AUR#920 Dec 19 Microsoft Is Number 100; Magisters; Horizon Capital; EPAM Systems; Currency Freefall; Economic Meltdown; Pinchuk & Clinton;

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

Ukrainian History, Culture, Arts, Business, Religion, Economics,
Sports, Government, and Politics, in Ukraine and Around the World       
 
MICROSOFT IS NUMBER 100
 
ACTION UKRAINE REPORT – AUR – Number 920
Mr. Morgan Williams, Publisher and Editor, SigmaBleyzer
WASHINGTON, D.C., FRIDAY, DECEMBER 19, 2008
 
INDEX OF ARTICLES  ——
Clicking on the title of any article takes you directly to the article.               
Return to Index by clicking on Return to Index at the end of each article
1.  MICROSOFT BECOMES 100th MEMBER OF U.S.-UKRAINE BUSINESS COUNCIL (USUBC)
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Thu, Dec 18, 2008
 
The Lawyer.com, London, United Kingdom, Monday, December 8, 2008
 
Horizon Capital, Kyiv, Ukraine, Friday, October 3, 2008
 
EPAM Systems, Lawrenceville, New Jersey, Wednesday, December 3, 2008
 
5UKRAINE: NEW DEMOCRATIC COALITION AGREEMENT SIGNED
Unblocked Parliament Passes Anti-crisis Measures
BYuT Newsletter Inform, Issue 97, Kyiv, Ukraine, Thursday, December 18, 2008
 
6UKRAINE’S CURRENCY MAY FALL 24% MORE AS IMF LIMITS INTERVENTION
By Michael Patterson and Laura Cochrane, Bloomberg, Friday, December 19, 2008
 
By Timothy Ash, Head of CEEMEA research, Royal Bank of Scotland
London, United Kingdom, Thursday, December 18 2008
 
The Associated Press (AP), Kiev, Ukraine, Thursday, December 18, 2008
 
9UKRAINIAN PRIME MINISTER DEMANDS CHIEF BANKER’S DISMISSAL OVER CURRENCY CRISIS 
UT1, Kiev, Ukraine, in Ukrainian 1410 gmt 18 Dec 08
BBC Monitoring Service, UK, in English, Thursday, December 18, 2008 
 
Inter TV, Kiev, Ukraine, in Russian 1800 gmt 18 Dec 08 
BBC Monitoring Service, UK, In English, Thursday, December 18, 2008  
 
11 UKRAINE’S ECONOMY CAN START GROWING AGAIN NO EARLIER THAN IN 2010
Interfax, Kyiv, Ukraine, Tuesday, December 16, 2008

12WEBSITE PUBLISHES UKRAINIAN PRESIDENT’S REPORT ON ECONOMIC SITUATION
“Crisis Through the Eyes of Bankova, Classified Materials”

Ukrayinska Pravda website, Kiev, Ukraine, in Ukrainian 15 Dec 08
BBC Monitoring Service, UK, in English, Monday, December 15, 2008
 
IMF Press Release No. 08/271, Washington, D.C. Wed, November 5, 2008
Ukrainian banking sector hit hard by financial crisis
Commentary & Analysis: By Pavel Korduban, Eurasia Daily Monitor, Vol 5, Issue 240
The Jamestown Foundation, Wash, D.C. Wed, December 17, 2008 
 
Associated Press (AP), Washington, D.C., Thursday, December 18, 2008
 
Holodomor is a Ukrainian invention
By Conor Sweeney, Reuters, Moscow, Russia, Friday, Dec 19, 2008
By Maria Kulczycky, Chicago, Illinois, Saturday, December 6, 2008
Action Ukraine Report (AUR), Washington, D.C., Friday, December 19, 2008
By Zoreslaw Bayduk, Voice of America (VOA), in Ukrainian, Wash, D.C.,  Tue, Dec 2, 2008 
English translation by Borys Potapenko, Detroit, Michigan, AUR, Wash, D.C., Dec 18, 2008
 
HOLODOMOR OF 1932-1933 IN UKRAINE “MY PEOPLE WILL LIVE FOREVER”
Address by H. E. Valdus Adamkus, President of the Republic of Lithuania
International Forum to Commemorate the 75th Anniversary of the Holodomor, Kyiv, Ukraine
President of Lithuania Website, Vilnius, Lithuania, Saturday, November 22, 2008  
Review & Outlook Editorial: Wall Street Journal Europe, NY, NY, Tue, Nov 25, 2008
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1
 MICROSOFT BECOMES 100th MEMBER OF U.S.-UKRAINE BUSINESS COUNCIL (USUBC)
 
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Thursday, December 18, 2008

WASHINGTON, D.C. – Microsoft, the worldwide leader in software, services and solutions, has been approved as the 100th member of the U.S.-Ukraine Business Council (USUBC), according to its executive committee, in an announcement on behalf of the entire USUBC membership, issued at the USUBC annual meeting in Washington, D.C. on Wednesday.  USUBC celebrates the opportunity to name one of the world’s best known corporations, Microsoft, as the 100th member.   

 
Founded in 1975, Microsoft (Nasdaq “MSFT”) provides software, services and solutions around the globe that help people and businesses realize their full potential.   Microsoft has 94,000 employees worldwide and is headquartered in Redmond, Washington, USA.
 
Dorothy Dwoskin, Senior Director, Global Trade Policy and Strategy, Microsoft, Washington, D.C., spoke on behalf of Microsoft at the USUBC annual meeting. She said, “Microsoft is very pleased to join USUBC as the 100th member and looks forward to working with USUBC for the advancement of the Ukrainian business community.  Microsoft is very committed to the Ukrainian market and continues to expand its program in Ukraine.”
 
MICROSOFT SET UP UKRAINIAN SUBSIDIARY IN 2003

Microsoft established its Ukrainian subsidiary in 2003. Since then, the local office grew from 5 to 150 employees developing a local partner ecosystem and raising awareness of Microsoft products in Ukraine.   A recent study by IDC found that for every dollar of revenue that Microsoft earns in Ukraine, local IT companies earn an average of US $26.33.  Microsoft Ukraine has been named one of Ukraine’s best employers in 2007.
Microsoft is an active member of the Ukrainian society. It actively engages with the education and business communities to foster local innovation, to use technology to improve education in schools, and to educate teachers, parents and students about child safety online.
 
MICROSOFT A SUCCESS STORY FOR AMERICAN-UKRAINIAN BUSINESS RELATIONS

“Microsoft is a success story for American-Ukrainian business relations. We work closely with the emerging private sector in Ukraine as well as the Ukrainian government on a variety of issues, from software legalization to e-government.   Membership in USUBC is a key to building these relationships.”
said Eric Franke, General Manager of Microsoft Ukraine.
 
Franke continued stating, “Working together with USUBC, Microsoft will continue to help build Ukraine’s  local software economy and looks forward to advancing intellectual property rights protection in Ukraine.” 
 
Mr. Franke has headed the Ukrainian subsidiary of Microsoft since December 2007. Prior to joining Microsoft, he ran several telecommunications companies in Ukraine in Russia, including UMC (now MTS Ukraine), Komstar and GTS.  Additional information about Microsoft can be found on its website: http://www.microsoft.com.
 
PRESIDENT YUSHCHENKO CONGRATULATES MICROSOFT & USUBC 
 
USUBC received several letters of congratulations about USUBC’s rapid membership growth the last two years and about Microsoft being named the 100th member from leaders in Ukraine and the United States. 
 
Letters were read at the USUBC annual meeting from Ukrainian leaders Victor Yushchenko, President of Ukraine; First Lady of Ukraine Kateryna Yushchenko; Ukrainian Prime Minister Yuliya Tymoshenko; First Deputy Prime Minister Ivan Vasiunyk; Minister of Economy Bohdan Danylyshyn, and Oleh Shamshur, Ambassador of Ukraine to the United States.  From the U.S. side letters were received from the U.S. Ambassador to Ukraine William B. Taylor and from U.S. Secretary of Commerce, Carlos M. Gutierrez. 
 
Oleh Shamshur, Ambassador of Ukraine to the U.S., read the letter from President Victor Yushchenko to those who attended the USUBC annual meeting in Washington.  President Yushchenko said in his letter to USUBC President Morgan Williams, “Let me congratulate the U.S.-Ukraine Business Council [USUBC] and you personally on the occasion of 100th member joining USUBC, the Microsoft Corporation. 

“I would like to stress that the active efforts taken by USUBC fill with real substance the strategic partnership between our countries. Effective work in the trade and investment sector of a number of organizations, USUBC included, has contributed to a significant growth in U.S.-Ukraine trade.
“I hope that, assisted by the U.S.-Ukraine Business Council, mutually beneficial cooperation between Ukrainian and American businesses will expand.”
Sincerely yours, Victor Yushchenko
 
LETTER FROM UKRAINIAN PRIME MINISTER YULIYA TYMOSHENKO 
 
“Thank you for your commitment to investment in Ukraine.  Your perseverance in working in our country, in some cases over many years, is critical to Ukraine’s economic and commercial development.  The engagement of the U.S.-Ukraine Business Council (USUBC) promotes the right business practices, and indeed, along with the European Business Association and the US Chamber of Commerce in Ukraine, has been instrumental in the design and implementation of BYuT’s “Contract with Investors,” Prime Minister Yuliya Tymoshenko wrote in her letter to USUBC of December 16, 2008.
 
“While the road toward transparency and rule of law that supports sustainable investment is a difficult one, especially in a global environment with such grave challenges, you have my commitment to continue to work to this end.  Our work in government is to create the framework so that all foreign and domestic investors can operate in confidence. 
 
“Despite the political and financial turmoil, we have accomplished significant gains in refunding long overdue VAT refunds, progressed in our efforts to adopt a Joint Company Stock Law and we expect that the OPIC dispute will be resolved in the coming days.  But we have much more work to do.
 
“I would ask that each and every one of you work in a transparent manner that conforms to Ukrainian and U.S. law, and in accordance with the best practices of the American business culture.  Ukraine can gain much from your engagement; as American business has so often done globally.  I ask you to lead by example in your business practices.
 
“Again, my compliments to USUBC on its growth and my wishes for its continued success.”
UKRAINE’S FIRST LADY KATERYNA YUSHCHENKO 
 
Ukraine’s First Lady Kateryna Yushchenko wrote in her letter to USUBC, “I am delighted to hear that Microsoft has become the 100th member of the U.S.-Ukraine Business Council.  Your dynamic and dedicated leadership has more than quadrupled membership in the Council over the past two years.
 
We are proud that many prominent American businesses who have been active on the Ukrainian market are now expanding their work and that others are
entering Ukraine’s economy at such a fast pace.
 
U.S. companies have been in the forefront not only in investment in Ukraine, but have also served as excellent examples of corporate responsibility. We are grateful for their extensive involvement in so many different areas of Ukraine’s development, and their commitment to improving the lives of Ukrainian citizens. 
 
We encourage all the USUBC members to continue to invest in Ukraine’s future by supporting our health, education, cultural and arts organizations.  This is particularly necessary now, as the less fortunate sectors of our society particularly feel the brunt of the world and national financial crisis.” Respectively, Kateryna Yushchenko
 
DEPUTY PRIME MINISTER IVAN VASIUNYK
 
“On behalf of the Government of Ukraine I would like to congratulate the U.S.-Ukraine Business Council and its President Mr. Morgan Williams on admitting the 100th members into its ranks.  Since its inception thirteen years ago USUBC emerged as one of the most active and consistent promoters of closer business ties and trade relations between Ukraine and the U.S., ” Ukrainian Deputy Prime Minister Ivan Vasiunyk wrote in a letter to USUBC dated December 17. 
 
“The recent substantial growth in its membership is a sign of the Council’s recognition within the U.S. business community as an effective advocate of its interests. USUBC also plays an instrumental role in facilitating contacts between the U.S. businesses and Ukrainian government officials.  This allows to identify and realize key investments and trade opportunities benefiting both the U.S. and Ukraine.
 
“Currently Ukraine is embarking on a major modernization project in order to prepare its major cities to host the soccer games of Euro Cup in 2012.  This requires active involvement of private investors willing to help the Government of Ukraine build new infrastructure objects, including airport terminals, roads and hotels.  USUBC can play its part by informing its members about the Government’s business plans for EURO-2012 and by engaging
major businesses into their implementation.” 
 
“I would like to wish USUBC and all of its members further success in your activities and hope that you will sieze on all of the new lucrative opportunities Ukraine has to offer.”   Sincerely, Deputy Prime Minister of Ukraine, Ivan Vasiunyk  
 
MINISTER OF ECONOMY OF UKRAINE BOHDAN DANYLYSHYN
“On behalf of the Ministry of Economy of Ukraine and on my own behalf let me congratulate the USUBC [U.S.-Ukraine Business Council] on the occasion of its 100th member, Microsoft,” the Minister of Economy of Ukraine, Bohdan Danylyshyn, wrote in his letter to USUBC on December 17, 2008. “Being an active player in the international business life, USUBC has successfully enrolled for cooperation a large number of world-famous companies.”
Minister Danylyshyn continued, “I would especially like to emphasize the role of the USUBC in organizing of the 1st Bilateral Business Forum held within the framework of the founding session of the Ukraine-U.S. Council on Trade and Investment in October 2008 in Kyiv [Ministry of Economy and USTR]. We note with pleasure that close ties are being formed between the business circles and governments of our countries that open new avenues for investment and trade. 
 
“I hope that USUBC’s extensive experience in developing cooperation between government institutions will be handy in the run-up to the Council’s 2nd session due in 2009 in Washington.
 
“Such cooperation is ample evidence of the soundness of the initiative launched by the Ministry of Economy aimed to attract U.S. companies’ representatives for cooperation with government interagency commissions and work groups responsible for decision-making in the area of entrepreneurship and business environment improvement. 

“I am convinced that mutually beneficial cooperation between Ukrainian and American financial and business circles will deepen the strategic partnership between Ukraine and the United States, expand investment both by a broader presence of US businesses on Ukrainian markets and of Ukrainian businesses on the U.S. markets.

Let me express my deep gratitude to all USUBC members and you personally for your support and wish you every success in strengthening the friendly ties between our countries.”  Respectfully yours, Bohdan Danylyshyn, Minister of Economy of Ukraine
 
AMBASSADOR OF UKRAINE TO THE U.S. OLEH SHAMSHUR
 
The Ambassador of Ukraine to the U.S., Oleh Shamshur, wrote on December 12 to USUBC, “I am pleased to congratulate you on this important occasion — announcement of Microsoft as 100th member of the U.S.-Ukraine Business Council [USUBC].  This certainly shows the effectiveness of the work that USUBC has done to promote Ukrainian-American business relations.
 
“In comparatively short time USUBC was able to increase its membership up to five times becoming by far the strongest and largest Ukraine related trade association outside Ukraine.
 
“I am confident that the U.S.-Ukraine Business Council will continue to successfully promote and strengthen U.S.-Ukraine economic cooperation.  I would like to wish you all the best, good luck in realization of new projects, creative energy, and, of course, many new members.
 
“Using this opportunity I would also like to send all  members of the U.S.-Ukraine Business Council my warmest wishes for a Holiday Season and a prosperous New Year!”  Sincerely, Oleh Shamshur
U.S. AMBASSADOR WILLIAM B. TAYLOR 
 
U.S. Ambassador William B. Taylor wrote in his December 15 letter to USUBC, “Congratulations on welcoming Microsoft as the 100th member of the U.S.-Ukraine Business Council.  Companies join your organization because they see real benefits – timely information on the Ukrainian business climate and effective advocacy for reform and action. 
 
“Your engagement not only helps U.S. companies achieve a real level playing field in the Ukrainian market, but the real results that your organization delivers help improve the overall business and investment climate here. 
 
The U.S. Embassy appreciates your engagement and looks forward to continuing our joint efforts on behalf of the U.S. business community in Ukraine.  Now more than ever, we need to support it.”  Sincerely, William B. Taylor, Ambassador
 

U.S. SECRETARY OF COMMERCE CARLOS GUTIERREZ
 
Paul B. Dyck, Deputy Assistant Secretary for Europe and Eurasia at the U.S. Department of Commerce attended the USUBC annual meeting and read the following letter to USUBC from the U.S. Secretary of Commerce Carlos Gutierrez:  “On behalf of the U.S. Department of Commerce, it gives me great pleasure to welcome the members of the U.S.-Ukraine Business Council to the 2008 annual meeting.
 
“Council members represent some of American’s finest companies and play an important role in transforming Ukraine’s economy.  The Council’s success in more than tripling its membership during the past two years attests to the interests that Ukraine holds for U.S. businesses. I congratulate the Council on the addition of Microsoft as its 100th member, and I support your efforts to build trade and investment ties between the United
States and Ukraine.
 
“I wish each of your members success in Ukraine and urge your continued partnership with the Department of Commerce as we work together to strengthen U.S.-Ukrainian relations.”  Sincerely, Carlos M. Gutierrez
 
USUBC MEMBERSHIP NOW STANDS AT 100
 
“USUBC is very pleased to have an important U.S. and international company such as Microsoft as the 100th member” said Morgan Williams, SigmaBleyzer, who serves as president of USUBC.  “USUBC has grown very rapidly during the past 22 months and now has a membership base which allows USUBC to provide its members such as Microsoft with a full-time operation and a significantly expanded program of work,” according to USUBC President Williams who is director of government affairs, Washington, D.C. office, for SigmaBleyzer Private Equity Investment Group. 
Microsoft is the 50th member to join in 2008, and the 78th new member since January of 2007. USUBC membership has quadrupled in the past 24 months, going from 22 members in January of 2007 to 100 members in December of 2008.   USUBC added one new member per week in 2008. 
 
Aitken Berlin LLP law firm in Washington, D.C., along with its subsidiaries, the Homeland Security Industries Association (HSIA) and the Global Development Law & Consulting Group (Global Development), became the 99th member of USUBC. 
 
Mars Ukraine was USUBC member ninety-eight. Mars, Incorporated is a family owned company, with six industry leading business units – Chocolate, Petcare, Food,  Drinks, Symbioscience and now Wrigley Gum and Sugar. Headquartered in McLean, Virginia, Mars, Incorporated operates in more than 79 countries.
 
Pratt & Whitney-Paton (PW-P), an American-Ukrainian joint venture between the Pratt & Whitney division of the United Technologies Corporation, USA, and the E. O. Paton Electric Welding Institute in Kyiv, Ukraine, was USUBC member ninety-seven.  

The new USUBC members in 2008 include MaxWell USA, Baker and McKenzie law firm, Och-Ziff Capital Management Group, Dipol Chemical International, MJA Asset Management, General Dynamics, Lockheed Martin, Halliburton, DLA Piper law firm, EPAM Systems, DHL International Ukraine, Air Tractor, Inc., Magisters law firm, Ernst & Young, Umbra LLC., US PolyTech LLC, Vision TV LLC, Crumpton Group, Standard Chartered Bank, TNK-BP Commerce LLC, Rakotis, American Councils for International Education, Squire, Sanders & Dempsey LLP, International Commerce Corporation, and IMTC-MEI.
 
Additional new USUBC members in 2008 are: Nationwide Equipment Company, First International Resources, the Doheny Global Group, Foyil Securities, KPMG, Asters law firm, Solid Team LLC, R & J Trading International, Vasil Kisil & Partners law firm, AeroSvit Ukrainian Airlines, Anemone Green Capital Limited, ContourGlobal, Winner Imports LLC (Ford, Jaguar, Land Rover, Volvo, Porsche), 3M, Edelman, CEC Government Relations RZB Finance LLC (Raiffeisen), IBM Ukraine, SoftServe Inc., The Washington Group (TWG), SE Raelin/Cajo, Inc., AnaCom, Inc., Pratt & Whitney-Paton, AGCO/Massey Ferguson, Zurich, Mars Ukraine, Aiken-Berlin LLP/HSIA and Microsoft. 
 
The complete USUBC membership list and additional information about USUBC can be found at: http://www.usubc.org.
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2.  UKRAINE’S MAGISTERS LAW FIRM MAKES BELARUS MERGER

The Lawyer.com, London, United Kingdom, Monday, December 8, 2008

LONDON – Ukrainian law firm Magisters is to launch its first office in Belarus, merging with local law firm BelJurBureau. The deal will take the
newly-combined firm past the 130-lawyer mark and is expected to be completed by the end of January 2009.

In total, 12 lawyers will join Magisters, led by partners Anna Rusetskaya and Denis Turovets in the Belarus office. Turovets will become managing
partner of ­Magisters’ Belarus office. He said the country’s underdeveloped legal market makes it ripe for new entrants to take advantage of an increase
in work. BelJurBureau’s lawyers work in practice areas such as dispute resolution, real estate, intellectual property and corporate.

“The Belarus market is one of the most attractive and financially stable in the region,” said Turovets. “The government’s recent privatisation plans
make it a lucrative emerging market for early entrants, as compared with more mature markets in the region such as Russia, Ukraine and Kazakhstan.”

Magisters is familiar with the merger process and has aggressive expansion plans. In 2006 the firm merged with Pravis Reznikov Vlasenko and Partners in
Ukraine and Legas Legal Solutions in Russia. Oleg Riabokon, managing partner of Magisters, said: “We intend to replicate in Belarus the success of our
mergers in 2006.”

This year has been one of the firm’s most active. ­Magisters opened a three-lawyer office in Georgia at the start of the year and hired its first
chief operating officer, Jason Bruzdzinski, from ­US-funded research centre Mitre Corporation.

Magisters also hired two new partners for the Moscow office from Rosneft and Russin & Vecchi and brought in UniCredit board member Sergey Karaganov as senior adviser.

The legal markets of ­Central and Eastern Europe (CEE) have witnessed a ­flurry of activity at the end of 2008. Austrian law firm Schönherr has
launched three new offices in the region, opening bases in the Czech Republic, Poland and Slovakia.

Schönherr will take over the Prague and Warsaw offices of Herbert Smith’s German ally Gleiss Lutz in the new year, while simultaneously launching its
own office in Bratislava.

Gleiss Lutz opened its Prague and Warsaw offices in 1992 and 1998 respectively. Four of its partners partners, two from each office, will join
Schönherr as part of the transfer deal.

In Prague partners ­Martin Nedelka and ­Martin Kubánek will move over to the Austrian firm, while in Warsaw partners Pawel Siekierzynski and Przemyslaw Pietrzak will join ­Schönherr together with counsel Torsten Bogen.

Rainer Loges, managing partner of Gleiss Lutz, said: “To be successful as a law firm, you regularly have to review your strategy. We opened our offices
in Prague and Warsaw ­initially to help our clients enter these markets. Today, our clients’ demands have changed and we believe they’ll be better
served by aligning our Eastern European offices with a firm whose strategic focus is on CEE.”

Earlier this year, Linklaters decided to scrap its offices in Bratislava, Buch­arest, Budapest and Prague, ­creating spin-off firm ­Kinstellar, led by
Linklaters’ former CEE head Jason Mogg. In September, Bird & Bird made its first foray into the region, simultaneously launching a series of offices in
Bratislava, Budapest, Prague and Warsaw. LINK: http://www.thelawyer.com/item/135993

 
NOTE:  Magisters law firm is a member of the U.S.-Ukraine Business Council (USUBC), www.usubc.org.
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3.  HORIZON CAPITAL INVESTS $15 MILLION INTO UKRAINIAN FOOD RETAIL CHAIN ‘FRESH’ 

Horizon Capital, Kyiv, Ukraine, Friday, October 3, 2008

KYIV – Horizon Capital, a private equity manager focused on mid-cap investments in Ukraine, today signed an equity investment agreement to invest US$15 million in equity in Evrotek Group PLC, the holding company for a recently formed Ukrainian food retail chain operating under the trade name Fresh, alongside International Finance Corporation (IFC). This investment will enable the company to further expand its modern retail chain.

“This investment will help us expand the chain geographically and build our market share. While the sector is growing rapidly, it is still fragmented and segments of the population and geography are very underserved by modern retail formats like Fresh,” said Mikhailo Veselsky, Evrotek’s Founder and Chief Executive Officer.

Evrotek Group PLC entered the food retail chain market in 2006 and is one of Ukraine’s newest retail store chains. “Fresh” has two standard formats: supermarket (1300 m2) and mini-hypermarket (2400 m2).

It intends to develop presence in large Ukrainian cities (population in excess of 100,000). Fresh has opened eight stores to-date, operating in Evpatoriya, Kerch, Kryviy Rih, Kherson and Rivne. The company’s expansion plan foresees a total of 58 stores and 3 logistics centers by 2010.

Mark Iwashko, Co-Managing Partner of Horizon Capital said: “This investment is an excellent opportunity not only to back an entrepreneur with a solid track record of success, but also to invest in one of the most interesting and fast growing sectors in Ukraine. Ukraine has consistently been ranked at the top of the AT Kearney Global Retail Development Index due to the size and potential of the market and the low level of modern retail penetration. ”

This investment was made on behalf of Emerging Europe Growth Fund (“EEGF”), a $132 million fund. This is a new investment in a portfolio of 11 companies, of which almost 40% are in the consumer/retail segment. Horizon Capital invested on behalf of EEGF from 2006 to 2008 focusing on the fastest growing mid-market companies in Ukraine, Moldova and the region.

ABOUT HORIZON CAPITAL: 
Horizon Capital (www.horizoncapital.com.ua) is a private equity fund manager that originates and manages investments in mid-cap companies with outstanding growth and profit potential in Ukraine and the region.

 
Currently, Horizon Capital manages three funds, Emerging Europe Growth Fund II (EEGF II), Emerging Europe Growth Fund (EEGF) and Western NIS Enterprise Fund (WNISEF), with over $600 million under management.
For additional information please contact: Tetyana Bega, Investor Relations Manager, Horizon Capital, +380 44 490 5580; +380 44 490 5589
e-mail: tbega@horizoncapital.com.ua
 
NOTE:  Horizon Capital is a member of the U.S.-Ukraine Business Council (USUBC)
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4.  EPAM SYSTEMS RANKED 5TH AMONG FASTEST GROWING COMPANIES IN NEW JERSEY

 
EPAM Systems, Lawrenceville, New Jersey, Wednesday, December 3, 2008

LAWRENCEVILLE, NJ – EPAM Systems, Inc. was honored as the 5th within the fifty fastest growing companies ranking of New Jersey businesses by NJBIZ, the state’s weekly business journal. EPAM Systems (www.epam.com), is a leading provider of software engineering and IT Outsourcing (ITO) services with delivery centers in Central and Eastern Europe (CEE).

New Jersey and its vicinity is home to over 20 percent of the FORTUNE 500® company headquarters, with more than 1,100 multinational firms from over 40 nations. This region is often referred to as “the epicenter of the nation’s largest business corridor.” EPAM, founded and headquartered in Lawrenceville, has made the New Jersey’s Finest list for the 3rd consecutive year, and was honored by NJBIZ on November 17th at their annual award ceremony.

“We are proud to be among the winners of this prestigious award. EPAM’s technology expertise and global presence that help companies outsource critical IT needs in a timely and cost-effective manner — in our case, worldwide — have served us, and our clients, well. Congratulations to all the winners! We are committed to continue bringing value to our clients, while growing EPAM Systems in this difficult business environment,” stated Arkadiy Dobkin, EPAM President and CEO.

ABOUT NJBIZ
NJBIZ, New Jersey`s only weekly business journal covering the entire state, was founded in 1987. The publication has received numerous statewide and national awards including the 2006 Most Improved Award from the Alliance of Area Business Publications.  NJBIZ is owned by Journal Publications Inc., a multi title publishing and events company based in Harrisburg, Pennsylvania, www.njbiz.com.

ABOUT EPAM SYSTEMS 
Established in 1993, EPAM Systems, Inc. is the leading global software engineering and IT consulting provider with delivery centers throughout Central and Eastern Europe (CEE). Headquartered in the United States and serving clients worldwide, EPAM provides software development and IT related services through its more than 4,500 professionals deployed across client delivery centers in Russia, Belarus, Hungary, and Ukraine.

EPAM’s core competencies include complex software product engineering for leading global software and technology vendors, as well as development, testing, maintenance, and support of mission critical business applications and vertically oriented IT consulting services for global Fortune 2000 corporations.

EPAM is ranked among the top companies in IAOP’s “The 2008 Global Outsourcing 100” and in “2007 Top 50 Best Managed Outsourcing Vendors” by Brown-Wilson Group`s Black Book of Outsourcing. Global Services Magazine recognized EPAM in its “2008 Global Services 100” list as No.1 company in the “Emerging European Markets” and included EPAM into the global Top 10 “Best Performing IT Services Providers”.

For further information contact Alena Busko, Marketing Manager, EPAM Systems , Delivering Excellence in Software Engineering, Office phone: +1 (609) 613-4031, ext. 50474, E-mail: press@epam.com, Website: www.epam.com.
 
NOTE:  EPAM Systems is a member of the U.S.-Ukraine Business Council (USUBC), www.usubc.org.
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U.S.-Ukraine Business Council (USUBC): http://www.usubc.org
Promoting U.S.-Ukraine business relations & investment since 1995.
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5.  UKRAINE: NEW DEMOCRATIC COALITION AGREEMENT SIGNED
Unblocked Parliament Passes Anti-crisis Measures

BYuT Newsletter Inform, Issue 97, Kyiv, Ukraine, Thursday, December 18, 2008

KYIV – Yesterday, representatives of the three blocs that comprise the recently announced Coalition of National Development, Stability and Order signed an official coalition agreement. This rubber stamps the formation of the democratic coalition, announced last week in the wake of Volodymyr Lytvyn’s appointment as Chairman (speaker) of Ukraine’s parliament.

The speaker appointment unblocked parliament, enabling lawmakers to pass measures to address the global financial crisis that is ravaging the country’s
economy.

The new coalition agreement was signed by Ivan Kyrylenko, the parliamentary leader of the Bloc of Yulia Tymoshenko (BYuT), Borys Tarasyuk, deputy leader of the pro-presidential Our Ukraine-People’s Self-Defence (OU-PSD) bloc and Ihor Sharov, faction leader of the centrist Lytvyn bloc.

The formation of the new coalition has removed the need for BYuT and the Party of Regions to forge an alternative national unity coalition – something BYuT’s leader, Prime Minister Yulia Tymoshenko, hinted at unless the pro-presidential bloc returned to the fold.

The first hurdle in ending the deadlock was overcome when a majority of lawmakers in each bloc signed their intent to form the new coalition. A
simple majority is all that is needed to activate such an agreement. In the case of OU-PSD, 37 of its 72 lawmakers committed their bloc.

 
With BYuT and the Lytvyn bloc already backing the coalition, its birth was announced last Wednesday, only moments after Mr Lytvyn was elected speaker by 244 lawmakers in the 450-seat assembly.

The president, has been lukewarm to hostile in his reception to the coalition. It is believed that he would have preferred a grand coalition or
pre-term elections. However, speaking to the BBC, he conceded the need to end the deadlock. “I agree that the political crisis doesn’t help solve the
economic crisis. We need to find a way out of the political crisis,” said Mr Yushchenko.

Prime Minister Yulia Tymoshenko was more upbeat. “I am convinced that this marks the end of the political crisis and will provide a strong platform
from which to address the effects of the severe global financial and economic downturn,” she said.

No Parliamentary Election Before Presidential Election
Under the terms of the coalition agreement the parties have agreed that there should be no parliamentary election before the presidential election,
which is slated for 2010. Yulia Tymoshenko will also stay on as prime minister. “I see no legal grounds for substantial changes in the government
and, first and foremost, the prime minister,” said Mr Lytvyn.

Yesterday, Mr Kyrylenko hinted at cabinet changes. “We agreed that we will not change the government, but there will be changes in government,” he
said. Details of a reshuffle are expected in the next few days.

Warm Response from International and Financial Communities
News of the coalition was welcomed by the international community. The European People’s Party – Europe’s largest centre-right political movement –
congratulated the president and premier.

The banking world also praised the new coalition, but tempered its enthusiasm due to the gloomy outlook for Ukraine’s economy. The country is
struggling to cope with a falling hryvnia, which is down nearly 60 percent this year against the dollar, and a slump in industrial output, down 29
percent in November.

Tim Ash, head of emerging markets research for Central and Eastern Europe, Middle East and Africa for the Royal Bank of Scotland said, “The fact that a
new coalition has been formed is positive, but the new administration and Ukraine more generally still faces huge challenges.”

The restoration of a working parliament to pass legislation to satisfy International Monetary Fund (IMF) conditions was a top priority for BYuT’s
leadership. Last Thursday parliament passed the required spending cuts and on Friday approved measures aimed at softening the impact of the crisis.
These included increased funding for pensions, deposit insurance and conditions that prohibit banks from unilaterally amending the conditions of
loans.

Parliament also passed the first reading of a law aimed at defending Ukraine’s domestic car industry. The legislation, which is compliant with World Trade
Organisation and EU rules, provides domestic manufacturers with local advantages without penalising foreign imports.

Despite tough conditions, the IMF suggested that Ukraine is now on course to receive its second tranche of the $16.4 billion bail-out loan announced in
October. So far, Ukraine has received its first tranche amounting to $4.5 billion. In return the government scrapped plans to increase public spending.

Ceyla Pazarbasioglu, the head of the IMF mission to Ukraine, expressed her backing for the National Bank of Ukraine’s policies to let the market
determine exchange rates and to recapitalise major banks.

We appreciate that we are in for a bumpy ride,” said Viktor Pynzenyk, Minister for Finance, “but we now have a parliament that functions and a
government that will not shirk from making the tough decisions needed to make progress.”
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6.  UKRAINE’S CURRENCY MAY FALL 24% MORE AS IMF LIMITS INTERVENTION

By Michael Patterson and Laura Cochrane, Bloomberg, Friday, December 19, 2008

NEW YORK – Ukraine’s currency, down 50 percent against the dollar since June, may weaken another 24 percent as the International Monetary Fund
restricts the former Soviet nation from halting the slide, Commerzbank AG says.

“It’s like a freefall, a falling knife,” said Michael Ganske, head of emerging markets in London for Commerzbank, Germany’s second-biggest bank. “The central bank has limited ammunition and ability and willingness to support the currency.”

The IMF’s $16.4 billion bailout package, agreed to last month, requires Ukraine to move toward a flexible exchange rate and prohibits reserves from
falling more than 4 percent by yearend from about $32.8 billion now. While the pact permits intervention to stem “disorderly” swings, Ganske said such
a decision “would be stupid.”

Ukraine’s central bank raised its refinancing rate to 18 percent yesterday from 17 percent to arrest the hryvnia’s decline after it fell as much as 18 percent in two days. The currency pared its decline yesterday to 9.1 per dollar from as weak as 9.78 as policymakers sold reserves and said a rate above 9 was “unacceptable.” At the start of the year, the dollar bought 5.04 hryvnia.

President Viktor Yushchenko threatened to fire central bank employees this week and Prime Minister Yulia Timoshenko demanded National Bank of Ukraine Governor Volodymyr Stelmakh’s dismissal. The country’s ruling coalition collapsed in September amid disagreement between Yushchenko and Timoshenko, before forming again this month.

STEEL STOCKS
Ukraine’s benchmark PFTS stock index has dropped 74 percent this year, the third-steepest retreat among 22 so-called frontier markets tracked by MSCI
Inc. Mariupolsky Metallurgical Plant, Ukraine’s largest steel company by revenue, slid 92 percent in trading in Kiev.

The extra yield investors demand to own Ukrainian government bonds instead of U.S. Treasuries has increased more than nine times this year to 25.86
percentage points, according to JPMorgan Chase & Co.’s EMBI+ indexes. That compares with an almost three- fold increase in the main emerging-market
index to 7.09 percentage points.

“I wouldn’t like to be in the shoes of the central bankers right now,” said Alexander Morozov, chief economist in Moscow for HSBC Holdings Plc, Europe’s biggest bank. “There’s not much of a way out.”

Yushchenko’s economic aide Roman Zhukovskyi said this week that 60 percent of foreign-currency loans and mortgages may go into default because of the
decline.

DEFAULT SWAPS
Ukraine, with $105 billion of corporate and state debt, has the fourth-highest credit risk worldwide, credit-default swaps show. The cost to safeguard Ukraine’s bonds against default jumped more than 13 times this year to 31 percent of the amount of debt protected, behind Ecuador, which defaulted last week, at 59 percent, Argentina, which reneged on $95 billion of bonds in 2001, at 46 percent, and Venezuela at 33 percent, CMA Datavision figures on Bloomberg show.

Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.

Ukrainian companies need to repay as much as $4.1 billion this month as lenders refuse to refinance the debt amid the worst global financial crisis since the Great Depression, according to Dmitry Gourov, an economist focusing on Ukraine at UniCredit SpA in Vienna. Dollar loans made up 53 percent of credit issued by Ukrainian lenders as of Sept. 30, the central bank Web site says.

SHRINKING PRODUCTION
The economy, which relies on steel for 40 percent of exports, is weakening after production dropped 48.8 percent in November and prices tumbled.

European hot rolled coil, the benchmark steel product, fell 47 percent since August to $425 a metric ton, according to data from U.K. industry publication Metal Bulletin.

The economy, which has expanded at an average annual rate of 7 percent since 2000, may shrink 5 percent next year, Oleksandr Shlapak, the president’s
deputy chief of staff, said last month.

Industrial production shrank by a record 28.6 percent in November as steel, machine building and oil refining slumped, after a 19.8 percent decline in
October, the Ukrainian Statistics Office said last week.

“This has to be stabilized now, and the only way to stabilize the situation is probably by tweaking the IMF program with more money and changing the
conditions to reflect these new more difficult realities,” said Simon Johnson, a senior fellow at the Peterson Institute for International Economics in Washington and former chief economist of the IMF.

IMF PROGRAM
The IMF has allocated $4.5 billion to support the country’s banks, increase deposit insurance and boost funding for unemployment benefits, according to
the last statement on the fund’s Web site, dated Nov. 5. Before the IMF deal, Natsionalnyi Bank Ukrainy drained $3.4 billion in November and $4.1
billion the previous month to manage the currency’s decline.

The IMF “doesn’t want to see its money wasted on defending a currency level that isn’t sustainable,” said Nick Chamie, head of emerging-market research
at RBC Capital Markets in Toronto.

Balazs Horvath, the IMF representative in Kiev, said in an interview yesterday that the government needs to stick to the agreement “to keep the
exchange rate from collapsing.”

The central bank will sell U.S. currency at a rate of 8.7 hryvnia per dollar today, 4.5 percent below the market exchange rate, Finance Minister Viktor
Pynzenyk said in televised remarks yesterday. Central banks intervene when they buy or sell currencies to influence exchange rates.

‘STRICTER POLICY’
“We will have a stricter monetary policy,” Stelmakh, the central bank governor, said yesterday. The central bank is calling for a law to force exporters to convert part of their revenue into hryvnia and a ban on household loans in foreign currencies, Petro Poroshenko, head of the central bank’s council, said late yesterday in Kiev.

“The central bank has asked exporters to sell their dollars, but in this situation exporters are reluctant to convert because they see a further  dip,” said Mandar Jayawant, a managing partner at Singapore-based Frontier Investment & Development Partners, which manages private-equity funds in frontier markets and doesn’t have investments in Ukraine.

“The sovereign is in a position where it shouldn’t necessarily default on its debt,” Kevin Daly, who manages about $4 billion in emerging-market bonds
at Aberdeen Asset Management in London, said in an interview on Bloomberg Television yesterday. “It clearly looks like it will continue to devalue.”

NOTE: To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Laura Cochrane in London at
lcochrane3@bloomberg.net. LINK: http://www.bloomberg.com:80/apps/news?pid=20601083&sid=aKk9xKdL10ts
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7.  UKRAINE STRATEGY UPDATE: CURRENCY FALLS TO A NEW LOW

 
By Timothy Ash, Head of CEEMEA research, Royal Bank of Scotland
London, United Kingdom, Thursday, December 18 2008

LONDON- The UAH remains under the cosh this morning, pushing to a new low of UAH9.5:US$1; the currency has now lost half its value since the summer. It also sets a gloomy backdrop for other “commodity” currencies in the region, including the rouble and the tenge.

President Viktor Yushchenko met with the governor of the NBU, Volodymyr Stelmakh, and the finance minister, Viktor Pynzenyk, at the airport in emergency session this morning: No they were not all getting the first flight out of town, albeit they may well have been tempted.

The NBU has announced a series of measures which it aims hopes will stabilise the situation including a hike in its refinancing rate to 12%, and offering to hold regular FX auctions, to sell US$ at UAH8.95 today and UAH8.7 tomorrow. The NBU also suggested that it plans to limit UAH liquidity to stem the flight into UAH. We doubt that the NBU’s rate hike will end there.

 
Yushchenko is also threatening to withdraw the licenses of banks that have undertaken gross violations and “currency speculation”. Eighteen banks are being investigated: note that similar pressure has been exerted on banks in both Russia and Romania lately, and reflect old habits of administered means of controlling the situation.

All this will just heap more pressure on banks, which are evidently seeing hefty outflows from their deposit base, in additional to the sizeable outflows reported by the NBU in the period to October (over 9% loss in UAH deposits in October alone). Banks will need recapitalising which overall will boost the cost of any bank bailout.

The NBU’s attempts to control the rate of depreciation of the UAH have evidently not been helped by Naftogaz’s need to cover outstanding external
liabilities to Russia; the company confirmed today that it has transferred US$800m to Russia to cover gas payments.

 
Gazprom is claiming that Ukraine will not now pay for gas delivered in November and December, and has suggested that it is unable to make direct deals with Ukraine; in effect Russia is saying that it still wants to work with intermediaries (e.g. RosUkrEnergo), its preferred option.

Yushchenko appears to be trying to take a leading role in managing the current crisis, which reflects the presidential control over the NBU, with
the governor being appointed by the president. Yushchenko has threatened personnel changes at the NBU in recent weeks, apparently aimed at Stelmakh.

 
At times like these though coordination between the central bank and the government needs to be strong, and Yushchenko has not helped matters by
threatening to re-ignite a political scrap within his own party, and with BYuT, by calling for the dismissal of those members of his own party who voted to back the coalition with Yulia Tymoshenko.

Not sure what the IMF can do from herein on in, given they already came up trumps with a new US$16.5 billion stand-by arrangement only a month or so
ago. This just goes to show that securing an IMF programme in itself is not a guarantee that a country can quickly emerge from crisis, remember Russia
in 1998, which went into a default-cum-devaluation just one month after securing a big ticket IMF programme.

Also not sure that the UAH’s demise changes the big picture story on Ukraine that much though. The currency correction will surely massively cut the
current account deficit, albeit the economy will suffer a huge contraction in 2009. The sovereign’s external liabilities falling due next year are
still modest, and should still be covered given the level of FX reserves.

 
Many corporates/banks will need to restructure some of the US$35-40bn in debt which falls due next year. Foreign banks will be asked sooner, rather than later to stump up more cash to recapitalise their local operations in Ukraine, given the likely extent of reserve draw-down underway. We assume still that they will roll the debts of their local subsidiaries in Ukraine.

NOTE FROM AUR: This material is for information only. It is not an offering document and its terms are qualified in their entirety by the final transaction documents in respect of the securities described therein. Certain transactions mentioned may give rise to substantial risks and may not be suitable for all investors.

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8.  ECONOMIC MELTDOWN PROMPTS PROTEST IN UKRAINE

 
The Associated Press (AP), Kiev, Ukraine, Thursday, December 18, 2008

KIEV, Ukraine: The currency has lost half of its value, tens of thousands face layoffs, residents in the capital are bundling up in winter clothes as the heat sporadically goes out and Russia is threatening to cut off gas supplies. It’s going to be a tough winter in Ukraine.

“I could understand if this were a village, but for the capital of a European country not to have heating, water and gas — how can this be?” asked Tamara Osipova, one of about 1,000 angry protesters outside the Kiev mayor’s office on Thursday.
This ex-Soviet republic has been one of hardest hit by the global financial crisis. Expert warn that the discontent visible Thursday could turn into mass opposition to a government paralyzed by political infighting. “This is all going to boil over next year,” political analyst Ivan Lozowy said. “Desperate people are capable of desperate actions.”
 
After years of robust economic growth, Ukraine has sunk into a deep recession, pressured by a drastic fall in the exports of steel, the core of the economy. A lack of confidence in the banking system, coupled with constant political turmoil under President Viktor Yushchenko has spurred a sharp devaluation in the national currency.
The hryvna has lost a half its value since the global credit crunch hit in September, and closed at trading 9.8 to the dollar Thursday, down from 4.9 in September.
Valentyna Ivanova, a 68-year-old retired engineer, said she could not survive on 700 hryvna a month — half of which she will spend on utilities after fees were raised. “When I come home I should eat something, shouldn’t I? And how will I buy food?” she asked at the protest.
Yushchenko has forecast the economy will contract up to 10 percent by the first three months of 2009.
Many Ukrainians also borrowed dollars to buy apartments and cars. Yushchenko’s economic adviser, Valentyn Zhukovsky, predicted that up to 60 percent of them may default. That will prompt some banks to confiscate property, while others may go bankrupt, experts say.
Prime Minister Yulia Tymoshenko has accused the central bank of speculating on the hryvna and pocketing profits and demanded the bank’s head be fired.
Tens of thousands of workers, meanwhile, face layoffs at steel mills and other industries. Industrial output shrank nearly to 30 percent in November, from a year earlier, the sharpest drop in a decade.
A recent nationwide poll of 2,000 people found that 16 percent of respondents were ready to take to the streets if life doesn’t improve. The study by Gorshenin’s Kiev Management Problems Institute had a margin of error of 2.2 percentage points. Adding to the tensions are Russia’s threats to cut off natural gas supplies next year if a $2 billion debt isn’t paid by Jan. 1.
Ukraine has a fraught history with mass protests. The 2004 election that catapulted Yushchenko to the presidency saw hundreds of thousands take to the streets to protest electoral fraud in what came to be known as the Orange Revolution.
But unlike those mainly peaceful protests, experts say, the current mood is gloomier and actions could get violent. Many Ukrainians feel betrayed and blame authorities for aggravating the crisis by their infighting and corruption.
The anger is palpable on Kiev’s snow-covered streets, where activists have been rallying for weeks. Last week, several districts saw hot water and heating cut off or disrupted, bringing back memories of the bleak post-Soviet years.
Kiev Mayor Leonid Chernovetsky and his longtime foe Tymoshenko have blamed each other for the funding shortages that triggered the disruptions.
Osipova, a 69-year-old retired music teacher who survives on a 800-hryvna monthly pension, has little use for any politicians. “They are all bandits,” she said.
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9.  UKRAINIAN PRIME MINISTER DEMANDS CHIEF BANKER’S DISMISSAL OVER CURRENCY CRISIS 

 
UT1, Kiev, Ukraine, in Ukrainian 1410 gmt 18 Dec 08
BBC Monitoring Service, UK, in English, Thursday, December 18, 2008 

KYIV – Ukrainian Prime Minister Yuliya Tymoshenko has accused the leadership of the National Bank of Ukraine (NBU) of staging the collapse of the national currency hryvnya to benefit businessmen close to the presidential staff.

Speaking during a briefing broadcast live by Ukraine’s state-owned UT1 television on 18 December, she said that selected banks were making fortunes, using large monetary assistance from the central bank to buy up dollars, fuelling demand for foreign currency and bringing the hryvnya’s rate down.
“A handful of people under the protection of the president, the National Bank governor and artificial banks set up specifically for the purpose, are making fortunes worth billions,” Tymoshenko said.
“What is happening at the National Bank today is a banal crime, which should entail criminal cases,” Tymoshenko said, vowing to pass the material in her possession to prosecutors, to the parliamentary ad-hoc investigative commission and to international money-laundering watchdogs.
Tymoshenko said the plunge of the hryvnya (from 5 to 10 hryvnyas per dollar) was a result of large-scale speculation and had no economic footing: “The rate of the hryvnya demonstrated by the National Bank today has no economic reasons whatsoever behind it. None whatsoever. The maximum possible rate amid the crisis is 6.57, according to government estimates.”
DEMAND FOR CHIEF BANKER’S DISMISSAL 
Tymoshenko demanded the dismissal of the NBU governor, Volodymyr Stelmakh, saying President Viktor Yushchenko was the only person who could initiate it in accordance with the constitution.
“The president bears full responsibility for the activities of the governor of the National Bank and for the activities of the National Bank and, beyond a shadow of doubt, is able to influence, via personnel decisions, everything that happens in the National Bank. No-one but the president is capable of doing that,” she said.
She demanded that Yushchenko submit a request for parliament to sack Stelmakh: “I would like to appeal to the president of Ukraine to stop covering things up, to stop earning on such things and to draw a line under this. I also demand that the president should urgently submit a request for the dismissal of the head of the National Bank and should oust the whole board from the National Bank.”
She called on Stelmakh to put a stop to currency speculation, warning of the dire consequences of the sharp depreciation of the hryvnya. “The Ukrainian budget has become hostage to these large-scale speculative operations. It cannot be planned for next year because the hryvnya’s rate at 10 hryvnyas per dollar in essence makes it impossible to sell natural gas, which we import, on the domestic market, because the gas price cannot double.
 
“It makes it impossible to buy nuclear fuel. It makes it impossible to buy medicines for people, practically all of which are being imported. It makes it impossible for people to repay their foreign-currency loans, which they have taken out for their consumer needs, some with their flats as collateral,” Tymoshenko said.
“I would like the president and his team, if it could be called that, the National Bank governor, (presidential secretariat head Viktor) Baloha, the deputy head of the National Bank, Mr (Anatoliy) Shapovalov, who sits on all those operations, to finally stop and think about this country. I know what they are after today. They want, first, to create a situation where the worse it is the better, to make life impossible for the government and to the country, as a result, making a good profit in the process. I stand radically against such behaviour,” she said.
Tymoshenko warned she will resort to radical steps if the president fails to act on her demand for Stelmakh’s sacking: “Both the government and I personally as prime minister, as well as the faction representing our political force in parliament, will take rather radical steps against this situation.
 
“If the president fails to request the dismissal of the National Bank governor, I am convinced that we will raise this issue in the Supreme Council, we will ask the Prosecutor-General’s Office to report on these areas, and I say it once again, we will bring all the shady deals being pulled off in the National Bank of Ukraine under the president’s full protection to the attention of the global bank community.”
“I hope that the YTB (Yuliya Tymoshenko Bloc) faction in the Supreme Council won’t allow any issues to be considered in the Supreme Council until the governor of the National Bank delivers a report and until the president requests the dismissal of the National Bank governor. From this moment all the compromises are over and we will act in an absolutely legal, open and public way.”
Tymoshenko expressed indignation at alleged threats from the National Bank to deprive the government of any funds at all if she went ahead with her criticism of the bank governors.
ATTACK ON TYCOON FIRTASH 
Tymoshenko spoke at length on what she described as large-scale speculative operations by commercial banks under the cover of the presidential secretariat. She launched a particularly scathing attack on the co-owner of the Swiss-registered gas intermediary RosUkrEnergo, Dmytro Firtash, and the Nadra bank, which his financial group recently purchased.
“All the refinancing, in essence, the redistribution of all the 40bn hryvnyas among Ukraine’s commercial banks, happened in such a way that the main financial flows were focused on individual banks which were part of a system of large-scale speculative operations with the hryvnya rate. I could name several banks, but I would like to dwell on just one. The thing is that the 40bn hryvnyas, or to be more exact 40,275m, was meant to support, among other things, the real sector of the economy.
 
“But nearly one-fifth of the money was channelled to a bankrupt bank, which was bought for peanuts; 7.1bn hryvnyas was channelled to the Nadra bank, where the money was accumulated and then, at the rate of the National Bank, which was always 1-1.5 hryvnyas lower than the market rate, that bank was buying up foreign currency.
 
“There are several more banks involved in the same operations. In effect, a bank that was bought for approximately 60m dollars, got financial resources issued by the Nati! onal Bank to an amount of 7.1bn. This is a scandal for the bank system. This is a scandal for the National Bank,” Tymoshenko said.
“In order for banks like Nadra, behind which is the notorious Mr Firtash, who is also behind RosUkrEnergo, which has ruined this country’s gas market – in order for them to make as much money as possible, it is now necessary to collapse the rate of the dollar. So such special banks as Nadra, among others, are now keeping almost 1bn dollars, waiting for the time when the hryvnya collapses and becomes the cheapest possible.
 
“As soon as the hryvnya hits bottom, such banks will pour their foreign currency onto the market and will buy hryvnyas. A strengthening of the hryvnya is planned then, after they have bought up dollars. One such operation by Nadra bank alone, behind which is the presidential administration as well, by the way, will fetch half a billion dollars. These are frightful operations, and these profits are in effect made on Ukraine’s sorrow and crisis.”
Tymoshenko said that she had heard from bankers that “the kickbacks” allegedly received for refinancing assistance from the central bank ranged between 3 and 7 per cent.
She said she would not tolerate any more currency speculation: “I would like to ask the Audit Chamber and the prosecutor-general to urgently check everything that is going on in the Nadra bank and the other banks listed on this sheet, which are speculatively ruining the hryvnya’s rate. Not a single country would tolerate this.
 
“Unfortunately, in Ukraine both politicians and people and the bank system for some reason intend to put up with this. I won’t tolerate this as prime minister. One month is enough to reach an understanding and wind up all these shady deals.” Tymoshenko gave assurances that the government would find ways with the present currency and economic crisis.
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10.  CHIEF BANKER ACCUSES UKRAINIAN PM OF SHIFTING BLAME FOR ECONOMIC CRISIS

 
Inter TV, Kiev, Ukraine, in Russian 1800 gmt 18 Dec 08 
BBC Monitoring Service, UK, In English, Thursday, December 18, 2008  

KYIV – [Presenter] Volodymyr Stelmakh [governor of the National Bank of Ukraine, NBU] has rejected all accusations from [Prime Minister] Yuliya Tymoshenko [who today accused Stelmakh of aiding and abetting currency speculation, which saw the rate of the dollar increase from five to 10 hryvnyas over a few weeks].

 
He believes that the Cabinet of Ministers is trying to shift the blame for this crisis in the Ukrainian economy onto the bank system. The NBU board asks all officials, politicians and journalists to be maximally responsible about spreading untrue information, which provokes panic among the population. The board recalls that this is punishable under criminal law.
[Stelmakh, in Ukrainian] I could cite the example that right after that statement the rate of the dollar increased, that is, the currency’s value halved. Now they are talking about rates of 14 or more hryvnyas per dollar. A very difficult situation has now taken shape in the Ukrainian economy. The incompetent performance of the government in managing the economy has led to the situation that as early as this December this country may find itself facing internal default.
 
At the present time the government has no funds to pay salaries, pensions, social allowances, or to honour external and internal obligations. The board of the NBU is alarmed by the present-day situation where the prime minister has overstepped the line that no one had ever overstepped before. It is an especially cynical fact that ordinary people may become a weapon in the hands of the government in its political wars. It is they who bear the brunt of the destabilization of the bank system.
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U.S.-Ukraine Business Council (USUBC) www.usubc.org.
Promoting U.S.-Ukraine business & investment relations since 1995. 
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11.  UKRAINE’S ECONOMY CAN START GROWING AGAIN NO EARLIER THAN IN 2010
 
Interfax, Kyiv, Ukraine, Tuesday, December 16, 2008

KYIV – Ukraine’s economic growth could restart no earlier than 2010,according to experts from the International Monetary Fund (IMF) and World Bank.
According to a press release of Kyiv-based Dragon Capital Investment Company, which refers to the participants of a phone conference organized by
the company, IMF and World Bank experts are considering two scenarios of development for the macro-economic situation in Ukraine.

According to the IMF forecast that was taken as the basis for its credit program for Ukraine,the development of the global recession in 2009 will cause a considerable worsening of trade conditions for Ukraine and a further cut in the share of loans in the private sector of the country.

“The fund expects a 3% fall in real GDP next year,mainly, due to the worsening of exports. Inflation will fall slightly due to the rise in the price of imported gas and the weakening of the hryvnia,” reads the release, citing IMF Mission Head Ceyla Pazarbasioglu.

The fund’s experts said that by late 2009,inflation will fall to 17% from the 25% expected in late 2008. In addition,the deficit of the current account of the country will considerably decline next year,partially due to the adaptation of the economy to new conditions. They said that the worsening in indicators of the financial account would be a restricting factor for the balance of the current account.

IMF does not rule out that the situation with the international economy will improve in Q2,2009 and in 2010 the global economy and the Ukrainian economy may show growth.

“Starting from 2011,the pace of growth in the Ukrainian economy may return to its potential level of 5.5-6%,and inflation will fall to 5-7%. A decline
in the pace of inflation will be a key conditions for provision of the real weakening of the hryvnia,” the fund experts said.

They also did not rule out that in 2010 the deficit of the current account would be small,partially due to the weakness of the economy and the restricted foreign financing,and will be moderate later,which would allow the National Bank of Ukraine (NBU) to boost reserves in this period.

“The fund’s program plays a very important role in the Ukrainian economy,although other international finance organizations should apply a lot of efforts [as well]. I’m glad to say that they’re doing this,in particular,the Word Bank and the European Bank for Reconstruction and Development (EBRD). In addition,the private sector should play an important role,that is companies and banks,” reads the release, citing IMF Permanent Representative in Ukraine.

 
He said that IMF representative during meetings with representatives of the Ukrainian private sector received encouraging news on the readiness of the
foreign financial institutions that own Ukrainian banks to prolong the commitments of their daughter structures that are to be fulfilled in 2009.
Pazarbasioglu said that Ukrainian authorities are ready to actively cooperate with the IMF.

The World Bank lead economist for Ukraine Martin Raiser said that the bank shares the IMF’s views on the macro-economic situation in Ukraine. “We have own independent macro-economic model,but I’m glad to say that we have very similar forecasts on the scenarios of development in Ukraine to those of the IMF,” he said.

He said that the key task of the World Bank in Ukraine is provision of financial aid to the budget if there is a rise in the cost of borrowing on the global and domestic capital markets,as funds will be needed to refinance payments on the foreign debts of the Ukrainian government.
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12.  WEBSITE PUBLISHES UKRAINIAN PRESIDENT’S REPORT ON ECONOMIC SITUATION
“Crisis Through the Eyes of Bankova, Classified Materials”

Ukrayinska Pravda website, Kiev, Ukraine, in Ukrainian 15 Dec 08
BBC Monitoring Service, UK, in English, Monday, December 15, 2008

KYIV – A Ukrainian website has published an unattributed report which quotes President Viktor Yushchenko’s report on the economic situation in Ukraine.

According to the website, the report was prepared by the presidential secretariat for Yushchenko’s 11 December meeting with the parliamentary faction of the Our Ukraine-People’s Self-Defence bloc which took place behind closed doors. The report predicts that Ukraine will soon deplete its gold and currency reserves, which will lead to the country’s default in 2009.

The following is the text of the report entitled “Crisis through the eyes of Bankova. Classified materials”, posted on the news and analysis Ukrayinska
Pravda website on 15 December; subheadings have been inserted editorially:

President’s office believes economy to get much worse soon Our editorial board has obtained [President] Viktor Yushchenko’s presentation for Our Ukraine – People’s Self-Defence [propresidential faction OUPSD]. Statements that the Ukrainian economy really has been affected by the crisis are not an invention of politicians. In the near future the economy will face an even deeper recession than the one for which Ukrainians had been prepared by the government.

Ekonomichna Pravda’s editorial board has obtained Viktor Yushchenko’s presentation, which he gave to the OUPSD faction during a meeting on
Thursday, 11 December. Statements that Ukrainian economy has been actully affected by the crisis are not an invention of politicians.

According to economists from the [presidential] secretariat, in the near future the economy will face an even deeper recession than the one for which
Ukrainians had been prepared by the government.  First, the head of state presented the figures which have been on everybody’s lips not for some time
now.

Decline began in August, with industry suffering most
According to the president, the real decline in the country’s gross domestic product (GDP) began in August. Aggregate production in September saw a
decline from 10.9 per cent (August on August 2007) to 5.5 per cent (compared to September 2007). In October, for the first time since 2000, the State
Statistics Committee registered a 2.1-per-cent fall in GDP compared with the same month in the previous year.

By way of comparison, it saw a rise of 2.2 per cent in October 2005, which was the worst year of the recent period. Indices in 2006 and 2007 were 9 per
cent and 7 per cent.

Industry was affected most of all. It moved into the “red” back in August: the decline was 0.5 per cent. It equaled already 4.5 per cent in September
and dropped to 19.8 per cent in October. This is exactly why industry was the first to announce large-scale redundancies and review of employees
salaries.You can read about the current situation at the country’s largest enterprises in the series of materials called “Oligarchs during the crisis”
on Ekonomichna Pravda.

It is not difficult to guess that the decline will continue. According to the president’s forecasts, real GDP will decline in the first quarter from 7 per cent to 10 per cent. Obviously, GDP in monetary equivalent can even not drop, but rise as a result of inflation. But this is no consolation. Prices are growing and the physical volume of goods and services produced is already much lower.

Unfortunately, these forecasts seem to be more realistic than those announced by the government: 2 per cent in annual terms.

Budget will continue to suffer revenue shortfall which began in November

According to president’s economists, planned revenues of the state budget’s general fund will also be exceeded by the end of the year, anyway. Despite the shortfall of almost 7bn hryvnyas [as of 16 December the official exchange rate was 7.6538 hryvnyas per US dollar], the budget will be exceeded by 10.68bn hryvnyas by the end of the year due to the revenues of the first 10 months.

According to Viktor Yushchenko’s estimates, the “shortfall” was 2.1bn hryvnyas in November and will reach 4.9bn hryvnyas in December. There is likely to be another figure in the red due to revenues of the special budgetary fund.

The revenues brought in by the customs service has seen a drastic fall. Of course, it has already exceeded the annual plan for collecting money by 11.3
per cent in the first months of the current year, when people actively purchased cars and imported goods, and gas and oil products were delivered to Ukraine. But this phenomenon was very unhealthy: a country cannot live at the expense of the customs service.

With tax revenues falling, budget cuts will have to be made

This unreasonable “distortion” has already disappeared, but it is not overlaid by revenues collected by the tax authorities: as of 8 December, the
shortfall in the tax collection plan was 8.6 per cent.

Imports, export prices and the country’s economic turnover have all fallen and sums collected in VAT have fallen. One can completely forget about corporate tax for the next two years. Therefore, despite the possible optimism of the 2009 budget, it will be most likely necessary to sequester it – to cut.

Yushchenko forecasts the growth of the budget at the level of 29.4bn hryvnyas instead of the planned 17.9bn due to the “whole” that appeared in
the State Pension Fund.

There are many people who will receive smaller budget allocations even this year. As of the end of November, the negative balance of the state budget
stood at 17.9bn hryvnyas. There are no funds to cover this deficit: the National Bank cannot endlessly buy Finance Ministry’s bonds. There is no
privatization this year, just like there probably will be no privatization next year. Therefore, the only way of balancing revenue and expenditure is
by sequestering the budget as early as this year.

There is one more incentive for not spending budget funds: they will be necessary for “filling in gaps” in the Pension Fund. As of the end of
November it was in the “red” by the tune of 15.8bn hryvnyas. But the Pension Fund gets a share of its funds from the state, and so the real “shortfall”
comes to 29.4bn. This gap is unlikely to be reduced in 2009.

Budgeting spending rising as local budgets struggle to fill coffers
But, according to Ekonomichna Pravda’s sources, absolutely conflicting things are taking place at the present time. Everything is being done to spend as much budgetary funds as possible: in particular, the state procurement procedure has been drastically simplified: there is no need now to hold tenders.

Apart from the state budget, local ones have been substantially affected by the crisis. While the average number of unfulfilled budgets used to be not
much more than 50, the number of unfulfilled local budgets could reach 598 out of 691, or see an 85.1-per-cent growth by the end of this year.

The secretariat forecasts an even more misbalanced budget in early 2009. Secured items of expenses alone come to 41.7bn dollars in the first quarter,
while the level of forecast revenues is 36.2bn. So, even without taking unsecured items of budget into account, the deficit will come to at least 21bn hryvnyas.

Therefore, there is a great problem of a double deficit, even if the funds are spent for secured items only, or to put it conveniently, for “social
purposes”. Any support for the economy is even out of the question.

IMF loan too small to cover deficit, but other sources very limited
The total forecast level of the shortfall in state funds is at the level of at least 82.5bn hryvnyas. According to the new dollar rate, this is just over 10bn dollars: this means that only two thirds of the IMF loan will be enough to cover it. Where should funding for these gaps come from? There are only three sources.
 
[1] The first one is privatization. This issue is a very “delicate” one, as all investors will understand that Ukraine faces a shortage of funds. In view of these conditions, no-one will pay a higher price for the Odessa Port Plant or [telecommunications company] Ukrtelekom. Therefore, it is better to sell nothing at all.
 
[2] The second source is borrowing. But no-one will grant more external borrowing than have already been granted. No-one will grant domestic ones either because the banks buying domestic bonds in a banal manner have no money.

[3] Thus, a third source remains: emissions by the NBU [National Bank of Ukraine]. This is banned by legislation, indeed, but there is an easy scheme
for avoiding bans.

To be completely honest, the only source remaining if those three are not used is tightening of belts and the budget not supporting any individuals except for the ordinary population. But this is impossible, as government officials only wish to steal and also to provide funding for purchasing electricity, heat, water and consequently, people’s labour as well. So, it is necessary to seek funds.

Country’s reserves could vanish in 2009
The work of the president’s economists also tackled the issue of the national currency’s devaluation. The hryvnya is among world leaders in this respect. According to this parameter, Ukraine is ahead of countries “more affected by the crisis” like Chile and Indonesia.

Any strengthening of the hryvnya’s exchange rate in such conditions is out of the question. The president’s forecast: the National Bank’s reserves will shrink before one’s very eyes every month. According to the scenario of the head of state, reserves could vanish as such in 2009.

It could be so if all planned debt obligations are returned, and namely, 16.8bn dollars of bank debts, 3.1bn of state debts and 9.8bn of debt those belonging to enterprises and individuals.

The most negative scenario admits that the reserves will be retained above the margin approved in accordance with the memorandum with the IMF: around
30bn dollars will remain as of the end of 2008. But if the loan from the fund is not taken into account, reserves will come to almost 17bn dollars in the “red” as of the end of December 2009. In this case, the NBU’s own hard currency will end in July. The IMF loan of exactly 16.8bn will help to further maintain the zero level. This is the origin of this figure.

Devaluation, default and bankruptcy possible
This means that hopes to spend the IMF money for funding the state’s budget deficit will be buried. But this is also the burial of National Bank’s stories about the appreciation of the hryvnya. According to economic classics, the NBU will have to drastically devalue the national currency as early as in spring.

This will inevitably cause a default of external liabilities, along with the bankruptcy of many banks and enterprises. But this will be the price of
retaining reserves and further price stability in the country.

Obviously, all of this will happen in the worst case scenario: when everyone rushes to get back debts. But judging from the president’s slides, it is realistic. Of course, the state and business will try to restructure debts so as to reduce the outflow of currency. This will mean the mass default of Ukrainian companies and banks.

But there are no doubts that absolutely everyone will be unable to do this. So, a fall in NBU reserves, and quite a substantial one, will take place
anyway. And this will mean greater demand for dollars throughout the whole year. In such conditions the rate will not appreciate.

Pessimistic scenario caused partly by lack of decisive steps
According to the pessimistic scenario of events, Ukraine will face huge state budget and Pension Fund deficits in 2009. The National Bank is also very likely to spend its currency reserves and the funds borrowed from the IMF, and the hryvnya will experience substantial devaluation.

This scenario is not fantastic, but quite realistic. The government and parliament have not taken decisive steps to resolve the major economic problems and have not yet indicated the sources of filling the budget with money.

Therefore, Ukraine is approaching 2009 in an uncertain state and the prospect of total collapse. Of course, reality will to some extent be milder, but at the present time it is hard to say to exactly what extent.

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13.  IMF APPROVES US$16.4 BILLION STAND-BY ARRANGEMENT FOR UKRAINE 

IMF Press Release No. 08/271, Washington, D.C. Wed, November 5, 2008
 
WASHINGTON, D.C. – The Executive Board of the International Monetary Fund (IMF) today approved a two-year Stand-By Arrangement (SBA) for SDR 11 billion (about US$16.4 billion) to help the authorities restore financial and economic stability and strengthen confidence.
 
The SBA request entails exceptional access to IMF resources equivalent to 802 percent of Ukraine’s quota in the Fund, and was approved under the Fund’s fast-track Emergency Financing Mechanism. Today’s approval enables the immediate disbursement of SDR 3 billion (about US$4.5 billion).
The authorities’ program is designed to help stabilize the domestic financial system against a backdrop of global deleveraging and a domestic crisis of confidence, and to facilitate adjustment of the economy to a large terms-of-trade shock. The authorities’ plan incorporates monetary and exchange rate policy shifts, banking recapitalization, and fiscal and incomes policy adjustments.
Following the Executive Board discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, issued the following statement:
“The Ukrainian economy, especially the banking system, is experiencing considerable stress. Falling prices for Ukraine’s major export, steel, have led to a substantial deterioration in Ukraine’s current account outlook.
 
“This terms-of-trade shock, along with existing vulnerabilities—high inflation, relatively low foreign exchange reserves compared with short-term external debt, significant exposure of banks to foreign funding, balance sheet mismatches, and a weak underlying fiscal position—interacted with the drying up of liquidity caused by the international financial crisis and led to a significant slowdown in capital inflows.
“The authorities’ program, supported by the two-year Stand-By Arrangement with the IMF, aims to restore financial and macroeconomic stability by adopting a flexible exchange rate regime with targeted intervention, a pre-emptive recapitalization of banks, and a prudent fiscal policy coupled with tighter monetary policy. Resolute implementation of the program should help reduce inflation to single digits by the end of the program.
“The flexible exchange rate regime, backed by an appropriate monetary policy and foreign exchange intervention, will help absorb external shocks and avoid disorderly exchange market developments. The recent unification of official and market exchange rates should increase clarity about the regime.
 
Recently imposed exchange controls will be phased out as confidence rebuilds. Plans to accelerate progress towards inflation targeting and enhance the independence of the National Bank of Ukraine are important to provide the nominal anchor under the flexible exchange rate regime over the medium term. In the near term, as liquidity pressures diminish, tighter monetary policy will be necessary to guard against inflation.
“A pre-emptive bank recapitalization will alleviate a potential credit crunch that could prolong and deepen the downturn in economic activity. Decisive measures that have been taken to allocate public funds to recapitalize banks and to facilitate bank resolution processes will ensure that problems can be dealt with promptly.
 
“Increased oversight, more targeted on- and off-site inspections, and improved cross-border supervisory cooperation will help to strengthen the financial system. A proactive strategy to resolve corporate and household debt problems will also be essential to reduce banking sector vulnerabilities.
“A prudent fiscal stance is planned, consistent with both the financing constraint and the need for recession-related social spending. The target of a balanced budget in 2009 will be kept under review in light of the macroeconomic, financing, and revenue outlooks.
 
“The targets would be achieved in part by expenditure restraint, and by a phased increase in energy tariffs. Ukraine’s extensive safety net provides a backstop to protect vulnerable groups, and the program also allows higher funding for unemployment insurance and targeted income support.
“The authorities have developed a strong and comprehensive package of measures to address the challenges Ukraine is facing and the Fund has provided commensurate financial assistance. Decisive measures have already been implemented by the authorities, including the passage of anti-crisis legislation.
 
Moreover, the authorities’ policy framework is sufficiently robust to adapt to evolving circumstances. The commitment of leaders of the main political parties to the core elements of the program increases the prospects for successful program implementation. All these elements give confidence that the program will succeed in stabilizing economic and financial conditions,” Mr. Portugal said.

ANNEX:

RECENT ECONOMIC DEVELOPMENTS 
Ukraine’s economy has grown very rapidly since 2000, expanding by more than 7 percent on average. Initially, this reflected the utilization of large excess capacity and increased productivity supported by a series of structural reforms. Since 2005, growth has been propelled by real domestic demand, namely a credit boom driven by strong capital inflows as well as incomes policies that redistributed large terms-of-trade gains to the population.
By mid-2008, the economy was overheating. Credit growth exceeded 70 percent, CPI inflation exceeded 30 percent, wage growth settled in the 30-40 percent range, a buoyant property market pushed valuations to high levels, and imports surged at an annual rate of 50-60 percent. The current account deficit reached 7 percent of GDP in the second quarter of 2008.
The Ukrainian economy also became vulnerable along other dimensions, including high short-term external debt relative to reserves, high exposure of banks to foreign funding, balance sheet mismatches, and a weak underlying fiscal position. Problems came to the fore as commodity prices plunged and the global financial turmoil deepened. These developments have had a considerable impact on the real sector as reflected in the sharp 5-percent contraction of the manufacturing sector in September.
At the same time, a sharp slowdown of external capital flows raised concerns about the ability of banks and corporates to roll over existing credit lines. When the sixth largest bank, Prominvest Bank, was put under receivership, a widespread deposit outflow began with at least US$3 billion—4 percent of deposits—withdrawn during the first three weeks of October.
 
Confidence in the country’s banking system and currency weakened. Intervention by the National Bank of Ukraine (NBU) mounted in October, reducing reserves from US$38 billion to US$32 billion. In addition to providing liquidity, the authorities also imposed a set of exchange controls to stem outflows.
The combination of weaker demand from Ukraine’s trading partners, falling export prices, rising import prices, and reduced access to international financial markets are expected to weaken growth prospects. Taking these developments into account, Ukraine’s overall financing needs for the next two years are large.
PROGRAM SUMMARY 
The authorities’ program aims at restoring confidence in Ukraine’s macroeconomic and financial stability by addressing the financial sector problems, facilitating adjustment to potentially large external shocks, and reducing inflation. The program is designed to respond flexibly to economic developments.
The program is based on projections that assume a global recession and continued deleveraging in international credit markets in 2009, implying a recession in Ukraine with deteriorating exports, limited external financing and a credit crunch. The projected impact on output—a 3 percent decline—is consistent with Ukraine’s experience under similar circumstances in 2004-05.
 
Under the program, inflation is expected to decrease to 17 percent by end-2009 from the projected 25.5 percent this year. The current account would compress to a deficit level of about 2 percent of GDP from the mid-2008 level of 7 percent.
Assuming a global recovery in the second half of 2009, the Ukrainian economy could be back at its estimated potential growth rate of 5-6 percent by 2011 with inflation at 5-7 percent by late 2011.Current account deficits are projected to remain small in 2010, in light of the weak economy, and to be moderate thereafter, allowing reserves to rise.
The key measures to achieve the objectives of the program focus on the following areas:
 
MONETARY AND EXCHANGE RATE POLICY 
The program supports the implementation of a flexible exchange rate regime to help Ukraine better absorb the external shocks it now faces. Base money will be the near-term anchor for monetary policy until an inflation targeting regime can be implemented. The independence of the NBU will be strengthened, and in the near term, monetary policy will be tightened to help achieve the 2009 inflation objective of 17 percent.
 
The program envisages eliminating exchange rate controls as soon as possible, and measures to improve the operation of the foreign exchange market, including cancellation of the foreign exchange transactions tax and a more transparent intervention policy.
FINANCIAL SECTOR POLICY 
The authorities intend to prepare a comprehensive bank resolution strategy that will include the resolution of problem banks and the recapitalization of viable banks to cushion the real economy from a potential credit crunch. The authorities have already resolved the sixth largest bank, Prominvest Bank, through a sale to a strategic investor.
The program further proposes to ensure that viable banks have access to liquidity; increase deposit insurance coverage to Hrv150,000 (about €20,000) from the current Hrv50,000, which will cover 99 percent of individual accounts; and strengthen the monitoring of banks, including through enhanced cross-border supervisory cooperation.
FISCAL POLICY 
The authorities will adopt a prudent fiscal stance while accounting for the need for recession-related social expenditures, including higher funding for unemployment insurance and targeted income support. Under the program, the deficit would not exceed 1 percent of GDP in 2008, and in 2009, the general government budget would be balanced (excluding bank recapitalization costs).
 
Even with the substantial increase of 0.8 percent of GDP social spending during the recession, these fiscal targets are deemed attainable. However, given the uncertainties on economic prospects and the availability of financing, the authorities are prepared to adjust the targets as needed.
 
To achieve their fiscal targets, the authorities are determined to correct the pricing policies in the energy sector and pursue a more balanced incomes policy by adjusting the minimum wage, pension, and social transfer increases in line with the projected inflation in 2009. These measures will help guard against higher inflation and depreciation.
 
Ukraine has an adequate social safety net in place to protect the vulnerable against adjustment policies, which the authorities are prepared to expand should the need arise. Ukraine joined the IMF as a member on September 3, 1992. Its quota is SDR 1,372 million (about US$2,049 million).
 
LINK: http://www.imf.org/external/np/sec/pr/2008/pr08271.htm
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14.  HARD TIMES FOR UKRAINIAN BANKS, CENTRAL BANK CHAIRMAN UNDER FIRE

Ukrainian banking sector hit hard by financial crisis
 
Commentary & Analysis: By Pavel Korduban, Eurasia Daily Monitor, Vol 5, Issue 240
The Jamestown Foundation, Wash, D.C. Wed, December 17, 2008 

Ukraine’s banking system is teetering on the brink of disaster. The International Monetary Fund’s (IMF) $16.4-billion loan (see EDM, November 12) has probably come too late either to restore trust in banks or to prevent the national currency, the hryvnya, from a free fall.

 
Most banks are in serious trouble, and several may soon change hands or collapse. Meanwhile, the chair is shaky under Volodymyr Stelmakh, the chairman of the National Bank of Ukraine (NBU, Ukraine’s central bank).

Ukraine’s ailing banks have been using the funds they are receiving from the NBU to buy foreign currency with hryvnyas. The demand for Ukraine’s main export commodity, metals, has fallen dramatically on the world market, so less hard currency is coming into Ukraine.

 
In addition, the Naftohaz Ukrainy national oil and gas company has been buying dollars on the domestic market in order to pay its debt to Russia (see EDM, December 3). All these factors have contributed to a 65 percent devaluation of the hryvnya against the dollar since August.

Ukraine has been among the countries worst hit by the global financial crisis. Key industries such as metallurgy and machine building are laying off workers, and real wages have started to fall for the first time in a decade. This makes it hard for Ukrainians to make payments on loans, many of which, especially mortgages, were issued in dollars.

 
Since most people are paid in hryvnyas, they have to buy dollars with the weak hryvnya and are paying back much more on the loans than they had expected. The share of problem loans in bank portfolios grew to 10.3 percent by December 11 and is continuing to grow (Kommersant-Ukraine, December 16).

Banks have all but stopped issuing loans, and their clients have hurried to withdraw deposits. In October the NBU introduced a moratorium on withdrawals ahead of schedule, which further undermined trust in banks.

 
Some 70 percent of Ukrainians would prefer to withdraw their deposits from banks, and 67.7 percent of them do not trust banks at all, according to a public opinion poll conducted across Ukraine at the end of November by the Kyiv-based Research and Branding Group (Ukrainski Novyny, December 8).

The Ukrainian version of a Russian business daily quoted a source at the NBU as forecasting that over 40 banks may soon collapse (Kommersant-Ukraine, December 16). Two banks, Nadra and Prominvestbank, have apparently been the hardest hit by the crisis.

Nadra reportedly borrowed more from the NBU than any other bank over the past few months (Zerkalo Nedeli, December 13). Although Nadra was taken over in November by RosUkrEnergo gas intermediary co-owner Dmytro Firtash (www.korrespondent.net, November 7), Nadra’s cash machines are empty most of the time, and it has stopped paying depositors money from their accounts.

 
Nadra, which is Ukraine’s seventh largest bank, is among the top five leaders of the mortgage loan market, which is a serious drawback in the current situation (Delo, December 15).

Ukraine’s sixth largest bank, Prominvestbank, was the first to admit to being in trouble. The NBU has been managing it and trying to find buyers for the bank since October 7. It was announced in early November that the Klyuyev brothers, businessmen and deputies from the Donetsk-based Party of Regions, had agreed to buy a controlling stake in Prominvestbank; but they apparently failed to come up with the necessary $120 million. Russian multibillionaire Alisher Usmanov, who had reportedly been interested in the bank, said he would not buy into it (Interfax-Ukraine, December 10).

The NBU reportedly offered stakes in Prominvestbank to the European Bank for Reconstruction and Development and the International Finance Corporation. A majority stake will most probably be nationalized (Ekonomicheskie Izvestia, December 12; Delo, December 16). The Ukrainian presidential office has urged Prominvestbank’s prompt nationalization, as the bank’s stabilization is one of the IMF’s main conditions (Interfax-Ukraine, December 16).

The new parliamentary coalition, established on December 16 by Prime Minister Yulia Tymoshenko’s bloc, the majority of President Viktor Yushchenko’s Our Ukraine-People’s Self-Defense (NUNS), and the bloc of Speaker Volodymyr Lytvyn, threatens to remove Stelmakh. On December 8 two NUNS deputies formed a parliamentary investigative commission to examine how the NBU managed its foreign exchange reserve (Zerkalo Nedeli, December 13).

 
Addressing the nation on TV a week ago, Tymoshenko blamed the NBU leadership for the situation on the currency market (Inter TV, December 10). Lytvyn is also in favor of replacing Stelmakh (UNIAN, December 13).

Stelmakh was deputy chairman when Yushchenko chaired the NBU in the 1990s, and the president is now his only supporter. Yushchenko met Lytvyn after his election as speaker on December 9 and warned him against being hasty in ousting Stelmakh, but even Yushchenko’s own trust in Stelmakh is waning.

 
On December 1 Yushchenko’s spokeswoman Iryna Vannykova warned that “the president will have to make difficult personnel decisions” if the NBU failed to stabilize the hryvnya (Zerkalo Nedeli, December 13). According to the Ukrainian constitution, even if the president decides to dismiss the NBU head, the final decision is up to parliament.   LINK: http://www.jamestown.org
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15.  UKRAINE’S VICTOR PINCHUK GAVE UP TO $5 MILLION TO BILL CLINTON’S FOUNDATION

 
Associated Press (AP), Washington, D.C., Thursday, December 18, 2008
  
WASHINGTON – Ukraine’s second-richest billionaire, Victor Pinchuk, gave up to $5 million to former U.S. President Bill Clinton’s foundation. Pinchuk, the son-in-law of former Ukrainian President Leonid Kuchma, is listed as among the major contributors to Clinton’s charitable foundation. Clinton spoke in 2007 at an annual meeting of Yalta European Strategy, a group Pinchuk founded to promote Ukraine joining the European Union.

Clinton laid out a list of big-ticket donors to his foundation Thursday that is heavy with foreign governments and business interests sure to have a stake in the policies that Hillary Rodham Clinton carries out as secretary of state.

Saudi Arabia and other foreign governments gave at least $46 million, while corporate donors included the Blackwater security firm that protects U.S. diplomats in Iraq.
The contributions went to the William J. Clinton Foundation, a nonprofit created by the former president to finance his library in Little Rock, Ark., and charitable efforts to reduce poverty and treat AIDS. President-elect Barack Obama made Hillary Clinton’s nomination as secretary of state contingent on her husband revealing the foundation’s contributors, to avoid questions about potential conflicts of interest.
The Kingdom of Saudi Arabia gave $10 million to $25 million to the foundation, and other government donors included Norway, Kuwait, Qatar, Brunei, Oman, Italy and Jamaica. The Dutch national lottery gave $5 million to $10 million.
The Blackwater Training Center donated $10,001 to $25,000. The State Department will have to decide next year whether to renew Blackwater Worldwide’s contract to protect U.S. diplomats in Iraq. Five Blackwater guards have been indicted by a U.S. grand jury on manslaughter and weapons charges stemming from a September 2007 firefight in Baghdad’s Nisoor Square in which 17 Iraqis died.
The foundation disclosed the names of its 205,000 donors on a Web site Thursday, ending a decade of resistance to identifying the sources of its money. While the list is loaded with international business leaders and billionaires, some 12,000 donors gave $10 or less.
Clinton agreed to release the information after concerns emerged that his extensive international fundraising and business deals could conflict with America’s interests if his wife became the nation’s top diplomat. The foundation has insisted for years that it was under no legal obligation to identify its contributors, contending that many expected confidentiality when they donated.
The list also underscores ties between the Clintons and India, a connection that could complicate diplomatic perceptions of whether Hillary Clinton can be a neutral broker between India and neighboring Pakistan in a region where Obama will face an early test of his foreign policy leadership. The former president did not release specific totals for each donor, providing only ranges of giving. Nor did he identify individual contributors’ occupations or countries of residence.
Donors gave Clinton’s foundation at least $492 million from its inception in 1997 through last year, according to the most recent figures available.
After negotiations with Obama’s transition team, Clinton promised to reveal the contributors, submit future foundation activities and paid speeches to an ethics review, step away from the day-to-day operation of his annual charitable conference and inform the State Department about new sources of income and speeches.
Representatives of the foundation, including CEO Bruce Lindsay and attorney Cheryl Mills, and aides to Hillary Clinton met privately Wednesday with staff of incoming Foreign Relations Committee Chairman John Kerry of Massachusetts and ranking Republican Dick Lugar of Indiana to discuss the foundation’s activities and review a memorandum of understanding drawn up by the Clinton and Obama teams.
The Foreign Relations Committee will hold hearings and vote on Hillary Clinton’s nomination before sending it to the full Senate. Shortly after Obama tapped Clinton, Lugar said he would support her, though he said there would still be “legitimate questions” raised about the former president’s extensive international involvement.
“I don’t know how, given all of our ethics standards now, anyone quite measures up to this — who has such cosmic ties,” Lugar said.
Some of the donors have extensive ties to Indian interests that could prove troubling to Pakistan. Tensions between the two nuclear nations are high since last month’s deadly terrorist attacks in Mumbai.
Amar Singh, a donor in the $1 million to $5 million category, is an Indian politician who played host to Bill Clinton on a visit to India in 2005 and met Hillary Clinton in New York in September to discuss an India-U.S. civil nuclear agreement.
Also in that giving category was Suzlon Energy Ltd. of Amsterdam, a leading supplier of wind turbines. Its chairman is Tulsi R. Tanti, one of India’s wealthiest executives. Tanti announced plans at Clinton’s Global Initiative meeting earlier this year for a $5 billion project to develop environmentally friendly power generation in India and China.
Two other Indian interests gave between $500,000 and $1 million each:
_The Confederation of Indian Industry, an industrial trade association.
_Dave Katragadda, an Indian capital manager with holdings in media and entertainment, technology, health care and financial services.
Other foreign governments also contributed heavily to the foundation.
_AUSAID, the Australian government’s overseas aid program, and COPRESIDA-Secretariado Tecnico, a Dominican Republic government agency formed to fight AIDS, each gave $10 million to $25 million.
_Norway gave $5 million to $10 million.
_Kuwait, Qatar, Brunei and Oman gave $1 million to $5 million each.
_The government of Jamaica and Italy’s Ministry for Environment and Territory each gave $50,000 to $100,000.
_The biggest donations — more than $25 million each — came from two donors.
They are the Children’s Investment Fund Foundation, a London-based philanthropic organization founded by hedge fund manager Chris Hohn and his wife Jamie Cooper-Hohn and dedicated to helping children, primarily in Africa and India; and UNITAID, an international drug purchasing organization formed by Brazil, France, Chile, Norway and Britain to help provide care for HIV-AIDS, malaria and tuberculosis patients in countries with high disease rates.
The foundation’s donor list includes numerous overseas business interests.
_Saudi businessman Nasser Al-Rashid gave $1 million to $5 million.
_Friends of Saudi Arabia and the Dubai Foundation each gave $1 million to $5 million, as did the Taiwan Economic and Cultural Office.
_The Swedish Postcode Lottery gave $500,000 to $1 million.
_China Overseas Real Estate Development and the U.S. Islamic World Conference each gave $250,000 to $500,000.
_The No. 4 person on the Forbes billionaire list, Lakshmi Mittal, the chief executive of international steel company ArcelorMittal, gave $1 million to $5 million. Mittal is a member of the Foreign Investment Council in Kazakhstan, Goldman Sachs’ board of directors and the World Economic Forum’s International Business Council, according to the biography on his corporate Web site.
Pinchuk, with an estimated net worth of more than $5 billion, is listed among $1 million to $5 million donors, including:
_Harold Snyder, director for Teva Pharmaceutical Industries, the largest drug company in Israel. His son, Jay T. Snyder, serves on the U.S. Advisory Commission on Public Diplomacy, which oversees State Department activities, and served as a senior U.S. adviser to the United Nations, where he worked on international trade and poverty. Jay Snyder donated between $100,000 and $250,000 to the foundation.
_No. 97 on the Forbes billionaire list, Ethiopian-Saudi business tycoon Sheikh Mohammed H. Al-Amoudi.
_Issam Fares, a former deputy prime minister of Lebanon.
_Mala Gaonkar Haarman, a partner and managing director at the private investment partnership Lone Pine Capital.
_Lukas Lundin, chairman of oil, gas and mining businesses including Tanganyika Oil Company Ltd., an international oil and gas exploration and production company with interests in Syria, and Vostok Nafta Investment Ltd., an investment company that focuses on Russia and other former Soviet republics.
The top ranks of Clinton’s donor list include lots of longtime Democratic givers, including some notable for their staunch support of Israel.
_TV producer Haim Saban and his family foundation, who donated between $5 million and $10 million, splits his time between homes in Israel and California. “I’m a one-issue guy and my issue is Israel,” he told The New York Times in 2004.
_Slim-Fast diet foods tycoon S. Daniel Abraham, a donor of between $1 million and $5 million, has been a board member of the American Israel Public Affairs Committee, which promotes Israel’s interests before the U.S. government.
_The American Jewish Committee and the United Nations Foundation donated $100,000 to $250,000.
Clinton thanked his donors in a statement for being “steadfast partners in our work to impact the lives of so many around the world in measurable and meaningful ways.”
According to the memorandum negotiated by the foundation and top Obama advisers, Bill Clinton agreed to publish the names of all past and future contributors to his foundation during Hillary Clinton’s tenure as secretary of state.
The former president also agreed to step away from direct involvement in the Clinton Global Initiative, an annual charitable conference where businesses and many foreign governments pledge donations to help ameliorate AIDS, poverty and other social ills. He will continue serving as CGI’s founding chairman but will not solicit money or sponsorships.
 
The CGI will cease accepting foreign contributions and will not host events outside the United States. Clinton started raising money for his library before leaving the White House. Over the years, the Clintons repeatedly refused to identify all the foundation donors, and continued to do so during Hillary Clinton’s 2007-08 presidential campaign.
Names surfaced nonetheless. Several news organizations unearthed foreign-government donors, and in 2001, Bill Clinton gave a list of 150 top foundation donors to a House committee investigating his pardon of fugitive businessman Marc Rich, whose ex-wife, Denise Rich, gave the library foundation at least $450,000. 
On the Net: Clinton Foundation contributors: http://www.clintonfoundation.org/contributors
NOTE: Beth Fouhy reported from New York. Associated Press writers Ted Bridis, Jim Drinkard and David Pace in Washington contributed to this story.
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16.  RUSSIAN FEDERAL SECURITY SERVICE GENERAL DENIES HOLODOMOR 

Says Holodomor is a Ukrainian invention
By Conor Sweeney, Reuters, Moscow, Russia, Friday, Dec 19, 2008
 
MOSCOW – A Federal Security Service general on Thursday dismissed as an “invention” a 1930s famine that Ukraine has asked Russia to recognize as genocide after Kiev urged the Kremlin to join in commemorations for millions of dead.

The dispute over the Holodomor, or mass famine, of the 1930s, in which historians believe 7.5 million died, is one of many pitting the Kremlin against Kiev’s pro-Western leaders.

President Dmitry Medvedev stayed away from ceremonies to mark the 75th anniversary of the calamity last month and accused Ukrainian President Viktor Yushchenko of distorting history for political gain.

“The Holodomor is a Ukrainian invention,” General Vasily Khristoforov, head of the registration and archives department at the Federal Security Service, or FSB, told Interfax. “Ukraine is trying to prove that the 1930s famine was an act of genocide that the Stalinist leadership committed against Ukrainians.

“Archive documents show undeniably that there was no deliberate genocide against the Ukrainian people. We have not found a single directive that would have even hinted about deliberate genocide against the Ukrainian people.”

Researchers, Khristoforov told Interfax, had proven beyond all doubt that a famine in the late 1920s and 1930s did grip various southern Soviet regions.
“Yes, it did, but not only in Ukraine,” he said.

About a dozen countries have recognized the Holodomor, one of three famines to hit Ukraine last century, as genocide. Addressing a gathering last month at the opening of a monument to the famine, Yushchenko denied any suggestion Russia was to blame for the famine. But he called on Moscow to denounce Stalinism and join in commemorations for the dead.

Millions were left to starve in their homes throughout Ukraine as Soviet authorities trying to bring independent farmers to their knees imposed impossible harvest quotas and requisitioned grain and livestock. Soviet authorities denied for decades that the famine had even occurred.

 
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17.  CHICAGO UKRAINIANS CONCLUDE HOLODOMOR 75TH COMMEMORATION
WITH SOLEMN ECUMENICAL GRAND REQUIEM IN CITY CENTER
By Maria Kulczycky, Chicago, Illinois, Saturday, December 6, 2008
Action Ukraine Report (AUR), Washington, D.C., Friday, December 19, 2008
CHICAGO – Chicago’s legendary wind whipped brisk and cold as bundled groups formed in Washington Park, the historical site for public debate and eloquent discourse that faces Newberry Library, a storied genealogical research center.   People held on to flags, banners, signs and emblems as the wind bent and unfurled them.
 
For weeks, radio stations, leaflets, church bulletins, posters, email postings and other information channels had been inviting, encouraging, and exhorting Ukrainians all over the city and suburbs to come to the city center on Saturday morning, November 15, to join the procession down Chicago’s central avenues heading for Holy Name Cathedral, the seat of the vast Roman Catholic Archdiocese of Chicago. 
 
The community had planned  a Solemn Ecumenical Requiem to mark the end of the its year-long commemoration of the 75th anniversary of the Ukrainian Genocide-Holodomor.
The Soviet-organized and meticulously executed genocide was launched to crush Ukrainian political aspirations and maintain the integrity of the Soviet Union, a strategy that has resonance in current events. 
 
Decades-long secrecy about the tragedy was enforced on victims and reinforced with a blockade on travel and a muzzling of the press, making it the largest unknown genocide of the 20th century.  The anniversary milestone was a link in an international campaign to bring attention to the horrific event and to acknowledge it as a genocide.
As yellow buses disgorged their occupants, many traveling from distant suburbs, the park filled.  Monitors nudged and shaped the crowd into groups by affiliation—parishes, youth groups, civic organizations, Ukrainian schools, the Ukrainian consular staff, and the general public of seniors, parents holding the hands of small children, families with strollers.  Uniforms and embroidery, as well as black ribbons, adorned many participants.
The procession stepped from the part and  into the wide street cordoned by police patrol cars.  It moved slowly along the route to the cathedral.  In the lead were young men and women in Ukrainian folk ensembles carrying a birch cross festooned in black ribbon.  Three thorn wreaths came next, then a 10-foot blue and yellow banner, followed by a coffin, draped in black with a large, stark lettering “10,000,000 VICTIMS.” 
A large group of clergy from Ukrainian Catholic and Orthodox parishes followed the coffin.  Then came Ukrainian and American flags carried by veterans.  The procession of orderly, somber participants stretched for city blocks as the park emptied. 
 
The mood grew exuberant  as the marchers looked forward and back and realized what had happened!  They saw friends, colleagues, and neighbors, but also at faces they didn’t recognize.  They were all united, making a statement with their large ranks, their number calling attention of passersby:  We ask the world to recognize our genocide, our national tragedy.
As the procession crossed State Street and moved to the stairs of the cathedral, the massive central doors stood closed, cold, forbidding.  Then the bells began to intone a rhythmic, grim chant, a funereal peal.  The procession stopped, stood for interminable minutes, buses and traffic piling up on either side.
Suddenly the great doors were flung open, and within, four hierarchs stood in full religious raiment, inviting the marchers inside.  The cross, wreaths, coffin, flags and clergy entered and proceeded down the main aisle as the marchers, 2,000 by some counts, silently streamed into the cavernous sanctuary.
Nestor Popowych, chairman of the 75th Anniversary Commemoration Committee, welcomed the assembled crowd and introduced Cardinal Francis George, Archbishop of Chicago, for whom Holy Name Cathedral is the home parish.  This was the first public event at the cathedral since a long renovation had kept the main sanctuary shut to services.
The cardinal came to the lectern and cited St. Paul, remarking on the ecumenical nature of the service.  He inveighed against all totalitarian regimes, particularly the communist terror that destroyed millions. Next, the new bishop of the Western Eparchy of the Ukrainian Orthodox Church, Bishop Daniel (Zelinsky) addressed the crowd. 
 
An impassioned speaker, he quoted Shevchenko’s poem, “The Plague,” noting how it foreshadowed the horror and suffering of Holodomor of 1932-33.  His shout, “10 million!” rang out through the cathedral, to the 65-foot rafters.  “We have to teach our succeeding generations.  And we can never forget!” he charged.
Archbishop Alexandr (Bykovetz) of Detroit, a survivor of Holodomor, spoke in Ukrainian about the loss of future generations, both in numbers and in potential, “the Sheptytskys, Mazeppas, Vyhovskis, Petluras, and Bandery,” as well as the artists, musicians, writers, and other lights of the community that were extinguished before they could be born.
The hierachs returned to the altar and the requiem service began: lyrical, melodic incantations in the Kyivan style of the Panakhyda (requiem) sung by a choir collected from the best voices of the numerous Ukrainian Orthodox and Catholic parishes throughout the region. 
 
It was conducted by Dr. Vasyl Truchly, noted for his deep and comprehensive study and propagation of knowledge about Ukrainian liturgical music, assisted by Michael Holian, a conductor, musician and teacher.  The music resonated through the sanctuary, supported by the responses of the bishops and the 20 priests surrounding them, and melding the spirits of the assembled crowd.
Photographers, reporters, and cameramen from the local NBC and ABC affiliates and Ukrainian media wandered through the cathedral, capturing the uplifted faces, the rows of Holodomor survivors in the front pews, the youth organizations in uniforms, and the sleeping baby in a mother’s lap.
Bishop Richard (Seminack), head of the Western Ukrainian Catholic Eparchy and pastor of St. Nicholas Cathedral, concluded the service with a moving recollection of the ritual of baking bread that his grandmother practiced, “blessing and praying at each step, picking up a crumb that fell to the floor and kissing it,” he recalled.  Bread is holy to Ukrainians, and this bread, the basis of their diet, was taken away from them, he noted.  Their resulting starvation created a wound that hasn’t healed through succeeding generations.
Bishop Richard thanked all the participants who so massively participated in the solemn ceremony, concluding right at high noon. The crowd filed out, a little more noisily now.  All had been visibly inspired by an event that will rank among the most memorable and affirming expressions of a community message in the city’s history.

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18.  SITE OF FUTURE MONUMENT TO VICTIMS OF HOLODOMOR BLESSED IN WASHINGTON  
 
By Zoreslaw Bayduk, Voice of America, in Ukrainian, Washington, D.C.,  Tue, Dec 2, 2008 
English translation by Borys Potapenko, Detroit, Michigan, AUR, Wash, D.C., Dec 18, 2008
 
WASHINGTON, D.C. – A ceremony took place in Washington, D.C. to bless the site of the future monument to the victims of the Ukrainian Holodomor. Permission to erect the future monument was signed by President George Bush. Participating in the ceremony was the First Lady of Ukraine, Katerina Yushchenko.
 
The clergy of the Ukrainian Orthodox and Greek Catholic Churches blessed the site in the center of the American capital where the monument to the victims of the Ukrainian tragedy will stand.
 
The ceremony was the culmination of a host of programs and projects of the Ukrainian community to commemorate the 75th anniversary of the Holodomor. The yet to be completed monument project began many years ago. The President of the UCCA, Tamara Gallo noted that the Ukrainian community has been working on this for over 15 years.
 
Efforts to secure permission to erect the Ukrainian monument in the center of the American capital were aided by Congressman Sandy Levin from the State of Michigan. He was the sponsor of the necessary resolution that was signed by President Bush: “We have gathered to tell the world that this blessed site will become a symbol not only for Ukrainians or Americans but for the whole world.”
 
The First Lady of Ukraine, Katerina Yushchenko, for whom the question of the Holodomor is personal, as her whole family suffered the tragedy, also thanked Levin, who is a long time close friend of the Ukrainian community:
 
“I am very grateful to all, who participated in this, especially Congressman Levin, as well as my gratitude goes out to the community for the many years of work to secure this beautiful site.”
 
Participating in the ceremony blessing the site for the future monument were Ukrainian and American diplomats, survivors of the Holodomor and those who came to Washington from various corners of America. Borys Potapenko came from Detroit: “Praise God that on this land in Washington, D.C. will stand a monument. Now, no professor will dispute that my family suffered, that the whole Ukrainian nation suffered.”
 
Soon a competition will be announced in Ukraine that will end with the government of Ukraine erecting in Washington, D.C. a monument that will remind the world about the little known tragedy.
 
LINK: http://www.voanews.com/ukrainian/2008-12-02-voa4.cfm
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19.  SPEECH BY THE PRESIDENT OF LITHUANIA VALDAS ADAMKUS IN KYIV AT THE

INTERNATIONAL FORUM TO COMMEMORATE THE 75TH ANNIVERSARY OF THE
HOLODOMOR OF 1932-1933 IN UKRAINE “MY PEOPLE WILL LIVE FOREVER”

Address by H. E. Valdus Adamkus, President of the Republic of Lithuania
International Forum to Commemorate the 75th Anniversary of the Holodomor, Kyiv, Ukraine
President of Lithuania Website, Vilnius, Lithuania, Saturday, November 22, 2008  
 
AUR EDITOR’S NOTE: Five heads of state spoke at the International Forum to Commemorate the 75th Anniversary of the Holodmor of 1932-1933 in Ukraine, “MY PEOPLE WILL LIVE FOR EVER” held in Kyiv on November 22, 2008. The Presidents of Ukraine, Poland, Georgia, Lithuania and Latvia all made presentations that were powerful, very strongly supported Ukraine and spoke out clearly and forcefully against the evils of totalitarian regimes, brutal Soviet policies, and the many Stalinist and Soviet crimes against humanity. Below you will find the speech by the President of Lithuania, Valdus Adamkus, who spent many years in the United States while the Soviets occupied his country, http://www.president.lt/family/biografija.
KYIV, UKRAINE – Mr. President,

Excellencies,

Dear People of Ukraine,

Today as we remember the suffering and the tragic fate of millions of people in Ukraine, we bear witness to the power of human and national memory. This memory does not allow to conceal, distort or forget the cruel actions and policies of totalitarian regimes and their crimes against humanity.

We will never forget the genocide that killed tens of millions of people in Europe and worldwide: the brutal Soviet policy that doomed hard working Ukrainians to famine seventy five years ago, and Communist repressions against the peaceful inhabitants of the Baltic States, Hungary, Poland, Kazakhstan, Afghanistan, Russia, and many other countries.

Historical truth always finds its way in defiance of hindrances and prohibitions. The Stalinist and Soviet crimes against humanity concealed for long decades are now well known and deplored by many nations.

In 2003, representatives from different parts of the world issued a joint declaration at the United Nations remembering the victims of the Holodomor. In 2005, the Seimas of Lithuania condemned the genocide in Ukraine.

 
Last year, UNESCO adopted a resolution on the Holodomor and its horrific consequences, and this year the European Parliament paid tribute to those who were starved to death by the Great Famine.

The people of Lithuania identify themselves with the people of Ukraine in their painful memories of Soviet totalitarian crimes. We too experienced Soviet repressions and brutality: mass deportations and the killing of innocent people that decimated one fourth of Lithuania’s population.

 
Next year we will commemorate the 70th anniversary of the shameful Nazi-Soviet deal: the Molotov-Ribbentrop Pact and its secret protocols.

After the two totalitarian regimes partitioned Europe, Lithuania – like many other European countries – was invaded and occupied.

 
However, despite long decades of deception and Soviet propaganda, the memory of the Lithuanian nation – passed on from generation to generation – had kept our love of freedom and spirit of independence alive throughout the entire period of occupation.
 
After long years of oppression we restored independence and made a free choice for Euro-Atlantic integration.

Today we strongly support the sovereignty and territorial integrity of Ukraine, the resolve of its people to build their future in the family of democratic nations.

 
Today we say with strong commitment: “Nobody can take away the right of an independent European state to choose its path of freedom and security.”

We are ready to share the historical memory of our nations with the world: the memory of Ukraine’s deep cultural roots in Europe, the sacred memory of Ukrainian freedom fighters, and the painful memory of Stalinist atrocities to suppress freedom and liberty. 

The contemplation and spread of historical truth is not directed against a specific nation or country. Saying the truth means identifying and condemning the crimes of totalitarian regimes.

 
Therefore, I believe that a time will come when nobody will ever attempt to deny the cruelties of the Soviet regime unleashed in Ukraine and claim that 25 thousand people were starved to death per day by a mismanaged economy or poor harvest.

The Nazi and Soviet-committed crimes against humanity, casting a long and deep shadow on the history of the 20th century Europe, will be equally condemned and their victims remembered and commemorated.

 
It is the last indispensable precondition for Europe’s moral and spiritual unity on the road towards mutual openness and genuine solidarity among the nations.

In the name of our fallen parents, brothers and sisters, in the name of those who fought for the independence of our countries, in the name of our future and the future of our children, we have to preserve and spread that memory of our shared past.

We must raise our own and global awareness, deepen respect for human life and dignity. It is the only way that we will stop the spread of totalitarian ideologies and prevent such experiments with nations and people like the Holodomor from ever happening again.

LINK: http://www.president.lt/en/news.full/9878

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20.  A EUROPEAN GENOCIDE

 
REVIEW & OUTLOOK EDITORIAL: Wall Street Journal Europe, NY, NY, Tue, Nov 25, 2008
 
Among the past century’s horrors, the Great Famine in Ukraine manages to stand out. First, for the scale of the mass starvation inflicted by Stalin on millions of people in Europe’s agricultural breadbasket. Second, for how little the world knows about this genocide. A now-free Ukraine wants to change that and just marked the 75th anniversary of the 1932-33 “terror famine,” or Holodomor.
Starting in the late 1920s, Stalin set out to collectivize and hobble the Soviet peasantry. His aim was to crush “the peasantry of the U.S.S.R. as a whole, and the Ukrainian nation,” wrote Robert Conquest in his groundbreaking book, “The Harvest of Sorrow.” An estimated 14.5 million people starved to death in Ukraine, Russia and Belarus when farmland was collectivized and harvests requisitioned. The submission of Ukraine to Moscow helped prolong the Soviet Union’s life for another 60 years.
The Stalinist regime and its ideological soulmates denied the famine at the time and later. Walter Duranty, the New York Times’s longtime Moscow correspondent, was Stalin’s chief apologist, sending false dispatches from Ukraine; he won a Pulitzer Prize. The left-leaning academy condemned Mr. Conquest and the late James Mace, the leading researcher of the famine, when their work appeared in the 1980s. The Berlin Wall’s collapse shamed some of the denialists. “I want to express my deepest appreciation to all who refused to be silent,” President Viktor Yushchenko said Friday.
The exception is the current Russian leadership. Ahead of the official commemoration this past weekend, President Dmitry Medvedev accused Ukraine of seeking to achieve “opportunistic political goals” based on “manipulations and distortions, falsification of facts about the number of dead.” As in Stalin’s day, Ukraine’s independent identity and nationhood stands in the way of a resurgent Russian imperium. By remembering the Holodomor, Ukrainians say — Never again.
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