified speculation about who might be “next” – and how to prevent Russia from multiplying the supposed Kosovo “precedent” in other ex-Soviet countries.
Having established itself as the main broker in the conflict, the European Union has many urgent priorities in Georgia itself. But it should also be thinking ahead about how it can demonstrate a stronger commitment to security, democracy, and prosperity in the European “neighborhood”.
The most effective way of dealing with a newly-assertive Russia will be for Europe to issue a collective refusal to accept a bipolar Europe of distinct Russian and EU spheres of influence.
The place to start is Ukraine. Fortunately, the EU-Ukraine summit on September 9 in Evian, France, provides the perfect opportunity.
Many Ukrainians now hear domestic echoes of the lead-up to war in Georgia. Ukraine has its own potentially separatist region in Crimea, and the country’s Russian minority numbers some 8.3 million. Half of Ukraine’s population is Russian-speaking in various degrees.
Although the Ukrainian constitution bans dual citizenship, the government has had to launch an inquiry into alleged covert Russian passport-holding in the Crimean city of Sevastopol.
Ukrainians note that Russia justified its invasion of Georgia, as the Nazis justified their dismemberment of Czechoslovakia, as being necessary to “protect” a minority to whom they had just given citizenship.
Russia has begun a war of words over Ukraine’s supply of arms to Georgia. And the conflict itself has shown that the Russian Black Sea Fleet, based in Sevastopol, can operate with impunity, whether Ukraine likes it or not.
Based on its analysis of Ukraine’s “Orange Revolution” as a foreign-backed “NGO revolution”, Russia has also been quietly building its own network of Russia-friendly NGOs in Ukraine since 2004. Ukrainians also talk of an otkat ekonomiya (“kickback economy”), in which Russian money percolates throughout the Ukrainian elite.
The European Neighborhood Policy is worthy enough, but it does not address the pressing concerns about maintaining and securing Ukraine’s independence.
Many member states will worry about leaping straight to the contentious issue of ultimate membership for Ukraine, but the EU already recognises Ukraine’s theoretical right to join once it has met the Copenhagen criteria; and it cannot be beyond EU leaders’ verbal dexterity to play up the prospect.
What Ukraine would value most is a real sense that it is being treated distinctly in its own right. The key words are “association” and “partnership”, in whatever order or combination.
The EU has more scope for short-term measures, and should develop a multi-dimensional solidarity strategy as a signal to both Ukraine and Russia. For example, the EU’s foreign ministers should invite their Ukrainian counterpart to give a briefing on Ukraine-Russia relations at their next meeting. Ukraine should be offered a road map for visa-free travel.
The new EU-Ukraine agreement should include a beefed-up solidarity clause, building on the 1994 Budapest Memorandum, whereby the EU would consult and assist Ukraine in case of challenges to its territorial integrity and sovereignty. And the EU should back Ukraine if it insists that the Russian Black Sea Fleet leaves on schedule in 2017.
The EU should also launch a comprehensive study of all aspects of Europe’s reliance on Russian energy supplies, including transit, energy security and conservation, supply diversification, and the impact of “bypass” pipelines like Nord Stream and South Stream.
It should consider linking the opening of the Nord Stream pipeline, which would allow Russia to cut off gas to Poland and Ukraine while maintaining deliveries to Germany, to the opening of the proposed “White Stream” pipeline to bring gas from Azerbaijan directly to Ukraine via Georgia, bypassing Russia.
The EU could even play a part in keeping the 2012 European Championship football finals on track. The decision to appoint Ukraine and Poland as co-hosts was a powerful symbol of European unity across the current EU border (Poland is a member, Ukraine is not). UEFA is unhappy with Ukraine’s progress in building the necessary infrastructure, but Ukraine should be given time to get its act together.
Where appropriate, the EU should extend these measures to Moldova, which is now calling Ukraine a “strategic shelter.”
Ukraine faces a crucial presidential election in 2009 or 2010 (and Moldova will hold elections in March 2009). After getting its fingers badly burned at the last election in 2004, Russia is clearly tempted to intervene again. The “Russian factor” will strongly influence the campaign. Greater Western engagement is needed to ensure that the “Europe factor” is equally prominent.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
The outlook for Ukraine is stormy, but the country’s not about to split apart.
Instead, a complex political dance is unfolding

ANALYSIS & COMMENTARY: Yurii Ruban, Guardian, London, UK, Friday September 05 2008

Dick Cheney, the US vice-president, arrived in Kiev this week amid what most Ukrainians will regard as just another seasonal gale. They have become
acclimatised to their nation’s stormy politics. To casual outside observers, though, it certainly sounds more serious than that.

When a prime minister is accused of leading a “constitutional coup” and a president is referred to as a “dictator” it might be assumed that civil unrest is on the cards. It isn’t.

What might make the bickering all the more incomprehensible is that the dispute centres on the two heroes of the 2004 Orange revolution. President Viktor Yushchenko and Yulia Tymoshenko, the prime minister, at one time the prince and princess of western values, have found it almost impossible to work together since.

Nevertheless, for all the violent epithets they throw at each other, the Orange revolution represented a watershed: disputes, no matter how fierce, will be resolved within the (imperfect) constitutional framework. Ukraine’s politics are certainly robust – but so is its democracy.

The Orange bloc dissolved more quickly than most liberation movements. With the latest crisis coming so soon after the Russia-Georgia war, it makes
sense to hunt for Moscow’s fingerprints. They are not hard to find: the Putin/Medvedev regime doesn’t use kid gloves.

Still, wholly domestic Ukrainian factors are also at play. Real differences exist between President Yushchenko and his erstwhile ally, not merely of
personality or in terms of the nuances of foreign policy, but in the vital economic realm as well.

Moscow will not be unhappy this week with events in the neighbour it too often still regards as a satellite but, in fairness, Putin is not to blame
for Ukraine’s inflation rate and the cabinet’s seeming inability to restrain public spending.

Yulia Tymoshenko might like to portray herself in front of some audiences as an eastern European Margaret Thatcher, but the reality is of a shameless
economic populist. Yes, she supports privatisation – as does the president – but, for her, it is a means to enrich an oligarchic elite and fund lavish public spending.

Moreover, while supporters of the two Orange parties, Our Ukraine-Self Defence (OU) and Bloc Tymoshenko (BYuT), share the same basic attitudes – in
contrast to the openly pro-Russian Party of Regions (PoR) and the Communists – the prime minister has recently modified her positions somewhat.

When President Yushchenko and counterparts from Poland and the Baltic states were on the barricades in Tbilisi last month defending Georgia’s
independence, Ukraine’s prime minister was notably absent and unable to provide any details of her whereabouts over a two-week period.

She has also appeared ambivalent about ending Russia’s lease on the port facilities at Sevastopol, which expires in 2017. The president has been clear that he sees the Black Sea fleet’s continued presence as an anachronism.

The assumption that Tymoshenko is courting favour with Moscow in advance of the presidential elections in 2010 in which she is a strong candidate was
borne out by the votes this week in the Rada, the Ukrainian parliament. Tymoshenko’s MPs joined forces with the PoR in an attempt to limit the presidential prerogative in the field of foreign affairs and reduce the status of the office from a French-style presidency to a purely ceremonial role.

Although Ukraine still enjoys strong economic growth, it must be questioned whether constitutional change needs to be rushed through when the price of
staple goods is most Ukrainians’ focus.

Tymoshenko enjoys a cult-like following and has improved her poll position, but because her government’s record is flimsy, she is unlikely to want early
elections. Yushchenko’s promise to put things in the people’s hands is commendable and no idle threat – he has done so several times before – but it is not inconceivable that these two will patch things up.

Yushchenko might be prepared to risk electoral humiliation in early elections but his primary interest is in maintaining some degree of unity on policy in the run-up to the decision on Ukraine’s application for a Nato accession plan in December.

Equally, the prime minister might want to tease votes away from the PoR but if she were forced into a coalition with them it might destabilise her own
power base, which understands it would freeze the process of further Euro-Atlantic integration.

Ukraine has managed reasonably well to accommodate its various minorities – not just the Russophone one – by providing generous autonomy for Crimea, for instance. But events in Georgia have certainly given politics a new edge.

Ukraine took a once-and-for-always decision in 2004; it sees its destiny as being with the rest of Europe. The prime minister now has to demonstrate
whether she is still in step with Ukraine’s citizens or dancing to a different tune, one played on the balalaika.


[return to index] [Action Ukraine Report (AUR) Monitoring Service]
By Mykola Siruk, The Day Weekly Digest (25), Kyiv, Ukraine, Tuesday, September 2, 2008
The head of the Russia & Eurasia Programme, British Royal Institute of International Affairs (Chatem-House) James Sherr is known well to Ukrainian, Russian as well as Western expert circles. He has been following the development of events in the post-Soviet countries in the security dimension for a long time.
What meaning will Russia’s recognition of the independence of South Ossetia and Abkhazia for the regional security and the situation in the world? What will be the consequences of this conflict for Ukraine? What conclusions should be made by the Ukrainian government? Why is the NATO Membership Action Plan a distracting moment?
These and other questions are raised in The Day’s exclusive interview with the British expert James SHERR.
[JAMES SHERR] “Let’s keep in mind the primary issue. On Aug. 8, Russia was given a magnificent opportunity to use military force on a limited and responsible scale. It didn’t. If it had done so-if it had ejected Georgian forces from South Ossetia and stopped at the border-it would have won a convincing military, political and psychological victory, and it would have come a giant step closer to securing that mantle of legitimacy as a ‘guarantor of stability and security’ that it has always aspired to in the former USSR.
“The West would have felt humiliated, it would have been apprehensive about Russia’s longer-term game plan, but it would have been in no position to object to anything or demand anything. Despite all the evidence that Russia had provoked President Saakashvili to take the rash and wanton step he took, Russia would have secured the moral high ground, and the West would have been consumed by self-reproach.
“Yet from the moment Russia occupied Georgian ports and cities, cut its key transport arteries, threatened the Baku-Tblisi-Ceyhan pipeline, brought its Abkhaz allies (and its own forces in Abkhazia) into the conflict, allowed its Osetian satraps to ethnically cleanse South Ossetia of Georgians and displayed swaggering contempt for the agreement it concluded with President Sarkozy, one thing has become clear to everyone: the issue is not Saakashvili, but Russia. The West is profoundly divided about what it can and should do, but there is no serious division on this point.
“And two other points of division have disappeared. No serious person can now doubt Russia’s determination to re-establish its dominance over what it still calls ‘post-Soviet space’. For 17 years in the West, the emotionally placid, ideologically complacent and intellectually over-sophisticated dismissed this ‘rhetoric’ as a ‘legacy of the past’ that would recede as Russia ‘adjusted’, became more self-confident, more prosperous, more integrated into the global economy. “All the latter things have happened. Yet what kind of Russia have they produced? Answer the question yourself.
“Moreover, who can now claim that a strong Russia is good for Europe? Many leaders of the G7 speak with urgency about the importance of cooperation with Russia. But which leader wants Russia to be stronger? This question also answers itself.
“These divisions were disappearing even before Russia recognised South Ossetia and Abkhazia on Aug. 26. So the question inevitably arises: Did Russia consider this fact before crossing this Rubicon? Here, the answer is not self-evident.
‘No, they are dizzy with success.’ ‘Yes, but they are dizzy with success’….Neither of these answers are adequate. They miss the key point: Russia is not only determined to use its new-found power, it feels entitled to use it. (As Putin put it in 2006, ‘Russia has earned a right to be self-interested’).
“And they miss a key nuance: Russia is more contemptuous of the West than confident of itself. The astute editor of Rossiya v Global’noy Politike, Fyodor Lukyanov (who supported Russia’s action of 8 August) is as convinced as I am that, with every step, Russia has calculated on Western division to secure its success.
“Yet whenever Russia’s leadership saw that it overestimated these divisions, it has ‘taken a more radical position’. In Lukyanov’s words, ‘the Russian leadership like the overwhelming majority of Russians was shocked by the unanimous support the West gave to Saakashvili’ and so, ‘in this emotional atmosphere’, on Aug. 26 ‘it took a great risk’.
“Consider the irony. Western division and Western toughness, in equal measure, now provoke Russia ‘to be self-interested’. Consider the implications. In the 1990s whenever the West reacted more negatively than Moscow anticipated, it sought compromise or backed down; today, it doubles the stakes.
“Consider the greater implication: when rational calculations prove faulty, ’emotional’ considerations take over. Conclusion: we are not only in uncharted waters, but dangerous waters.”
[THE DAY] How do you see the implications for Ukraine?
[JAMES SHERR] “Precarious, but far from desperate. Ukraine will come under greater pressure from Russia. It will be offered greater ‘inducements’, too About these two things, I have no doubt.
I also have no doubt that when Russia planned war with Georgia and finally found the excuse for one, it had Ukraine on its mind as much as Georgia. But that does not mean Ukraine is Georgia. War between Russia and Georgia is shocking, and it is also threat to the entire Black Sea region.
“But war between Russia and Ukraine is a threat to the entire Euro-Atlantic system. And it is a threat to Russia as well. Russia’s preferred mode of action in Ukraine, even under threatening circumstances, is different from what it was in Georgia, and its timetable is longer.
“The challenge for the West as well as Ukraine is to keep it long: to slow the game down and equalise the players as well. At one level, that should not be difficult for Ukraine. Ukraine, unlike Georgia, has never provoked its neighbour. That is not Ukraine’s way.
Ukraine can no longer allow the greatest threat to its security to be Ukraine itself.
“But equalizing the stakes is very difficult for Ukraine. I can only endorse what Anatolii Hrytsenko has recently said and what I have said in almost every previous interview. Ukraine can no longer allow the greatest threat to its security to be Ukraine itself.
“It must act with purpose, not parade its principles. It must implement policies, not declare them. It dare not promise (let alone threaten) what it has no means to deliver. Its leaders must bring competent professionals together and listen to them.
“They must revive institutions, get the wheels of the state machine to turn, motivate the people inside it and raise the morale of people outside it. They must stop finding scapegoats for their own mistakes.
“They must remove every ‘subjective’ factor that obstructs people of dedication, competence and integrity and stop rewarding servility, venality and laziness. They must think about the future and make plans for it. And that means modernising the Armed Forces, the security services and the energy sector.”
[THE DAY] Does that mean you agree with Hrytsenko that Ukraine should withdraw its MAP application?
[JAMES SHERR] “Of course, Hrytsenko proposed this as a gesture of strength. Today, I fear that it would be interpreted as a sign of weakness and, whatever the actual motivation, many in the West would simply come to the conclusion that Ukraine had capitulated to Russian pressure. But on the basic issue, Hrytsenko and I are of one mind.
“MAP is a distraction. The tough, indispensable issue is how to strengthen Ukraine’s capacity, security and defences in concrete terms. And how we, NATO, can help Ukraine strengthen it-not just by ‘enhancing cooperation’ but by practical measures of assistance.
“That course of action will prove more rewarding, more convincing and less provocative than MAP, and it will prove more reassuring and less divisive in Ukraine itself. That is the commitment that Ukraine now requires from NATO, not MAP. And that commitment will be the litmus test of our relationship. If NATO is unwilling to provide real assistance, then what value could MAP possibly have?
“If Ukraine does nothing to help itself, then who will agree to assist?”
[return to index] Action Ukraine Report (AUR) Monitoring Service]
Welcome to send us names for the AUR distribution list.

Noting its “intimidation” of Ukraine and the Baltic states, and a threat of attack on Poland 
Says demise of the Soviet Union was the greatest step for liberty in the last 60 years
By Guy Dinmore and John Thornhill in Cernobbio, Italy, Financial Times, London, UK, Sep 6 2008
Dick Cheney, the US vice president, broadened his attack on Russia late on Saturday, directly challenging Vladimir Putin’s view of history and warning that his government could “not have it both ways” by using “brute force” and still hoping to build economic progress. Mr Cheney saved his toughest anti-Russian speech for the last leg of his tour of Georgia, Azerbaijan, Ukraine and Italy.
His unequivocal rhetoric contrasted with the more moderate remarks of José Manuel Barroso, the head of the European Commission who goes to Moscow on Monday with Nicolas Sarkozy, the French president, to try to get Russia to abide by the ceasefire agreement it signed after invading Georgia last month.
Addressing the global Ambrosetti conference near Lake Como, Mr Cheney said that within a 30-day period Russia had violated the sovereignty of a democratic country, breached a ceasefire agreement with the EU, seriously damaged its international standing and undermined its relations with the US.
The Bush administration’s most hawkish member widened his list of Moscow’s alleged misdeeds by also accusing it of selling advanced weapons to Syria and Iran. Arms sold to Damascus had been channelled to Lebanon and Iraq, Mr Cheney said.  His comments come at a delicate moment of diplomacy between Europe and Syria with Mr Sarkozy in Damascus just two days earlier.
Mr Cheney also got personal, quoting Mr Putin, the Russian prime minister, as calling the end of the Soviet Union “the greatest geopolitical catastrophe of the 20th century”. He then added: “Let me give you my opinion. The demise of the Soviet Union was inevitable and the greatest forward step for liberty in the last 60 years.”
He went on to say that the Russian people deserved freedom and prosperity. He warned: “The Russian leaders cannot have it both ways” – enjoying the benefits of commerce and prestige while engaging in brute force.
Concern was intensifying over Russia’s “larger objectives”, Mr Cheney said, noting its “intimidation” of Ukraine and the Baltic states, and a threat of attack on Poland for agreeing to accept US missile defence systems directed toward Iran.
Mr Cheney warned Europe over the dangers of its over-reliance on Russia as an energy supplier. He also challenged European partners in Nato over their reluctance to extend membership for Georgia and Ukraine, saying the “time has come” to start MAP, the membership action plan.
Business leaders and politicians attending the conference had expected an uncompromising assault by Mr Cheney. But some said it only highlighted a sense of exasperation by a departing administration that had failed in its own diplomacy toward Russia, and the acute differences between Washington and Europe.
Mr Barroso also appeared to want to diminish the role of the US in resolving the conflict in Georgia, telling the Financial Times: “The hope for peace is the EU.” “I’ve not seen any proposals coming from any parts of the world apart from the peace proposal put forward by president Sarkozy on behalf of the EU,” he said.
Speaking later to reporters, Mr Barroso said: “We are interested in having constructive relations with Russia. It is important to note what we need. We need cool heads, not a cold war and this is the basic message.”
Mr Barroso also urged Russia to respect the Sarkozy peace plan it had signed. Responding to Russia’s unilateral recognition of the breakaway Georgian regions of South Ossetia and Abkhazia, Mr Barroso noted that article six of the plan provided for diplomatic discussions over their status.
Moscow has said it will withdraw its forces from a “buffer zone” it has established in Georgia only after international peacekeepers are in place and the government of Georgia has signed non-aggression pacts with the two regions.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

By Tabassum Zakaria, Reuters, Kiev, Ukraine, Friday, Sep 5, 2008
KIEV – U.S. Vice President Dick Cheney appealed to Ukraine’s divided leaders on Friday to unite and forge closer links with the West, pledging Washington’s support for Kiev to join the NATO military alliance.
Cheney was visiting amid a political crisis in Ukraine which has split the ruling coalition and sparked fresh debate about whether the former Soviet
republic should draw closer to the West, to Russia, or pursue a neutral stance.
“The United States has a deep and abiding interest in your well-being and security,” Cheney said after meeting President Viktor Yushchenko, a pro-Western leader seeking rapid NATO membership. Ukraine’s best hope to overcome threats, he added, “is to be united, united domestically first and foremost, and united with other democracies.”
The vice president later visited a memorial to victims of a devastating famine in the 1930s, triggered after Soviet ruler Josef Stalin forced peasants into collective farms. []
Cheney’s visit was likely to anger neighbouring Russia, already irritated at his strong support on Thursday for Georgian membership of NATO. Moscow wants to keep Ukraine, a key gas transit country, part of its sphere of influence.
A Russian Foreign Ministry spokesman attacked Cheney for making fresh promises to Georgia on Thursday about NATO membership, saying this encouraged Georgian aggression.
Russia and Georgia fought a brief war last month after Tbilisi sent in troops to try to seize back the rebel region of South Ossetia, provoking massive retaliation by Moscow.
“The new promises to Tbilisi relating to the speedy membership of NATO simply strengthen the (President Mikheil) Saakashvili regime’s dangerous feeling of impunity and encourages its dangerous ambitions,” Russian Foreign Ministry spokesman Andrei Nesterenko told reporters.
The conflict has hurt Russian stocks and the rouble as foreign investors pull money out because of the increased political risk. Russian shares plunged more than 7 percent on Friday to their lowest level in over two years and the Central Bank intervened on Thursday to prop up the rouble.
Yushchenko, hosting Cheney on Friday, said NATO membership was vital to protect his country, which shares a land border with Russia and has a large Russian-speaking population.
Cheney restated a promise made by NATO at a summit in Bucharest that Ukraine would be eventually allowed to join the military alliance, saying “that commitment stands today”.
That meeting refused to give Kiev and Tbilisi a Membership Action Plan — a first step towards membership. The U.S.-backed idea was resisted by Germany, France and smaller NATO states.
Nor is the idea of membership wholeheartedly embraced in Ukraine itself. Polls show a majority of Ukrainians oppose NATO membership and the leader of the country’s biggest parliamentary party said the issue should be decided by the Ukrainian people.
“Any attempts to force Ukraine into NATO are doomed to failure,” Viktor Yanukovich told a news conference. “This question has to be solved … through a referendum”.
Cheney was touring the region to show Washington’s support for Ukraine, for close U.S. ally Georgia and also for booming oil state Azerbaijan. The latter two countries are key links in an energy corridor bypassing Russia that transports around 1 percent of daily world crude oil output west from the Caspian Sea.
Earlier in Kiev, Cheney met Prime Minister Yulia Tymoshenko, whose enthusiasm for NATO has cooled since she signed a letter in January calling for a Membership Action Plan. Tymoshenko and Yushchenko’s coalition collapsed on Wednesday after only nine months, plunging the country into chaos.
European Union president France brokered a ceasefire to the Georgian conflict and EU foreign ministers were meeting in southern France later on Friday to discuss sending civilian monitors to the zone.
EU foreign policy chief Javier Solana said plans were “practically ready” for an EU civilian monitoring mission to Georgia which the bloc hopes will convince Russia to withdraw its forces to pre-conflict lines in Georgia.
The EU, Russia’s biggest trading partner, has threatened to suspend talks on a partnership agreement if Moscow fails to withdraw its troops to pre-conflict positions by Sept. 15.  But EU leaders are wary of sanctions which could isolate Moscow, encourage Kremlin hardliners and damage Europe’s booming business relationship with Russia.
EU trade chief Peter Mandelson told Reuters in an interview on Friday it was in no-one’s interests to use the Georgia crisis to delay Russia’s entry into the World Trade Organisation.
The Moscow-led Collective Security Treaty Organisation, known as the ODKB, backed Russia’s actions in Georgia on Friday, but stopped short of recognising Georgia’s separatist regions as Moscow has done.
In Washington, a U.S. official said Washington would scrap a civilian nuclear deal with Russia intended to lift Cold War restrictions on trade and open up the U.S. nuclear market and Russia’s uranium fields to companies from both countries.
“The administration will not be moving forward with the agreement. It will be pulling it back from Congress,” said the State Department official, speaking on condition of anonymity.
The United States has used warships to ferry relief supplies to Georgia, in part to send a signal to Moscow. Its biggest ship yet arrived on Friday. The USS Mount Whitney dropped anchor off Georgia’s Russian-patrolled port of Poti. Russia has accused U.S. warships of rearming Tbilisi’s defeated army, a charge rejected as “ridiculous” by Washington. (Additional reporting by Conor Sweeney and Oleg Shchedrov in Moscow, Sabina Zawadski in Kiev and Mark John in Avignon)
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
By Steven Lee Myers, The New York Times, New York, NY, Friday, September 5, 2008

KIEV, Ukraine — President Viktor A. Yushchenko said Friday that the question of Ukraine’s membership in NATO had new urgency in the wake of Russia’s conflict with Georgia, even though his political coalition was once again on the brink of collapse in part because of the issue.
Meeting with Vice President Dick Cheney, he also expressed concerns about the broader threat that Russia posed to its neighbors in the region. And he pressed the United States and its allies to reconsider a decision in the spring not to begin a process intended to lead to Ukraine’s membership in the North Atlantic Treaty Organization.
The conflict, Mr. Yushchenko said, “showed that there are security risks in the Black Sea and we need to do everything possible to make sufficient steps that would not allow expanding that threat to other regions and other frozen conflicts.”
Mr. Cheney expressed strong support for Ukraine’s membership in NATO, as he did the day before in Georgia, where Russian forces seized control of two breakaway regions, Abkhazia and South Ossetia, as well as “buffer zones” in Georgian territory.
“The United States fully supports the right of Ukraine to build ever-stronger ties of cooperation and security throughout Europe and across the Atlantic,” Mr. Cheney said, appearing with the Ukrainian leader after separate meetings with him and his once and again estranged ally, Prime Minister Yulia V. Tymoshenko.
Russia’s anger over NATO’s expansion has boiled over in recent months, with Prime Minister Vladimir V. Putin and other leaders denouncing the alliance as an aggressive and destabilizing force on its borders. In Moscow, the Foreign Ministry criticized Mr. Cheney’s similar promises of membership in the alliance to Georgia and its president, Mikheil Saakashvili.
“Statements of this kind and new promises to Tbilisi of fast NATO membership only strengthen the dangerous feeling of impunity of the Saakashvili regime and encourage its aggressive ambitions,” a spokesman, Andrei Nesterenko, said.
Russia has blamed Mr. Saakashvili for inciting last month’s brief war by trying to seize control of South Ossetia on the night of Aug. 7.
The Bush administration has vigorously lobbied the alliance to offer “membership action plans” to Ukraine and Georgia and considers the alliance’s expansion an important part of President Bush’s “freedom agenda.” The NATO allies, led by Germany and others wary of aggravating Russia, balked at that in April at the alliance’s summit meeting in Bucharest, though a final statement included a promise that both countries could eventually join the alliance.
While the United States and most European countries have uniformly denounced Russia’s invasion, as well as its recognition of Abkhazia and South Ossetia, there has been no collective agreement on how strongly to respond. Even within the Bush administration, the matter is evidently still largely unsettled, though the administration has been very supportive of Georgia and Ukraine diplomatically, and has granted Georgia an aid package of $1 billion.
A senior administration official traveling with Mr. Cheney said he believed that NATO would rethink its position on Georgia and Ukraine when the alliance’s foreign ministers met again in December. “People have been shaken by events in Georgia,” the official said. “It has created a new situation. I think there are some indications that some of the allies are looking with a fresh set of eyes.”
The official said the Bush administration would expend “an awful lot of energy” in its remaining months in office to build support for bringing Ukraine and Georgia into the alliance.
In Avignon, France, the European Union’s foreign ministers met to discuss relations with Russia and Ukraine, and signaled a less confrontational approach than the United States.
At a news conference, France’s foreign minister, Bernard Kouchner, said that it was vital to coordinate policy with the United States but that Europe saw its relationship with Russia, a large and close neighbor, differently from the way Washington did.
“Of course, Mr. Cheney, the vice president, has a certain sense of protecting the people,” he said when asked about Mr. Cheney’s visit to Ukraine. “I’m not so sure that with this sense of protecting the people he has got a lot of success.”
The European Union is to hold a summit meeting with Ukraine on Tuesday, after a senior delegation visits Moscow to try to enforce the French-brokered cease-fire agreement between Russia and Georgia. European countries are discussing how warm an embrace to give Ukraine after the Georgian fiasco.
Joining NATO has been a principal policy objective of Mr. Yushchenko since he became president after public protests in 2004 that became known as the Orange Revolution. But membership is far from popular in Ukraine, where a majority of people remain hostile to the idea of splitting so sharply with Russia.
Differences over NATO and the war in Georgia contributed to political tensions here. Those issues and a new effort last week to weaken the president’s powers splintered the fragile alliance between Mr. Yushchenko and Ms. Tymoshenko, raising the prospect of a new round of elections.
Mr. Cheney stepped carefully around Ukraine’s internal political disputes, the administration official said, but in public he urged the two leaders to unite. “Ukraine’s best hope to overcome these threats is to be united — united domestically, first and foremost, and united with other democracies,” he said.
A cold-war-like confrontation on the Black Sea continued Friday when the Mount Whitney, the flagship of the United States Navy’s Mediterranean fleet, anchored outside the Georgian port of Poti with a delivery of tons of aid supplies.
Russian troops remained stationed on the outskirts of Poti in what the Kremlin has called a security zone that stretches deep inside Georgian territory. The Russians no longer patrol the city itself, and the port is functioning normally, said a spokesman for Georgia’s Interior Ministry. The Mount Whitney began unloading its cargo uneventfully.
NOTE: Reporting was contributed by Michael Schwirtz from Tbilisi, Georgia; Clifford Levy from Moscow; Steven Erlanger from Avignon, France; Stephen Castle from Brussels; and Neil MacFarquhar from the United Nations.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
Please contact us if you do not wish to receive the AUR.

By Roman Olearchyk in Kiev, Financial Times, London, UK, Friday, September 5 2008
KIEV – Dick Cheney, the US vice-president, expressed strong US backing for Ukraine on Friday as he visited Kiev in show of support in the wake of last month’s conflict between Russia and Georgia.
Ukraine sided with the US over Georgia and is wary of Russia’s intentions in the region. Like Georgia, Ukraine is an aspiring member of Nato, in the face of Russian opposition.
After a meeting with Ukraine’s president, Viktor Yushchenko, Mr Cheney pledged the US would support Ukraine’s efforts to join Nato, saying that Russian opposition to further eastward expansion of the bloc should not influence this decision. He said “no outside country gets a veto” adding that the commitment made in April “stands today”.
Stopping off in Kiev after visiting Georgia and its energy-rich neighbour, Azerbaijan, Mr Cheney discussed energy diversification and regional stability
The US has backed existing and planned energy transit routes for oil and gas in the region to bypass Russia, including projects in Ukraine, which is itself deeply vulnerable to energy imports from Russia.
Next year Moscow is expected to impose a fourth stiff natural gas price rise on Kiev in as many years. Ukraine’s efforts to break from Moscow’s grip have been hampered by domestic crises sparked by relentless political rivalries.
Mr Cheney’s visit was clouded by the latest moves in the escalating power struggle between the country’s pro-western president and prime minister.
Standing alongside Mr Cheney, Ukraine’s president called for fresh talks to preserve his party’s coalition with Yulio Tymoshenko, the prime minister. He stressed, however, that any compromise deal would need to include the passage of a resolution in parliament upholding Georgia’s “territorial integrity.”
On Wednesday, Mr Yushchenko’s party backed out of a coalition with his erstwhile ally accusing her of betrayal and softness in support for Georgia.
The Ukrainian president has accused Ms Tymoshenko’s party of dragging its feet on a parliament resolution on the issue. She has voiced solidarity with Georgia, but her party wants the resolution to be discussed in a parliament commission before a vote.
While Ukraine’s economy has done well this year, economists are concerned that its impressive 8-year growth spurt could be dented by this, its third political crisis in as many years. Ukraine’s small and illiquid stock market has been sinking for months along with global peers.
Alexander Valchyshen, head of research at Investment Capital Ukraine, a private asset management and investment banking firm, said the country’s economy in the next few months will experience a “cooling connected with the global economic situation.”
“Factors in play could weaken the local currency, but we don’t expect a tumble. Commodity prices are falling, including Ukraine’s main export, steel. The prospect of higher natural gas import prices next year will possibly further increase Kiev’s current account deficit. In light of this, the political crisis poses a risk of curtailing foreign direct investments, which have been strong thus far this year with some $7bn coming in,” he said.
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Press office of President Victor Yushchenko, Kyiv, Ukraine, Fri, Sep 5, 2008

KYIV –  President Victor Yushchenko together with his wife Kateryna Yushchenko and the U.S. Vice President Richard Cheney with his wife Lynne Cheney put flowers near the Monument to Victims of Holodomor 1932-1933 in Kyiv.




PHOTO: Vice President Dick Cheney is joined by Mrs. Lynne Cheney, President of Ukraine Viktor Yushchenko and Mrs. Kateryna Yushchenko, in presenting memorial baskets Friday, Sept. 5, 2008, at the Holodomor Memorial at St. Michael’s Square in Kiev. The Holodomor, Ukraine’s famine of 1932-33, was imposed by Soviet communists and killed an estimated three to seven million. White House photo by David Bohrer


PHOTO: Vice President Dick Cheney is joined by Mrs. Lynne Cheney, President of Ukraine Viktor Yushchenko and Mrs. Kateryna Yushchenko in a moment of silence Friday, Sept. 5, 2008 at the Holodomor Memorial in Kiev. White House photo by David Bohrer


PHOTO: Seen through the Holodomor Memorial, Vice President Dick Cheney observes a moment of silence Friday, Sept. 5, 2008 in Kiev, to remember the millions of Ukrainians murdered between 1932-33 during a Soviet enforced artificial famine. Mrs. Kateryna Yushchenko, wife of Ukrainian President Yushchenko, is at right. White House photo by David Bohrer
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
U.S.-Ukraine Business Council (USUBC):
Promoting Ukraine and U.S.-Ukraine business investments since 1995.
A Glenside resident is hoping a 9-foot-tall flower brings more than an appreciation of flowers to those who see it.

By Mischa Aaron Arnosky, Times Chronicle, Glenside News
Fort Washington, PA, Wednesday, August 13, 2008
GLENSIDE, PA – The sunflower in Ruth Griffith’s front lawn, next to the flagpole, garners a lot of attention. Cars drive past slowly to take a look and, well … it’s a conversation starter with both neighbors and strangers. But Griffith said the sunflower is more meaningful than it appears.

Griffith is of Ukrainian heritage and the flower represents the 75th anniversary of the genocide and famine that struck the country as a result of Joseph Stalin, known as Holodomor, in which more than 7 million Ukrainians died. And her grandfather, Vasya Horbatiuk, was a victim.

“Stalin was taking all grains that they grew and after he took all the grain, he took all the food,” Griffith said. “My grandfather was in charge of a collective farm and he would let the peasants, after the grain was taken, go in the field and collect what was left behind. For that he was arrested and starved to death in prison.”

According to Griffith’s grandmother, her grandfather’s parents, her great-grandparents, had everything taken from them as a result of Horbatiuk’s actions.
“Absolutely every last morsel of food, whatever they had, even the seeds, whatever there was, was taken from them as punishment,” Griffith said.

Griffith teaches a graduate class on the famine and genocide at Kean University in Union, N.J., and wanted to incorporate the sunflower into her lesson plans. She said most people don’t know that the sunflower is originally from the United States, but was very popular in Europe, as it was cultivated for its food and oil.

“Every Ukrainian home had a sunflower,” Griffith said. “It was the last food that they had for about five months.”

It took three years for Griffith to get a good sunflower. Earlier in the year, she planted seeds for five flowers, but it yielded only one really large flower. The stem’s diameter is several inches wide.

“It’s as if this one flower took all of the life and energy from the others,” Griffith said. “This one took so unbelievably well and I’m so proud of it.”

Griffith said some of the children in her neighborhood have mistakenly taken the flower for a beanstalk. Correcting them, Griffith said the tall plant will ultimately look more exciting than a beanstalk, and it allows her to talk about her heritage.

“It’s a genocide that’s not very well known,” Griffith said. “The people that went through it stayed in the Soviet Union for the most part and couldn’t talk about it. They had to praise the people that starved them to death.”

Because Griffith teaches a class on the subject, there are people asking her students the same questions about their sunflowers in New Jersey. One of the sad things, though, is that the sunflower will fully bloom in a couple of days and then start to bow, as it becomes top heavy. Her sunflower has conveyed more information than most flowers, though.

“I tell people this is for my grandfather and great-grandparents,” Griffith said. “This is to remember them.”


FRIDAY, OCTOBER 10, 2008, 9:00 A.M. to 1 P.M., Union, New Jersey


Welcome: In 1932-1933, in the heart of a region called the breadbasket of Europe, Stalin’s Communist regime committed a horrendous act of genocide against millions of Ukrainians.  A productive agricultural nation was subjected to starvation, one of the most brutal forms of torture and death.

Holodomor is the name given to the genocide by starvation of at least 7 million Ukrainians in 1932-1933.  In Ukrainian, “Holodomor” literally means “murder by starvation.”  Seventy-five years after the fact, Ukrainians commemorate this tragedy while an increasing number of nations of the world recognize the terror famine as genocide.

Unlike other famines in history that were caused by natural disasters, the Ukrainian famine was an artificial measure undertaken by Josef Stalin. 

His Communist regime not only confiscated all the grain harvested by Ukrainian farmers, but also withheld food deliveries from other locations, seized vegetables grown in gardens, executed those who tried to get food, and forbid farmers and their families to leave their land in search of survival. 

While Ukrainians starved to death, the grain they had grown and harvested was being exported to foreign markets in order to fund rapid industrialization and a growing Soviet military.

Come to this conference to learn why the genocide occurred and how it was carried out. This free educational conference is sponsored by Kean University in order to preserve the dignity of all human beings, to promote human rights around the world, and to ensure that food is never used as a weapon again.

LINK: To October 10, Holodomor Conference:

CONTACT: By email:
By phone:  Dr. Ruth P. Griffith, 1-908-737-0387
By surface mail: Ruth P. Griffith, CAS 317, Kean University, 1000 Morris Avenue, Union, NJ  07083
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

Marketwire, Winnipeg, Manitoba, Canada, Thursday, Sept. 4, 2008

WINNIPEG, MANITOBA— The history and experiences of survivors of the Holodomor-the Ukrainian famine in 1932 and 1933-will be accessible online for all Canadians, thanks to support from the Government of Canada.

The Honourable James Bezan, Member of Parliament (Selkirk-Interlake), on behalf of the Honourable Josee Verner, Minister of Canadian Heritage and
Status of Women and Minister for La Francophonie, today announced funding for the Ukrainian Canadian Congress.

The Congress will receive $50,000 in funding to create a section on its website called Holodomor: Honouring the Past for a Better Future. This site
will highlight experiences of Holodomor survivors living in Canada. The site will also include cultural and artistic works by Canadian artists in
commemoration of the 75th anniversary of the Holodomor.

“The Government is proud to participate in this project, which will educate the Canadian and international public about the Holodomor and honour its
survivors who now live in Canada,” said Minister Verner. “This website will allow all Canadians join Ukrainians and the international community in
commemorating the 75th anniversary of the Holodomor.”

“Projects such as this showcase the potential of the Internet to give Canadians greater access to our history and heritage,” said Mr. Bezan. “I am proud that our Government is contributing to a project that will help all Canadians remember and learn about this particular event in our history so as to ensure that similar tragedies are not repeated in the future.”

The Government of Canada has provided this financial assistance through the Department of Canadian Heritage’s Gateway Fund, a component of the Canadian Culture Online Strategy. This program, which is committed to fostering a uniquely Canadian presence on the Internet, works with creators, cultural industries, communities, and institutions to produce online Canadian cultural content that promotes our country’s rich culture, history, arts, and heritage. [This news release is available on the Internet at under Media Room.]

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

Ukrinform, Kyiv, Ukraine, Saturday, September 6, 2008 

KYIV – A conference devoted to the 75th anniversary of the 1932 – 1933 Great Famine (Holodomor) in Ukraine was called in Rome by Ukraine’s embassy to Italy, an UKRINFORM correspondent reported.

The delegates to the conference, particularly, heard a report by Italian Professor Andrea Graziosi, author of a popular book about Holodomor, which he wrote following reports by Italian diplomats on the “famine terror” in the USSR, especially in Ukraine.
Italian politologist and journalist Massimiliano di Pasquale told about the roots of the tragedy and the Soviet bureaucratic machine. Professor Olena Ponomareva of Rome’s La Sapienza university gave little known historical details helping realize the artificial nature of Holodomor. Particularly, she told about mass killing of Ukrainian kobza-players in the Stalin epoch for impossibility to censor their singing.
The authorities of Rome presented a big and prestigious Julius Caesar Hall to host the forum. Italian parliament deputies, representatives of the Italian delegation to the Council of Europe and other officials sent telegrams to welcome the event. According to different estimates, the Holodomor masterminded by the totalitarian communist rule had a death toll of seven or ten million in Ukraine.

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

By Stanislav Kulchytsky, Professor, Scholar, Researcher, Historian
The Day Weekly Digest (25), Kyiv, Ukraine, Tuesday, 2 September 2008 
To many people, the assessment of the Holodomor as an act of genocide against the Ukrainian people, which is entrenched in the law passed by the Verkhovna Ra­da of Ukraine on Nov. 28, 2006, is unconvincing. The Russian Federation is particularly opposed to it. This places a great responsibility on historians.
When the law was being passed, every Ukrainian MP was given a thick folder with documented proof. Now it is the task of our parliamentarians to convince those who still doubt the correctness of the position that was adopted by most Ukrainian parliamentarians. Scholars themselves must also show where they have achieved consensus and where they still disagree.
The international forum pegged to the 75th anniversary of the Holodomor is slated for Sept. 25-26 in Kyiv. This event will include an international scholarly conference that will examine the causes and demographic consequences of the tragedy that befell the Ukrainian people and issue a legal assessment.
What will be the scholarly verdict? That depends on the results of the discussion that must begin even before we take our seats at the conference table. On the pages of this newspaper, which has always devoted attention to the problem of the Holodomor, I would like to submit a number of questions for discussion by my colleagues and the general public.
There is actually no difference between the concepts of famine and Holodomor. In both cases, people were dying because they had no food. However, there is a quantitative difference: in the latter case, the death toll was incomparably higher. Hence the term, Holodomor, meaning “to kill by hunger.”
In December 1987 Volodymyr Shcherbytsky, First Secretary of the Central Committee of the Communist Party of Ukraine (CC CP(B)U), admitted that a famine had taken place in the USSR, but he attributed it to drought. Drought was also indicated by the communist faction during the deliberations in the Ukrainian parliament of President Yushchenko’s Holodomor bill.
However, weather statistics do not support the drought theory. Stalin himself did not fault the weather, and he explained the “food difficulties” by the inadequate work of the peasants on collective farms.
The resolution of the CC CP(B)U, entitled “On the Famine of 1932-33 in Ukraine and the Publication of Archival Materials Connected with It” (Jan. 20, 1990) attributed the famine to what was called “a grain-delivery policy that was disastrous for the peasantry.” Indeed, as a result of the confiscation of grain from the 1932 harvest, grain-producing regions were struck by famine, which led to tens of thousands of deaths.
Ukraine differed from other regions in that the state took away almost all the grain not only from the 1932 harvest but also from the 1931 harvest. Thus, famine began in Ukraine in the first half of 1932 and continued practically uninterrupted until the second half of 1932. Like in other regions, it claimed the lives tens of thousands of peasants.
Russian politicians and scholars emphasize that the famine was a general peasant tragedy that was caused by the government’s policy. This policy is being condemned, but at the same time it is being justified. It is claimed that grain was confiscated in order to earn hard currency to build new projects for the first Five-Year Plan. It is stressed that the Soviet Union’s industrial weakness would have never allowed it to gain a victory in the Great Patriotic War.
This vision of history allows the ruling circles in contemporary Russia to highlight the achievements of the past and to conceal crimes. This is precisely why our opponents in Russia are trying to dilute our tragedy, which claimed millions of victims in the all-Union famine that also took place in Ukraine before the Holodomor.
Non-recognition of the Holodomor as a separate phenomenon allows them to nullify any efforts to qualify it as an act of genocide.
[1] First of all, Soviet-era diplomats of the Stalinist regime succeeded in excluding social groups, among which peasants figure, from the text of the UN Convention on the Prevention and Punishment of the Crime of Genocide. There are only four population groups to which the facts of genocide apply: racial, religious, ethnic, and national.
[2] Second, the confiscation of grain, whatever the circumstances, is explained by state interests (in this case, by the need to speed up industrialization). In other words, it is not linked to the deliberate creation of conditions that were incompatible with life, and the Convention on Genocide is supposed to establish this final goal.
Studying the past requires knowledge of the circumstances in which the mortality rate in Uk­raine began to reach hideous proportions. This means that an analysis of the Kremlin’s socioeconomic and nationalities policies should be carried out within this set of information.
When the state was confiscating the grain, the peasants resisted. This passive resistance gradually took on spontaneous forms of massive sabotage of the work on collective farms. The loss of grain because of weed-infested fields and mismanaged harvesting campaigns became disastrous both for the state and the peasants. Active resistance consisted of unorganized but massive protests against the government. In March 1930 it was by and large Ukrainian peasants (nearly 3,000 compared to 1,275 in all other regions) who forced Stalin to suspend the collectivization process for half a year.

Newly-published OGPU documents indicate that in the second half of 1932 the situation in the Ukrainian countryside, which had been starving for two years in a row – was becoming particularly explosive. The economic crisis in the USSR was intensifying, one of whose indicators of which was the mass famine among the population. Stalin dispatched extraordinary grain-delivery commissions to Ukraine, the North Caucasus, and the Povolzhie (Trans-Volga region), which confiscated all the grain.

To forestall protests by the starving peasantry, Stalin addressed a joint session of the Politburo of the Central Committee and the Presidium of the Central Control Commission (TsKK) of the All-Union Communist Party (Bolshevik) (VKP(B)) on Nov. 27, 1932, declaring that anti-Soviet elements were penetrating the collective farms in order to commit acts of wrecking and sabotage.
“It would be unwise for the communists, proceeding from the fact that collective farms are a socialist form of economy, to fail to respond to the blow of these individual collective farmers and collective farms with a destructive blow,” he emphasized.
Ukrainian collective farmers became the main target of Stalin’s preemptive attack. It was precisely in the Ukrainian SSR and the Kuban region that the collective farms that were most in arrears with regard to the grain deliveries in November and December 1932 found themselves blacklisted. These collective farms were constantly searched for hidden grain, and all food supplies were confiscated. The starving populace was becoming incapable of resisting.
In January 1933 the Chekists confiscated nearly all existing foods on the entire territory of Ukraine. Thus, in the final months of 1932 and the first half of 1933 the all-Union famine was transformed into the hideous Holodomor in Ukraine. At the same time, the state declared for the first time that collective farm production belonged to it and not the collective farmers.
In January 1933, instead of limitless food apportionment (prodrozkladka), mandatory grain deliveries in the form of taxation were introduced in the USSR. The acute economic crisis that threatened to unseat Stalin thus came to an end, and collective farms acquired the format in which we remember them.
The ROSSPEN (Russian Political Encyclopedia) Publishers recently issued a fundamental monograph by Professor Viktor Kondrashin of Penza University, entitled The Famine of 1932-33: The Tragedy of the Russian Countryside. The author refers to my book, Why Did He Destroy Us? Stalin and the Ukrainian Holodomor, which was issued last year as part of The Day’s Library Series.
He states the following: “In today’s Ukraine, because of the political state of affairs, a theory has appeared which divides the tragedy that befell the entire Soviet peasantry in 1932-1933 into an ‘act of genocide, namely the Holodomor, in Ukraine’ and the famine that befell other regions of the former USSR, including Russia. According to the cynical assessment of some advocates of this approach, Russia should agree with this evaluation of events that took place in 1932-1933 in order to become a ‘democratic country.'”
There is only one point with which I could agree with Kondrashin: Ukraine’s legislative and executive branches united for the first time when they recognized the Holodomor as an act of genocide. This is the current state of affairs. However, I must point out that the emergence of this ‘theory’ has nothing to do with it. It is easy to prove that contemporary politicians were simply listening to arguments that have been in scholarly circulation for more than two decades.
In January 1990 I familiarized myself with two sets of information that are independent of each other and which compelled me to separate the Ukrainian famine from the all-Union one. The most important document of the first set was located in a collection in the party archives at the Institute of Party History.
This is a resolution passed by the Politburo of the CC CP(B)U on Nov. 18, 1932, which contains a clause about levying meat fines on those who were in arrears with regard to the state grain deliveries. The Radnarkom’s resolution about levying meat fines and “and other foodstuffs” (potatoes) was included in a collection of documents that was being prepared for publication by the Institute of History at the Academy of Sciences of the Ukrainian SSR.
This collection of party documents was submitted to the Politburo of the Central Committee of the Communist Party of Ukraine (CPU) on Jan. 20, 1990. After a heated debate, it was decided to publish it. None of the CC members who had voted for its publication understood what “fines in kind” meant. As stated above, the famine was attributed to the grain deliveries.
The other set of information consisted of three volumes of eyewitness testimonies provided by Holodomor survivors. These testimonies were submitted to the US Commission on the Ukraine Famine. James Mace, its executive director, brought me the galleys of this three-volume publication. I described the manuscript’s contents in the journal Pid praporom komunizmu (Under the Banner of Communism), and I highlighted the universal searches in the course of which not only meat and potatoes were confiscated as “fines in kind” but all foodstuffs.
The facts were shocking: a half-bottle of grain brought by a grandmother to her grandsons was confiscated, a pot of borshch was overturned on the stove-even a rag doll was confiscated because there was a chunk of bread sewn into one of the sleeves.
Was the state selling grain abroad in order to purchase turbines for the Dniprohes, the Dnipro Hydroelectric Station? Any connection between Dniprohes and the Holodomor can be ruled out as soon you remind yourself of that overturned pot of borshch or the rag doll.
What happened in January 1933 was a huge operation aimed at annihilating millions of people before the very eyes of the population of the entire country, which did not notice anything. After all, how can one notice the deaths of millions on a limited territory in the conditions of an information and physical blockade, when people in other regions were also starving to death?
The organizers of the Holodomor proved so skilful at concealing it that it would take years to reveal the truth. I already had five years’ experience studying the subject, and I understood the goal of the “fines in kind.”
Therefore, I believed Mace’s eyewitnesses, who in our country were called fascist collaborators. That is why in my book Tsina “velykoho perelomu” (The Price of the “Great Breakthrough”), issued by the Ukraina Publishers in 1991, I reached the following conclusion: “The famine and the genocide in the countryside were programmed beforehand” (p. 302).
In order to conceal their criminal actions, those who organized the all-out confiscation of foodstuffs from peasants’ homes left no official records. It was carried out on the basis of verbal orders by brigades of “grain deliverers” led by Chekists. The similarity of their actions in each raion is corroborated by eyewitnesses who survived the Holodomor.
Their accounts are included in the Memorial Books of Holodomor Victims, copies of which will be available in every oblast of Ukraine as of this year. Along with documents attesting to the “fines in kind,” they indicate that the Stalinist government deliberately used famine as a weapon meant to destroy the Ukrainian peasantry.
To sum up: in 1929-31 the USSR carried out collectivization, which was accompanied by repressions that targeted millions of peasants. The economic relations between the city and the countryside, which were established after collectivization, led to a crisis that the state overcame by both economic and terror measures.
The confiscation of all foodstuffs took place in only two regions where Ukrainians comprised two-thirds of the population. In other words, this confiscation was aimed not against peasants in general but against Ukrainian peasants.
The documented mechanism behind the organization of the Holodomor consisted of three elements: the confiscation of food, the ban on the departure of starving peasants from Ukraine and the Kuban to other regions, and the information blockade. All together, these measures meant the creation of conditions incompatible with life, i.e., genocide.
The UN Convention does not require that the causes of genocide be explained. However, in our case, it must be proved that Ukrainian peasants were being destroyed not as peasants but as Ukrainians. This is where the problem arises: in which of two groups – ethnic or national, as laid down in the UN Convention – should Ukrainians be placed?
Historians have already informed the world community about the immense scale of the tragedy of the Ukrainian people. It was acknowledged in the Joint Statement on the Great Famine of 1932-1933 in Ukraine (Holodomor) by 36 countries (including Russia) during the 58th session of the UN General Assembly on Nov. 10, 2003, in connection with the 70th anniversary of the Holodomor.
When questions about qualifying this tragedy arise, a wall rises up between us and our fellow discussants. The problem is not just people who are not well versed in this topic but also knowledgeable people and even those who lost relatives during the Holodomor. The crux of the matter is not the grasp of facts but their interpretation.
Were the Ukrainians in the USSR an ethnic or national group? The answer to this question is crucial.
The USSR was a state with a maximum degree of centralization of administration, but it had the look of a commonwealth of sovereign republics, each of which had the right to secede from the federation. The inherent contradiction between the form and content of Soviet statehood was the sword of Damocles hanging over the “titular nation” that made up a Union republic with the status of a state. This “titular nation” was supposed to remain an ethnic community, not a state one. The Kremlin regarded any attempt to realize state rights as separatism.
Did the long-standing policy of overemphasizing the linguistic-cultural segment and the destruction of state political ones within the structure of a nation affect the mentality of the population? They certainly did, as evidenced by sociological surveys. According to the monitoring conducted by the Institute of Sociology at the National Academy of Sciences of Ukraine, respondents were asked to answer the question, “How do you primarily consider yourself?” (in percentages).
It turns out that only one-half of the respondents respect their state, and this situation has lasted for 15 years with only a slight trend for the better. At the same time, it is becoming clear that living within the bounds of their own nationality is not germane to the residents of Uk­raine. The small number of people among the respondents who consider themselves representatives of this ethnos is primarily explained by the acceleration of migration processes.
On the contrary, closed ethnic communities are germane to the Ukrainian Diaspora. Ukrainians who live outside Ukraine are law-abiding citizens of their host countries, but for the most part they cherish their own nation.
Interpreting facts pertaining to the Holodomor depends on how a person considers him or herself: a representative of the Ukrainian ethnos or a citizen of Ukraine? The exposure of this tragedy began in the Diaspora, which is why overseas the predominant idea was that the Kremlin rulers had assigned themselves the task of exterminating Ukrainians as an ethnic group. This idea was picked up on by part of the population in Ukraine because it was Ukrainians who had died en masse.
At the same time, the thesis about the deliberate extermination of Ukrainians caused a sharp reaction in another part of the population. After all, it was no less understandable that the Soviet government was not hunting down every Ukrainian only because s/he had the misfortune of being born Ukrainian. The most painful reaction came from Russians both in Ukraine and in Russia. Ethnic cleansing always involves the clearing of a certain territory in favor of another ethnic group. It is not difficult to guess which one.
The interpretation of the Holodomor as ethnic cleansing placed it typologically on a par with the Holocaust. That was why the Diaspora started referring to the Holodomor as the Ukrainian Holocaust. Vasyl Hryshko’s classical work Moscow Does Not Believe in Tears first appeared in New York in 1963. It was reprinted in 1978 under a new title, The Ukrainian Holocaust.
The word combination “Ukrainian Holocaust” is unacceptable in relation to the Holodomor.
[1] To begin with, there was a Ukrainian Holocaust, one in which half a million Jews were massacred by the Nazis and their allies in Ukraine during the Second World War. This cannot be forgotten, and the application of this word combination to another tragedy is an indirect invitation for us to forget the first one.
[2] Secondly, the identification of the Holodomor with the Holocaust pushes the former into the category of ethnic cleansing, whereas the Holodomor should be considered a form of terror.
In the last few years a large number of documents on the Kremlin’s nationalities policy have been published. They offer undeniable proof that Stalin strove to make the Ukrainian nation, which was a threat to his personal power, into a politically harmless ethnic group. When the Holodomor turned Ukrainians into an inert mass of hunted individuals, he adopted efforts to give them the appearance of a blossoming nation. In 1934 the Ukrainian capital was transferred to Kyiv, the national center of the Ukrainian people.
According to Mace, the objective of the Stalinist terror by famine was understood long before the publication of the Kremlin’s secret documents. In 1982 this 30-year-old scholar addressed a Holocaust conference in Tel Aviv, where he briefly defined this goal: to destroy the Uk­rainian people as a political factor and as a social organism. He repeated this formula about the destruction of the Ukrainians in a paper that he presented at the first scholarly conference on the famine of 1932-33, held in Montreal in 1983.
Perhaps the Ukrainian Institute of National Memory’s most significant event last year was an exhibit entitled “My zvynuvachuiemo! (We Accuse!). It is available in the form of color panels and as an album that was issued in a large print run. Four pages of the album are dedicated to “Stalin’s Satraps: The Organizers of the Great Famine.”
There are eight of them: Joseph Stalin, general secretary of the CC AUCP(B); Viacheslav Molotov, head of the Sovnarkom; Lazar Kaganovich and Pavel Postyshev, secretaries of the CC AUCP(B); V. Balytsky, plenipotentiary of the OGPU in Ukraine; Stanislav Kosior, general secretary of the CC CP(B)U; Vlas Chubar, head of the Radnarkom of the Ukrainian SSR; and Mendel Khataevich, secretary of the CC CP(B)U.
This list can – and must be – updated. The names of Kosior and Chubar should be deleted because they knew nothing about Stalin’s plan. Khataevich may have known, but his position did not allow him to play an independent role. This leaves five people, but another individual must be added-Ye.
Yevdokimov, the OGPU’s plenipotentiary in the North Caucasus. Of these six, one-half died a natural death (Stalin, Molotov, Kaganovich), and the other half was purged. Stalin did not want to leave any traces, not even in people’s memories.
I have already publicized the names of the people who were involved in organizing the Holodomor in The Day, after which I was scolded by Yu. Hubenia-for failing to mention Kosior and Chubar. “Are our homegrown criminals any better? Did they kill in a more humane fa­shion?” (Den, Aug. 1, 2008.) I would be happy to make Mr. Hubenia happy, but the list is what it is. Also, why should we consider those who ruled Ukraine as “homegrown”?
In fact, the number of people who were involved in this heinous crime turns out to be quite small. In fact, with the exception of Balytsky, Yevdokimov, and Postyshev, who were purged, but with the addition of Nikolai Yezhov, they were the ones who carried out a series of large-scale punitive operations not only in Ukraine but all the other Soviet republics in 1937. Society, as well as the state party that was formally empowered as a dictatorship, proved to be powerless against the ill will of the small group of leaders.
If we have identified the organizers, identifying the executors is a far more complicated task. What is Soviet power? This is three separate verticals of over-centralized power that had practically merged with the society: the party one (tens of thousands of apparatchiks, hundreds of thousands of activists, millions of party and Komsomol members); the soviet one (hundreds of thousands of employees, millions of members of unions and civic organizations); and the Chekist one (tens of thousands of operatives, hundreds of thousands of secret informers). To which rung of this hierarchical ladder should we restrict ourselves?
On every rung there were zealous executors of the leaders’ will, agents provocateurs, and brave and outspoken individuals. Therefore, I would not risk drawing up a list of executors. People found themselves in a situation from which there was no escape.
Today they could be hangmen and tomorrow-victims. Starving members of the komnezams (poor peasants’ committees) were di­rectly involved in carrying out Stalin’s action, which was aimed at confiscating all foodstuffs. They were fed as long as they “worked.” Eventually they too starved to death.
At any rate, a list of executors has already been compiled and posted in July of this year on the Web site of the Security Service of Ukraine (SBU). What can I say about it?
The SBU’s initiative should be supported because, barring television, the Internet is the most effective way to acquaint the general public with topical historical problems. However, the manner in which the pertinent data is provided is inadequate according to several parameters.
[1] First, one-third of the documents relates to the famine, not the Holodomor. [2] Second, the documents on the Holodomor do not describe the mechanism of terror. The absence of such documents in the SBU archives cannot justify their absence on the Web site. This is an archival-documentary project, and it should use documents that have been pub­lished. [3] Third, the signature under a directive does not necessarily mean that this person was the initiator of events that were supposed to be carried out by executors of the lower level or parallel structures.
One should not forget the main feature of Soviet power: the absolute subordination of lower rungs to the higher ones. The principle of “de­mo­cratic centralism,” which underpinned the activity of any organized structures, led to omnipotence at the top of the power pyramid. Those at the top dictated the conduct of all organs and links of the state administration. They were the ones who determined who was to sign documents about carrying out the repressions, as well as the content of these documents.
After this list of documents was made public, a small scandal erupted in the press, which was caused by the over-zealous deciphering of the real surnames or names of the listed individuals. For example, Mironov’s real name turned out to be Kagan; Genrikh Grigorievich Yagoda turned out to be Yenokh Gershenovich.
The Ukrainian Jewish Committee im­mediately accused the SBU of anti-Semitism. Its committee’s executive director Eduard Dolinsky declared: “This list contains 18 names, and the majority of them are Jewish. At the same time, the real culprits, such as the ethnic Ukrainians Hry­horii Petrovsky and [Vlas] Chubar, did not make it into this list.”
There were actually 19 names on the list, including one Georgian, two Ukrainians, five Russians, eight Jews, and three individuals of various ethnic backgrounds. Contrary to Dolinsky’s allegation, Jews do not figure prominently in this list. However, the accurate decoding of the names is probably proof of the compilers’ desire not to omit a single Jew. This is sad.
Fifty-five years after Stalin’s death we are still looking at each other the way this expert on the nationalities question was counting on. It is not at all surprising that the list has only two Ukrainian names; there were many more Ukrainians in the non-Ukrainian regions.
It is not surprising that there are eight Jews on this list, considering that they were separated from the Ukrainian milieu. All of the ones on the list were used and then killed. Stalin skillfully played on national prejudices; this was the legacy of past historical eras.
It would seem that there is nothing easier than determining the demographic consequences of the Holodomor. After all, we have the results of the 1926 and 1927 censuses, as well as annual data on mechanical and natural migration processes. Natural migration was recorded in 1932-33, but very poorly. With accurate data on all the other years of the inter-census period it is possible to determine the rates of non-natural mortality.
Apart from statistics, there is also the Institute of Demography and Social Studies, which is in a position to make computations on a professional level. Why, then, does the above-mentioned album We Accuse contain ten different assessments ranging from three to seven million people? Why does the writer Vasyl Bahriany or the legendary army commander Vasyl Kuk, people who are not experts in the field of demography listed as experts?
Last but not least, why does this album not cite such a specialist as the Ukrainian academician Serhii Pyrozhkov, the founder of the Institute of Demography and Social Studies, who is now Ukraine’s ambassador to Moldova?
The first scholarly findings on the mortality rate in Ukraine were published in 1990. Since then, Ukrainian, US, Australian, and French researchers have analyzed Soviet demographic statistics and arrived at a more or less identical conclusion: in 1932-33, Ukraine’s natural mortality rate was exceeded by three to four million people.
The drop in the birth rate owing to the famine raises the total of demographic losses to five million. Considering the abnormally high mortality rate in the North Caucasus, the famine claimed six million.
In stating the losses resulting from the Holodomor, Ukraine’s official representatives unjustifiably relied on statistics that figured in Ukrainian Diaspora publications. These overstated figures were disconnected from demographic statistics, which in Soviet times were concealed from the public no less assiduously than Soviet defense statistics.
Volodymyr Kubijovic, an authoritative demographer and geographer in Diaspora circles, declared that the direct losses amounted to three million, specifying that “Most authors list much higher losses caused by the famine-four to seven million.
If these figures were accepted, one would have to consequently assume a very strong influx of people to Ukraine from other republics, particularly to the countryside, in order to equalize such huge losses. We have no data on such a massive influx of non-Ukrainians to Ukrainian villages.”
In New York City this past April I met with Askold Lozynsky, the president of the World Ukrainian Congress, and gave him a copy of my monograph in which I devote special attention to the demographic consequences of the Holodomor.
Unfortunately, my book did not convince Mr. Lozynsky. In an article pub­lished in The Day on 6 June he once again repeated the Diaspora’s figures of seven to ten million victims. Will the demographic section of our conference slated for September finally be able to resolve this question?
The UN General Assembly will not examine the Holodomor issue this year. Russia’s representatives proposed that it be postponed for a year, explaining that they have to coordinate their position with Ukraine.
We have to convince not only Russia but also our own society and the international community of the correctness of the findings on the Holodomor. However, we must convince not with emotions but on the basis of data stemming from scholarly analyses of this historical phenomenon.
This is why authoritative scholars must have a common position on the problems raised in this article. A common position will be instrumental in shaping world pub­lic opinion in regard to the Ukrainian Holodomor. Then it will be possible to resubmit this question to the United Nations.
On Aug. 10, 2008, Vladimir Putin visited Vladikavkaz, the capital city of North Ossetia, to make the sensational statement that in the current conditions South Ossetia cannot be re-integrated into Georgia. He called the situation in South Ossetia an act of genocide against the Ossetian people.
There was nothing coincidental about his statement about genocide. On a Web site ( that was created in May 2007 you can find meticulously collected data on all inter-ethnic conflicts. This Web site has become the ideological justification of political events that are aimed at withdrawing South Ossetia from Georgia.
Putin’s statement sparked an almost instant reaction. On Aug. 14 the investigative committee of Russia’s Prosecutor-General’s Office initiated criminal proceedings in connection with the killing of Russian citizens and Russian peacekeepers by Georgian troops in South Ossetia. This criminal case was initiated on the strength of the genocide clause.
Georgia may well respond with its own account of the events that are now commonly referred to as the war between Russia and Georgia. What is surprising is how quickly and expertly Russia’s leaders are using the legal concept of genocide in order to achieve their political objectives.
Perhaps we should borrow from this experience and create our own Web site. We can guarantee that we will not have any political goals. Our sole objective will be to call a spade a spade. Current and future generations of Ukrainians should know that the victims of the Holodomor were victims of genocide.  LINK:
[return to index] [Action Ukraine Report (AUR) Monitoring Service]
A Free, Private, Not-For-Profit, Independent, Public Service Newsletter

With major support from The Bleyzer Foundation
Articles are Distributed For Information, Research, Education, Academic,
Discussion and Personal Purposes Only. Additional Readers are Welcome.
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 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  If you are
receiving more than one copy please let us know so this can be corrected. 
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 (USUBC)
1701 K Street, NW, Suite 903, Washington, D.C. 20006
Tel: 202 437 4707; Fax 202 223 1224
Link to the AUR 2008 Archive:

Power Corrupts and Absolute Power Corrupts Absolutely.
return to index [Action Ukraine Report (AUR) Monitoring Service]

Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s