AUR#914 Oct 31 Vote to Secure IMF Loan Put Off Again; Currency Battered; Kyiv’s Crackup

 
ACTION UKRAINE REPORT – AUR       
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In-Depth Ukrainian News, Analysis and Commentary

Ukrainian History, Culture, Arts, Business, Religion, Economics,
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ACTION UKRAINE REPORT – AUR – Number 914
Mr. Morgan Williams, Publisher and Editor, SigmaBleyzer
WASHINGTON, D.C., FRIDAY, OCTOBER 31, 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.  UKRAINE’S PARLIAMENT PUTS OFF VOTE TO SECURE IMF LOAN AGAIN
Reuters, Kiev, Ukraine, Thursday, October 30, 2008
 
By Maria Danilova, Associated Press, Kiev, Ukraine, Thursday, October 30, 2008  
UNIAN news agency, Kiev, in Ukrainian 1513 gmt 30 Oct 08 
BBC Monitoring Service, UK, in English, Thursday, October 30, 2008 

4UKRAINE CAN MEET ECONOMIC CHALLENGES, IMF MISSION SAYS 

Interfax Ukraine, Kyiv,  Ukraine, Thursday, October 30, 2008

5UKRAINE MAY DEFAULT WITHOUT IMF LOAN SAYS HEAD OF CENTRAL BANK
By Daryna Krasnolutska & Kateryna Choursina, Bloomberg News, NY, NY, Wed, Oct 29, 2008

 
Newspaper looks at conditions of IMF loan for Ukraine
Kommersant-Ukraina, Kiev, Ukraine, in Russian 30 Oct 08 p 1
BBC Monitoring Service, UK, in English, Thursday, October 30, 2008
 
Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, October 30, 2008
 
Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, October 30, 2008
 
Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, October 30, 2008

10SETTLING OF PROMINVESTBANK’S PROBLEM IS PRELIMINARY MEASURE FOR RECEIVING IMF CREDIT

Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, October 30, 2008
 
11 KIEV’S CRACKUP
Personality politics means a repeat of Ukraine’s troubles.
Opinion: by Adrian Karatnycky, The Wall Street Journal Europe
New York, New York, Wednesday, October 29, 2008
 
Mark Rachkevych, Editor, Kyiv Post, Kyiv, Ukraine, Thursday, October 30, 2008
 
By Maggie Urry and Rebecca Bream, Financial Times, London, UK, Wed, Oct 29 2008
14UKRAINE’S EMBARRASSING SHOW
Editorial, Kyiv Post, Kyiv, Ukraine, Thursday, October 30, 2008
 
15 KYIV LEADERS LOCKED IN TRASH-TALKING AS ECONOMY UNRAVELS 
Ukraine’s political leaders seem oblivious to the global financial crisis and the worldwide media exposure that depicts them as unstable
Op-Ed: By Adrian Karatnycky, Kyiv Post, Kyiv, Ukraine, Thursday, 23 October, 2008 
 
BYuT Newsletter, Issue 91, Kyiv, Ukraine, Monday, October 27, 2008

17.  UKRAINE POLL SUGGESTS SUPPORT FOR PRESIDENT MINIMAL 

Running behind Communist Party and Lytvyn Bloc
Interfax, Kyiv, Ukraine, Tuesday, October 28, 2008

18USA TRYING TO SET UKRAINE, RUSSIA AGAINST EACH OTHER WITH

Itar-Tass, Moscow, Russia, Tuesday, October 28, 2008
 
Agence France Presse (AFP) Strasbourg, France, Thursday, October 23, 2008
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1
 UKRAINE’S PARLIAMENT PUTS OFF VOTE TO SECURE IMF LOAN AGAIN

Reuters, Kiev, Ukraine, Thursday, October 30, 2008

KIEV – Ukraine’s parliament on Thursday put off final approval of financial legislation needed to secure a $16.5 billion IMF loan, pending further
consultations. Chairman Arseniy Yatsenyuk told deputies when the chamber began deliberations in the morning that committees hoped to produce a single
draft of the legislation later in the day.

He later acknowledged that disagreements had persisted and debate on the package to stabilise Ukraine’s financial position and banking system was
postponed until Friday. “The three committees have yet to reach a final agreement on the text,” he said.

“It is proposed … that two additional committees examine this and that we return to the draft tomorrow morning to ensure against a hasty, foolish decision that would fail to win the required number of votes.” There was no fresh attempt to blockade proceedings as had occurred for more than a week in a row over an early election.

The chamber gave initial backing to the package on its first reading on Wednesday, urged on by leaders saying the credits depended on quick approval
of measures required by the IMF.

Ukraine’s hryvnia currency, which lost nearly 15 percent of its value on Wednesday, bounced back from historic lows on Wednesday to trade at 5.9-6.07
to the dollar after the central bank offered to intervene with no limits on the currency volume.

IMF demands include helping banks to recapitalise, working to lower inflation and balancing the budget next year, according to the respected Ukrainska Pravda Web site, which published what is said was a memorandum of the IMF-Ukraine agreement.

The accord also called for the central bank to abolish a corridor for the hryvnia to trade against the dollar, a demand met by the bank this week, and
establishment of an official rate varying no more than 2 percent from the daily market rate.

Battered by a gaping current account deficit, the hryvnia plunged to a record low of 7.2 to the dollar on Wednesday, despite central bank intervention that has sapped 10 percent of its reserves. (Writing by Ron Popeski; Editing by Ruth Pitchford)
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2.  UKRAINE CURRENCY STRENGTHENS ON HOPES OF SECURING IMF LOAN 
 
By Maria Danilova, Associated Press, Kiev, Ukraine, Thursday, October 30, 2008  
KIEV, Ukraine – Ukraine’s battered currency rose Thursday for the first time in days, partly on hopes the country could secure a hefty International Monetary Fund loan to overcome a severe financial crisis.
The hryvna closed at 6.15-6.25 to the U.S. dollar on the foreign currency exchange, according to the Inter Business Consulting agency, after reaching a record low of 7.2 to the dollar the day before. The currency has lost about a quarter of its value since the beginning of the year.
The market responded to Parliament’s approval Wednesday of a series of stabilization bills, required by the IMF to receive the $16.5 billion loan.
Currency traders also reacted to the National Bank’s offer to sell dollars to all players at close to the market rate. That, combined with a more transparent policy on the foreign currency market, had been a key demand of the IMF.
“This is a very positive dynamic,” said Iryna Piontkivska, an analyst with Troika Dialog Ukraine. “The market has to believe that the National Bank is really doing this.”
Parliament must still approve the bills in a final reading Friday, after which the IMF would have to approve the aid package.
The Ukrainian economy, which grew strongly over the past four years, has been one of hardest-hit by the global crisis among emerging markets, and experts predict a recession next year. A 30 percent fall in demand for its key export, steel, has caused the hryvna to plunge, despite National Bank spending of nearly $5 billion this month alone to support the currency.
The global credit crunch, coupled with problems at a key bank prompted a run on banks that cleared the system of $3.4 billion this month.
Metal plants across the country were either slowing or halting production and thousands of workers faced layoffs. Volodymyr Boiko, the head of one of the country’s main steel plans, Ilyich Iron and Steel Works of Mariupol, said earlier this week that the company might rack up $42 million in losses by the end of the month and was ready to be nationalized.
The Ukrainian stock market, which has shed over 75 percent of its value this year, closed with a 9.64 percent gain following global markets and in reaction to the positive news at home.
Also, the European Bank for Reconstruction and Development announced Thursday that it was boosting its investment in Ukraine by 40 percent from the previous year to 1 billion euros ($1.3 billion). The cash is to fund energy and railway modernization programs.
“Without a doubt we believe that in the long term this crisis will be overcome,” said EBRD spokesman Anton Usov. “In any case, Ukraine remains a very interesting and attractive country for investors.”
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3.  MP SAYS UKRAINIAN ANTICRISIS BILL READY FOR FINAL APPROVAL ON FRIDAY 
 
UNIAN news agency, Kiev, in Ukrainian 1513 gmt 30 Oct 08 
BBC Monitoring Service, UK, in English, Thursday, October 30, 2008 

KIEV – The parliamentary committee for tax and customs policy has completed the finalization of the anticrisis draft law [that parliament needs to pass to get a large stabilization loan from the IMF] and the document is about to be handed out to members of parliament, the committee head, Serhiy Teryokhin, has told journalists.

“The document that I have right here has already been registered. It will now be handed out to people’s deputies, and theoretically it could be considered [today], but the fact that the document contains 146 corrections and 63 pages of tables of comparison, and the reluctance of people’s deputies to work in the evening – all this has prompted our speaker to postpone the consideration of the issue till tomorrow,” Teryokhin said.
As already reported by UNIAN, Supreme Council [parliament] speaker Arseniy Yatsenyuk proposed holding the second reading of the draft law “On urgent steps to deal with the negative consequences of the financial crisis and on amendments to some legislative acts of Ukraine” at a parliamentary meeting tomorrow morning on 31 October.
The speaker said at the parliament meeting that the Supreme Council did not yet have an agreed version of the anticrisis draft law for consideration in the second reading.  Yatsenyuk proposed considering it tomorrow “in order for all proposals to be included, so we do not act in a rush now and fail to get the requisite number of votes”.
[Ukraine’s STB television reported at 1600 gmt that speaker Yatsenyuk had closed the parliament meeting on the evening of 30 October and that parliament would consider the anticrisis law on the morning of 31 October.]
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4.  UKRAINE CAN MEET ECONOMIC CHALLENGES, IMF MISSION SAYS 
 
Interfax Ukraine, Kyiv,  Ukraine, Thursday, October 30, 2008
 
KYIV – Ukraine can meet with the current economic challenges and the credit support by the International Monetary Fund will facilitate this, IMF Mission Head Ceyla Pazarbasioglu said at a press conference in Kyiv on Wednesday. “The challenges facing Ukraine are large and serious ones, but they can be met. Instead of the scenario of a hard landing [for the economy], we are drawing up a scenario of soft, normal, controlled landing,” she said.
She assessed the list of anti-crisis measures drafted by the Ukrainian authorities as “very powerful.” “That is why the IMF is prepared to react so swiftly to this with its support,” she said.She said the IMF had not set any particular terms for decisions to fight the crisis, as the quality of the decisions is the most important thing.
“The Board of Directors [of the IMF] will convene for a meeting after these discussions [in the Verkhovna Rada] are over. In a week or two weeks – this will depend on the decisions Ukraine endorses,” she said.
“I have had meetings with a number of representatives of the parliament and leaders of political factions and I have arrived at the conclusion that all of them understand the problems facing us in future and the need for action,” she said.
She refused to comment on specific parameters of the stand-by program for Ukraine, saying only that standard terms for credits from the IMF envisaged a two- or three-year adaptation period [without redemption of the principle of the credit].
Head of the National Bank Volodymyr Stelmakh noted that the reason for the problems in the country are, in particular, the worsening of the external economic situation on the international markets for steel and chemicals, and also difficulties in accessing foreign credits: Ukrainian companies are losing out to their Russian and Chinese rivals, he said. At the same time he added, that the situation is worsened by the poor credit conditions for Ukrainian companies.
And according to Stelmakh, there are unsold steel and chemical products worth in $800 million in storage, while imports of goods to Ukraine continue to rise. That situation causes a mismatch between demand and supply on the currency market: the average day supply of currency has fallen almost to $100 million.
The situation on the forex market in October was affected, according to Stelmakh, by the higher demand for foreign currency on the cash market, as the panicked population tries to protect its savings by buying foreign currency.  Other factors are the speculative operations of financial institutions and the purchase of foreign currency by banks and business.
According to Stelmakh, the loan from the IMF will give an opportunity to the NBU to boost interventions on the interbank forex market and stabilize the situation. He said, however, that the problems with foreign currency earnings would remain in 2009 in the light of the world economic recession.  ommenting on the structure of the foreign reserves of the NBU, Stelmakh said the US dollar accounted for 43% of the reserves.
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5.  UKRAINE MAY DEFAULT WITHOUT IMF LOAN SAYS HEAD OF CENTRAL BANK

By Daryna Krasnolutska & Kateryna Choursina, Bloomberg News, NY, NY, Wed, Oct 29, 2008

KIEV – Ukraine may be forced to default on billions of dollars of debt should it fail to secure a promised $16.5 billion loan from the International Monetary Fund, central bank Governor Volodymyr Stelmakh said.

The Oct. 26 agreement on a 24-month IMF loan to help support the nation’s financial system needs approval by the country’s Parliament, which has put off a vote on the aid four times, and the Washington-based lender’s executive board.

Without the loan package, “we will not be able to show our creditors that we have a reliable mechanism to repay our debts,” said Stelmakh today at a
joint press conference with the IMF mission in Kiev, Ukraine. “We will discredit ourselves and thus we may have to announce a default.”

Ukraine, like Belarus, Hungary, and Pakistan, is seeking IMF funds to support its national currency and keep banks from running out of cash as emerging market economies feel the pinch of the global economic crisis. Lawmakers have yet to cast a vote on legal changes needed to accept the money as the nation’s top leaders squabble over early elections, probably to be held in December, and the agenda for the next parliamentary session.

Ukraine has $100 billion in total debts, 80 percent of which is corporate debt, President Viktor Yushchenko said on Oct. 23.

The hryvnia plunged 12 percent against the dollar, the most in 10 years, to a record-low 7.1250 per dollar as of 1:18 p.m. in Kiev, from 6.3500 yesterday. It was the biggest intraday decline since September 1998. The currency slid to the lowest level since it was introduced in 1996.

BAD CREDIT
The state, sandwiched between Russia and the European Union, has the worst creditworthiness of Europe’s emerging markets, based on the cost of
credit-default swaps, which protect bondholders against default. Its credit rating was cut by international agencies, including Fitch, Standard &
Poor’s, Moody’s this month, which allows creditors to demand Ukrainian companies and the government to repay their debts ahead of schedule.

The IMF executive board’s final decision cannot be made until the eastern European country’s legislature completes its tasks. When that is done,
“Ukraine will get its first component,” said Ceyla Pazarbasioglu, the head of the IMF mission to Ukraine.

Among the new laws needed, pushing “strong bank recapitalization is key for the IMF loan,” said Pazarbasioglu. The IMF also wants to see a “strong
monetary and exchange rate policy, prudent fiscal policy, strong financial policy and reforms to improve investment climate.”

MELTDOWN RISK
Prime Minister Yulia Timoshenko, whose allies physically blocked Parliament last week, told lawmakers today that Ukraine is seeking to lock in an
interest rate of 4 percent for the loan.

Ukraine faces an economic meltdown as prices for Ukraine’s main exports, including steel, drop and a weakening currency makes imports more costly.
The inflation rate almost tripled in a year to a record 31.1 percent in May before easing back to 24.6 percent in September. If Ukraine fails to get the
IMF loan, inflation will also surge, said Stelmakh.

The current-account deficit widened to $8.4 billion, or 5.8 percent of gross domestic product, in the first nine months of the year, according to the central bank’s Web site. The current- account gap will probably total $15 billion this year, said Stelmakh earlier this month.
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6.  TO BE BORROWED

Newspaper looks at conditions of IMF loan for Ukraine
 
Kommersant-Ukraina, Kiev, Ukraine, in Russian 30 Oct 08 p 1
BBC Monitoring Service, UK, in English, Thursday, October 30, 2008

A Ukrainian newspaper details the conditions on which Ukraine can obtain the IMF’s loan, following as a package of anti-crisis laws has passed the first reading in the Ukrainian parliament. The IMF’s terms are: freezing wages and benefits paid in the public sector, reducing taxes and allowing the agricultural land to be sold, the paper says.

 
The following is the text of an unattributed article entitled “To be borrowed” and published in the Ukrainian edition of the Russian business daily newspaper Kommersant on 30 October:
The Cabinet of Ministers, the National Bank of Ukraine [NBU] and the International Monetary Fund [IMF] have reached an agreement on the terms of Ukraine receiving a 16.5bn-dollar loan.
 
To obtain this loan, Ukraine has promised not to increase social standards for two years, to begin selling agricultural land, to increase gas prices for the public, to reduce taxes and to reduce support for the [national currency] hryvnya. Experts suppose that acting upon the IMF’s recommendations will become “shock therapy” for the Ukrainian economy, but they doubt that Ukraine will completely give up a socially oriented budget policy.
The head of the IMF’s mission, Ceyla Pazarbasioglu, yesterday [29 October] assured the NBU’s representatives that the IMF is ready to open a two-year credit line worth 16.5bn dollars through a stand-by programme in order to tackle the impact of the financial crisis on Ukraine’s balance of payment.
 
“The loan is worth 11bn SDRs, which is an equivalent of 800 per cent of Ukraine’s quota in the IMF. We are satisfied with the initiatives put forward by the government and we will be waiting for them to be approved in parliament,” Pazarbasioglu said.
 
She also specified that the IMF’s board of directors will make the decision as soon as the law “On urgent measures to prevent negative consequences of the financial crisis and amending some legal acts” is approved. Yesterday parliament approved the law in the first reading by 248 votes, and the draft law could be passed today.
IMF’s loan is of vital necessity to Ukraine, the governor of the National Bank of Ukraine, Volodymyr Stelmakh, said. Otherwise, he said, along with the acceleration of inflation Ukraine may face a technical default “and suffer a damage to our reputation connected with that”.
“The loan will allow Ukraine to escape a slump in the economy, it will make it smoother,” Pazarbasiouglu agreed. Even if economic reforms are implemented and funds from the private sector and international organizations are attracted, Ukraine’s will still need some 17bn dollars while the IMF’s programme is being carried out, the IMF calculated.
The IMF and the NBU did not disclose the conditions for obtaining the loan and promised to detail them after the loan is ratified by the IMF’s board of directors. Pazarbasiouglu only said that the loan will be disbursed in tranches. Ukraine will receive the first one, consisting of the largest portion of the whole loan, immediately after the loan ratification, the next one in six months.
 
When asked about the loan’s interest rate, Pazarbasiouglu said that it will be determined by the board of directors and added that the IMF’s standard interest rate is 3.7 per cent. Parliament deputy speaker Mykola Tomenko said yesterday that the IMF’s loan is given for 15 years at a 4-per-cent interest rate.
According to the memorandum on the economy and financial policy which was put forward by the Cabinet of Ministers and the NBU together with the IMF (Kommersant has a copy available), Ukraine will be under the IMF’s influence for almost three years, having committed itself to conduct reforms proposed by the IMF.
 
The document says that “the deepening of the global financial turbulence and a decline in raw material’s prices have undermined trust and called for more rapid economic reforms then it was planned.” As for the NBU, it promises to let the national currency free-float and to step up the banking monitoring during the crisis and the record devaluation of the hryvnya.
The NBU’s main objective will be to keep inflation in Ukraine in 2009 at the 17-per-cent level while this year the IMF is expecting a 25.5-per-cent growth in consumer prices. In order to pull “liquidity” out of the economy the NBU intends to raise the interest rate on its certificates of deposits in 2009.
 
The growth of monetary base will be kept at the 11-per-cent level, “in the light of our expectations that the nominal growth of the economy will not exceed 12 per cent.” Taking into account high inflation, the NBU and the government actually admitted that Ukraine is in for a recession next year.
 
It was discussed on Tuesday [28 October] at the presidential secretariat, they expect the GDP’s plunge of 2 per cent. As a participant in talks with the IMF told Kommersant, the IMF’s representatives expected the Ukrainian economy to fall by 4 per cent while the Foreign Ministry argued that the GDP would grow by 2 per cent.
Under these conditions, the Finance Ministry promises to keep the 2008 budget deficit at 1 per cent of the GDP (0.3 per cent – financing of the relief-efforts of the flooding in western Ukraine and 0.7 per cent – coverage of the tax revenue shortfall in the fourth quarter) and to adopt a zero deficit budget in 2009 (taking into account the bank recapitalization operations). On the whole, the government expects “a more severe fiscal situation” compared with the previous years due to the “economic slowdown”.
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7.  RESERVE REQUIREMENTS TO UKRAINIAN BANKS TO BE TOUGHENED, SAYS MEMO WITH IMF

 
Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, October 30, 2008

KYIV – The National Bank of Ukraine (NBU) will increase interests on deposits and reserve requirements to banks to fight inflation in 2009. The commitment is stipulated in a memo agreed by the government and the National Bank of Ukraine with the International Monetary Fund (IMF).

“According to the goal, but only to overcome stresses on the financial market, we’ll have to low the liquidity. Partially this will be done due to the resumption of previous rules on reserve requirements, although in addition, we’ll increase interest on deposits in the NBU to cut their gap with the discount rate,” reads the memo, which was also sent to Interfax-Ukraine.
According to the document, the NBU should counteract inflation through bringing the size of monetary base to a certain indicator in the light of expected demand on money. According to the memo, a list of acceptable guarantees for credits will be revised. “We’ll also direct our activities to improve the quality of the NBU balance through revising a list of acceptable guarantees, in particular, granting a quick cut in the share of banking shares in the list,” reads the document.
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8.  NBU COUNCIL’S POWERS MAY BE RESTRICTED, SAYS MEMO WITH IMF
 
Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, October 30, 2008
KYIV – The Council of the National Bank of Ukraine (NBU) may become a body with a narrower specialization. The goal is stipulated in a memo agreed by the government and the National Bank of Ukraine with the International Monetary Fund (IMF).
 
“We’ll conduct reform of the NBU Council, turning it to the body with narrower technical specialization, according to optimal practice,” reads the memo, which was also sent to Interfax-Ukraine. According to the document, the step is needed to increase the NBU’s level of independence.
In addition, amendments to existing law to prolong the term for which the NBU Council is elected are foreseen. According to the document, the
government’s debt to the NBU will be registered with securities, and a primary dealer system will be created on the state securities market.
As for the financial sector, it is necessary to issue funds to commercial banks by the NBU with the toughening of their checks. In addition, the memo
foresees a rise in the ceiling size of deposit guarantee sum to UAH 100,000. “After the outflow of deposits, we’ll cancel administrative restrictions on
early withdrawals from fixed deposits,” reads the document.
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9.  UKRAINE’S AUTHORITIES TO CREATE SPECIAL BODY FOR
MONITORING FOREIGN DEBT, SAYS MEMO WITH IMF
 
Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, October 30, 2008

KYIV – Ukraine’s authorities plans to form a body to monitor the state foreign debt, according to a memo agreed by the government and the National Bank of Ukraine with the International Monetary Fund (IMF).

“[The body is to be formed] …in order for persons responsible for the formation of policy to react to the risky formation of peak burdens in servicing of the foreign debt at early stages,” reads the memo, which was issued to MPs on Wednesday and was also sent to Interfax-Ukraine.
Ukraine said in the document that the state is deeply analyzing the consequences, which may have various economic forecasts and scenarios for the development of the economic situation, regarding risks of default in the private sector.
“We’re also thoroughly analyzing laws on bankruptcy to determine the necessity to make amendments to optimize processes and liquidation of delays with simultaneous observation of required procedures,” reads the document.
According to the NBU, Ukraine’s gross foreign debt in Q2 2008 grew by $7.53 billion, or 8.1%, and as of July 1, 2008 reached $100.06 billion, including $14.87 billion of the state sector debt and $38.45 billion of the banks debt. Last week, Ukrainian President Viktor Yuschenko said that sort-term corporate debts, to mature in one year, are worth $28.2 billion.
Over the past two months, due to the negative impact of the international financial crisis and the fall in the prices on commodity markets, which have upset Ukraine’s balance of payments, the hryvnia exchange rate on interbank has weakened by over 40%. The NBU partially supports the national currency, which caused a cut in its forex reserves over the first ten days and second ten days of October of 7.7%, or $2.9 billion, to $34.6 billion.
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10.  SETTLING OF PROMINVESTBANK’S PROBLEM IS PRELIMINARY
MEASURE FOR RECEIVING IMF CREDIT
 
Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, October 30, 2008

KYIV – The International Monetary Fund (IMF) is ready to issue a stand-by stabilization credit if the problem with Kyiv-based Prominvestbank is settled.
This is stipulated in a memo agreed by the government and the National Bank of Ukraine with the IMF, where the settling of the problem with Prominvestbank was indicated as a preliminary measure.

“We’ll settle the Prominvestbank’s problem very quickly,” reads a document spread among MPs on Wednesday, which was also sent to Interfax-Ukraine.
Presidential Secretariat First Deputy Head Oleksandr Shlapak said while introducing the draft law of the president on anti-crisis measures in the Verkhovna Rada on Wednesday that UAH 1 billion will be allocated from the national budget to increase the statutory capital of Ukreximbank, which will use the fund to buy shares of an additional issue of Prominvestbank and receives over 80% in its statutory capital. Additional revenues will be received from over-target payments from VAT on imports.
According to Ukrainian law, this variant of buying banks by the state would require a voluntary refusal of the present bank shareholders from buying shares of the additional issue. Taking into account the present size of the bank’s statutory capital (UAH 200.175 million), the shares will be bought at their face value. In this case, Ukreximbank may buy 83.32% in the bank’s statutory capital.
 
CJSC Prominvestbank was founded in 1992. According to the NBU, the bank ranked 6th among 178 operating banks in Ukraine by July 1, 2008, in terms of overall assets, estimated at UAH 27.539 billion, which accounted for 3.94% of the overall assets of the Ukrainian banking system.
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11.  KIEV’S CRACKUP
Personality politics means a repeat of Ukraine’s troubles.

OPINION: By Adrian Karatnycky, The Wall Street Journal Europe
New York, New York, Wednesday, October 29, 2008

Once again, Ukraine’s fractious and confusing politics are on display. Early elections have been called — but one major party has been blocking the
parliamentary tribunal, stuffing paper and chewing gum wrappers into voting machines, and using the courts to keep the poll from going forward.

The IMF may be stepping into the financial breach with a $16.5 billion loan — but not as long as the aid package and comprehensive legislation to
deal with the crisis remain hostage to the personal ambitions of Ukraine’s leading politicians.

This is nothing new. Partisan bickering and electoral rivalries have long trumped political compromise and stalled reforms, earning Ukraine an image
as a country beset by crisis and instability.

Ukraine’s politics shattered anew on Oct. 8, as the year-old government headed by Yulia Tymoshenko fell after being abandoned by President Viktor
Yushchenko’s Our Ukraine coalition. Rather than reconfigure a fragile pro-Western coalition stymied by endless rivalries, President Yushchenko instead called new elections in the hope they will strengthen his hand in shaping the country’s domestic and international policy and improve his chances for re-election.

This was the second collapse of a governing coalition headed by parties and leaders that worked together in the democratic Orange Revolution of 2004. In
2005, the first collapse of an “Orange” government led to elections in which the pro-Russia Party of the Regions gained power.

That President Yushchenko has now opted to risk a similar outcome amid a global economic crisis, at a time when Russia is behaving belligerently, and
as Ukraine is under review for a closer relationship with NATO, shows just how toxic are relations between the president and prime minister. It also
shows how little trust Mr. Yushchenko and sections of Ukraine’s elite have in Ms. Tymoshenko’s stewardship of Ukraine’s government and economy.

So bitter are relations among the country’s political elite, in fact, that they cannot set a date for elections. The poll originally was slated for Dec. 7, but that date has been put in doubt by a combination of court challenges by the Tymoshenko bloc, the necessary “freezing” of the decree dismissing parliament so that lawmakers can tackle emergency financial legislation, and growing anxiety in the president’s camp over very poor showings in recent public opinion polls.

But the collapse of the Tymoshenko government is more than a parting of ways among intense rivals for the presidential election of 2010. The Tymoshenko
government was the victim of aftershocks from two international crises: Russia’s invasion of Georgia and the global financial crisis. These crises have further fragmented an already messy political scene, creating new cleavages among Ukraine’s “Orange” politicians and within the major opposition Party of the Regions.

The war in Georgia split the Orange coalition. The hawks, represented by President Yushchenko and Our Ukraine, sought to speed up Ukraine’s entry into NATO and forthrightly condemned Russia’s aggression. The doves, meaning Ms. Tymoshenko and her bloc, gingerly skirt the issue of NATO membership,
which only three in 10 Ukrainians support, and have criticized both Russia (mildly) and Georgian President Mikheil Saakashvili (severely).

The war also fragmented the opposition Party of the Regions into a firmly pro-Russia camp headed by former Prime Minister Viktor Yanukovych, who
endorsed Russia’s invasion of Georgia, and the business wing, which made clear that Russia violated international law.

The global financial crisis, too, exacerbated internal differences among the major political players. President Yushchenko’s interest in removing Ms.
Tymoshenko as prime minister was reinforced by nervous business interests who mistrust her populist inclinations, and thus her stewardship of the
economy at a time of crisis.

But business groups also appear to mistrust Mr. Yanukovych, who as prime minister from August 2006 to December 2007 showed a predisposition to
accumulate unchecked power and used the state’s power to advance the economic interests of his closest backers.

As a result, business would prefer to see a solution that leads to a depoliticized government of competent technocrats who can steer the country in economically challenging times.

Ideally, in a time of crisis, such a government would be based on an agreement among the three major political forces. But given the bitter relations between Ms. Tymoshenko — whose competent economic team has restrained her innate populism and has been saying and doing the right things in recent days — and President Yushchenko, such a government is more likely to be built around a tacit “national unity” coalition between Mr. Yushchenko’s political forces and the Party of the Regions.

But such a coalition would be possible only after new elections and could be headed by an economically competent leader such as the current parliamentary speaker, Arseniy Yatseniuk, or the former prime minister and current Defense Minister Yuri Yekhanurov.

For Ukraine, whose state independence was one of the most important geopolitical outcomes of the collapse of communism in 1989-91, this means further uncertainty. Uncertainty means no progress on NATO integration, and little predictability for global investors.

At the same time, the current political turmoil masks the realities of the country: dramatic improvements in living standards over the last five years; an electorate that rejects the far left and far right; growing national pride; deepening democratic pluralism; and significant influence of entrepreneurs and business leaders on the major political parties.

Given the toxic personal relations and climate of mistrust among Ukraine’s key leaders, political stability will come only with the emergence of new voices and new parties. And given the fact that polls indicate that the majority of Ukraine’s citizens are unhappy with the political choices on offer, this perhaps is Ukraine’s best hope for long-term success.

In the meantime, we can count on more of the same Ukraine: radical rhetoric and Byzantine political jockeying that concludes in a centrist compromise
and just averts the country’s collapse.

NOTE: Mr. Karatnycky is senior scholar at the Atlantic Council of the U.S.
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12.  UKRAINE FINDS ITSELF FINANCIALLY SQUEEZED FROM ALL DIRECTIONS

 
Mark Rachkevych, Editor, Kyiv Post, Kyiv, Ukraine, Thursday, October 30, 2008

Ukrainians are bracing for an extended rough patch as global financial turmoil gives way to global economic recession. The purchasing power of the country’s most vulnerable citizens is being mightily reduced.

A consumer lending boom, which in recent years fueled purchases of cars, apartments and appliances, has come to an abrupt end.
The country’s banks are wobbly.
Declining exports and rising imports have worsened the nation’s current account deficit, putting pressure on the country’s currency, which is already at an historic abyss.
To make matters worse, the pockets of Ukrainians are being squeezed by Europe’s highest inflation rate.
There is no end in sight.
As global demand falls, the country’s export-oriented steel industry is grinding to a halt. Factories which employ hundreds of thousands warn they could be forced to lay off workers soon.
These symptoms alone are enough to put the country into the emergency room, awaiting surgery.
What has the doctor prescribed to stabilize the situation?
An emergency loan, effectively a $16.5 billion injection of fresh cash to boost liquidity and keep the national currency stable, is expected soon from the International Monetary Fund. But it will come along with painful conditions.
While the IMF’s conditions had not been spelled out publicly, sources say they will require the government to cut expenditures and impose a two-year freeze on social expenditures.
In other words, as expenses go up, more than 14 million pensioners, teachers and other budget-funded citizens should not expect their incomes to increase.
With the option of default not acceptable, economists say Ukraine has little choice but to accept this painful dose of help.
The central bank in October injected more than $3 billion onto the currency market from what was $38 billion in reserves to stabilize the hryvnia. Yet the slide continued.
The currency has, since summer, depreciated from a rate of below Hr 5 to the U.S. dollar, reaching Hr 6.6 to the dollar at street exchanges this week.
“We can expect further depreciation of about 10 percent next year as export prices continue to fall,” said Oleksandr Zholud, an economist with the International Center for Policy Studies.
The rate of inflation has cooled a bit recently since spiraling early this year. Nonetheless it is expected to finish the year at 20 percent or higher.
The cost of certain every-day items has surged.
The government has accused pharmaceutical retailers of trying to unfairly capitalize on the financial crisis. Allegedly, they conspired in October to artificially boost prices by 70 percent. Prices for dairy, meat and fruits increased 5 percent to 25 percent in October, according to Delo newspaper.
“Senior citizens are affected psychologically and materially because of rising inflation,” said Volodymyr Dzyobak, head of the All-Ukrainian Association of Pensioners of Ukraine.
“Psychologically this manifests into poorer health. They are stocking up on food to hedge against further inflation. Their savings deposits are frozen [by recent anti-crisis measures adopted by the central bank],” he added.
Wholesalers and supermarkets, including Germany’s Metro Cash & Carry have begun slashing prices for their goods by 10 percent on average, and up to 40 percent for some product. Fozzy Group, owner of several supermarket chains, also reduced prices, while cutting back 16 planned store openings in the near term.
Tariffs for utilities – such as water, electricity and gas – are expected to rise. Regulators have already announced that heating bills will be spiked up 35 percent as of Dec. 1. “Ukrainian homeowners can expect their natural gas bills to at least double next year,” Zholud added. He said painful adjustments for average Ukrainians are ahead.
Russia, Ukraine’s main fuel supplier, will next year sharply raise the price for blue fuel imports for the fourth time in as many years. This will put pressure on the government, which continues to bailout the state energy holding Naftogaz Ukrainy, to weed out subsidies by raising prices on households toward market levels.
“Industrial gas consumers have already been paying gas prices similar to those in Europe. In contrast, residential consumers have been subsidized, charged rates even below the $179.50 per thousand cubic meter price [Ukraine pays for imports this year.] In Western Europe, residential consumers actually pay more than industry for gas, due to the costs of maintaining residential gas delivery networks,” Zholud added.
An average consumer’s spending has already been slashed due to higher credit interest rates and higher hurdles to qualify for credit, according to Jathan Tucker, a trader with Galt & Taggart Securities Ukraine.
As the domestic currency slides, Ukrainians will find every-day imported goods more expensive.
Mass layoffs are under way in the backbone of Ukraine’s blue-collar economy, the country’s heavy industry sector.
Layoffs were detected in the troubled metallurgical sector as well as in light industry, and the food business, said Yuriy Kuzov, department head of the Federation of Employers of Ukraine. Kuzov forecasted that by years’ end there will be six applicants for every job vacancy or 500,000 people. That means that some 15 percent of Ukraine’s industrial workforce will be looking for work.
Tucker said “the ultimate impact” is hard to predict. It depends much on global commodity demand and prices. He said “inventories are fluctuating by the week.” “But ultimately, unless global demand [for steel and other exports] picks up, further layoffs can be expected,” Tucker added.
Altogether, experts forecast at least 6-8 percent unemployment for 2009. Official figures show that unemployment in the country stood at just over 2 percent early in 2008.
Several factories have in recent days warned they were close to halting production. The most recent is Nikopol Ferroalloy, Ukraine’s top ferroalloy factory. It plans to freeze production on Nov. 1.
Outside of steel mills, coal mines and other factories, Ukraine’s highly-populated eastern regions offer few employment alternatives. The mining-metallurgy sector alone employs about 1 million.
Tatiana Kolombet, commercial director at Kyiv-based recruitment agency Brain Source International, said companies across the board are in the process of laying off 20-30 percent of their employees.
Finding a new job will be tough.
The majority of current job applicants, Kolombet added, come from the financial and investment sector as well as from construction and development firms.
“The graduating class of 2009 will have as tough of a time finding a job as everybody else because the job market has gotten more competitive,” said Kolombet. Companies are adjusting to keep sales up in these cash-crunch days.
New car prices have fallen as dealerships strive to keep buyers interested. Kia Motors Ukraine offered certain buyers $2,000 discounts. Ford Motors offered $5,000 discounts, according to Delo newspaper.
Tourism is expecting a downturn, according to Serhiy Pidmohylniy, director of Terra Incognita travel agency.
Last year, New Year vacation packages were booking early in autumn. This year, travelers appear hesitant, Pidmohylniy said. [Stephen Bandera contributed to this report]
 
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13.  UKRAINE’S FERREXPO ISSUES PROFITS WARNING 

By Maggie Urry and Rebecca Bream, Financial Times, London, UK, Wed, Oct 29 2008
Cutbacks in the steel industry caused Ferrexpo, the Ukrainian iron ore miner, to issue a profits warning and announce the surprise resignation of its chief executive, a move that sent its shares down 25 per cent.
 
The news provided more evidence of how the widening recession is hitting formerly strongly growing economies in eastern and central Europe. Ferrexpo sells most of its iron ore to steelmakers in the region and the group said a number of its customers had deferred orders in the past two weeks.
Ferrexpo said this would cause “materially reduced demand” for its iron ore pellets for the rest of 2008 and meant full-year sales would be 5 to 10 per cent lower than expected.
Shares in the group tumbled more than 25 per cent, falling 13 1/2p to 39 1/2p. The shares were floated in London in June 2007 at 140p and reached a peak of 484 1/2 this June, when Ferrexpo briefly entered the blue-chip FTSE 100 index.
Ferrexpo said it would freeze its expansion plans and focus on existing operations. “These decisions have been made to enable the group to avoid incurring significant capital expenditure at a time of market uncertainty,” it said.
The strategy shift led to the resignations of Mike Oppenheimer, chief executive, and Dennis McShane, business development director, who said that their roles had been changed. Kostyantin Zhevago, the 33-year-old Ukrainian billionaire businessman and politician who owns 51 per cent of Ferrexpo, is taking over as chief executive.
 
Earlier this month, Mr Zhevago was forced to cut his stake in Ferrexpo from 72.5 per cent to 51 per cent after the fall in its share price prompted bankers JPMorgan Chase to recall a loan. To raise the necessary cash, Mr Zhevago sold shares in Ferrexpo to RPG Industries, the parent of Czech coal miner New World Resources, for 83p each.
RPG has nominated Miklos Salamon, executive chairman of NWR, and Marek Jelinek, finance director of NWR, to be non-executive directors of Ferrexpo. A person close to the deal said that, having nearly lost control of his company, Mr Zhevago wanted to exert more control over the running of Ferrexpo, leaving no room for Mr Oppenheimer.
Ferrexpo had been in talks with several mining and steel companies, understood to include US Steel and Arcelor Mittal, about joining forces to build two new mines, Yeristovskoye and Belanovskoye, to exploit the northern end of the Poltava iron ore deposit in Ukraine. But interest in such expansion projects has waned in the past month, and Ferrexpo has had to put the plan on hold.
 
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14.  UKRAINE’S EMBARRASSING SHOW

Editorial, Kyiv Post, Kyiv, Ukraine, Thursday, October 30, 2008

Ukrainian politicians seem clueless about how national leaders should behave.

Considering the selfish and childish behavior of Ukraine’s political leaders, it is a constant wonder why anyone would take this nation seriously – let alone lend it $16.5 billion, as the International Monetary Fund is prepared to do.

The latest juvenile antics took place in the Verkhovna Rada. That’s where members of Prime Minister Yulia Tymoshenko’s bloc seem to have acted as
not-so-petty vandals on Oct. 24 by stuffing rubbish into the slots of the electronic voting system to break it. Tymoshenko’s camp denies involvement.  But it looks like only the latest shenanigan in a bitter and paralyzing rivalry between Ukraine’s leaders.

 
Yushchenko and Tymoshenko have long forgotten that the 2004 democratic Orange Revolution was not about them. People took to the streets to stand up
for Ukraine — and the principles of justice and democratic elections. Instead, the two heroes of the revolution have been degrading themselves in their pathetic attempts to cling to power at all costs. Turning to ex-Prime Minister Victor Yanukovych, whose rigged election triggered the 2004 revolt, is not the solution.

Even with an IMF bailout, the nation faces a rough road ahead. The loan will be needed to stabilize the sliding hryvnia, which is trading at all-time lows. Passing a no-deficit budget will mean lean times for millions of people dependent on state benefits. Likely borrowers will face higher interest rates in a further drag to the economy.

The nation may be forced to sell its remaining prized assets, such as telecoms giant Ukretelecom, at unattractive prices. But the most complicated task is building an economy that will reverse the huge imbalance between the nation’s increasing imports and dwindling exports, particularly of steel and other commodities.

The current leadership has proved itself too inept – and too subservient to the interests of the nation’s oligarchs – to inspire much hope. But out of crises, new leaders sometimes emerge to take charge with courage, imagination and determination. Let’s hope that happens in Ukraine.

LINK: http://www.kyivpost.com/opinion/editorial/30682

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15.  KYIV LEADERS LOCKED IN TRASH-TALKING AS ECONOMY UNRAVELS 
Ukraine’s political leaders seem oblivious to the global financial crisis and the worldwide media exposure that depicts them as unstable

OP-ED: By Adrian Karatnycky, Kyiv Post, Kyiv, Ukraine, Thursday, 23 October, 2008 

There is an air of bravado among Ukraine’s elite.

President Victor Yushchenko’s decision to dismantle parliament and to call new elections – as well as his recent reaffirmation of this step – means Ukraine will have a weak interim government for at least the next three months.

Whatever the intrinsic merits of the president’s determination to break the policy deadlock, the decision shows scant regard for the scale of the international financial crisis that has rapidly brought growth to a screeching halt in the richest economies, led to huge job losses and obliterated financial institutions that were once “worth” hundreds of billions of dollars.

As recently as two weeks ago, Prime Minister Yulia Tymoshenko was taking an equally bold position, declaring that the country was immune to serious consequences from the international downturn as it was not fully integrated into the global economic community. And statistics on the country’s gross domestic product growth seemed to bear her out. The most recent data from Ukraine showed growth continued smartly upward through the end of September at an annual rate of 7.1 percent.

Only Victor Yanukovych – a man with a Ph.D. as legitimate as the court ruling that annulled his criminal convictions – emphasizes the economic threat to Ukraine. But he does so because he is in opposition, not because he understands the issues.

Nor do Ukraine’s leaders seem to understand that they live in a global media environment. Accusations by the president that his rival, the premier, is a “traitor,” or her Oct. 21 blocking of the parliament, are shrugged off as “business as usual.”  But to the international community, they are dire signals that the country is unstable.

Despite the political “trash talking” and “theatrics” of Ukraine’s leaders, with the global financial crisis having accelerated, there will be no escaping it. The hryvnia, Ukraine’s currency, is already in a steep slide, with citizens rapidly converting significant portions of the 200 billion in hryvnias held in banks into safer dollars and euros.

 
As a result, Ukraine’s central bank will be in a tough position to meet all the demand for hard currency that Ukraine’s banks (which need sources of liquidity) and citizens (who want the euro and dollar) will generate in the coming months.

Construction is in steep decline, too. And with steel prices plummeting globally, Ukraine’s former growth engines – its steel conglomerates – could lay off workers in an effort to adjust to the tougher times.

All this has already had a massive toll on the value of equities on the PFTS, Ukraine’s leading stock exchange. Inflows in foreign direct investment are also likely to be significantly affected, reducing available capital for growth, modernization and expansion.

Nor does the global slowdown necessarily mean that Russia’s price for natural gas will decline with the overall global decline in commodities. Not a chance. The bad news is that it usually takes about a year for gas prices to catch up with the price of oil. So there will be no real relief to Ukraine’s natural gas price tag come new year.

Given the domestic political chaos, it is small wonder that Western investors worry that, in the wake of the failure of Prominvestbank, the country’s sixth largest, there will be further financial tremors. As a result, rightly or wrongly, given the current political and policy turmoil, Ukraine is now viewed by many Western investors as the next potential Iceland, a country in the throes of bankruptcy.

All this does not mean the sky is falling. But it does mean that Ukraine’s leaders would be well-advised to drop some of their false confidence and insouciance. The coming months will need rapid and resolute actions. And there are questions whether the growing political rivalries at the top will allow for the rapid implementation of sensible policy.

Luckily, Ukraine’s increasingly sophisticated and enterprising business elite is sensitive to the challenges and threats posed by the global slowdown. Through their powerful influence on the three major political groupings, business is likely to press politicians to responsible action.

As importantly, there is a strong group of excellent professionals at the helm of Ukraine’s central bank. The government economic team of Victor Pynzenyk and Bohdan Danylyshyn is well-regarded and seen as highly competent by the international business community.
 
As significantly, there are signs that pragmatic, growth-oriented and economically literate younger politicians, including Parliamentary Speaker Arseniy Yatsenyuk, are chafing at the bit as politicians continue to squabble. Their discontent with the range of political options now offered to voters may be the basis for well-funded new parties that will help break the deadlocked mold of Ukrainian politics.

All these are important reason for long-term optimism. In the mid-term, too, there may be good auguries for Ukraine.

The International Monetary Fund and World Bank project that, as a result of the global financial crisis, Europe and the United States will have something approaching zero growth in the coming year. Emerging markets are believed to be on the path of growth of between 3 and 7 percent in 2009, with Ukraine at the lower part of the range.

This should make Ukraine an attractive place to invest, if the country’s currency and financial system is not in a free fall. And that means the politicians must do their job and ensure that all sources of standby financing, including a loan package from the International Monetary Fund, is pre-negotiated and in place in case there is a need.

 
They should also move forward with stalled privatizations. Parliament will need to act quickly to approve any package that is negotiated as well as other needed emergency measures.

If Ukraine’s leaders understand that they personally will be blamed by the public for any serious economic setbacks, there are strong prospects Ukraine can ride out the current global financial crisis. That is certainly what President Yushchenko, with support for re-election in early 2010 at single digits, must hope for. Otherwise, he would be far better served to allow Yulia Tymoshenko to continue serving as premier and to bear the brunt of public anger at steep economic decline.

Of course, it would be best if Ukraine’s leaders agreed to a short-term compromise and created a government of national unity that could cope with the economic crisis. But given the worry of Yushchenko and the business elite about Tymoshenko’s populist proclivities, and their lack of confidence in her stewardship of the economy, such an outcome appears unlikely.

Still, the odds are that, even without a global political compromise, Ukraine’s leaders will find a way of cobbling together and implementing policies to prevent an economic meltdown. That, alas, has been the standard operating procedure of Ukraine’s elite for most of the 18 years of independence.

NOTE: Adrian Karatnycky is senior scholar with the Atlantic Council of the United States and managing director of the Myrmidon Group LLC, a small New York-based consultancy that works with investors and corporations seeking entry into the emerging markets of Ukraine and Eastern Europe.

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16.  YUSHCHENKO’S ALLIES DESERT HIM

 
BYuT Newsletter, Issue 91, Kyiv, Ukraine, Monday, October 27, 2008
 
The Popular Movement for Restructuring (commonly known by its Ukrainian abbreviation as “Movement” [Rukh]) has broken ranks with President Viktor Yushchenko’s political force, Our Ukraine-People’s Self-Defence (OU-PSD). This is the latest in a long line of senior personalities and political parties to have broken with the president, after standing shoulder to shoulder with him during the Orange Revolution.
  
The list of those deserting the president lengthens each month. Notable names include: Oleksandr Zinchenko, the head of Mr Yushchenko’s 2004 campaign; Petro Poroshenko (Chairman of the National Bank of Ukraine) and Davyd Zhvannia, both financiers of the election campaign and godfathers to Mr Yushchenko’s children; Party of Industrialists and Entrepreneurs leader Anatoliy Kinakh; Party of Reforms and Order leaders Taras Stetskiv, Mykola Tomenko and Viktor Pynzenyk; the head of the People’s Self-Defence bloc, Yuriy Lutsenko; long time business and political ally Oleh Rybachuk and the head of Mr Yushchenko’s 2004 campaign analysis and research; and former Defence Minister Anatoliy Hrytsenko.
 
A CASE OF DEJA VU 
One of the last to break with Mr Yushchenko is former Foreign Minister and head of Rukh, Borys Tarasiuk. In an open letter addressed to Rukh members, dated 13 October, Mr Tarasiuk tells of the déjà vu he feels today. He recalls the intense pressure (from Leonid Kuchma in the late 1990s and Mr Yushchenko today) applied to make Rukh conform, with failure to do so backed up by threats to artificially split the party.
  
As in the past, the presidential apparatus is threatening to split Rukh if it does not obey orders. Today, three Galician branches of Rukh support the president’s desire for pre-term elections rather than joining an enlarged orange coalition.
  
The president’s demand is for Rukh to merge with his People’s Union-Our Ukraine party into a new pro-Yushchenko party. A refusal to take this step, Mr Tarasiuk told his members, will lead to the presidential apparatus attempting to ensure that Rukh does not enter the next parliament.
 
GRAND COALITION 
Furthermore, Mr Tarasiuk predicted that there will be a grand coalition of the Party of Regions with the remnants of the OU-PSD bloc in the newly elected parliament. In this eventuality, Rukh would go into opposition with the Bloc of Yulia Tymoshenko (BYuT).
   
In conclusion Mr Tarasiuk warns, “Rukh could not be destroyed by the former anti-people’s authorities and it cannot be destroyed by “our” authorities for which we struggled so long!”
  
Rukh has had a presence in the Ukrainian parliament ever since the March 1990 elections and was led by the legendary former dissident Vyacheslav Chornovil until March 1999. Later that month Mr Chornovil died in a suspicious car crash still under investigation.
 
LIMITED OPTIONS 
Mr Tarasiuk does not mention in his open letter with which political force Rukh would enter the new parliament? If Rukh refuses to accept disbanding and fusing with the People’s Union-Our Ukraine, as Mr Tarasiuk has stated, then Rukh has only two options.
 
Firstly, to campaign alone or with other disaffected parties from the nine parties in OU-PSD. This though is doubtful as it is unlikely such a bloc would win sufficient votes to enter parliament. Yuriy Lutsenko, leader of the People’s Self-Defence bloc, has already expressed his intention to campaign on a single list with BYuT.
  
The second option is to campaign with BYuT as its fourth political party (BYuT is composed of Ms Tymoshenko’s Fatherland party, the Reforms and Order party and the Social Democratic party). Negotiations towards an enlarged BYuT coalition with Rukh have reportedly been on-going during the last month.
  
Since its formation in 1987-1988, the biggest electoral victory for Rukh came as a member of the Our Ukraine bloc in the 2002 elections, when the pro-presidential bloc came first. The Communist Party was pushed into second place for the first time and then into fifth and fourth place in the 2006 and 2007 elections.
 
DECLINING FORTUNES 
Unexpectedly, Our Ukraine’s unification of centre-right parties unravelled in the Yushchenko era. Our Ukraine and OU-PSD received a 13.95 percent and 14.15 percent share of the vote respectively in the 2006 and 2007 parliamentary elections, compared with 23.57 percent in 2002. This was largely attributable to disillusionment and disappointment with the president over backtracking on implementing pledges made during the Orange Revolution. 
 
Since the 2007 elections, support for OU-PSD has declined even further to 5 percent. As in the case of Mr Tarasiuk, Mr Yushchenko has broken with all of his leading allies from 2002 (when Our Ukraine was established) and the 2004 elections that sparked the Orange Revolution.
  
With such a narrow support base, fewer political allies and depressingly low opinion poll ratings, the president’s strategy of fighting an election is tantamount to political suicide. It is likely the People’s Union-Our Ukraine party will fight the next elections renamed “Our Ukraine Yushchenko bloc,” to recall the success of Our Ukraine in 2002. The first five on the list will be Mr Yushchenko, Vyacheslav Kyrylenko, Arseniy Yatsenyuk, Yuriy Yekhanurov and Yuriy Kostenko.
 
FLAWED STRATEGY
But the president’s strategy ignores a major difference between today and six years ago; namely, that nearly all of the political parties in Our Ukraine (2002-2006) and OU-PSD (2007) have broken with Mr Yushchenko. One wing of the former Rukh (led by Mr Kostenko) will be a member of the Yushchenko bloc in the forthcoming pre-term elections while another wing (led by Mr Tarasiuk) will campaign in the forthcoming elections, hopefully with BYuT.
  
The Yushchenko bloc is expected to go into the next elections comprising only two parties: the People’s  Union-Our Ukraine and the People’s Party. This means it will fight for the same votes as the other former parties that made up its ranks. However it will be disadvantaged by a narrower support base that translates into a narrower voter catchment. Ironically, its disintegration contrasts with the Party of Regions, which has been busy enlarging its base by absorbing former Kuchma parties.
  
Low support for the Yushchenko bloc will ruin the president’s already weak chances of re-election – a situation made worse by putting his name behind pre-term elections that are deeply unpopular with a public that has grown increasingly tired of politicians. [Email us at nlysova@beauty.net.ua]
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17.  UKRAINE POLL SUGGESTS SUPPORT FOR PRESIDENT MINIMAL 

Running behind Communist Party and Lytvyn Bloc
 
Interfax, Kyiv, Ukraine, Tuesday, October 28, 2008

KYIV – Five parties would win seats in Ukraine’s parliament if elections were held today, and the Party of Regions would receive the largest single proportion of seats in the legislature, an opinion studies group said on Tuesday, citing an opinion poll.

The returns of the survey, carried out by the Razumkov Center and announced at a news conference in Kyiv, suggest that 28.3% of Ukrainians would vote for the Party of Regions, while the Yulia Tymoshenko Bloc would receive 27.5%, the Communist Party 7.8%, the Lytvyn Bloc 6.9%, and a hypothetical party supporting President Viktor Yushchenko 5.7% of the vote.

Each of the other groups would be unable to achieve the 3% mark needed to win representation in parliament, while 5.5% of the population would vote against all the parties and 6.8% are undecided.

Asked whether they would go to the polls if the next parliamentary elections were held next Sunday, 35.9% of respondents answered they most likely would, 28.8% said they definitely would, 14.6% said they had not yet made up their mind, 9.5% said they would definitely not go, 5.3% said they would be unlikely to go, and 3.3% were undecided.

The Razumkov Center also said 81.8% of those questioned in the same poll said Ukraine is in general moving in the wrong direction, 5.3% expressed the opposite view, and 12.9% were undecided on the issue. The Center questioned 10,865 people in all regions of the country in the survey, conducted on October 7-19. The returns were said to have a 1% margin of error.

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18.  USA TRYING TO SET UKRAINE, RUSSIA AGAINST EACH OTHER WITH

THE GREAT FAMINE ISSUE SAYS RUSSIA’S UN REPRESENTATIVE
 
Itar-Tass, Moscow, Russia, Tuesday, October 28, 2008
UNITED NATIONS – The United States is trying to set people of Ukraine and Russia against each other with the Great Famine issue, Russian Permanent Representative to the United Nations Vitaly Churkin said on Tuesday.

He said the United States was thus “resolving the hard task of pushing Ukraine into NATO while 80% of Ukrainian citizens objected to the Ukrainian
drawing into the North Atlantic alliance.”

The U.S. and British delegations were rude and kept interrupting the chair of the UN General Assembly’s General Committee, which was considering the Assembly agenda, Churkin said. The General Committee discussed the possible attachment of the Ukrainian draft resolution on the Great Famine to the agenda.

“The Great Famine and Ukrainian genocide claims create a certain background for another mainstream ideological action of the Ukrainian administration, i.e. glorification of Ukrainian accomplices of the Nazi,” he said. “The most illustrative example of this glorification is the Hero of Ukraine title posthumously awarded by the Ukrainian president to one of the most notorious leaders of Ukrainian Nazis, Shukevich, in 2007.”

“The Babiy Yar tragedy is the most vivid symbol of Holocaust,” Churkin said. “Plenty of those who killed Jews in Babiy Yar were Ukrainian accomplices of the Nazi.”

All that “is totally discordant with the United Nations Organization, which was established amid the victory of the anti-Hitler coalition, and principles of this organization,” he said.

 
“Russia has been fighting against the phenomenon for more than three years. Each year it offers a resolution that condemns the appearance of new forms of racism and glorification of nazism, and each year the resolution gains support of the UN General Assembly. We hope that the resolution will enjoy broader support this year than in 2007 when it was approved by 130 states.”

“European nations regularly abstain in the vote on the draft Russian resolution that condemns glorification of the Nazi. Maybe, the United States, which has taken up history and has become hyperactive in the Great Famine issue, will finally support the resolution. So far, only two states ­ the U.S. and the Marshall Islands ­voted against our resolution last year for reasons I would call inexplicable,” Churkin said.

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19. THIS IS WHAT YOU GET FOR USING THE WRONG APPROACH ON THE UKRAINIAN

GENOCIDE EUROPEAN PARLIAMENT RECOGNISES UKRAINIAN FAMINE OF 1930’s
 
Sent: Thursday, October 23, 2008 8:46 AM
UNIAN, Kyiv, Ukraine, Thursday, October 23, 2008

The European Parliament has recognised the Ukrainian famine of 1930s as crime against humanity, according to the EP official web-site.

In a resolution on the commemoration of the Holodomor, the artificial famine in Ukraine in 1932-1933, MEPs describe it as “an appalling crime against the Ukrainian people, and against humanity”.

According to the resolution, the Holodomor famine of 1932-1933, which caused the deaths of millions of Ukrainians, “was cynically and cruelly planned by Stalin`s regime in order to force through the Soviet Union`s policy of collectivisation of agriculture against the will of the rural population in Ukraine”.

[WRONG, WRONG, WRONG! LEMKIN HAD THE RIGHT REASON: “… The Soviet plan was aimed at the farmers, the large mass of independent peasants who are the repository of the tradition, folklore and music, the national language and literature, the national spirit of Ukraine”.

& the Communist activist Prokopenko was exact when he admitted: “Starvation in Ukraine was brought about in order to reduce the number of Ukrainians, resettle in their place people from another par of the USSR, and in this way kill all thought of independence.” Roman Serbyn]

MEPs believe that “recalling crimes against humanity in European history should help to prevent similar crimes in the future” and they stress that “European integration has been based on a readiness to come to terms with the 20th century`s tragic history and that this reconciliation with a difficult history does not denote any sense of collective guilt, but forms a stable basis for the construction of a common European future founded on common values”.

 The resolution therefore makes a “declaration to the people of Ukraine and in particular to the remaining survivors of the Holodomor and the families and relatives of the victims”.

 It “recognises the Holodomor (the artificial famine of 1932-1933 in Ukraine) as an appalling crime against the Ukrainian people, and against humanity”.

 The text then “strongly condemns these acts, directed against the Ukrainian peasantry, and marked by mass annihilation and violations of human rights and freedoms”.

 It also “expresses its sympathy with the Ukrainian people, which suffered this tragedy, and pays its respects to those who died as a consequence of the artificial famine of 1932-1933”.

 Lastly, the resolution “calls on the countries which emerged following the break-up of the Soviet Union to open up their archives on the Holodomor in Ukraine of 1932-1933 to comprehensive scrutiny so that all the causes and consequences can be revealed and fully investigated”.

 
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20.  EU PARLIAMENT SAYS UKRAINIAN 1930S FAMINE WAS SOVIET “CRIME” 

 
Agence France Presse (AFP) Strasbourg, France, Thursday, October 23, 2008

STRASBOURG – The “artificial” famine that killed millions in Soviet-era Ukraine in 1932-33 was “cynically and cruelly planned” by Moscow, a European Parliament resolution said Thursday.

The European Union’s parliament stopped short of labeling the regional outcome of the communist policy of collectivization of agriculture “genocide,” the term used by a 2006 Ukrainian parliament law.
However, its resolution said the deaths of between 4 and 10 million people, according to census and statistical estimates, were “an appalling crime against the Ukrainian people, and against humanity.”
The stance is likely to trigger deep irritation in Moscow, which has argued that drought was a pivotal factor. The text “strongly condemns these acts, directed against the Ukrainian peasantry, and marked by mass violations of human rights and freedoms.”
Lawmakers also called on former Soviet states to open up their archives so that “all the causes and consequences” can be studied. Other areas and their ethnic groupings, including Kazakhstan, were also badly affected by the famine.
The Holodomor – understood as “murder by hunger” in Ukrainian – has been recognized as genocide by a small number of governments around the world, with Kiev campaigning for years to have the U.N. apply the strict legal definition.
Pro-Russian Ukrainians say it resulted from ideological error, with historians divided as to all the circumstances behind it and the 2006 law in Kiev passed by only a slim majority.
The program of forced collectivization saw the produce of Ukrainian farmers confiscated with the Soviet authorities also blocking food supplies into Ukraine in what some historians have argued was an attempt to crush a drive for independence. Ukraine gained its independence with the collapse of the Soviet Union in 1991.
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AUR#913 Oct 22 Why Ukraine Needs IMF Funding Now; Currency Weakened; Orange to Red; Chicago Exhibition "Our Daily Bread"

 
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       
                     
ACTION UKRAINE REPORT – AUR – Number 913
Mr. Morgan Williams, Publisher and Editor, SigmaBleyzer
WASHINGTON, D.C., WEDNESDAY, OCTOBER 22, 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
Analysis and Comment: By Anders Åslund,
Senior Fellow, Peterson Institute for International Economics
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Tue, Oct 21, 2008
 
Reuters, Kiev, Ukraine, Tuesday, October 21, 2008 
 
By Damien McElroy, Foreign Affairs Correspondent, Telegraph, London, UK, Tue 21 Oct 2008
 
4UKRAINE’S CURRENCY WEAKENED FOR A FIFTH STRAIGHT DAY  
Fitch Ratings extended its cut of Ukraine’s credit rating to 10 of the former Soviet republic’s banks.
By Emma O’Brien, Bloomberg, New York, NY, Tuesday, October 21, 2008  
 
Reuters, Kiev, Ukraine, Tuesday, October 21, 2008
 
Interfax Ukraine, Kyiv, Ukraine, Tuesday October 21, 2008

7UKRAINE: KEY FACTS ON FINANCES AND POLITICS

Reuters, Kiev, Ukraine, Monday, October 20, 2008 
 
By Jan Cienski in Prague, Financial Times, London, UK, Tuesday, October 21 2008
 
9OLIGARCH LOVE: SYNERGIES BETWEEN COAL AND IRON ORE
By Emiliya Mychasuk & Emiko Terazono, Financial Times, London, UK, Tue, Oct 21 2008
 
By Lyubov Sorokina, Reuters, Lviv, Ukraine, Mon Oct 20, 2008 
 
A Ukrainian agricultural supply company, USUBC member 95
U.S.-Ukraine Business Council, Washington, D.C., Wednesday, October 22, 2008
Tony Halpin in Moscow, The Times, London, UK, Tuesday, October 21, 2008
 
Commentary: by Anne Penketh, The Independent, London, UK, Tuesday, 21 October 2008 
By Askold Krushelnycky in Kiev, The Independent, London, UK, Tue, 21 Oct 2008 
 
By R M Cutler, Canadian international affairs specialist, Montreal
Asia Times Online, Hong Kong, Wednesday, October 22, 2008
 
16.  THE ICELAND SYNDROME 
Anne Applebaum, Columnist, The Washington Post, Tue, Oct 21, 2008; Page A17
Comment & Analysis: By David Rothkopf, Financial Times, London, UK, Tue, Oct 21 2008
By Tony Barber in Brussels, Financial Times, London, UK, Tue, Oct 21 2008
 
19UKRAINE STRUGGLES AMID CRISIS
By Daryna Krasnolutska, Bloomberg, Kiev, Ukraine, Mon, Oct 20, 2008

20 UKRAINE: TEETERING ON THE BRINK
President Rescinds Decree Cancelling 7 December Election
BYuT Inform newsletter, Issue 90, Kyiv, Ukraine, Tuesday, October 21, 2008

 
21.  CENTRAL EUROPEAN MEDIA ENTERPRISES COMPLETES BUY OUT OF MINORITY PARTNERS IN STUDIO 1 + 1 IN UKRAINE
Central European Media Enterprises, By PR Newswire, Tuesday, October 21, 2008
 
Commentary: By John R. Bolton, The Washington Post, Washington, D.C., Mon, Oct 20, 2008; Page A15
 
23A NATO PATH FOR UKRAINE AND GEORGIA
Letter-to-the-Editor, by Robert McConnell, The Washington Post
Washington, D.C., Tuesday, October 21, 2008; Page A16
 
While the Georgia-Russia conflict has played a role in dashing Ukraine’s
hopes for NATO membership, so has very dramatic domestic political turmoil
By Jeremy Druker for ISN Security Watch, International Relations & Security Network (ISN)
Zurich, Switzerland, Monday, October 20, 2008
 
Exhibition to feature fifty-four Holodomor artworks by Ukrainian artists
Ukrainian National Museum, Chicago, Illinois, Wednesday, October 15, 2008
 
Ukrinform, Kyiv, Ukraine, Friday, October 17, 2008 
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1
 WHY UKRAINE NEEDS IMF FUNDING 

 
Analysis and Comment: By Anders Åslund
Senior Fellow, Peterson Institute for International Economics
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Tue, Oct 21, 2008
 
Kiev has an eerie feeling. The many construction projects have come to a sudden halt. A couple of weeks ago, cranes were turning all over the skyline of Ukraine’s capital, but now they stand abandoned, as credit has dried up.
The International Monetary Fund (IMF) is close to giving Ukraine a fast and large credit to salvage its economy. It is badly needed. The banking crisis in the West might have been mitigated with enormous financial injections. Now the emerging markets call for their salvation.
Like many other emerging economies, Ukraine has delivered to its people a magnificent average growth rate of 7.6 percent for eight straight years. The government has been fiscally conservative. The budget has been close to balance for the last three years.
 
The public debt is tiny at 10 percent of GDP. With international currency reserves of $37 billion last week, Ukraine is by no means bankrupt. The moderate current account deficit of 4.2 percent of GDP last year was more than financed by foreign direct investment.
Even so, the yields on Ukraine’s Eurobonds have shot up to 20 percent a year, a level characteristic of countries in external default, as the global financial crisis has also hit Ukraine. While interbank markets have seized up in the West, many Western financial institutions are abandoning emerging markets.
 
Regardless of its performance, a Ukrainian company can no longer refinance a foreign loan and is forced to close down when a large loan falls due.
Since July, the prices of many commodities have fallen by half, as is the case with steel, Ukraine’s main export. The steel companies cut production drastically, by 30 percent last month, and are laying off workers. Falling steel exports are aggravating Ukraine’s trade deficit.
But most of the economy can be saved from financial collapse. Ukraine’s exclusion from international finance is a market failure that only the state can resolve, and in this international context, the IMF represents the state.
The Ukrainian government has faced up to the situation and asked for emergency credits from the IMF, and the IMF management has responded swiftly and positively.
 
The Ukrainian ministry of finance and central bank are working around the clock with the IMF mission in Kiev to conclude a program. This crisis is reminiscent of the Asian financial crisis of 1997–98, and the IMF has opened speedy emergency funding established then.
The IMF needs to do two things.
 
[1] First, it must check that Ukraine’s economic policies are solid and issue its approval. Late Saturday night, I met Minister of Finance Viktor Pynzenyk in his office in Kiev, after his latest IMF negotiations, who made clear that an agreement is within reach.
[2] Second, the IMF needs to open a large credit line of some $20 billion to restore confidence in Ukraine’s financial well-being, just as wealthy Western governments have intervened at home.
Speed is vital. Every day, Ukrainian companies fall off the financial cliff for no good reason. Their only fault is that they have taken a foreign loan.
 
The slightest delay in an IMF agreement can lead to a run on the Ukrainian currency, the collapse of the Ukrainian bank system, mass bankruptcies, a double-digit fall in output, mass unemployment, and undoubtedly political unrest. But none of this is necessary. It can and should be avoided.
Ukraine’s quarrelsome politicians seem to realize that their nation is in danger and to be ready to swallow the bitter pill of an IMF emergency program. They also need to take this opportunity to promote long-delayed reforms, because Ukraine will suffer badly in any case.
Several other emerging markets, such as Pakistan and Hungary, are in a similar situation and also need IMF support. What is true for Ukraine is also true for them. Many other countries should come to the fore and receive financial support on due conditions in time.
Fortunately, most emerging economies have entered this crisis with strong state finances and sound macroeconomic policies, rendering fast assistance feasible. Remember, an IMF loan is not a gift, but it is paid back within several years. Like the East Asians, the current IMF clients will be able to pay back.
After a long rest, the IMF is badly needed. Today, its challenge is to act fast enough and to make sufficient funds available for emerging economies in danger.
 
FOOTNOTE: Mr. Åslund returned from a visit to Ukraine on Sunday, October 19. He is a Senior Fellow at the Peterson Institute for International Economics in Washington and is the author of the forthcoming book “How Ukraine Became a Market Economy and Democracy.”  Mr. Aslund has served for several years as a Senior Advisor to the U.S.-Ukraine Business Council (USUBC) in Washington.
 
LINK: http://www.petersoninstitute.org/issues/020.htm
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2.  UKRAINE CLOSE TO IMF DEAL AS PARLIAMENT STUTTERS
 
Reuters, Kiev, Ukraine, Tuesday, October 21, 2008 
  
KIEV – Ukraine is on the verge of gaining a loan from the International Monetary Fund, its prime minister said on Tuesday, but the ex-Soviet state’s fractious parliament failed to debate measures needed to secure the deal.

Ukrainian officials have said that the IMF could lend as much as $14 billion, although the Fund has not commented so far on its week-old mission to Kiev.
“At the moment we have practically concluded our negotiations with the IMF,” Tymoshenko told a meeting of economists. “We have 90 percent agreed on a package of measures which are necessary.”

“We have started talks with the IMF so that the government could … receive financial aid literally within two weeks which could stabilise all the (financial) processes.”
A presidential aide said some of the conditions set by the Fund included reducing social spending and balancing the budget — measures which parliament had been due to discuss.
President Viktor Yushchenko dissolved parliament this month and called a December election after his coalition with Tymoshenko collapsed after months of rows that have stalled economic reform.
Late on Monday, he issued a decree allowing the chamber to resume work for “a few days” to pass anti-crisis measures, as well as approve funding for the election. But the session fell into disarray.
POLITICIANS STALL
Tymoshenko’s supporters, opposed to the election and any notion of funding it, blocked the speaker’s rostrum and the sitting was declared closed.
It also appeared that the measures to be put to parliament had been proposed by Tymoshenko’s government, as opposed to a rival package fronted by the president a day earlier.
Analysts are worried whether the government, firms and banks are capable of refinancing their debt as global lending grinds to a halt. The government has been unable to go ahead with a sale of Eurobonds, despite conducting a road show in June.
The hryvnia currency hit an all-time low this month at 5.9 to the dollar, undermined by a gaping current account deficit. The central bank has a difficult balancing act between spending billions of its reserves propping it up or letting it weaken.
Tymoshenko later told a briefing that some of the loan now under discussion could go towards bolstering those reserves. The rest would prop up the banking system.
Ukraine exhibited the first symptom of a crisis when its sixth largest bank, Prominvest, was placed in receivership on Oct. 8. But authorities stress that a run on the bank was caused by rumours of a murky takeover, not foreign investor sentiment.
Although political crisis has gripped Ukraine almost without pause since the 2004 “Orange Revolution” which swept Yushchenko to power, the economy has still recorded annual growth of around 7 percent on average.
The IMF, however, says growth will likely slow drastically to 2.5 percent next year from 6.4 percent this year. (Reporting by Natalya Zinets; writing by Sabina Zawadzki; editing by Patrick Graham)
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3.  UKRAINE SEALS IMF BAILOUT WITH RUSSIAN BACKING

 
By Damien McElroy, Foreign Affairs Correspondent, Telegraph, London, UK, Tue 21 Oct 2008
 
LONDON – Ukraine was poised to complete an International Monetary Fund rescue package for its banks but at the cost of securing Russian backing for the 8 billion pound infusion. The breakthrough came after the country’s feuding political leaders postponed a December election to ensure passage of financial reforms demanded by the institution.
Ukraine has boomed in recent years on the back of higher commodity prices and a liberalisation of its property and financial sector. But the country’s current account deficit has ballooned in recent months, exposing its currency and financial institutions to a loss of investor confidence.
The National Bank of Ukraine has poured hundreds of millions of dollars into struggling banks but without extra cash from the IMF its reserves are dangerously depleted. The country’s currency, the hryvnia, dropped to an all-time low against the dollar before progress was reported.
Prime Minister Julia Timoshenko said an agreement on a $15 billion IMF loan was 90 per cent complete. Parliament will meet next week to approve the package. “The talks are almost finished with the IMF and we’ve almost agreed on what necessary changes to laws we have to make to get the loan,” she said.
But the populist leader, who is locked in a bitter power struggle with former ally, President Victor Yushchenko, warned that the country would have to make painful adjustments. “Ukraine will have to tame its social appetites,” she said. “We will have to cut spending that Ukraine cannot now afford.”
The announcement of progress in the IMF talks came hours after Russian Finance Minister Alexei Kudrin signalled its support for a bail out. The Kremlin’s efforts to restore its influence in Ukraine has become the dividing line of domestic politics in the former Soviet state.
Despite the gravity of the crisis the country’s parliament saw scenes of disarray as supporters of Miss Timoshenko used chairs to jam shut the door of the chamber.
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4.  UKRAINE’S CURRENCY WEAKENED FOR A FIFTH STRAIGHT DAY  
Fitch Ratings extended its cut of Ukraine’s credit rating to 10 of the former Soviet republic’s banks.

By Emma O’Brien, Bloomberg, New York, NY, Tuesday, October 21, 2008  
MOSCOW – Ukraine’s hryvnia weakened for a fifth straight day against the dollar after the country delayed elections and Fitch Ratings extended its cut of Ukraine’s credit rating to 10 of the former Soviet republic’s banks.
The currency dropped 0.4 percent to 5.5200 per dollar by 11:18 a.m. in Kiev, from 5.4975 late yesterday. It earlier fell to 5.5500, the lowest level against the dollar since Oct. 9.
President Viktor Yushchenko yesterday postponed parliamentary elections called after the collapse of the governing coalition by a week to Dec. 14. Fitch, which cut Ukraine’s rating to B+ from BB- and left its “negative” outlook intact Oct. 17, downgraded banks including Privatbank, the nation’s biggest bank by assets, yesterday. Moody’s Investors Service cut Ukraine’s outlook to “stable” yesterday. (To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@bloomberg.net)
 
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U.S.-Ukraine Business Council (USUBC): http://www.usubc.org
Promoting U.S.-Ukraine business relations & investment since 1995.
==============================================================
5.  UKRAINE PARLIAMENT FAILS TO DEBATE KEY MEASURES
 
Reuters, Kiev, Ukraine, Tuesday, October 21, 2008
 
KIEV: Opponents of Ukraine’s president prevented parliament from voting on a bill to finance an early election yesterday, the latest setback for him in a power struggle with his prime minister.
President Viktor Yushchenko had asked parliament to vote on the election bill and measures to counter a global financial crisis. Prime Minister Yulia Tymoshenko says Ukraine cannot afford a parliamentary poll and has done all she can to stop it.
Allies of Tymoshenko resumed their tactic of massing around the chairman’s rostrum and the parliamentary session was declared closed. “We insist that the country first get stabilising measures,” said Ivan Kyrylenko, head of Tymoshenko’s bloc in parliament. “Then we can examine bills dealing with the election.”
Yushchenko dissolved parliament this month and called an early election after accusing Tymoshenko, an estranged ally, of destroying a governing team linked to the 2004 “Orange Revolution”.
On Monday, he suspended that decree to enable parliament to work for a “few days” to pass anti-crisis measures and finance the election, while postponing the poll a week until December 14.
The National Security Council, made up of the president, prime minister and top officials, approved anti-crisis measures on Monday. Details of the Council’s plan, beyond calling for a balanced budget and cuts in the civil service, remain sketchy.
Chairman Arseniy Yatsenyuk vowed to call the chamber into session again only once members reached agreement on an agenda. Analysts said paralysis in parliament could hinder the president’s plan to proceed with the election.
 
“Tymoshenko is clearly ready to use any means to keep the president from holding the election at a time to his advantage,” said Oleksander Lytvynenko of the Razumkov think tank. “She outsmarted the president. This is probably not the last postponement.”
Tymoshenko says an election is “reckless” as Ukraine’s leaders negotiate with the International Monetary Fund on extending credits of up to $14bn.
The effect of the global crisis has been limited on Ukraine, though its hryvnia currency has weakened and the central bank has provided an increasing amount of refinancing for banks.
Tymoshenko called on all forces in parliament last weekend to form a coalition of unity to tackle the crisis, but major party leaders ignored her.
Political turmoil, constant since Yushchenko swept to power on mass “Orange” rallies, hit a new peak when his Our Ukraine party quit its alliance with Tymoshenko’s bloc last month. Joining the president in backing the early election is opposition leader and ex-prime minister Viktor Yanukovich, whose Regions Party is parliament’s biggest group.
A poll published yesterday showed an election unlikely to produce much change in the chamber. Tymoshenko’s bloc led with 20.7%, followed by the Regions Party with 19.5% and Our Ukraine far behind with 7.3%.
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6.  MOODY’S LOWERS RATINGS FOR 12 UKRAINIAN BANKS

Interfax Ukraine, Kyiv, Ukraine, Tuesday October 21, 2008

KYIV – International rating agency Moody’s has downgraded the global local currency (GLC) deposit ratings and the National Scale Ratings (NSRs) of 12 Ukrainian banks. Moody’s said in a press release that it had “also changed the outlook to stable from positive on the B2 long-term global foreign currency (GFC) deposit ratings of 21 Ukrainian banks.”

The press release said: “”Today’s rating action has been triggered by (i) the downgrade of Ukraine’s local currency bank deposit ceiling to Ba1/Not Prime from Baa1/Prime-2, and by (ii) the change of the outlook on Ukraine’s B2 foreign currency bank deposit ceiling to stable from positive.”
The press release said these changes were made owing to the global liquidity crisis along with Ukraine’s own macroeconomic, financial and political problems.
Moody’s lowered the global local currency (GLC) and NSRs of the following deposit ratings of Ukrainian banks:
– Bank Nadra: GLC deposit rating to B1 from Ba3, NSR to Aa2.ua from Aa1.ua – Calyon Bank Ukraine: GLC deposit rating to Ba1/NP from Baa1/P-2,   
   NSR to Aa1.ua from Aaa.ua
– Index-Bank: GLC deposit rating to Ba1/NP from Baa3/P-3, NSR to Aa1.ua from Aaa.ua
– ING Bank Ukraine: GLC deposit rating to Ba1/NP from Baa1/P-2, NSR to Aa1.ua from Aaa.ua
– OTP Bank Ukraine: GLC deposit rating to Ba1/NP from Baa2/P-2, NSR to Aa1.ua from Aaa.ua
– Pivdenny Bank: GLC deposit rating to B2 from B1, NSR to A1.ua from Aa3.ua
– PrivatBank: GLC deposit rating to Ba1/NP from Baa3/P-3, NSR to Aa1.ua from Aaa.ua
– Raiffeisen Bank Aval: GLC deposit rating to Ba1/NP from Baa1/P-2, NSR to Aa1.ua from Aaa.ua
– Savings Bank of Ukraine: GLC deposit rating to Ba1/NP from Baa2/P-2, NSR to Aa1.ua from Aaa.ua
– Ukreximbank: GLC deposit rating to Ba1/NP from Baa2/P-2
– UkrSibbank: GLC deposit rating to Ba1/NP from Baa2/P-2, NSR to Aa1.ua from Aaa.ua
– Ukrsotsbank: GLC deposit rating to Ba1/NP from Baa2/P-2, NSR to Aa1.ua from Aaa.ua
Moody’s changed the outlook on the global foreign currency (GFC) long-term deposit ratings of the following Ukrainian banks to stable from positive, following the change in outlook on the sovereign ceiling for such deposits: – Alfa Bank Ukraine, Bank Finance and Credit, Bank Nadra, Bank NRB, Calyon Bank Ukraine, First Ukrainian International Bank, Forum Bank, Index-Bank, ING Bank Ukraine, Kreditprombank, OTP Bank Ukraine, Pivdenny Bank, Pravex-Bank, PrivatBank Commercial Bank, Raiffeisen Bank Aval, Savings Bank of Ukraine, Swedbank Invest, OJSC Swedbank, Ukreximbank, UkrSibbank and Ukrsotsbank.
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7.  UKRAINE: KEY FACTS ON FINANCES AND POLITICS

 
Reuters, Kiev, Ukraine, Monday, October 20, 2008 
 
KIEV – Prime Minister Yulia Tymoshenko expressed confidence on Monday that talks with the International Monetary Fund would prove successful and that Ukraine would secure “substantial” financial assistance. [UA-M] Officials have suggested the IMF could lend Ukraine a sum ranging from $10-14 billion.
Following are key facts about why Ukraine is vulnerable to heightened risk aversion among international investors.

POLITICS —–
(1)  Ukraine has been plagued by political turbulence since “Orange Revolution” protests in 2004 brought to power President Viktor Yushchenko and a team committed to moving closer to the West and joining NATO and the European Union.

Rows pitting Yushchenko against his former ally Yulia Tymoshenko, who twice served as his prime minister, undermined the “Orange” camp and brought down governments. The president dissolved parliament this month and called a December parliamentary election, the third in as many years.
(2)  Upheaval — and trouble forming a stable ruling coalition — reflect Ukraine’s longstanding division into the nationalist west and centre, which looks to the EU and United States, and the Russian-speaking east and south, friendlier towards Moscow.
(3)  Relations with Russia, bumpy throughout the post-Soviet period, have sunk to unprecedented lows over Yushchenko’s denunciation of Moscow’s military intervention in Georgia. Ukraine depends heavily on Moscow for energy supplies.

CURRENCY POLICY —–
(1)  The hryvnia currency hit an all-time low of 5.9/$ on Oct. 8, weakened by growing global risk aversion and regional tensions after Russia’s conflict with Georgia.

(2)  In mid-2008 the hryvnia had strengthened as far 4.5/$, after the central bank abandoned a policy of keeping it in a corridor of 5.00-5.06 per dollar within a 4.95-5.25 band.
(3) The central bank’s council and executive board have sent mixed messages about future actions and clashed in May over revaluing the hryvnia’s official rate. The board appears to take less notice of the currency band, set by the council.

FINANCES —–
(1)  The central bank has said foreign exchange reserves as of the end of September at $37.5 billion covered 3.7 months of imports.

(2)  The current account deficit was running at 7.9 percent of GDP in the first half of this year, up from 4.2 percent in 2007.
(3)  Analysts based outside Ukraine forecast its current account deficit at $21-25 billion, or 10-12 percent of gross domestic product, by year-end; Ukraine-based analysts give lower forecasts of about 6 percent of GDP.
 
(4)  Prices for Ukraine’s steel exports are forecast to drop, while Russia’s Gazprom has suggested next year’s price for gas imports could soar to $400 per 1,000 cubic metres from $179.50 now.

CURRENCY RISKS —–
(1)  The central bank risks encouraging imports and further widening the trade gap if it supports the hryvnia. However, letting it float would remove an important anchor for domestic and foreign businesses in Ukraine’s export-driven economy. * Many people hold debt in foreign currency and would have to pay more to service it if the hryvnia weakened.

(2) Consumers are extremely sensitive to currency movements — they lost savings when the Soviet Union collapsed and again through hyper inflation and a currency crisis in the 1990s that more than halved the hryvnia’s value to about 4/$ and beyond.
(3) Ukraine was forced to restructure its debts in 2000 and made the final payments on that restructuring just last year.

FOREIGN DEBT —–
Ukraine’s foreign debt totalled just over $100 billion as of July 1, of which about $15 billion was government debt.

(1) The central bank has said it expects banking sector debt worth $1-1.2 billion to mature in the final quarter of this year.
(2) Citi analysts estimate Ukraine’s 2009 external financing requirement to be $55-66 billion, of which $32-40 billion is in the private sector. Foreign banks own 40-42 percent of total banking assets and 25 percent of short-term banking debt is owed to parent banks. (Compiled by Sabina Zawadzki; Editing by Ruth Pitchford)

LINK: http://www.reuters.com:80/article/bondsNews/idUSLK27995520081020

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8.  CZECH COAL MINING GROUP TO BUY 25% STAKE IN UKRAINE’S FERREXPO

By Jan Cienski in Prague, Financial Times, London, UK, Tuesday, October 21 2008
 
PRAGUE – New World Resources, the London-listed Czech coal mining group, is to buy 25 per cent of Ferrexpo, a Ukrainian iron ore producer whose owner had been forced to sell off part of his stake in the company after it plunged in value.
NWR said that it would pay pound126.6m ($217.5m), or 86p a share, for the stake in Ferrexpo acquired this month by NWR’s majority shareholder, RPG Industries, the investment vehicle of the Czech billionaire Zdenek Bakala. The purchase will be funded from NWR’s existing cash and the company expects to be offered a place on Ferrexpo’s board.
“It is very complementary to our presence in the region,” said Miklos Salamon, NWR’s chairman, adding that the purchase would give NWR a strategic partner in Ukraine, with some of Europe’s largest coal and iron reserves.
NWR, through its subsidiary OKD, is the largest hard coal producer in the Czech Republic and has begun analysing investments in Polish coal mines.
Ferrexpo, which has its headquarters in Switzerland and briefly entered the FTSE 100 this year, produces more than 9m metric tons of iron ore pellets a year – of which 85 per cent is exported to steelmakers around the world – as well as a further 30m metric tons of iron ore. Both companies are listed on the London Stock Exchange.
“We have got the region’s pre-eminent coal producer and pre-eminent iron ore producer in a significant alliance,” added Mr Salamon.
 
Ferrexpo is controlled by Kostyantin Zhevago, a Ukrainian billionaire businessmen and politician, who was faced with a margin call by JPMorgan after Ferrexpo’s shares were hit by the sell-off in commodities stocks.
Shares in Ferrexpo have dropped 84 per cent since May and closed at 77p on Monday. Mr Zhevago still holds 51 per cent of the company through his investment vehicle Fevamotinico.
Mr Bakala, who has made a fortune by investing in distressed heavy industries, quickly seized on Mr Zhevago’s troubles. “The only reason there was a deal was because of current circumstances,” said Mr Salamon.
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9.  OLIGARCH LOVE: SYNERGIES BETWEEN COAL AND IRON ORE

By Emiliya Mychasuk & Emiko Terazono, Financial Times, London, UK, Tue, Oct 21 2008

When times are tough it’s good for oligarchs to know other oligarchs who will do a deal, and then share that deal with minority investors of companies controlled by them.

So it is with Czech coal miner New World Resources, controlled by Zdenek Bakala , who is selling the Ferrexpo stake to New World that he recently
bought from Kostyantin Zhevago , the Ukrainian billionaire businessmen and politician, who was faced with a margin call by JPMorgan. Made all the more
convenient by the fact that JPMorgan Cazenove’s Ian Hannam floated both companies.

There are also links between New World chairman Miklos Salamon and the Ferrexpo chief executive, Mike Oppenheimer, the two having worked together
at BHP Billiton, Mr Salamon said yesterday.

He was a little impatient with analysts who said they couldn’t really understand the synergies between coal and iron ore, at a briefing, telling them it was a “very, very, very attractive opportunity” to get into a big ore body in Ukraine.

Minorities in New World will get to vote on the deal, while Mr Bakala’s company will not – but will get a say in the new directors to join the board as a result. No prizes for guessing. (people@ft.com)

 
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10.  ANOTHER UKRAINE EURO 2012 SOCCER ARENA FACES UNCERTAINTY
 
By Lyubov Sorokina, Reuters, Lviv, Ukraine, Mon Oct 20, 2008 
 
LVIV, Ukraine – Authorities in Ukraine’s western city of Lviv are looking for new builders after an Austrian firm pulled out of constructing a stadium for the Euro 2012 finals, an official said on Monday.
Austria’s Alpine Bau, one of the country’s largest building firms, last week said it could not complete the 30,000-seat stadium within budget constraints set by Lviv city officials.
The incident is the second involving construction of Ukrainian stadiums for the tournament after authorities had to change the general contractor for renovation of Kiev’s main stadium, due to host the Euro 2012 final.
After two visits to Ukraine by President Michel Platini, UEFA last month upheld the right of Ukraine to keep the tournament, co-hosted with Poland, subject to strict monitoring.
Oleh Zasadny, head of the Euro 2012 department at Lviv city council, said the council had rejected Alpine Bau’s new costs which exceeded the budgeted 85 million euros ($114.3 million).
“Lviv city council has therefore launched procedures to find a new contractor,” Zasadny told Reuters. “Talks are under way with companies from Italy, Croatia, Turkey, Germany and Spain and official proposals have been submitted.” In Kiev, a senior Ukrainian soccer federation official said it was awaiting word on who would be awarded the contract.
“Lviv authorities still have not decided on a contractor who can tell terms on completing the project and present a detailed plan on its realisation,” Ivan Fedorenko, head of the federation’s Euro 2012 directorate, told Reuters.
Fedorenko said a decision had also still to be taken on renovating Lviv’s dilapidated airport — a key concern to European officials, along with hotels and other infrastructure. He said city authorities were to report to UEFA next week on plans for the stadium and by mid-November on related projects.
Alpine Bau spokesman Karen Keglevich said the company found itself unable to meet the demands of local authorities. A threat of sanctions against Poland was lifted after UEFA reached an agreement with the Warsaw government to remove a government-appointed administrator for soccer and agree to hold new elections for the national federation.
UEFA were not immediately available for comment. (additional reporting by Igor Nitsak in Kiev and Christian Gutlederer in Vienna; editing by Miles Evans)

LINK: http://uk.reuters.com/article/worldFootballNews/idUKLK46646220081020?sp=true

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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.  SE RAELIN JOINS U.S.-UKRAINE BUSINESS COUNCIL (USUBC)

A Ukrainian agricultural supply company, USUBC member 95
 
U.S.-Ukraine Business Council, Washington, D.C., Wednesday, October 22, 2008
WASHINGTON, D.C. – SE Raelin, a Ukrainian agricultural supply company, founded and managed by Peter B. Chykaliuk of Scarborough, Maine (through Cajo, Inc., a USA company) has been approved for USUBC membership, according to the USUBC executive committee, in an announcement on behalf of the entire USUBC membership. SE Raelin/Cajo, Inc is USUBC member ninety-five.

Peter Chykaliuk, PhD, started working in Soviet Ukraine in 1989 and was one of the early pioneers in the private agricultural supply business.  Another early private sector pioneer was USUBC senior advisor Leonid Kozachenko who worked closely with Peter. 

 
Peter has experienced the ups and downs of doing business in Ukraine over the past 19 years.  He says he is still very optimistic about the future growth of agriculture and agribusiness in Ukraine and the ability of Ukraine to contribute much more to the world’s supply of agricultural and food products.

Peter has Ukrainian heritage and says he is 100% Ukrainian. He told USUBC recently that his father unfortunately did not live long enough to see an independent Ukraine.  Peter attended the recent breakfast meeting USUBC held in Washington with Ukrainian President Victor Yushchenko.

Initially Peter imported farm machinery produced in the USA and then distributed farm chemicals, and bartered a few years crude oil products for grain and tolled grain in the alcohol plants.

 
In 1990 Peter formed a JV called Ukratek with Lvivselhosmash to produce upgraded local sprayers and imports of USA built equipment such as Spra-coupes. Peter then focused on niche markets and organized a wholly owned subsidiary registered in Ukraine in 1994 called SE Raelin.
Currently SE Raelin in Ukraine has developed a 95% market share of grain sorghum seed sales, adjuvants[surfactants] blueberry plants [only registered plants in Ukraine], and kiwi. He continues to import and sell farm machinery [since 1989], vehicles [pickups], and has just registered the first western produced sterile soybean inoculant trademarked Nitrodar. 

Cajo, Inc., is a USA registered company, owned by the Chykaliuk family, with over 20 years experience in trade and production with Ukraine. Its interests include:  Agricultural Seed, Equipment and Parts Supply, Blueberry Production and Development, Automobile and Truck Exports, Fine Apparel Manufacture and Retail, Medical Equipment Sales, and Music Recording and Management.

Cajo, Inc., holds the registered trademarks with the Ukrainian Institute of Industrial Property for Chyk, Raelin, Defoamer, Silo 700D, Chudoviy BMP, Amanda Lee, Nitrodar, Prime, Swift, Sprint II, Sprint W, Dash E and others.

Additional information about SE Raelin and Cajo, Inc. can be found on the websites:  www.raelin.com/ua/en/company and on www.cajoinc.com.

“I first met Peter in the early 1990’s in Ukraine and am pleased to have his company SE Raelin/Cajo, Inc. as a member of USUBC,” said Morgan Williams, SigmaBleyzer, who serves as president of USUBC.  “USUBC has grown very rapidly during the past 19 months and now has a membership base which allows USUBC to provide its members such as SE Raelin with a full-time operation and a significantly expanded program of work,” according to president Williams.
 
USUBC MEMBERSHIP WILL TOP 100 IN 2008
SE Raelin/Cajo, Inc. is the 45th new member for 2008, and the 75th new member since January of 2007. USUBC membership has quadrupled in the past 20 months, going from 22 members in January of 2007 to 95 members in October of 2008. Membership is expected to top 100 in 2008. 

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) and SE Raelin/Cajo, Inc. 

The complete USUBC membership list and additional information about USUBC can be found at: http://www.usubc.org

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12.  UKRAINE’S ECONOMY ON BRINK AS VIKTOR YUSHCHENKO & YULIYA TYMOSHENKO BICKER

 
Tony Halpin in Moscow, The Times, London, UK, Tuesday, October 21, 2008
MOSCOW – Their political marriage swept them to power on a wave of popular support in the Orange Revolution. Now the bitter divorce between the couple who were nicknamed Beauty and the Beast threatens to tear Ukraine apart.
Viktor Yushchenko, the President, and Yuliya Tymoshenko, the Prime Minister, are waging war on each other as the economy in Ukraine teeters on the brink of disaster. Each side blamed the other’s lust for power for the split in the pro-Western coalition that led Mr Yushchenko to call parliamentary elections in December, the third in less than three years.
Mrs Tymoshenko sought to avoid an election yesterday by urging political opponents in parliament to join her in a “grand coalition” to confront the financial crisis. Her plea for reconciliation fell on deaf ears because most parties stayed away.
However, Mr Yushchenko acknowledged the depth of the financial crisis when he delayed the disputed polls for a week and recalled parliament to enact emergency measures. Elections will now be held on December 14.
 
Allies and enemies said that Mr Yushchenko was determined to hold the election to oust Mrs Tymoshenko as Prime Minister and prevent her from using the office to challenge him for the presidency next year. He has accused her of placing “personal interests over national ones” and said that the Orange alliance was destroyed by her “hunger for power”.
Government ministers were equally vicious about the President. Hryhoriy Nemyria, the Vice-Prime Minister and a key aide to Mrs Tymoshenko, told The Times: “The desire to get rid of Yuliya is so strong that it’s basically at the top of the President’s agenda and it doesn’t matter what will happen with Ukraine.”
Ukraine has had a series of political crises since the 2004 revolution. In the latest, the party supporting Mr Yushchenko pulled out of the coalition Government with Mrs Tymoshenko.
Mr Nemyria claimed that the President was seeking to create an unstable parliament by calling new elections so that he would be in control of Ukraine during the presidential contest against Mrs Tymoshenko, who is ahead of him in opinion polls. “This is a classic example when personal survival and political future demeans all rational behaviour,” he said.
Mrs Tymoshenko won a court order to block the decree to hold an election but Mr Yushchenko fired the judge and declared the ruling invalid. Mrs Tymoshenko withdrew her legal challenge and offered to accept any condition set down by the President if he cancelled the election. He refused.
A team from the International Monetary Fund is in Ukraine while it negotiates a loan of up to $14 billion (pounds8 billion) to support the banking system and prevent a run on the currency, the hryvnia.
 
The central bank has already placed restrictions on Ukrainians making withdrawals from deposit accounts. Its reserves of $37.5 billion are enough to cover less than four months of imports.
Mrs Tymoshenko appeared on television on Sunday to warn Ukrainians that holding an election during the financial crisis would destroy the country. She said that the Government should continue to work until the crisis had passed “and after that you can have any elections you like”.
Some analysts argued, however, that Mrs Tymoshenko is playing up the economic threat to buy time and position herself favourably for the presidential battle.
 
LINK: http://www.timesonline.co.uk:80/tol/news/world/europe/article4981663.ece
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13.  RUSSIA WILL KEEP ONE EYE ON UKRAINE AND THE OTHER ON RELATIONS WITH WEST

 
COMMENTARY: by Anne Penketh, The Independent, London, UK, Tuesday, 21 October 2008 

No disrespect to the people of Iceland (pop 302,000), but if Ukraine and its population of 46 million on the borders of Europe goes belly up as a result of financial and political turmoil it would be a most serious matter for all of us.

 
Any instability in Ukraine would have implications for our energy supplies, because Russian gas transits through the former Soviet state on its way to western Europe.
But the most pressing question concerns the intentions of Russia, the giant power on Ukraine’s border. Russia has already turned off the gas tap once to Ukraine back in January 2006. The trigger that time around was a pricing dispute, and prices are set to rise steeply again.
 
The risk now is that the Kremlin might be tempted to exploit Ukrainian instability in order to punish President Viktor Yushchenko for supporting Tbilisi during last August’s six-day war.
But President Putin said after the conflict that Russia did not have territorial ambitions over Ukraine, where Russia’s lease on the Crimean port of Sebastopol for its Black Sea fleet expires in 2017.
 
There had been fears in the West that after recognising the breakaway territories in Georgia after the August war, Moscow would move to protect the ethnic Russian minority in Crimea.
 
Last weekend, though, a Russian deputy prime minister and former defence minister, Sergei Ivanov, told the BBC that the fleet would leave if the lease was not renewed. “It’s Ukraine’s problem, not Russia’s,” he said. President Yushchenko has riled Moscow by ruling out an extension of the lease.
 
But “the Russians have been indicating that they are playing within certain limits,” said the Russia expert Philip Hanson of the think-tank Chatham House. He said given that the financial crisis was also affecting Russia severely, “the Russians have got a lot of interest in not worsening relations with the West”. Interesting?
 
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14.  ORANGE REVOLUTION IMPLODES TO LEAVE A NATION IN DESPAIR

 
By Askold Krushelnycky in Kiev, The Independent, London, UK, Tue, 21 Oct 2008 
 
KIEV – Their leaders are at war, their country is verging on bankruptcy and the Russians are growling on their doorstep. Ukrainians have been plunged into disillusion and despair by the lethal combination as they witness the death throes of the Orange Revolution that brought President Viktor Yushchenko and Prime Minister Julia Tymoshenko to power.
Now, it seems, the last vestiges of the idealism which fuelled the peaceful revolution four years ago are going to the wall as Mr Yushchenko insists on calling a third parliamentary election in as many years, in a move blocked by his rival, the Prime Minister.
Ms Tymoshenko, who has described the President’s election plan as “reckless” for raising political tensions at a time of dire financial crisis that has devastated Western institutions, went on television on Sunday night to urge political leaders to unite behind her to shield the country from economic meltdown. She warned that holding a parliamentary election in December would “destroy the country”.
But few top politicians heeded her call to attend a unity meeting yesterday. Those who joined her were members of her own bloc, the Communist Party and some rebels of the president’s Our Ukraine party. “It is a great shame that there has been insufficient wisdom to form a united team,” Ms Tymoshenko, clearly irritated, told a news conference. “But I feel we have seen a first attempt.”
Ukraine’s government has had to rescue two top banks, the national currency’s rate has fallen 12 per cent, the stock market is in free fall and the country is seeking a multibillion loan from the International Monetary Fund (IMF) to stabilise the financial sector.
And with relations between Ukraine and Russia having suffered over Mr Yushchenko’s support for Georgia during last August’s Caucasus war, the Russian gas giant Gazprom has now suggested next year’s price for gas imports could soar to $400 (pounds230) per 1,000 cubic metres from $179.50 now.
Ms Tymoshenko suggested the IMF, which sent a delegation for talks last week in Ukraine that are continuing this week, should make an aid package of up to $14bn dependent on the President abandoning his snap election plans.
At the start of 2005, the pro-Western Mr Yushchenko had massive support inside Ukraine, and the entire Western world seemed to be in love with the Orange Revolution. But he has managed to squander that immense goodwill in a stunning fashion by reneging on almost all of his election promises, particularly to fight rampant official corruption and to put behind bars some of the Mafia-like politicians and businessmen who have amassed huge fortunes by crooked means.
Over the past two years the relationship between the President and Prime Minister has degenerated from occasional snide bickering to a torrent of vicious insults and accusations so that talk of a revived Orange coalition is greeted with a cynicism that has increasingly squeezed out the optimism ushered in by the 2004 pro-democracy protests. Yet another election would further ratchet up that cynicism.
 
One young businessman, Ihor Tokarivsky, who for weeks during the Orange Revolution braved freezing temperatures and the danger that force would be used to disperse the demonstrators, said: “Yushchenko and Tymoshenko had everything and people like me still continued to support them despite the shameful public fights and the fact that they failed to keep their promises to lock up some of the criminals who have ripped off this country.
“But this time I’ve had enough and I don’t think I’ll vote at all and I have lots of friends who feel the same. I don’t believe any more that politicians will change the country for the better. Everyone just has to look out for themselves and their own families.”
One former member of Ms Tymoshenko’s BYuT party said: “Whatever the elections produce, little will change. Most MPs are there to make money and politics is only of concern to them insofar as they can use their positions to advance their business interests. It is hard to explain to a Westerner the level of cynicism prevalent in parliament. I wouldn’t call it a parliament; rather it’s Ukraine’s most exclusive business club.”
Ukraine: A nation in turmoil
(1)  Political turmoil has intensified since the President dissolved parliament this month and called a snap election, the third in as many years, resisted by
       the Prime Minister.
(2)  Relations with Russia have sunk to all-time low after war with Georgia.
(3)  The Ukrainian currency, the hryvnia, hit all-time low of 5.9 to the US dollar on 8 October.
(4)  Foreign debt totalled just over $100bn as of 1 July.
 
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15.  UKRAINE GOES FROM ORANGE TO RED

By R M Cutler, Canadian international affairs specialist, Montreal
Asia Times Online, Hong Kong, Wednesday, October 22, 2008

MONTREAL – For all the hand-wringing and justified concern about Asian economies, many countries in the region are in much better shape than several of the emerging markets in Europe. Hungary may yet have recourse to lending from the International Monetary Fund (IMF), while the Iceland debacle has received a good deal of publicity. Ukraine’s plight is hardly less extreme.

Ukraine is in the midst of a financial and banking crisis, exacerbated by political turmoil, that has driven the principal national stock equities indicator, the PFTS Index, down 78% from a high of 1,209 in mid-March to 266 on Monday.

 
The country relies heavily on external finance, and its banking system is by some measures the most at risk after Iceland’s, which collapsed only days ago. On the basis of the cost of its credit-default swaps, Ukraine is the least creditworthy of all of Europe’s emerging markets.

During the first two weeks of October, a bank run depleted aggregated accounts by about US$1.3 billion and the National Bank of Ukraine had to give a $1 billion stabilization loan to the sixth-largest bank in the country. Since then the central bank has reduced reserve requirements, forbidden the premature cashing-in of bank deposits with maturity dates, imposed limits on loans, and established a maximum 5% collar between the buy and sell rates for foreign-currency trading.

The foreign exchange market is negatively affected also by the external balance, the state’s debt to Russian energy giant Gazprom, and also the debt to the central government incurred by Ukraine’s various regional authorities for natural gas distributed throughout the country.

The national banking authority has had to sell US dollars to prop up the value of the hryvnya, the national currency, which has declined by 20% in recent weeks and by 12% just this month. The ratings agencies have responded unsympathetically. To give an example, Standard and Poor’s downgraded the country’s long-term foreign currency sovereign credit rating to BB- from B+.

To complete the painting of the economic picture, metals account for one-quarter of Ukraine’s gross domestic product and over two-fifths of exports, and as I have noted elsewhere (see Crash, Asia Times Online, October 11, 2008), prices for metals have fallen worldwide; at the same time, subsidies on energy prices in Ukraine have been increasingly reduced under pressure from Russia, from which Ukraine imports much of the energy it consumes.

For all these reasons, the IMF is setting up a US$14 billion standby facility for the country to stabilize its financial system. This is all taking place in a political context of continuing intra-elite conflict and turmoil that has been going on since the “Orange” revolution at the end of 2004.

Viktor Yushchenko was sworn in as president in January 2005 and Yuliya Tymoshenko, a former minister of energy, was named prime minister. Eight months later, Yushchenko dismissed Tymoshenko’s government and named one of his own allies to replace her.

 
Four months after that, in January 2006, a vote of parliament removed this new government over an agreement with Russia that sharply increased the cost of imported gas (see Ukraine clash threatens oil to Europe, Asia Times Online, August 2, 2008).

Yanukovich’s (Moscow-oriented) Party of the Regions became the largest party in parliament after March 2006 elections. It was outnumbered by the “orange” coalition (Yushchenko’s party plus Tymoshenko’s bloc), but this group was unable to form a government. Finally, in July 2006, Yanukovich was named prime minister on condition that he continue a pro-Western foreign policy orientation.

In January 2007, Yanukovich’s supporters in parliament voted a law to reduce the president’s prerogatives in governing. Yushchenko responded two months later by dissolving parliament. In new legislative elections, the orange parties gained a bare majority and Tymoshenko was (again) named prime minister, with no votes to spare.

 
Earlier this year, she survived a no-confidence vote, only for one of the president’s chief assistants to accuse her in the press three months ago of treason to Ukraine’s national interests for not supporting Georgia against Russia.

Last month, Tymoshenko’s group voted with Yanukovich’s party to (again) limit by statute the president’s powers, following which Yushchenko’s parliamentary allies left the orange coalition. In this context, following the inability of anyone to form a new ruling coalition, Yushchenko two weeks ago called for new parliamentary elections.

A great deal of criticism has been voiced in Ukraine over this intra-elite jockeying, which many observers see as positioning by Tymoshenko for a run for president in 2009. According to one report, the IMF has “recommended” cancellation of the snap parliamentary elections “as a condition” of access to the aforementioned $14 billion facility. On Monday they were postponed by a week from December 7 to the 14.

It is not altogether clear that the elections will take place even then, since administrative preparations are behind schedule and the cost of holding the elections may be deemed excessive in the midst of the immediate financial crisis. An improvised election campaign at present would only increase negative sentiment and paralyze the government, while energy costs, inflation and the current account deficit continue to increase.

Compared to this tableau, some Asian economies are not in such a bad situation after all.

FOOTNOTE: R M Cutler (http://www.robertcutler.org) is a Canadian international affairs specialist.

LINK: http://www.atimes.com/atimes/Central_Asia/JJ22Ag01.html

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16.  THE ICELAND SYNDROME 
 

By Anne Applebaum, Columnist, The Washington Post, Tue, Oct 21, 2008; Page A17
Imagine this scenario: In a medium-size European country — call it Country X — the bank regulators hold an ordinary meeting. These being extraordinary times, the regulators discuss the health of various banks, including the country’s largest — call it Bank Y — which is owned by an even larger Italian financial group.
 
Last spring, Bank Y, which is perfectly healthy, transferred a large sum to its now somewhat-less-healthy Italian parent; since this is nothing unusual, the regulators drop the subject and move on.
 
The following day, the matter is reported in a marginal, far-right newspaper in somewhat different terms: “A billion dollars transferred to Italy! Country X’s hard-earned money going abroad!”
 
Within hours, as if on cue, everyone starts selling shares in Bank Y, whose stock price plunges. So does the rest of Country X’s smallish stock market. So does Country X’s currency. Within a few more hours, Country X is calling for an international bailout, the IMF is on the phone and the government is wobbling.
Except for that final sentence — there was no international bailout or call to the International Monetary Fund, and the government is fine — that is a brief description of something that happened last week to one of Poland’s largest banks.
 
A real meeting, followed by an unsubstantiated rumor in a dodgy newspaper, and a bunch of nervous investors started selling. Shares in the bank collapsed by the largest margin in its history; for one ugly day, they dragged down the rest of the Polish stock market and currency as well.

As I say, the story ended there. But it could have gone further, and, indeed, in several other countries it has. A month ago, in the first round of this crisis, panicky rumors brought down banks. Now, with trillions of nervous dollars sloshing around the international markets, panicky rumors are bringing down countries.

The case of Iceland, which in recent weeks has nationalized its three major banks, shut its stock exchange and halted trading in its currency, is by now well known. Less well known is the speed with which the Icelandic disease is spreading.
 
Consider Hungary, once the destination of choice for investors who wanted an Eastern European head office with a 19th-century facade and a pastry shop next door: The currency is in free fall and so is the stock market, flummoxing those previously well-fed investors. (One of them told a Hungarian financial Web site: “I haven’t got a clue as to when and how this would end, I’m just staring into empty space.”)
 
Or Ukraine, whose central bank governor declared his banking system “normal and reliable” on Monday of last week. By Tuesday of last week, Ukraine had desperately requested ” systemic support” from the IMF.
So far, most of these crises have been explained away: The banks of Iceland had debts larger than Iceland’s gross domestic product, Hungary’s finances were long mismanaged, and Ukraine, whose president just called for the third election in as many years, is badly governed. But the speed with which some of these defaults are happening, coupled with the paranoia inherent in the political culture of small countries, has led many to suspect political manipulation as well.
To put it another way: If you wanted to destabilize a country, wouldn’t this be an excellent time to do it? If Country X’s stock market can crash after the publication of a single article in an obscure newspaper, think what might happen if someone conducted a systematic campaign against Country X. And if you can imagine this, so can others.
All governments have enemies, internal and external, or at least are faced with elements that do not wish them well: the political opposition, the country next door, the former imperial power. For someone, there will always be the temptation to bring down the government, destabilize the country and thus create political chaos.
Even when there hasn’t been political meddling, someone else will suspect that it has occurred, anyway. Here, then, is a prediction: Political instability will follow economic instability like night follows day. Iceland is not alone. Serbia, the Baltic states, Kazakhstan, Indonesia, South Korea and Argentina are all in financial trouble; so, too, are Russia and Brazil.
And here’s a final, unpleasant thought: Pakistan. This is a country with 25 percent inflation and a currency in free fall; a country with a jihadist insurgency on its border with Afghanistan, permanent hostility on its border with India, nuclear weapons and a tradition of street demonstrations in response to suspect newspaper articles.
 
Dozens of people, with all kinds of agendas, have an interest in using financial markets to destabilize Pakistan, and Afghanistan along with it. Eventually, one of them will. (applebaumletters@washpost.com)
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17.  THE INTERNATIONAL MONETARY FUND (IMF) FACES UP TO COMPETITION

 
Comment & Analysis: By David Rothkopf, Financial Times, London, UK, Tue, Oct 21 2008
For weeks, the headlines have been dominated by banks faltering and countries propping them up. But we have entered a new phase of this crisis in which countries themselves are starting to struggle. Where these battered countries are first turning for help illustrates that what we are witnessing is different from anything we have seen before.
 
It also lays out a clear challenge for those who are hoping the global financial summit announced over the weekend will produce an effective Bretton Woods II, a new international system reflecting a new financial order.
For decades, countries in trouble have turned to the International Monetary Fund and the great powers of the developed world for the cash infusions needed for debt payments or to meet budget shortfalls.
 
Typically, the money came with conditions, conforming to a prescription known as the Washington consensus that promoted market liberalisation and fiscal responsibility. For many the conditions were odious. But money talks and the result was the classic illustration of soft power, of western states advancing their interests not at the point of a gun but at the tip of a cheque-signer’s pen.
But as this crisis has unfolded, the first impulse of some of the countries in trouble has been to seek aid from emerging economy lenders, from countries that possess both the financial resources to help and a more accommodating attitude to lending conditions. When Iceland’s economy started to spiral downwards its leaders, frustrated by the lack of swift help from western allies, turned to Russia .
 
Although the slow pace of those talks ultimately resulted in Iceland agreeing a package led by the IMF, it is noteworthy that those loans came with fewer conditions than the Fund has imposed in the past, a sign that it is starting to realise it is not the only game in town.
THE CASE OF PAKISTAN
This trend is further illustrated by the case of Pakistan. With reserves falling to under $4.5bn (euro3.4bn, pound2.7bn), just enough to pay for six weeks of imports, politically unstable Pakistan has been speeding towards an economic calamity. A financial crisis would pose a threat to the new pro-western government of President Asif Ali Zardari, which is already under siege. But the institutions of the west are very unpopular in Pakistan.
So to whom did Pakistan turn in its hour of need? Last week Mr Zardari travelled to Beijing to seek a loan from the country with the world’s largest reserves. While specifics of the deal with the Chinese are unclear, it appears they will offer help in the form of commercial deals, energy aid and participation in a larger international rescue package.
 
The Pakistanis want to augment this with funds from the oil-producing nations of the Persian Gulf that have agreed to discuss a “friends of Pakistan” bail-out with China, the US and others in an effort designed not to appear western dominated. Again, the IMF has subsequently (and with explicit unease) been approached and is likely to play a role in any final package, although there are signs it may again soften its usual terms.
The developments in Iceland and Pakistan are not isolated cases. A new mix of lenders is being sought, suggesting that the successor to the Bretton Woods order is being created on an ad hoc basis by the markets. Well before the crisis, the Chinese lent billions to Africa. In one press release associated with a financing programme, the Chinese leadership noted the money came with “no political conditions”.
 
Even so, the move has concerned leaders in the global financial establishment. Hugo Chávez, president of Venezuela, drove the Americans crazy as Bolivia, Argentina, Ecuador, Nicaragua, Honduras and Cuba accepted his aid. Last year, Mr Chávez distributed four times as much aid in South America as the US.
Do these loans come, as advertised, without strings? Of course not. A recent meeting announcing a Russian loan to Venezuela produced a declaration of support for Russia’s territorial claims in the Caucasus.
 
China has often put pressure on beneficiaries to vote China’s way against Taiwan in the United Nations or to withdraw recognition of Taiwan. Venezuela wants to counter US influence in the Americas and its cash has reinforced the views of countries already wary of the US.
This new set of lenders is gaining influence. Mr Chávez has begun to create a Bank of the South to institutionalise his ad hoc programme. Even if that project does not achieve the scale he hoped – with falling oil prices, it will be hard to meet funding goals – it heralds the emergence of a new wave of alternative institutional structures, not dominated by western powers.
As other countries face crisis – Turkey, Argentina, Ukraine, the Baltics and others in eastern Europe all look precarious – it will be telling how many go the traditional route and how many initially explore other options.
Of course, the final irony is that the free market gurus at the IMF and in the US Treasury are relearning an old free market lesson: competition. Unlike the moment when aggressive private sector lenders made the Fund seem redundant, the current shifts have significant geopolitical implications. The balance of soft power is shifting. Western leaders should learn the lesson: the old system is outdated.
 
The powers that dominated it did not practice the medicine they preached to others in previous financial crises. Any new system must now reflect the new financial order, giving bigger roles to emerging powers. If this does not happen, the new entities could start out even weaker than the damaged ones they replace.
NOTE: The writer is a visiting scholar at the Carnegie Endowment for International Peace and the author of “Superclass: The Global Power Elite And The World They Are Making.”
 
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18.  IMF WARNS BUSINESS AS EUROPEAN UNION OUTLOOK WORSENS 

By Tony Barber in Brussels, Financial Times, London, UK, Tue, Oct 21 2008
European businesses will suffer a sharp contraction in credit next year as the full consequences of the global crisis unfold for non-financial companies, the International Monetary Fund predicted on Tuesday.
“In the US we already see a lack of access to credit for companies. In Europe there is a bit of a longer delay in the credit cycle. But there will be a very sharp slowdown in credit growth next year,” Alessandro Leipold, acting director of the IMF’s European department, told the Financial Times in an interview.
 
Mr Leipold was speaking as the IMF published its latest regional economic outlook for Europe, forecasting growth in eurozone gross domestic product of 0.2 per cent next year, down from an expected 1.3 per cent in 2008. For the 27-nation European Union, the IMF predicts GDP growth of 0.6 per cent in 2009, down from 1.7 per cent this year.
According to the IMF report, bank lending to eurozone non-financial companies reached a record nominal annual growth rate of 15 per cent last March. Mr Leipold said the credit cycle had clearly turned since then, bringing higher borrowing costs and tighter bank lending standards.
“Our forecast is that credit growth will fall to a low single-digit figure next year, maybe 2 or 3 per cent. It’s already down now to about 10 per cent,” he said. He said the sharp slowdown in bank lending would reduce inflationary pressures in the eurozone, opening an opportunity for interest rate cuts next year by the European Central Bank.
“Inflation risks are clearly disappearing. We wouldn’t speak of upside risks at all. We see further scope for monetary easing,” Mr Leipold said.
The IMF, which is working to stabilise the financial systems in Hungary and Ukraine, had detected risks that contagion from the global crisis might infect other parts of central and eastern Europe, he said.
With about three-quarters of the region’s banks owned by foreign institutions, based principally in western Europe, there was a risk that problems at the parent banks would cause the flow of funds to their subsidiaries to dry up.
“In western Europe, recapitalisation and other measures have been taken to support the parent banks, and that should be positive for eastern Europe. But there’s an issue of co-ordination across borders. If you offer favourable treatment for banks in western Europe, you could create adverse circumstances in eastern Europe.”
Mr Leipold said the IMF would like to see better co-ordination of financial market supervision in Europe, with one possibility being a “hub and spokes” system in which a strong central supervisor worked in close contact with supervisors at national level.
Acknowledging the political resistance in some EU countries to a more centralised system, he said: “We hope the financial crisis will be an opportunity to cross some political red lines.”
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19.  UKRAINE STRUGGLES AMID CRISIS
By Daryna Krasnolutska, Bloomberg, Kiev, Ukraine, Mon, Oct 20, 2008

KIEV – Ukraine’s hryvnia fell to its weakest level in more than a week against the dollar after Moody’s Investors Service followed other agencies
in reducing or reviewing the country’s rating because of the credit crisis.

Moody’s Investors Service lowered Ukraine’s outlook Monday as the global liquidity crunch adds pressure to an economy already beset by racing
inflation and political instability. The hryvnia has slumped 18 percent since the start of September as the collapse of the government and seizure in debt markets made it harder for Ukraine to fund its current-account deficit.

The outlook for the former Soviet republic’s foreign- and local-currency debt ratings was cut from positive to stable, Moody’s said Monday in an
emailed statement from New York. Moody’s downgrade follows moves by Fitch Ratings and Standard & Poor’s.

The worldwide financial turmoil is prompting investors to shun riskier assets in emerging markets. Ukraine has the worst creditworthiness of Europe’s
emerging markets, based on the cost of credit-default swaps, which protect bondholders against default. The country is also heading for early elections
on Dec. 7 after the second collapse of a ruling alliance between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko.

“Although Ukraine’s government balance sheet remains strong at the moment, the current global market turmoil heightens the existing vulnerabilities,”
said Moody’s Vice President Jonathan Schiffer said in the statement.

The hryvnia fell 3.7 percent to 5.4400 to the dollar, its weakest level in more than a week, as of 2:25 p.m. in Kiev. The hryvnia has slumped 16 percent against the dollar since early September because of turmoil in global financial crisis, the government coalition collapse, and new national elections, scheduled for Dec. 7.

Fitch cut Ukraine’s credit rating to B+ on Oct. 17 and Standard & Poor’s put it on review for downgrades on Oct. 15. “There has already been speculation against the local currency, with its attendant adverse affects for inflation, debt servicing and the asset quality of the banking system,” said Schiffer.

The current-account deficit will probably widen to $15 billion this year, weakening the hryvnia, said central bank Governor Volodymyr Stelmakh last
Monday.

The shortfall reached 7.2 percent of gross domestic product in the first seven months, or $7.7 billion, as higher energy costs and domestic consumption boosted imports, the central bank said on Aug. 29.

The country is seeking a loan of as much as $14 billion from the International Monetary Fund to help cover the gap, said Oleksandr Shlapak, the first deputy chief of President Viktor Yushchenko’s staff, on Friday.

The economy may face the risk of recession as prices for its main exports, including steel, dropped as demand weakened on the global market, according
to Shlapak.

Worldwide inflation, driven by food and energy prices, was exacerbated in Ukraine by higher government spending. The annual rate almost tripled in a
year to a record 31.1 percent in May before easing back to 24.6 percent in September.

Ukraine’s foreign-currency denominated bonds are currently rated Ba3 by Moody’s, a high-yield, or “junk,” level three steps below investment grade. The local-currency debt is rated a step lower at B1.
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20.  UKRAINE: TEETERING ON THE BRINK
President Rescinds Decree Cancelling 7 December Election

BYuT Inform newsletter, Issue 90, Kyiv, Ukraine, Tuesday, October 21, 2008
 
KYIV – President Viktor Yushchenko has cancelled his decree which dissolves parliament and calls for new elections on 7 December. The step enables parliament to pass vital budget legislation and measures aimed at alleviating the financial crisis threatening Ukraine’s economy. At a press conference the president suggested that pre-term elections would be held on 14 December.
  
The presidential decree was cancelled following a meeting of the National Security and Defence Council (NSDC) which met on Monday. “We hope that parliament will approve the anti-crisis measures which were discussed at the Security Council,” said the president.
  
The president’s announcement was aired on national TV. It follows Prime Minister Yulia Tymoshenko’s TV address on Sunday, in which she appealed for the formation of a new coalition government to tackle the effects of the global financial crisis. A sombre premier told viewers that it would be “reckless” to hold elections given the severity of the threat facing the country.
  
Ms Tymoshenko suggested postponing the elections, originally scheduled for 7 December, in order that a reshuffled government, based on a broad coalition, could work on plans to stabilise the financial sector and strengthen the economy. “Such a coalition should act until such time as the threat of financial and economic collapse is removed from our country and the world at large. After that, you can have any elections you like.”
  
On Monday the president made it clear that he thought the financial crisis was best handled by the NSDC and the premier’s efforts to form a broad coalition were spurned.  “It is a great shame that there has been insufficient wisdom to form a united team,” said Ms Tymoshenko speaking to reporters.
  
Mr Yushchenko hopes parliament will pass spending cuts and create a fund to help prop up ailing banks and companies. The president rescinded his decree at a time when Ukraine is finalising a loan from the International Monetary Fund (IMF) to shore up its creaking financial system. Last week the government confirmed that the IMF is willing to loan up to $15 billion to help strengthen Ukraine’s financial services sector.
 
Until recently the global financial crisis had not severely impacted Ukraine’s economy, which is still expected to grow 6.9 percent this year. However, recent events have proven the 46 million population former-Soviet republic is not immune to the global turmoil gripping the world’s financial markets.
 
Central Bank Steps In  
Recently, the National Bank of Ukraine (NBU) was forced prop up Prominvestbank, Ukraine’s sixth largest bank, after anxious investors in the east of the country withdrew $1.3 billion. It now looks likely Prominvestbank will be nationalised – a move that has received the premier’s blessing. “We should return this bank back to the state and the state will assume all responsibility for Prominvestbank’s obligations,” said Ms Tymoshenko.
  
Also, a $300 million loan has kept Nadra, the seventh-largest bank afloat. On Friday the NBU relaxed measures imposed on banks across the retail sector, which had included freezing selected accounts.
  
Associated Press reported Volodymyr Dinul, an analyst with Renaissance Capital, as saying: “It looks like the National Bank is in control of the situation. Let us hope that everything will calm down sooner rather than later.”
 
Macroeconomic Warning Lights Flashing  
Ukraine’s macroeconomic indicators reveal that the economy is vulnerable. “It is the equivalent of warning lights flashing,” said a London-based emerging markets analyst.
  
The government is still grappling with curbing inflation, which in May topped 31 percent before falling back to 16 percent in September, as anti-inflationary measures implemented by the Cabinet of Ministers bore fruit. Indeed, in July the country experienced 0.5 percent deflation.
  
But perhaps of more immediate concern is the pressure on the hryvnia which on Monday was at UAH 5.45 to the dollar. In recent weeks, the currency has taken a battering as investors exited emerging markets in a scramble for dollars. Nevertheless, the NBU has reserves of $37.5 billion to prop up the currency but is concerned not to draw too heavily on its reserves.
  
Current Account Deficit Widens  
At the same time the country’s widening current account deficit is cause for alarm. This is being aggravated by the country’s trade deficit, which, for the first eight months of the year, has grown to $12.5 billion from $5.9 billion in the same period last year. This has not been helped by a global drop in the demand for steel – one of Ukraine’s principal exports.
  
According to SigmaBleyzer, in 2009 “the current account deficit is likely to widen to $24 billion, which corresponds to 10 percent of forecasted GDP.” Of this gap, about $10 billion reflects the likely increase in the cost of imported gas.
  
However one London-based analyst thought these figures were somewhat gloomy. He told Inform that he considered the predicted $24 billion figure was high as a slowing economy will see import demand fade and he anticipated some foreign exchange devaluation. He also suggested a slowing economy would see energy consumption fall and, together with energy conservation measures and a reasonable price for gas, the gap would be lower than predicted.
  
Recent gas negotiations between Prime Minister Tymoshenko and her Russian Federation counterpart, Vladimir Putin, resulted in a broad market agreement, which foresees a gradual increase to market prices over a three-year period. Although a final decision on the price is expected in November, Naftohaz Ukrainy CEO, Oleh Dubnya, has said he expects the 2009 gas price to be in the vicinity of $250 to $300 per 1,000 cubic meters.
 
High Credit Risk  
Another cause for concern is Ukraine’s relatively high level of external debt. In the last two years total external debt grew 45 percent to $100 billion. Most of this is fuelled by the corporate and banking sectors, both of which are now under intense pressure.  Ukraine’s fledgling stock market has lost some 43 percent of its value in October alone, after gains last year of 130 percent.
  
The uncertainty surrounding the economy and financial sector has seen the country downgraded in terms of its ability to pay back debt. Ukraine is seen as a high default risk, with its Credit Default Swaps (an insurance-like contract that promises to cover losses on a bond in the event of default by the bond issuer) now trading at a mind-boggling 2,000 basis points.
  
This means that the annual cost of insuring $10 million of debt for five years has rocketed. According to Markit, a credit research firm, such a price tag would involve “an upfront payment of over $4 million plus $500,000 a year.”
  
This mounting risk is reflected in the US Treasury’s Quarterly Assessment of Financial Risks, September 2008, which placed Ukraine among the 10 top financial risks in the world. 
  
On Monday Moody’s cut its sovereign rating outlook on Ukraine to stable from positive. On Friday, Fitch Ratings downgraded its long-term foreign and local currency issuer default rating on Ukraine to “B+” from “BB-“. A statement from Fitch said: “The downgrade reflects Fitch’s concern that the risk of a financial crisis in Ukraine involving a large depreciation of the currency, further stress in the banking system and significant damage to Ukraine’s real economy is significant and rising.”
 
IMF to the Rescue  
Last week Ukraine joined Hungary, Iceland and Serbia by approaching the IMF for assistance. The head of the NBU, Petro Poroshenko stressed that IMF funds were only a contingency to “calm down investors.”
  
Mr Poroshenko’s First Deputy Chairman, Anatoly Shapovalov, said that the size of the credit from the IMF would depend on Ukraine’s quota subscription in the fund. This is believed to be around $2 billion. Normally countries draw three to five times the amount in the fund. But such a sizeable loan would come with many conditions attached.  
  
“At the moment, we do not need these funds, but who can say how the global crisis will develop tomorrow?” said Mr Shapovalov.
  
The IMF has denied that the funding is contingent on the early elections being postponed. However, over the weekend the New York Times quoted BYuT lawmaker Sergei Teriokhin as saying that “if the contested status of the cabinet is not resolved, the monetary fund will not know whom to meet with.”
 
Election Madness  
Given the financial and economic turmoil, most observers are aghast by the president’s decision to dissolve parliament and hold an election – a process that could deprive the country of a government until spring 2009.
  
“It would be morally and politically irresponsible to hold elections at this time,” said Ms Tymoshenko, “the world is facing its sternest financial crisis for a generation and we decide the best way to resolve it in Ukraine is to spend $80 million on an election. As rational, responsible leaders we must act calmly and swiftly. The country needs stability, so I appeal once more for unity.”
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21.  CENTRAL EUROPEAN MEDIA ENTERPRISES COMPLETES BUY
OUT OF MINORITY PARTNERS IN STUDIO 1 + 1 IN UKRAINE
 

Central European Media Enterprises, By PR Newswire, Tuesday, October 21, 2008
HAMILTON, Bermuda – Central European Media Enterprises Ltd. (“CME”) (Nasdaq/Prague Stock Exchange: CETV) today announced that on October 17, 2008 it completed the purchase of the remaining 10% of the Studio 1+1 group following the exercise of its call option. CME now owns 100% of the Ukrainian television station.
Michael Garin, CME’s Chief Executive Officer, commented: “This is the final step in achieving full control of Studio 1+1, one of the key objectives of our strategy in Ukraine. As a result, we expect to strengthen our performance and position in this market. Our goal for the future is to make Studio 1+1 the number one television station in Ukraine.”

Adrian Sarbu, CME’s Chief Operating Officer, added: “Studio 1+1 is a tremendous asset in what is by far our largest market with 47 million people. With the completion of this transaction we are now in a position to accelerate the execution of our strategic plan to improve the operating performance and profitability of the station. We have already taken the first steps on the way to become the number one television station in Ukraine.

 
We have appointed two key executives in Ukraine, reset our programming strategy, repositioned our news show and established a new production unit. Studio 1+1 forms the core of our growth strategy for Ukraine and we look forward to expanding our presence in this market.”
The 10% interest was acquired for cash consideration of US$109.1 million pursuant to the framework agreement signed in January 2008.
Launched in 1997, Studio 1+1 is one of the most popular national broadcasters in Ukraine, reaching almost 47 million people with an all-day audience share of 12% and prime time audience share of 14% in its 18+ target group during the first half of 2008.
CME is a broadcasting company operating leading networks in seven Central and Eastern European countries with an aggregate population of approximately 97 million people.
 
CME’s television stations are located in Bulgaria (TV2 and Ring TV), Croatia (Nova TV), Czech Republic (TV Nova, Nova Cinema, Nova Sport and MTV Czech), Romania (PRO TV, PRO TV International, Acasa, PRO Cinema, Sport.ro and MTV Romania), Slovakia (Markiza, Nova Sport and MTV Czech), Slovenia (POP TV, Kanal A) and Ukraine (Studio 1+1, Studio 1+1 International, Kino, Citi). CME is traded on the NASDAQ and the Prague Stock Exchange under the ticker symbol “CETV”.
 
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22.  RUSSIA UNROMANTICIZED

 
Commentary: By John R. Bolton, The Washington Post
Washington, D.C., Mon, Oct 20, 2008; Page A15
 
Former secretaries of state Henry Kissinger and George Shultz argued recently on this site that the United States should neither be “isolating” Russia nor drifting toward “confrontation.” The Post’s Masha Lipman urged us to avoid “Cold War preconceptions and illusions.”
 
Unfortunately, these distinguished commentators are aiming at straw men. No serious observer thinks we face a new Cold War or that isolating Russia because of its increasing foreign adventurism is a real solution. U.S. opposition to Russia’s recent behavior should not rest on a desire to “punish” Russia but on the critical need to brace Moscow before its behavior becomes even more unacceptable.
Russia has been growing increasingly belligerent for some time. Its invasion of Georgia is only the most recent and vicious indicator of its return not to the Cold War but to a thuggish, indeed czarist, approach to its neighbors. Vladimir Putin gave early warning in 2005, when he called the breakup of the Soviet Union “the greatest geopolitical catastrophe of the 20th century.”
 
In the same speech, Putin lamented that “tens of millions of our fellow citizens and countrymen found themselves beyond the fringes of Russian territory.” He may now be acting to reverse that “catastrophe,” as further demonstrated by Moscow’s embrace of Ukrainian Prime Minister Yulia Tymoshenko and other efforts to interfere in that country’s elections. Prudence based on history requires us to assess Russia’s invasion of Georgia as more than an aberration until proven otherwise.
Russia has repeatedly demonstrated its capacity to threaten American interests: providing cover to Iran’s nuclear weapons program by enthusiastically neutering sanctions resolutions at the U.N. Security Council and trying to market reactors to Tehran; selling high-end conventional weapons to Iran, Syria and other undesirables; using its oil and natural gas assets to intimidate Europe; making overtures to OPEC; and cozying up to Venezuela through joint Caribbean naval maneuvers, weapons sales and even agreeing to construct nuclear reactors.

Take the controversy over locating U.S. missile defense assets in Poland and the Czech Republic. We fully informed Russia before withdrawing from the 1972 Anti-Ballistic Missile Treaty that we would create a limited (but geographically national) missile defense system to protect against the handfuls of missiles that might be launched by states such as North Korea or Iran.

 
As anyone can tell from looking at a globe, anti-missile sites in Europe wouldn’t defend against the missile trajectories of a Russian strike on America. (That’s why the Distant Early Warning Line was in Alaska and Canada, not Europe.) Russia’s threats against Poland are aimed at intimidating Western Europe, an all-too-easy objective these days.
 
We have real interests at stake, such as a route to the Caspian Basin’s oil and gas assets that does not traverse Russia or Iran. If Moscow’s marching through Georgia goes unopposed, marching will look more attractive elsewhere, starting with Ukraine, which has a large ethnic Russian population “beyond the fringes” of Moscow’s control. “Legitimate security interests” do not justify invading and dismembering bordering countries.
A rational Russia policy has to escape the persistent romanticism of Moscow in recent administrations and the desire of some Europeans to close their eyes and hope things will work out. Too many Europeans believe they have passed beyond history and beyond external threats unless they themselves are “provocative.” Last spring in Bucharest, that mentality led Germany and others to reject U.S. suggestions to put Georgia and Ukraine formally on a path to NATO membership. Moscow clearly read that rejection as a sign of weakness.
Ultimately, what most risks “provoking” Moscow is not Western resolve but Western weakness. This is where the real weight of history lies. Accordingly, attitude adjustment in Moscow first requires attitude adjustment in NATO capitals, and quickly, before Moscow’s swaggering leaders draw the wrong lessons from their recent successes.
First, NATO must reverse the Bucharest summit mistake immediately. This is achievable before Inauguration Day on Jan. 20. Admitting Estonia, Latvia and Lithuania into NATO has stabilized a possible zone of confrontation in the Baltics, and moving to bring in Ukraine and Georgia would eliminate a dangerous vacuum in the Black Sea region.
 
Second, we should scale up rapidly in military cooperation with current and aspiring NATO members in Central and Eastern Europe to make it clear that more Russian adventurism is highly inadvisable.
 
Hopefully, other NATO countries will join with us, but we should act bilaterally if need be. Third, we should proceed fully with missile defense plans, on which we have repeatedly offered Russia full involvement and cooperation, to protect us all from rogue-state threats.
Such an approach will not endanger Western security but enhance it. And if Russia takes offense, better to know that now than later, when the stakes for all concerned may be much higher.
FOOTNOTE: John R. Bolton, a former U.S. ambassador to the United Nations, is the author of “Surrender Is Not an Option: Defending America at the United Nations and Abroad.” He is a senior fellow at the American Enterprise Institute.
 
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23.  A NATO PATH FOR UKRAINE AND GEORGIA

Letter-to-the-Editor, by Robert McConnell, The Washington Post

Washington, D.C., Tuesday, October 21, 2008; Page A16

In his Oct. 20 op-ed, “Russia Unromanticized,” John R. Bolton called for NATO to “reverse” its Bucharest summit decision on Ukraine and Georgia. I
agree with Mr. Bolton’s conclusion, but NATO doesn’t have to “reverse” anything.

Here’s why: In Bucharest, NATO gave Ukraine and Georgia political “guarantees” that they would receive NATO membership, an extraordinary and
unique position from NATO. Now is the time for NATO to follow up on its promise and give the two countries the first step in the process, membership
action plans (MAP).

The plans have no time limits. Granting MAPs to the two countries would be the beginning of the process. The question is not, as some have said, whether Ukraine and Georgia are ready for NATO. The question is whether NATO is ready for Ukraine and Georgia.

On that point at least Ukraine has been a more active partner in recent NATO activities than have been a number of NATO members.

ROBERT MCCONNELL
McLean

The writer is co-founder of the U.S.-Ukraine Foundation, which encourages democratic development, free-market reform and human rights in Ukraine.

LINK: http://www.washingtonpost.com/wp-dyn/content/article/2008/10/20/AR2008102002539.html
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24.  UKRAINE’S NATO HOPES DASHED

While the Georgia-Russia conflict has played a role in dashing Ukraine’s
hopes for NATO membership, so has very dramatic domestic political turmoil
 
By Jeremy Druker for ISN Security Watch, International Relations & Security Network (ISN)
Zurich, Switzerland, Monday, October 20, 2008

Back in April at the Bucharest summit, NATO leaders had both good news and bad news for Ukraine. The good news was that the leaders officially agreed that Ukraine would eventually become a NATO member and supported the country’s request for a Membership Action Plan (MAP). The bad news was that a MAP invitation was not forthcoming.

Still, Ukrainian officials could leave Romania satisfied that NATO foreign ministers would review the country’s progress already in December. And, optimists believed, if the answer was still negative, the Alliance might be looking for a triumphant way to celebrate its 60th anniversary in 2009. What better way than to invite Ukraine, a large country key to Europe’s future security plans.
Now, six months later, those hopes appear dashed – though the Bush administration continues to spend its waning days in office pushing for Ukraine’s entry into NATO. The Georgia-Russia conflict over South Ossetia has played a major role, but just as important has been Ukraine’s domestic political turmoil, which has also served to heighten lingering concerns among Western European leaders about the country’s overall readiness and stability.
The Georgia war has given plenty of ammunition to both sides of the “Ukraine in NATO” debate. On the one hand, Russia’s heavy-handed invasion – condemned by many for its disproportionate use of force and the subsequent occupation of large chunks of Georgian land – vindicated those who “see a pro-western Ukraine as an indispensable bulwark against a neo-imperial Russia,” as Dmitri Trenin from the Carnegie Endowment for International Peace put it recently in a Newsweek article.
A Ukraine entrenched in the Atlantic Alliance would, supporters say, put an end to speculation that the Crimean peninsula, which houses Russia’s Black Sea Fleet, is next on Moscow’s list of places to provoke confrontation and move in aggressively.
Convincing as those points might be to some, in most western capitals, they pale in comparison to the major counter-argument that Russia is clearly capable of playing hardball and even violating international law in the name of furthering its strategic interests. So soon after Georgia – with the West still trying to come up with a plan for dealing with a resurgent Russia, but craving its energy exports – Moscow should not be provoked.
Using such a line of reasoning, Germany and France, among others, helped derail Ukraine’s ambitions back in the spring. They have not shifted their stance since then. In fact, they have moved backwards and have become more recalcitrant. Earlier this month, German Chancellor Angela Merkel decided to not even wait for December.
 
At a press conference with Russian President Dmitry Medvedev in St Petersburg, Merkel said neither Ukraine nor Georgia would receive a MAP invitation at the foreign ministers’ meeting.
On top of that, the already dysfunctional political scene in Ukraine has degenerated even further over the past few weeks, giving NATO members another reason for rejection. On 8 October, President Victor Yushchenko dissolved parliament and called for early elections.
 
That came a few weeks after the breakup of the ruling coalition, the culmination of a long-running battle with Prime Minister Yulia Tymoshenko and her recent decision to support opposition moves to limit presidential powers. 
The two former Orange Revolution allies have also sparred over accusations from the president’s team that Tymoshenko took a neutral stance over the war in Georgia, refusing to denounce Russia in return for support for her presidential ambitions. Yushchenko, who quickly condemned Russian actions, has even claimed that Tymoshenko’s behavior was contrary to the country’s national interests and tantamount to treason.
It’s hard to know whether detractors honestly believe the current political situation precludes a MAP invitation, or whether this excuse is rather a fig leaf for fears of provoking Russia. Some believe that the current “turmoil” is simply chaotic, unbridled democracy and political plurality at work.
“Political discussions are active, interesting, invigorating,” said Ivan Lozowy, a journalist based in Kiev who runs the newsletter Ukraine Insider. Political leaders have to deal with limitations, stemming from competition, on their power and ambitions. This is all good.”
“Best of all would be a real reformist alternative, which we currently do not have, and if those in high government posts would stop trying to amass more power and use the power they have to benefit the average Ukrainian. But given Ukraine’s history, it’s a great thing to see this competition,” he told ISN Security Watch.
Andrew Wilson, a Ukrainian expert at the European Council for Foreign Relations, put the likelihood of a MAP invitation in December at virtually nil. “There is a slight chance that some NATO members would offer Yushchenko something for domestic political purposes,” he told ISN Security Watch. But with the president’s political numbers running so low, Wilson thought NATO leaders would probably find it inadvisable to bet on the president in such a manner.
The question is also whether such a “gift” would gain Yushchenko points beyond his hard-core followers. NATO continues to prove a difficult sell to the population, even in pro-western parts of the country.
In a poll conducted by the Kyiv International Institute of Sociology (KIIS) on 30 August-8 September 2008, respondents were asked “Which military security option is the best for Ukraine?” While only 17.4 percent said joining NATO, 28.3 percent chose “joining a military union with Russia” (25 percent opted for not joining any bloc and 10.6 percent for a new EU-member-only system of collective security).
KIIS also asked Ukrainians how they would vote in a referendum “next week” on joining NATO. Around 22 percent said they would vote “Yes” and almost 65 percent said “No.”
“The Ukrainian government has employed a small, not very noticeable and ineffective advertising campaign in favor of NATO, but, at least in this case, mud does stick,” said Lozowy. “NATO has these distinct negative associations for the average Ukrainian: It is anti-Russia, it is aggressive, the Alliance bombed Yugoslavia, etc. On the other hand, if you ask the man on the street if they want Ukraine to ‘be part of Europe’s collective security system’ a very high percentage of people would be ‘for’ such a choice.”
The irony in all of this is that militarily, Ukraine is probably as ready as any new members in recent years have been. The country has been involved in Partnership for Peace activities since the program began in 1994, and in 1997, the country signed a “Charter on a Distinctive Partnership.”
In December 1999 then-president Leonid Kuchma initialed a decree on defense reform that paved the way for NATO to monitor Ukraine’s reforms and provide regular consultations and advice. In 2002, Ukraine officially declared its intention to join the alliance. In the past few years, real defense reform has taken place with sharp reductions in troops, an increase in readiness levels, and heightened transparency.
All of that will mean apparently little, however, when NATO foreign ministers gather in December, the same month the country goes to the polls to elect a parliament for the third time since Yushchenko’s dramatic election in the winter of 2004-2005.

FOOTNOTE: Jeremy Druker is executive director, editor-in-chief and one of the founders of Transitions Online. The views and opinions expressed herein are those of the author only, not the International Relations and Security Network (ISN).

LINK: http://www.isn.ethz.ch:80/isn/Current-Affairs/Security-Watch/Detail/?fecvnodeid=108031&fecvid=21&v21=108031&lng=en&id=92919

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25.  “OUR DAILY BREAD” HOLODOMOR EXHIBITION TO OPEN IN CHICAGO OCT. 24

Exhibition to feature fifty-four Holodomor artworks by Ukrainian artists
 
“They put a gun to your head and made you swear you would bring in grain the next day.
Everyone cried. There was nothing left to bring!” Hanna Ikasivna Cherniuk, Holodomor survivor
 
Ukrainian National Museum, Chicago, Illinois, Wednesday, October 15, 2008
 
CHICAGO – “Our Daily Bread”, an exhibition of artworks commemorating the Ukrainian Holodomor-Genocide, opens Friday, October 24th at the Ukrainian National Museum, 2249 West Superior, in Chicago. 
 
“Our Daily Bread” officially opens at 6:30 PM with a program that features a short video by Ukrainian singer Oksana Bilozir and an opening statement by the granddaughter of a Holodomor survivor, Ms. Oryna Hrushetsky-Schiffman. 
 
In 1932 and 1933, between seven and 10 million Ukrainians were deliberately starved to death during the “Holodomor” – or death by starvation. This genocide was masterminded by Joseph Stalin and his inner circle, and was carried out by Soviets who confiscated every last bit of food from Ukrainian peasants who were resistant to collective farming – and who represented the backbone of the Ukrainian people.
 
This year, 2008, marks the 75th anniversary of the Holodomor, and the government of Ukraine as well as Ukrainians around the world have been organizing events in an effort to expose and publicize this crime against humanity while there are still survivors young enough to recall its horrors.
 
EXHIBITION FEATURES 54 HOLODOMOR ARTWORKS
In Chicago, the latest event commemorating the Holodomor is an exhibition at the Ukrainian National Museum opening Friday, October 24th. “Our Daily Bread” features 54 artworks that are part of the “Holodomor: Through The Eyes of Ukrainian Artists” collection. 
 
The founder and trustee of the unusual collection, U.S. businessman Morgan Williams, gathered the over 350 original Holodomor artworks in the collection during the last 11 years in Ukraine.  Williams is director, government affairs, Washington, D.C., for the SigmaBleyzer private equity investment group and serves as president of the U.S.-Ukraine Business Council (USUBC).

 
Most of the artworks were created after 1988, when Ukrainians were finally free to evoke the suffering and horrors of the Holodomor in the last days of the USSR, right before Ukraine declared independence in 1991. Before 1988 no one was allowed to talk about this tragedy let alone express themselves through artwork or writings.  Many Ukrainian artists may very well have only learned of the Holodomor at that time, after decades of extreme Soviet suppression of the atrocities.
 
The government of Ukraine has officially declared the Holodomor a genocide against the Ukrainian people and is asking the United Nations to do so as well. Just this past September, the United States House of Representatives passed a Resolution condemning the Holodomor and the former Soviet government’s deliberate confiscation of grain harvests, which resulted in the starvation of millions of Ukrainian men, women, and children.
 
It was a devastating chapter of Stalin’s reign of terror that wiped out one quarter of the peasantry – and later included the intelligentsia and other leaders of Ukrainian society who were shot and exiled by the hundreds of thousands in an attempt to destroy the Ukrainian nation. And it was carried out at a time when Ukraine, then officially the Ukrainian SSR, had one of the richest farmlands in the world – “the breadbasket of Europe.” 
 
The exhibition will also include a room depicting what life was like in Ukraine prior to enforced collectivization—as well as an evocative walk-through installation depicting the horrors of the Holodomor.
 
The “Our Daily Bread” Holodomor exhibition is on view through Sunday, November 30, 2008. The Museum hours are Thursday to Sunday from 11:00 a.m. to 4:00 pm.  The Ukrainian National Museum is located at 2249 West Superior Street in the Ukrainian Village neighborhood. Call 312-421-8020 or visit the Museum’s website, www.ukrainiannationalmuseum.org  for more information.

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26.  UKRAINIANS OF RUSSIA STARTLED WITH RUSSIA’S BAN FOR HOLDING INTERNATIONAL

ACTION EVERBURNING CANDLE IN COMMEMORATION OF HOLODOMOR 1932-1933
 
Ukrinform, Kyiv, Ukraine, Friday, October 17, 2008 
 
KYIV – The Community of Ukrainians in Russia (CUR) and the Federal National-Cultural Autonomy (FNCA) of Ukrainians of Russia express regret and surprise at the actions of Russian authorities that practically made it impossible to hold the international action Everburning Candle by Ukrainian organizations in Russian regions, the statement of CUR and FNCA reads, UKRINFORM own correspondent reports.
The events on commemorating the victims of Holodomor 1932-1933 planned for October had no political ground, Ukrainian organizations in Russia emphasize. However, Russian authorities prohibited holding the mass educational commemorative events within Everburning Candle which arrived in Russia from Kazakhstan on October 8 on various reasons.
 
Only Ukrainian organizations in Moscow and Saint Petersburg managed to hold large-scale events, even the Russian Orthodox Church refused (except Moscow) to hold commemorations and called them “inexpedient”.
As UKRINFORM earlier reported, in 2008, on the initiative of the World Congress of Ukrainians, in view of the 75th anniversary of Holodomor 1932-1933, Ukrainians from all over the world are holding the action Everburning Candle. Its route covers all continents and countries where Ukrainians live.
On October 6, the Russian Foreign Ministry sent a diplomatic note in which the Russian party, referring to Ukraine’s position regarding Holodomor, made a condition either to hold events in line with Russia’s position on this issue or to cancel the action.
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AUR#912 Oct 18 Political & Financial Turmoil; Fitch Downgrades; Holodomor Exhibition in Chicago

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       
                     
ACTION UKRAINE REPORT – AUR – Number 912
Mr. Morgan Williams, Publisher and Editor, SigmaBleyzer
KYIV, UKRAINE, SATURDAY, OCTOBER 18, 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
Andrew E. Kramer, The New York Times, New York, NY, Sat, Oct 17, 2008
 
Agence France Presse (AFP), Kiev, Ukraine, Fri, Oct 17, 2008
Fitch Ratings, London/Moscow, Friday, October 17, 2008
 
By Maryana Drach, Iryna Shtogrin, RFE/RL, Prague, Czech Republic, Ukraine, Thu, Oct 16, 2008
 
By Stefan Wagstyl, Financial Times, London, UK, Thursday, October 16 2008
Analysis & Commentary: By Bohdan Danylyshyn, Minister of Economy of Ukraine
Zerkalo Nedeli, Mirror Weekly, #38 (717), Kyiv, Ukraine, 11 -17 October, 2008
 
Ukraine’s economy is in trouble, there is no doubt about it.
Analysis & Commentary: By Edward Hugh, Macroeconomist, Barcelona, Spain
Global Economy Matters, Sun, Oct 12, 2008 & RGE Monitor, New York, NY, Sun, Oct 12, 2008
 
Editorial: International Herald Tribune, Paris, France, Tuesday, October 14, 2008
 
9SOFTSERVE, INC. JOINS THE U.S.-UKRAINE BUSINESS COUNCIL (USUBC)
Leading multinational software development and consulting company, member 93
U.S.-Ukraine Business Council (USUBC), Washington, D.C., October, 2008
 
Exhibition to feature fifty-four Holodomor artworks by Ukrainian artists
Ukrainian National Museum, Chicago, Illinois, Wednesday, October 15, 2008
 
Raphael Lemkin’s perception of the Ukrainian genocide is a solid recommendation to
the UN Assembly to finally recognize the Ukrainian tragedy for what it was – ‘a case
of genocide, the destruction of a nation. 
By Roman Serbyn, historian, professor, scholar, Montreal, Canada
Action Ukraine Report (AUR) #912, Kyiv, Ukraine, Satruday, October 18, 2008
Ukrainian National Information Service (UNIS), Washington, D.C. Friday, Oct 3, 2008
 
13CAN EUROPE SURVIVE GERMANY?
Analysis & Commentary: By Alexander Motyl
Professor of Political Science at Rutgers University-Newark
The Atlantic Council, New York, NY, Thursday, October 2, 2008  
Window on Eurasia, by Paul Goble, Vienna, Friday, October 3, 2008
 
Activities of the Security Service of Ukraine regarding declassification and publication
about the operations of the Soviet Union Securities Services and the history of the
Ukrainian Liberation Movement

Security Service of Ukraine (SBU), Kyiv, Ukraine, Thursday, October 2, 2008
SBU material translated into English for the Action Ukraine Report (AUR) #912
Morgan Williams, Editor & Publisher, Washington, D.C., Saturday, October 18, 2008
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1
 POLITICAL TURMOIL JEOPARDIZES FINANCIAL RELIEF FOR UKRAINE
 
Andrew E. Kramer, The New York Times, New York, NY, Sat, Oct 17, 2008
 
MOSCOW — Aid for Ukraine’s staggering economy may be endangered by the country’s continuing political instability. Like Iceland and Hungary, Ukraine is seeking aid from the International Monetary Fund to counter the global financial crisis. But Ukraine, its economy reeling from falling steel prices, is also struggling with political problems.
The infighting threatens an emergency loan from the monetary fund. The fund is seeking assurances from the cabinet that next year’s budget will be balanced, but President Viktor A. Yushchenko issued a decree this month dissolving Parliament and, with it, the cabinet.
That decree, which would lead to elections on Dec. 7, is being contested by the president’s opponents in Parliament. So until the decree’s validity is decided in the courts, it is unclear whether the current cabinet holds power. The prime minister, Yulia V. Tymoshenko, says it does, while the president’s office says it does not.
In the interim, a delegation from the monetary fund has been meeting with representatives of the prime minister and the president. The fund is offering a loan of as much as $15 billion to shore up the country’s finances as foreign investors flee.
Ms. Tymoshenko, who met with the delegation on Friday, expressed support for the loan. But if the president’s order to dissolve Parliament is upheld, she said, the cabinet will lack the authority to negotiate with the fund.
In that case, negotiations will be delayed until a new Parliament is formed after the elections. After previous elections, coalition-building in Ukraine has taken months.
“Alarm bells aren’t ringing yet,” Sergei Teriokhin, a former minister of the economy and member of Parliament in Ms. Tymoshenko’s bloc, said in a telephone interview. But if the contested status of the cabinet is not resolved, he said, the monetary fund will not know whom to meet with. “It is necessary that somebody in the country make guarantees on the budget policy of next year.”
Mr. Yushchenko and Ms. Tymoshenko have alternately collaborated and competed since they rallied crowds together on Independence Square in Kiev during the protests known as the Orange Revolution in 2004.
 
Most recently, his Our Ukraine bloc was in a coalition with Ms. Tymoshenko’s, an arrangement that gave her the prime minister’s post. But the two split after the Russian invasion of Georgia in August. Mr. Yushchenko accused Ms. Tymoshenko of muting her criticism of the Russian military action to please the Kremlin.
The political turmoil has coincided with a steep economic decline. On Friday, the international agency Fitch Ratings downgraded Ukraine’s sovereign debt rating and issued a negative outlook for the country.
 
A Ukrainian shipping company, Industrial Carriers, has gone bankrupt. The government has frozen rail tariffs for steel companies, and as foreign investment dries up, speculators are betting on a decline in the national currency.
In response, Ukraine plans to nationalize some commercial banks, which have liquidity problems, a member of Parliament told the monetary fund’s delegation on Friday.
Hungary, which has struggled to cope with the effects of the financial crisis, also received a vote of no confidence on Friday when Fitch cut its rating to negative from stable. Hungary’s large debt, much of it in foreign currencies, has made the country particularly vulnerable to the current external shocks.
The government scaled back its growth estimates for 2009 to just 1.2 percent from 3 percent. Hungary has lined up support from the European Central Bank and the monetary fund in an effort to reassure credit and currency markets. (Nicholas Kulish contributed reporting from Budapest.)
 
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2. CRISIS-HIT UKRAINE SEEKS IMF EMERGENCY LOAN
 
Agence France Presse (AFP), Kiev, Ukraine, Fri, Oct 17, 2008
 
KIEV – Ukraine held crunch talks Friday on an emergency loan from the IMF to prop up its fragile banking system, but moves to address the economic crisis were overshadowed by deepening political strains.
Prime Minister Yulia Tymoshenko, who is locked in a fierce battle with President Viktor Yushchenko over his decision to call fresh polls, said the loan of up to 14 billion dollars was “essential” to bail out the country.
As the talks continued with the International Monetary Fund, global ratings agency Fitch downgraded Ukraine’s credit rating and issued a stark warning about the ex-Soviet republic’s economic outlook.
 
“The downgrade reflects Fitch’s concern that the risk of a financial crisis in Ukraine involving a large depreciation of the currency, further stress in the banking system and significant damage to Ukraine’s real economy is significant and rising,” the agency said in a statement.
Tymoshenko on Thursday linked the outcome of the IMF talks to the cancellation of the December 7 parliamentary elections, which have become the subject of a bitter political tug-of-war. President Viktor Yushchenko on October 9 ordered the snap general elections. Tymoshenko immediately contested the order.
For Ukraine to receive credit, “it is necessary to postpone the elections, something the International Monetary Fund said in its statement,” news agencies quoted Tymoshenko as saying ahead of the loan talks.
The cabinet has blocked funding needed for the elections and a court suspended Yushchenko’s order. On Friday, Yushchenko’s backers said a higher court had overturned the earlier ruling and said the elections could go ahead.
Amid the infighting, the deputy chief of the country’s central election commission, Andriy Magera, indicated the timing of the elections remained in doubt.
“All deadlines for appropriate preparation for voting expired long ago,” Magera told Interfax-Ukraine news agency in an interview.
Earlier, both Yushchenko and Tymoshenko expressed hopes the IMF loan deal would go through. The IMF was “ready to give Ukraine a loan amounting to 14 billion dollars for the stabilisation of our state’s financial sector,” Yushchenko’s office said in an announcement of his meeting with the IMF team. Tymoshenko had earlier met with the head of that team, Ceyla Pazarbasioglu.
“We are very interested in our cooperation resulting in Ukraine receiving essential financial assistance from the IMF,” Tymoshenko said in a statement.
Ukrainian parliament speaker Arseny Yatsenyuk separately met with Pazarbasioglu and told her that Ukrainian authorities were planning to nationalise ailing commercial banks in Ukraine.
Yatsenyuk told the IMF official that “nationalisation of commercial banks was to be performed in order to save the Ukrainian banking system,” the Ukrainian parliament said in a statement published on its website. Local IMF representatives declined Friday to comment on the negotiations.
Ukraine stopped early withdrawals from savings accounts this month in a bid to halt a run on banks. The central bank has bailed out several banks and the Ukrainian stock market has lost more than 70 percent of its value this year.
Such problems have made the country one of Europe’s most vulnerable emerging economies, according to Capital Economics analyst Neil Shearing.
“The turmoil in global markets has raised concerns about a funding crisis in emerging Europe, with some investors fearing that Hungary could be the next Iceland (when) in fact Ukraine appears the more vulnerable to a balance of payments crisis,” Shearing said in a statement.
This was made worse, he said, by the political crisis that led President Yushchenko to call the December 7 general election after the collapse in September of the pro-Western coalition government.
 
“Once political risk is factored in, Ukraine could be most vulnerable to a balance of payments crisis, despite the fact that its overall external deficit is smaller,” Shearing said.
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3.  FITCH RATINGS DOWNGRADES UKRAINE TO ‘B+’

 
Fitch Ratings, London/Moscow, Friday, October 17, 2008
LONDON/MOSCOW – Fitch Ratings has today downgraded Ukraine’s Long-term foreign and local currency Issuer Default Ratings (IDRs) to ‘B+’, from ‘BB-‘ (BB minus). The Outlooks on both IDR remain Negative. The agency has also downgraded the Country Ceiling to ‘B+’ from ‘BB-‘ (BB minus) . The Short-term foreign currency IDR is affirmed at ‘B’.
“The downgrade reflects Fitch’s concern that the risk of a financial crisis in Ukraine involving a large depreciation of the currency, further stress in the banking system and significant damage to Ukraine’s real economy is significant and rising.
 
Such a scenario would damage the sovereign’s balance sheet. Nevertheless, Fitch believes risks to Ukraine’s ability to meet its sovereign obligations remain low in the near term owing to the sovereign’s modest refinancing needs,” said Andrew Colquhoun, Director in Fitch’s Sovereigns Group.
Ukraine has officially requested assistance from the IMF and a Fund team is currently in Kyiv. Fitch would view a sizable and appropriately-designed IMF programme as a positive factor, although the agency awaits precise details before drawing firm conclusions.
 
However, depositor confidence in the banking system may remain shaky and the economy will face a difficult adjustment even if a programme is arranged, extending Ukraine’s exposure to financial instability.
On 13 October, Fitch signalled rising concerns over the health of Ukraine’s banking system amid a sharp tightening in liquidity conditions and some deposit withdrawals from the system following the failure of sixth-largest bank Prominvest.
 
Fitch is unconvinced that the raft of emergency support measures announced by the central bank, including stepped-up liquidity provision and a ban on early redemption of term deposits, will be adequate to shore up depositor confidence and forestall further banking-system stress. New central bank rules restricting loan growth threaten to exacerbate a slowdown in the economy, which could hit banks’ asset quality relatively soon.
A relatively high share of FX-denominated lending (51% at end-August) exposes the financial system to risks from enhanced currency volatility. Ukraine’s currency, the hryvnia (UAH), fell to 5.6 against the USD by 8 October, down 10% on the month, before climbing back to around 5.2-5.3 on intervention by the central bank.
 
The UAH is likely to stay under pressure from a widening current account deficit, which Fitch projects at around 7% of GDP in 2008, versus 4.2% in 2007. Falling steel prices will intensify a terms-of-trade shock originating in a likely strong increase in Ukraine’s gas import price next year. Strong borrowing by the private sector took Ukraine’s gross external debt to USD100bn by end-June 2008, including USD28bn of private-sector short-term debt.
 
Hard numbers on private-sector external debt maturities for 2009 are not available, but Fitch estimates these could be around USD19bn for longer-term borrowing. With many private-sector borrowers likely to find it hard to refinance their maturing external borrowing, the sovereign may be forced to provide resources from official reserves, which are also needed to shore up confidence in the exchange rate.
Fitch continues to draw comfort from Ukraine’s moderate sovereign refinancing needs for 2009 of USD2.5bn, of which USD0.9bn are domestic (mostly in UAH) and USD1.6bn are external (including a USD0.5bn eurobond maturity in May), compared with the latest disclosure for official reserves of USD37.5bn on 9 October.
 
The country’s low general government debt/GDP ratio of 10% for end-2007 is well below the ‘BB’ median of 34% (and the ‘B’ median of 33%). However, worsening economic prospects and requirements for official support to the economy could erode Ukraine’s fiscal strength in the medium term.
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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4.  IN UKRAINE, IMPACT OF GLOBAL CRISIS BEGINNING TO STING

By Maryana Drach, Iryna Shtogrin, RFE/RL, Prague, Czech Republic, Ukraine, Thu, Oct 16, 2008
KYIV — Political uncertainty is nothing new for Ukrainians. But financial uncertainty is something different — and deeply unwelcome. As the effects of the global financial crisis take hold around the world, money flows have become a source of extreme anxiety in Ukraine. On the streets of the capital, many residents expressed worry about the fate of their savings.

“I went to Privatbank to withdraw money from my active account, which I’m supposed to be able to use any time,” says one man. “They told me to go away; they didn’t give me anything. I’m still fighting about it. Tomorrow I’m going to go and file a lawsuit.” “I have doubts,” says another. “This is one of those situations where money is controlling people, rather than people controlling their money.”

Others were more sanguine. “I trust the banks. The interest rates haven’t gone down and our bank is working normally,” says one woman, adding, as an afterthought: “When my deposit comes in December, I can take the money out and put it someplace else.”

‘STRICT, BUT CORRECT’
Officials at Ukraine’s central bank are all too aware of the risks of public jitters. Citing a “psychological factor,” the National Bank of Ukraine (NBU) this week decided to impose limits on lending, foreign-currency trade, and early withdrawals of certain deposits.

The decision, taken October 13, came after National Bank depositors — unnerved by mounting inflation and a weakening currency — withdrew more than $1.3 billion from their accounts in just under two weeks. It’s hoped the steps will prevent a full-scale run on the bank by panicking citizens.

The NBU was also forced to provide a $1 billion stabilization loan to the country’s sixth-largest bank, Prominvestbank, which failed after panicked depositors in the eastern region of Donetsk rushed to withdraw their money.

Vyacheslav Yutkin, who serves as chairman of the board of the Ukrainian branch of Russia’s Sberbank, says the NBU’s measures were appropriate but too slow in coming.

“The methods of the Ukrainian National Bank are strict, but correct. It’s an important and necessary preventive measure,” Yutkin says. “If the National Bank had reacted two weeks earlier, banks would have had the chance to hold on to at least $1.5 billion in accounts, and the current liquidity crisis wouldn’t be so bad. But it took a long time for them to make a decision, and that made the crisis even worse.”

PIECES OF THE PUZZLE 
Some officials are still offering an upbeat assessment of the economic climate. Economy Minister Bohdan Danylyshyn on October 15 noted Ukraine’s 2008 GDP growth stayed steady at 7 percent through September, and still remains strong despite “some decline” in certain sectors.

Other authorities have expressed confidence that Ukraine will escape the worst of the damage brought on by the global financial crisis because the country’s still-developing stock exchange is less vulnerable to the vagaries of market fluctuations.

It is difficult to gloss over other indicators, however. Inflation peaked in May at 31 percent — putting Ukraine higher than any other country except Zimbabwe and Venezuela — before dropping to a less alarming 16 percent in September. The value of the local currency, the hryvnya, last week sank by 20 percent, forcing the NBU to intervene and sell dollars at an artificially low rate.

With such figures in mind, many economy-watchers acknowledge Ukraine will not be able to avoid the long-term effects of the crisis.

This will be particularly true if a global economic and construction slowdown shrink the global market for commodities like steel, which is Ukraine’s top export and responsible for 40 percent of its hard-currency earnings. Many steel mills have already slowed or stopped production because of a drop in worldwide demand.

A global recession would also have a dramatic impact on remittances for Ukraine’s large migrant workforce. Ukraine is second only to Russia in remittances in Central and Eastern Europe, sending home nearly $8.5 million a year — an estimated 8 percent of the country’s GDP.

WILD CARD
Then there is the critical factor of the price Ukraine will pay for Russian gas in 2009. Ukraine currently pays just $180 per 1,000 cubic meters. But Russia has repeatedly said it wants former Soviet states to switch to market prices, and has pointedly noted its fees for Western European markets exceeded $500 in October. A sudden hike in Ukraine’s gas prices could have a devastating effect on the country’s financial reserves — although not everyone is worried.

“We shouldn’t forget that Ukraine has almost $40 billion in reserves; that’s more than enough,” says Oleksandr Suhonyako, the head of the Association of Ukrainian Banks, a grouping of the country’s major commercial banks and credit institutions.

 
“But the financial crisis isn’t going to be over soon, and it just keeps growing every day. I think it’s not a matter of a month, but half a year, or even more. In order the meet the problems of the future, we need to start thinking about international loans now.”

Prime Minister Yulia Tymoshenko, speaking at a news conference on October 14, avoided answering a question of whether Ukraine was seeking help from the International Monetary Fund (IMF).

Such a move would be interpreted by many as a sign that Ukraine’s economy was in deep trouble. Instead, Tymoshenko — perhaps looking ahead to a presidential bid in 2010 — stressed that the government was doing “everything possible and impossible” to minimize the impact of the global crisis on Ukraine.

But an NBU official said on October 15 that Ukraine might seek support from an IMF credit program. Hungary, Serbia, and Iceland have already said they will approach the IMF for help gaining access to credit and defending their currencies investors’ risk aversion.

Finance Minister Viktor Pynzenyk has begun meeting with members of an IMF expert mission that arrived on October 15, and the two sides “discussed the situation concerning the world financial crises and the challenges facing Ukraine’s financial system,” Reuters reported.

The statement added that both sides agreed to produce “recommendations for Ukraine vital for the operation of the banking sector and macroeconomic stability for Ukraine, based on the experts’ assessment and taking account of the experience of other European countries.”

Reuters reported that the IMF’s Kyiv office made no comment on the mission, adding that it was expected to remain in Ukraine for at least a week. It cited estimates of the potential IMF largesse to Ukraine at $3 billion-$5 billion.

Speaking to reporters after a cabinet session on October 16, Reuters quoted Tymoshenko as saying that “we have information” that the IMF “is ready to examine special credits from $3 billion-$14 billion to stabilize the financial system,” but that it would be contingent on Ukraine calling off early elections announced last week by President Viktor Yushchenko.

NO RAPID REACTION?
Accordingly, it’s the government’s own internal struggles that may prove one of the greatest liabilities as the country fights against impending economic woes.

Ukraine in December is facing its third set of parliamentary elections in as many years, a result of intractable squabbling between Tymoshenko and Yushchenko. The pair’s Orange Revolution partnership in 2004 quickly devolved into an intense political rivalry that has mired Ukraine in a protracted political standoff and may continue until 2010, when the two are expected to face off for president.

Yutkin says Ukraine has grown accustomed to political uncertainty, and that the ongoing political drama will not have a noticeably adverse affect on economic conditions.

“I think politics are having only minimal influence in this situation,” he says. “The economic system in Ukraine adapted a long time ago to the conditions of political instability and inflation. Higher prices and political upheaval aren’t the main factors causing panic among bank depositors.”

The World Bank, however, warned this week that policymakers in Eastern Europe and Central Asia “need to be prepared to respond quickly to the rapidly changing international financial environment.” Some worry that Ukraine’s constant cycle of elections and political infighting mean little, if any, decision making will be done in the interim.

 
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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U.S.-Ukraine Business Council (USUBC): http://www.usubc.org
Promoting U.S.-Ukraine business relations & investment since 1995.
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5.  EASTERN EUROPE IS IN THE RED

By Stefan Wagstyl, Financial Times, London, UK, Thursday, October 16 2008
When Lev Partskhaladze, a Ukrainian property developer, was preparing to float his company on the London stock market three years ago, he saw no end to his country’s home and office construction boom. Today, with cranes standing idle over Kiev building sites and property sales evaporating, he admits the global credit crunch is bringing the boom to a halt.
“We are seeing a financial crisis transforming into an economic crisis in the world. It has not fully hit Ukraine yet but it’s close,” says the chairman of XXI Century Investments. With its shares down 97 per cent from their peak, the company is trying to raise cash by offloading projects to other developers.
Mr Partskhaladze is not alone in having to confront the region’s changed realities.
 
Across central and eastern Europe, the global crisis is biting hard, albeit very unevenly. In Russia, the authorities have set aside nearly $200bn (pounds116bn, euro149bn) for a financial market rescue, Ukraine is in talks with the International Monetary Fund over emergency loans of up to $14bn, Hungary was on Thursday bailed out with a euro5bn ($6.7bn, pounds3.9bn) loan facility from the European Central Bank.
Latvia and Estonia are suffering the region’s first recessions in a decade, while growth in oil-rich Kazakhstan has slowed to a crawl. Even in Poland, where Donald Tusk, the prime minister, insists his country is “an island of stability”, the crisis has raised doubts about Warsaw’s euro entry plans.
Stock markets have plunged accordingly, with Polish shares trading at less than half their peak levels and Ukraine’s down by three-quarters.
 
Property markets have slowed, even if developers are still trying to hold up prices. After riding high earlier in 2008, some currencies have come under pressure, notably the Hungarian forint. In Ukraine, where the central bank has intervened to support the hryvnia, the credit default swap rate, a risk measure, has soared 1,400 points to 1,900, among the world’s worst.
The financial whipsaw has cut billionaires down to size, not least Oleg Deripaska, the Russian metals oligarch, who has sold valuable stakes to raise cash. Others are grabbing opportunities to buy cheaply: Mikhail Prokhorov, the Russian nickel investor, acquired 50 per cent of Renaissance Capital, a Moscow bank, for $500m – about one-quarter of its value of a year ago.
With the global crisis still raging, despite the calming effects of this week’s support moves in the US and the European Union, it is impossible to predict how events will play themselves out in a region increasingly important to the west as an export market and low-cost production base. But hopes it might escape unscathed have evaporated. Apart from corporate casualties, some countries could run into difficulties funding current account deficits.
 
Erik Berglof, chief economist of the European Bank for Reconstruction and Development, says: “There is enormous uncertainty right now … These countries could deal with rising borrowing costs and an economic slowdown coming from the US and western Europe, but a complete shutdown of international borrowing – nobody can withstand that.”
The result of this shock will, as in the west, increase the state’s role in the economy once more – and possibly provoke political conflicts over the share-out of scarce financial resources. As in the west, there could be public anger against those who profited from the boom years, often spectacularly so. Hungary, which first ran into economic trouble two years ago, has already experienced social tensions.
Economic growth is slowing sharply, with the IMF forecasting a decline in real gross domestic product growth for central and south-east Europe from 5 per cent this year to just 3.5 per cent in 2009. For Russia and the former Soviet Union, it predicts around 7 per cent for this year and 5.5 per cent for 2009.
 
By global standards, with the US and western Europe facing recession, these are respectable numbers. In non-crisis circumstances, a moderate slowdown would even have been welcome in some countries. Until the summer their main danger was overheating, with inflation running as high as 31 per cent in Ukraine. Thanks to bumper harvests, tumbling food costs are helping to curb consumer price rises but inflation is still high in some countries, notably Russia, with 15 per cent.
Also, the region as a whole is less exposed to financial turmoil because companies and households have mostly taken less credit than in the west. Raiffeisen International, the Austrian bank, says bank assets were just 90 per cent of GDP in 2007 in central Europe and 65 per cent in Russia, compared with 250 per cent in the eurozone.
But these generalisations conceal many country risks. As Jan Krzysztof Bielecki, chief executive of Poland’s Bank Pekao, says: “The development of the situation over the last few weeks has shown that there is nothing more mistaken than calling this a single region. The differences between Poland and Kazakhstan are like the difference between heaven and hell.”
A key danger is the region’s dependence on external finance, especially bank credit. According to the Institute of International Finance, total private capital and credit flows into “emerging Europe” (including Turkey) are likely to fall from a record $394bn last year to $322bn in 2008 and $262bn in 2009.
 
Given that $262bn is still a high figure by historical standards, there is great scope for a much bigger drop. Within this total, bank credit is set to fall particularly fast, from $219bn in 2007 to $155bn in 2008 and just $74bn next year.
While foreign direct investment is forecast to increase modestly to nearly $90bn next year, it cannot compensate for the dramatic decline in bank lending. Nor will portfolio investment save the day: the flows are far too small, peaking last year at just $8.5bn.
The biggest financing needs are in Russia, where the central bank estimates $39bn in debt falls due this year and $116bn in 2009. Little wonder that bankers and oligarchs are queuing for credits the authorities are distributing from their $560bn in foreign exchange reserves. Russia is in no danger of default but banks are under pressure – with fears of a panic increasing this week after Globex, a midsized lender, banned depositors’ withdrawals.
If the crisis persists, even the wealthy Russian state will have to count its roubles. Relative to the size of the national economy, Moscow’s financial rescue package is bigger than the $700bn programme launched by the US. Russia’s budget spending is more than doubling to $586bn in 2010, just as the oil price has roughly halved from its peak. Further declines will put spending under pressure.
 
But with inflation high, driving up pay and pensions, there is little scope for painless cuts, especially as Russia is committed to huge infrastructure projects, including the Sochi 2014 winter Olympics.
IN UKRAINE ————
In Ukraine, banks have also borrowed heavily overseas to finance credit growth and are struggling to refinance themselves. At the same time, the current account deficit is widening as prices for steel, Ukraine’s main export, plummet. So Kiev’s external financing needs are growing just as credit is short and foreign direct investment, a big source of finance in recent years, is slowing.
Ukraine’s authorities insist the economy is in good shape. The central bank has maintained order by taking control of one bank and supporting 20 other lenders. But efforts to ease the crisis are hampered by political turmoil, with president Viktor Yushchenko calling early parliamentary elections for December. Yulia Tymoshenko, prime minister, on Thursday confirmed Kiev was turning to the IMF, which she said was considering lending “$3bn-$14bn”.
In central and south-east Europe and the Baltic states, many economists assumed countries would be protected from the global storm because their banks’ finance came not from markets but from the multinational banks that have bought most local lenders. But as Mr Berglof of the EBRD says, with parent banks now under pressure, this assumption may no longer apply. “This strength is turning into a vulnerability,” he warns.
Individual banks deny they have plans to pull out. But they have been raising the costs of foreign exchange denominated loans, which account for around half of corporate and household lending in central Europe. This week, leading Hungarian banks cut such foreign exchange lending, in moves which on Wednesday precipitated the biggest daily drop in the forint in five years.
 
On Thursday the currency rallied sharply after the authorities announced public support from the ECB – unprecedented for a country outside the eurozone – and liquidity boosting measures. Janos Veres, finance minister, says the IMF stands by to support Hungary but will intervene only in extremis.
Poland, the Czech Republic and Slovakia are in better economic condition than Hungary, having avoided the profligate public spending in which Budapest indulged until running into financial difficulties in 2006. The Czechs, with low local interest rates, are free of foreign exchange loans. But like Hungary, these countries are exposed to another painful shift – an expected steep decline in demand from western Europe. Slovakia, with its heavy dependence on a single industry – cars – is particularly vulnerable.
Except for Hungary, however, bankers are less concerned about central Europe than the Baltic states and south-east Europe, where current account deficits are high. All have relied heavily on a mix of foreign direct investment and credit for financing recent rapid growth. But with economies slowing, bankers wonder which countries can avoid a hard landing – or worse.
 
Estonia and Latvia, which ran into financial difficulties even before the global crisis, are already in recession. Lithuania is not far behind. But at least Baltic current account deficits are falling, from 18 per cent of GDP on average last year to 8.6 per cent in 2009, according to the IMF.
In south-east Europe, the Fund predicts deficits to stay at 14 per cent next year, including 21.5 per cent for Bulgaria. “Action is needed to rein in rising external and internal imbalances, mindful of more volatile external financing conditions,” the IMF says But whether that action will come in time is a moot point. Analysts at Citigroup rank Romania and Bulgaria alongside the Baltic states, Hungary and Ukraine as countries vulnerable to “a risk to financial stability”.
As credit growth decelerates across the region, putting a brake on economies, current account deficits should decline as credit-financed imports fall. So soft landings are certainly well within reach. The difficulty comes in bridging the financing gaps that are bound to emerge in the most hostile financial conditions in 60 years. If there is a crumb of comfort, it is that these ex-communist states have more experience than most of implementing tough economic policies under pressure. [Additional reporting by Jan Cienski in Warsaw, Roman Olearchyk in Kiev and Thomas Escritt in Budapest]
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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6.  GLOBAL FINANCIAL CRISIS – A TEST FOR UKRAINE

 
ANALYSIS & COMMENTARY: By Bohdan Danylyshyn, Minister of Economy of Ukraine
Zerkalo Nedeli, Mirror Weekly, #38 (717), Kyiv, Ukraine, 11 -17 October, 2008
 
Before discussing future implications of the global financial crisis for Ukraine’s economy, let us consider if it has already affected us. The national economic system is integrated into the world economy closely enough to be involved in the global processes.
 
The eroded macro-stability of international markets could not but impact internal developments in Ukraine. The global financial crisis of 2007-2008, as any other, has been unfolding in several waves. We have survived the first two without big losses, although not without mistakes.
[1] The first wave rose in 2007, when stock indices of the world’s leading banks and financial institutions went down. Under the circumstances, risk capital looking for stable yet high-profitability markets moved from developed to emerging markets, which continued to show high growth rates and profitability.
 
According to financial experts, the risk to profitability ratio in those emerging markets was fairly attractive. As a result, stock markets in respective countries grew in 2007, China and Ukraine being leaders of such growth.
The inflow of credits was also substantial: in 2007, Ukrainian economy borrowed USD 24.3 billion in middle- and long-term credits.
[2] The second wave started in early 2008, when the ongoing fall in the world stock markets re-directed cash flows from one class of assets to another, in particular to commodities and energy resources. These assets became more marketable, and commodity prices soared up. In January-July, average metal prices in eight regions of the world rose by 81%; “Brent” oil price rose by 32%.
 
By the time first favourable forecasts appeared as to the global gross grain harvest in 2008/2009 marketing year, wheat prices (USA, FOB) for 2007/2008 marketing year had grown by 79%, on average.
Ukraine’s economy responded to the above challenges in the following way.
The overall inflationary background intensified. Inflationary spiral, set spinning in 2007, has been in motion in 2008. Political instability affected economy.
 
Over the first eight months of 2008, industrial manufacturers’ prices grew by 36.5%, especially in such sectors as mining of mineral resources (except for fuel-and-energy ones) by 70.4%; metallurgy and metal works by 68.1%, coke production by 64.3%; and the chemical industry by 55.9%. All of these sectors are oriented towards foreign markets or towards servicing export-oriented production.
The convergence factor (resulting from openness of the Ukrainian economy to global trends, e.g. to the 2008 consumer price rise in most countries of the world) also accelerated inflation processes in the domestic consumer markets.
 
In September CPI amounted to 101.1% (in January-September it amounted to 116.1%), but it was much less than in 2006 and 2007, when it grew by 2.0% and 2.2%, respectively. So in general, in Q3 Ukraine had the lowest rate of price rise in the last four years – as low as 0.5%. The overall inflation was driven, first and foremost, by rising prices (tariffs) for services.
The role of export-oriented production in the country’s economic growth increased. In early 2008, production growth in export-oriented sectors accelerated, and the financial resources of the national economy were re-distributed, in particular through the banking system, from other sectors into commodities and export-oriented ones.
 
Thus, in the first seven months of 2008, production growth in metallurgy was 3.5%; in the chemical industry it was 5.2%. It accounted for relatively high growth rates in industry at large –7.3%.
Over the same period, the share of profitable companies in the total number of enterprises increased from 65.1% in January-July 2007 to 66.9% in January-July 2008, and their profits boosted by 71.7% as compared to the corresponding period of 2007. Leaders of profitability growth were coke production and oil refinement (by 5.7 times), the mining industry (by 2.2 times), and chemical and petrochemical industries (by 2.5 times).
Lending also increased, especially in such sectors as agriculture (135.1%), coke production and oil refining (132.5%), machine building (132.1%), chemical and petrochemical industries (130,6%).
In early 2008, the Ukrainian economy remained attractive for foreign investors. The growth of total foreign capital investments in the national economy was 2.7 times as rapid as in the corresponding period of 2007. And again, most essential capital investments went to well-performing sectors: agriculture (149.7%), banking and financial activity (142.1%), coke production and oil refining (123%).
Against a backdrop of positive balance of payments and excessive supply of hard currency, the official exchange rate of hryvnia to the US dollar decreased by 3.96% to reach 4.85 UAH/USD in late August. In January-August, foreign currency reserves augmented by USD 56 billion – to USD 38.1billion.
The second wave of the global financial crises set off ripples in the Ukrainian stock market. The PFTS index lost 43.5% in the first seven months of 2008, primarily due to the withdrawal of some foreign investors (the so-called ‘jobbers”) from Ukrainian, as well as from the global, markets and to political instability in Ukraine.
 
Almost all companies listed on PFTS suffered a decline in share and securities prices. Under the conditions of free capital flows, the Ukrainian economy demonstrated market-driven tendencies to seeking super-profits, which enhanced its export-oriented and commodity components, especially given intensified commodity drivers in the global markets.
[3] The third wave of the global financial crisis is unfolding before our eyes.  It has already caused a series of bankruptcies of the world’s leading financial companies and financial crisis rollover to the real economy sector, drop in demand on global markets and, as a result, plummeting commodity prices and stagnation of leading economies. In August-September, average metal prices in eight regions of the world fell by 18.3%, and oil prices fell by 26.5%.
The Ukrainian economy has not yet felt the consequences of the third wave in full. At this juncture, it is hard to estimate their severity and duration, but some impact has been obvious.
Thus, in August, for the first time since October 2002, industrial production decreased by 0.5% (y-o-y), in particular in metallurgy – by 8.6%, the chemical industry – by 9.1%, and coke production and oil refining – by 4.9%.
In other words, a set of external shocks, coupled with the export-oriented companies’ strategy geared towards searching out niches in foreign markets while underestimating domestic ones, slowed growth, which, in the first eight months of 2008, was as low as 2% in metallurgy and 3.5% in the chemical industry. In general, rates of industrial production growth fell to 6.3% in the first eight months of 2008.
The PFTS index continued to go down, losing another 43% in the last two months. Bad news from mining industries and metallurgy had an adverse impact on the PFTS index, too.
In view of the above, the GPD growth of 7.1% was achieved at the expense of other sectors, chiefly, agriculture, where the harvest was unusually rich.
Devaluation processes became manifest in the currency market, and in September foreign currency reserves reduced by USD 0.6 billion. Negative inflation expectations contributed to the overall turmoil. A negative balance of sale/purchase of cash foreign currency by the population amounted to USD 1,321 million.
The third wave of global financial crisis forced governments in the world’s largest economies to revise their policy vis-à-vis financial markets. In particular, the governments of the USA, the UK, Germany, Russia, the Benelux States and other countries decided to support some of the troubled financial institutions.
Investors expect the government of Ukraine to take similar measures. However, the drivers of mortgage and financial crises in the USA and other developed economies and those forming potential negative tendencies in Ukraine’s economy are different.
In order to find solutions allowing for mitigation of the influence of the global crisis on the Ukrainian economy, we should analyze the most likely channels of this influence.
As matters stand, the channel relating to global stock markets is not the most powerful and painful for Ukraine’s economy. Of course, it puts certain pressure on the currency market as the risk (speculative) capital flows out, but it will hardly affect the development of the real economy sector in Ukraine.
 
For one thing, the organized stock market is underdeveloped – only 4.66% of all transactions take place on it. For another thing, foreign investors and other sources of funding, including stock market funds, account for as little as 5%-7% of all investments.
There are other channels of influence, more deeply-felt by the Ukrainian economy.
[1] The first channel is foreign trade. Widespread financial problems have already undermined demand in the international markets. Recession in the world’s leading economies will be accompanied by the decreasing investment demand and poorer dynamics of construction. This, in turn, will continue to drive down prices for metallurgy and machine building products.
Since the Ukrainian economy is highly dependent on exports making up more than 47% of the country’s GDP, the above trends in the global markets will be harmful for the development of export-oriented sectors, with subsequent repercussions on industries relying on exports directly and indirectly.
[2] The second channel is the banking system. The penetration of foreign capital into Ukraine’s financial institutions is considerable. The financial sector is one of the national leaders in attracting foreign direct investments (19% of total accumulated foreign capital).
 
The share of foreign capital in the banking sector amounts to 37.2% of total capital, which exceeds the threshold of economic security established at 30%; in the insurance sector it approaches the threshold value, currently constituting 28.1%.
Given the large share of transnational financial corporations on the Ukrainian banking sector, the global financial crisis could have an indirect adverse impact if mother companies suffer great losses or have liquidity problems.
In this context, it is noteworthy that investments and development of Ukrainian manufacturing companies hinge more on lending than on the stock market: 16% of investments in fixed assets are funded from loans. The most credit-dependent sectors are agriculture, construction, processing industries, including the chemical and petrochemical industry, the food industry, coke production and oil refining.
[3] The third channel of influence is debt. In June 2008, gross foreign debt made up 59.9% of GDP at USD 100.06 billion. Almost 85% of this debt was that of the private sector. According to IMF data, the maximum limit of foreign debt for low and middle income countries is set at 49.7% of GDP; once this limit is exceeded, the probability of financial crisis increases to 70%.
Deteriorating liquidity in global financial markets could slow up lending to the Ukrainian economy. As a result, Ukrainian borrowers will have difficulty refinancing their credit liabilities in external markets.
Furthermore, the share of short-term capital in foreign debt is large (28.2% as of late June 2008). Over the first six months of 2008, the ratio of short-term foreign debt coverage with reserves fell by 15% to 1.258. This capital, in the event of its sudden outflow could contribute to destabilization of the national currency exchange rate.
The current conditions of the national economy development differ a great deal from those of 1998 when Ukraine was also hit by a profound global financial crisis. Now the national economic system is less resistant to financial shocks. Whereas in 1997-1998 corporate debt was small and the corporate sector did not rely so heavily on foreign funding, today the national financial system is more dependent on external cash flows.
If worst comes to worst, and all of the above channels start working at once and in their full capacity, the global financial crisis will have grave consequences for Ukraine:
[1]  the deficit of foreign trade balance will increase sharply to go beyond 10% of GDP, which is critical for emerging economies;
[2]  the positive balance of account of capital transactions and financial transactions will dwindle;
[3]  the positive balance of payments, maintained over the last few years, will turn into a negative one.
In order to prevent dramatic devaluation, the National Bank of Ukraine will have to sell hard currency from its reserves. And yet, it will be a difficult task to achieve. Under the circumstances, GDP growth could slow down to 2.5%- 3%, CPI will go beyond 20%.
It is not about mere situation modeling, other things being equal. Nor is it about analyzing scenarios based on the “what if” principle. Since the 1998 crisis, the national economy has become much more integrated into international financial markets; its structure and development characteristics have changed significantly.
 
Today economic growth is determined by domestic potential, rather than external factors. Households’ consumer demand is growing rapidly, together with investments in renovation of fixed assets and introduction of modern technologies. Ukraine has become an international market player.
In light of the escalating global financial crisis, the government and National Bank have taken a number of measures allowing for the reduction of the risk of its profound destructive influence. They include a package of anti-inflation initiatives, steps to enhance banking sector stability and to minimize the impact of the global financial crisis on Ukraine’s economy.
 
In early 2008, the National Bank passed a resolution toughening requirements to calculating the banks’ regulatory capital adequacy (long-term asset transactions with time of floatation exceeding the time of funding should be additionally risk adjusted at 50% rate and so on), which enabled banks to adjust and improve their position.
In addition, Ukraine has an “insurance police” of sorts in the form of Euro- 2012. If the planned scope of work is fulfilled, the country will get a guaranteed inflow of foreign direct investments, mid-term and long-term loans, because investors worldwide view such events as image-building, promotional projects with low financial risks.
As a popular saying goes, hope for the best and prepare for the worst. The current challenges and threats require that public authorities and the private sector address them effectively and take additional preventive measures.
What can the government do?
Given the risks of reduction in export-oriented production due to weakening global demand and problems with payments under export transactions, the government should work to stimulate domestic demand for the group of export goods and, thus, enhance the role of domestic production. It can start with launching new infrastructure and residential construction projects funded from the state budget.
 
The government should prevent a sharp decline in grain prices by urging the Agrarian Fund to purchase grain of this year’s harvest. It will provide agricultural producers with sufficient resources to prepare and carry out the sowing campaign. It will also support, directly and indirectly, the development of metallurgy, coke production, the mining industry, oil refining, the chemical industry, the food processing industry, trade and transport.
In order to manage the financial instability risk, it is strongly advisable to revise the draft 2009 budget so as to increase capital expenditures, including in construction, without increasing the budget deficit. It is also important to set up a Stabilization Fund that will cover all governmental guarantees, which will gain more confidence in the governmental commitment to pursue a well-balanced and sound budget policy.
In times of financial crisis, the government’s strategy is to encourage investments into the real sector of the economy. To this end, alongside accelerating the implementation of projects related to Euro-2012, we should unblock privatization processes.
 
The government cannot do that alone, we need support from the Verkhovna Rada to get the State Privatization Programme adopted. Parliament should also pass a package of laws drafted by the government and geared towards boosting Ukraine’s investment attractiveness.
What can NBU do?
In order to prevent a banking crisis, NBU should establish principles of refinancing commercial banks that have short-term liquidity problems for the period of financial crisis. A currency crisis can be averted with a series of measures precluding the exchange rate destabilization by speculators. NBU should continue to pursue the policy of increasing the rate volatility in order to reduce risks to the balance of payments.
What can businesses and investors do?
Given the limited financial resources inside the country and shrinking access to foreign loans, businesses face a difficult choice: either to suspend production and lose markets, maintaining high prices in expectation of better times, or to reduce prices trying to restore demand and keep consumers.
 
The latter option is for those manufacturers who care about their future, expansion and economy of scale; the former is for profiteers who make large money quickly and drop the production.
The government can undertake to hold consultations aiming to sign memoranda with investors and large businesses on reducing prices for goods and services.
Only the concerted efforts of the government and National Bank, supported by Parliament and the business community will enable the Ukrainian economy to pass the maturity test in times of global financial crisis.
 
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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7.  UKRAINE WOBBLES AS THE FINANCIAL GROUND BENEATH IT TREMBLES

Ukraine’s economy is in trouble, there is no doubt about it.
 
ANALYSIS & COMMENTARY: by Edward Hugh, Macroeconomist, Barcelona, Spain
Global Economy Matters, Sun, Oct 12, 2008 & RGE Monitor, New York, NY, Sun, Oct 12, 2008
 
       “The medium-term outlook is sensitive to external developments and policy responses. A benign external environment, featuring even
       higher steel prices and FDI, could produce growth in excess of 7 percent, but inflation could prove hard to control under a peg. Under
       an adverse external outlook, by contrast, the peg could lead to external sustainability problems.”  IMF 2006 Article IV Consultation
       Staff Report (February 2007) (http://www.imf.org/external/pubs/cat/longres.cfm?sk=20411.0)
UKRAINE’S ECONOMY IS IN TROUBLE, THERE IS NO DOUBT ABOUT IT. The cost of protecting debt against a sovereign default by Ukraine’s government soared to a record on Friday, following the arrival of a twin storm of both political and financial uncertainly.
 
The Ukraine president Viktor Yushchenko announced earlier in the week (only to be challenged on Saturday by his perpetual rival Julia Tymoshenko) that he was going to call what would be the country’s third parliamentary elections in as many years just as the central bank found itself forced to step in and take control of the country’s sixth-largest bank while the country’s currency – the hyrvnia – went for a nose-dive.
 
With the benefit of hindsight the IMF forecast cited in the paragraph above has been extremely prescient. During the “benign external environment stage” Ukraine’s economic growth has been substantial, steel prices have been high, and FDI flows (especially into the banking sector) strong.
 
As a result inflation went through the roof. Now we have entered the “adverse external environment” stage, and steel prices are falling while bank and other external finance flows reverse direction. The sustainability issues are evident, and the coming days are going to be critical.
Ukraine is not alone in having problems at this point (but here there is no strength or consolation to be found in company), and stock markets around the globe fell dramatically last week. Ukraine’s PFTS bourse was, thus, only one among several that found themselves compelled to suspend trading.
 
Ukraine’s stockmarket was closed for the second time in the week on Wednesday (trading had previously been suspended on Monday) following an 11 per cent drop in shares on Tuesday (with banks plummeting between 22 and 26 per cent, and metal producers slumping from 13 to 16 per cent).
 
Trading did recommence again on Thursday, only to see an additional 14 percent in value wiped out, and the doors firmly barred again on Friday. Markets will now remain closed until Monday, when, at the time of writing, they are scheduled to open once more.
 
The PFTS index has now lost 41 percent since the start of September, when the large scale investor pull-out from Russia really got underway, and is down 73 percent since the start of the year, a rollercoaster performance following the 130 percent rise last year. [To see the chart and a series of charts go to http://globaleconomydoesmatter.blogspot.com/index.html]
 
CREDIT DEFAULT SWAPS SOAR 
Credit-default swaps on Ukraine’s $14.9 billion state debt jumped by 473 basis points to 1,700, the biggest one-day advance, according to CMA Datavision prices in London. Ukraine now is priced as having the highest risk of default among Europe’s emerging markets.
Ukraine is highly dependent on foreign investment at a time when credit markets around the world are frozen. Ukraine’s current account deficit has surged strongly this year to a projected $7.7 billion (up from about $2 billion). At the same time annual inflation soared to a record 31 percent in May and was still stuck at 25 percent in September.
The central bank has already spent an estimated $1 billion supporting the hyrvnia after it fell as much as 12 percent against the dollar during September and early October. The intervention reduced foreign reserves to $36.5 billion yesterday and pared the decline in the hryvnia, which strengthened by 6.6 percent on Friday to reach 4.9987 per dollar. This followed a drop to 5.9 to the dollar on Wednesday (or a cumulative 20% devaluation since early the start of September).
 
All these numbers are large, whichever way you look at them. And this kind of intervention is expensive, and while Ukraine is not on the brink of bankruptcy (yet) it cannot continue for that long. Reserves already fell in terms of months of next period imports from 4 months to 3.7 between Q1 and Q2 2008 according to central bank data. At the same time Ukraine’s external financing requirements have risen sharply in recent years (see chart below). [To see the chart and a series of charts go to http://globaleconomydoesmatter.blogspot.com/index.html]

BANKS TAKE A BEATING 
The National Bank of Ukraine also took over the management of Prominvestbank during the week, and imposed a moratorium on payments to creditors for six months, triggering generalised credit rating downgrades.

The move came after nearly a week of local media reports, which were followed by queues outside banks and in front of ATMs, that Prominvestbank was in difficulties due to heavy involvement in Ukraine metal and real estate industries – both good earners until as late as last month, but now sectors which face massive losses due to falling international commodity prices and more costly credit.
Moody’s investor services expressed concern about the ability of Kiev-based Prominvestbank – which had a reported 27.6 billion hryvnia ($5.1 billion) of assets as of Sept. 30 ” to continue its operations as a viable stand-alone entity”.
 
In a report written by analyst Yaroslav Sovgyra, and was published Thursday, the ratings agency said “Prominvestbank’s franchise and the overall credit profile have been significantly impaired in light of the recently experienced run on deposits by the bank.” Moody’s cut its foreign-currency deposit grade for Prominvestbank to Caa2, the fourth-lowest ranking, and down from B2. Fitch Ratings cut Ukraine’s credit outlook to “negative” from “stable” on Sept. 25.
Ukraine’s banks owed a total of $38.4 billion as of July 2008, according to central bank data. To put things in perspective, this could be compared with the estimated $61 billion owed by Iceland’s three collapsed banks. But the foreign indebtedness of Ukrainian banks has grown rapidly in recent years, doubling in 2006 to $13.87 billion, from $6.75 million in 2005.
 
Much of the lending (around 50%) is forex denominated, and although the total private debt to GDP ratio (65%) is comparatively low, lending has been rising at a very fast rate (75% per annum).
Around 30% of Ukraine’s total foreign debt ($128 billion or around 65 percent of GDP in 2008 according to IMF estimates) is owed by commercial banks.
In an attempt to address the crisis, the Ukraine central bank has injected 7.795 billion hryvnia into the banking system since the beginning of October, following 5.96 billion lent to banks during September.
 
The problem is much more extensive than Prominvestbank itself, with shares in Raiffeisen Bank Aval, Ukraine’s second-biggest bank by assets, also down 74 percent this year. Shares in AKB Ukrsotsbank, the country’s fourth-biggest bank, have slumped 79 percent.
Ukraine’s banking sector appeared even more shaky following the Prominvest decision than it did before it, with numerous banks formally applying for government assistance. According to intefax a total of 25 loan institutions have filed requests for low- interest credits or other state financing.
Local newspaper Kommersant-Ukraina named Narda bank (another in the top ten) as one of the banks seeking government financing. Narda are set to receive a 290 million dollar bail-out package to cover approximately 230 million dollars of external debt, according to the report.
Other Ukrainian banks reported to be asking for help on Thursday were Rodovidbank, Alfa-Bank, Kreditprombank, and Finansi i Kredit bank, according to an article in Economicheskie Izvestia. The article said that the central bank had already approved 23 of 25 assistance package requests – and that they were worth in total around 620 million dollars,. Banks applying for cash injections account for something like 25 per cent Ukraine’s banking sector.
Apart from Kazakhstan, Ukraine is currently the only government among Europe’s emerging markets with credit-default swaps currently trading above the 1,000 basis points level. But even Kazakhstan debt is way below the Ukraine equivalent, with contracts on Kazakhstan jumping to 1,050 basis points from 759 basis points on Friday as the government increased sevenfold the limit on retail bank deposits guaranteed.
The problem is most certainly becoming a regional one, and extending across Eastern Europe, with contracts on Russian government debt up 179 basis points (to 559), their highest level since at least 2004. Credit-default swaps on Turkey rose 138 points to 552 points, while those on Hungary increased 116 points to 458.
As I have argued in a number of previous posts Ukraine is evidently suffering from a wide variety of problems, including institutional chaos and ongoing population decline, and it is not really surprising that it should be singled out as the country destined to lie at the heart of the forthcoming CEE “correction”.
STRONG GDP GROWTH 
        “The growth forecast for 2008 reflects strong performance during the first half of the year, terms-of-trade gains, and indications of a
        bumper harvest,” the October 2008 IMF World Economic Outlook report stated. “Going forward, growth is projected to decelerate
        markedly, reflecting weaker export market growth, slowing real wage increases, moderating terms-of-trade gains, and higher financing
The current events in Ukraine may well take some observers by surprise, since the general impression has been that the economic performance has been solid and GDP growth has been strong in recent years, and this has given the impression that the underlying reality was sound, which it basically hasn’t been.
 
The country has been bedevilled by constant infighting, while at the same time a combination of strong migration of Ukraine workers to external destinations and very long term low fertility has meant that the country endemically suffers from acute labour shortages as the population both ages and declines comparatively rapidly. Hence, in my view, the absurdly high levels of inflation we have been seeing.
Nevertheless, real GDP has grown by 7.5 percent a year on average since 2000, in line with other CIS countries, and indeed that rate has been higher than in most other transition economies: whether or not this growth was built on sand is what we are now all about to find out. [To see the chart go to http://globaleconomydoesmatter.blogspot.com/index.html]

GDP was up at a 7.1% y-o-y rate in the January to August period, and in fact the expansion has even been accelerating in recent months largely, due to the good harvest and the increase in agricultural output – up 24.4% January to August. Manufacturing output has also been doing well, driven by a seemingly unquenchable thirst for steel in Russia, and was up 7.3% y-o-y in the January-August period.

 
Construction, on the other hand, has now been in recession for some time, with output down 5.3% y-o-y in the first eight months of the year. The decline in construction is a reflection of the growing credit difficulties the economy has been having, and the slowdown has been making its presence felt in domestic consumption generally, with the rate of retail sales increase (while remaining strong) starting to taper off, falling from 10.4% y-o-y in Q1 to 8.2% in Q2.
 
And as we know, the recent Russian tank excursion through the Roki tunnel has meant that Russia is now nothing like so thirsty for steel (see below), and as a result, we should expect to see headline Ukraine GDP growth dropping fairly rapidly (we could be down to a 3 or 3.5% annual rate by the end of Q4, with more downward movement to follow as we move into 2009), as the country gets caught in the twin pincer of an internal credit crunch (sudden stop) and a sharp drop in external demand for its key product.
OVERHEATING AND THE INFLATION PROBLEM 
Evidently the Ukraine economy was pushed well beyond its short term capacity limits by a combination of expansionary fiscal and incomes policies (real, inflation adjusted, income was up 13.4% y-o-y in January-August) and high steel prices (both of which fuelled very strong domestic demand growth), and these were simply reinforced by very rapid money and credit growth.
 
These factors, together with rising food and energy prices, lifted CPI inflation to a peak of 31% percent in May (see chart below), since which time the rate has fallen back, but only as far as the 24.6% rate registered in September. [To see the chart go to http://globaleconomydoesmatter.blogspot.com/index.html]

Core inflation has also risen – with producer prices still rising at an annual rate of 42.7% in September (having peaked at 46.3% in July, see chart below), while real wage growth continues to be substantial, and inflation expectations remain at a very high level. [To see the chart go to http://globaleconomydoesmatter.blogspot.com/index.html]

CURRENT ACCOUNT DETERIORATION 

The Ukraine current account deficit has deteriorated sharply because of the very strong domestic demand growth and, more recently, the eroding competitiveness of Ukraine manufacturing industry. This has loss of competitiveness has occurred despite significant improvements in the terms of trade. This favourable situation is now coming to an end and in all probability even reversing as steel prices drop substantially.
 
Capital inflows, and especially FDI, which have been strong, may now well reverse. Private external debt and debt rollover have risen sharply, leaving the economy more sensitive to balance-sheet risks and deteriorating global liquidity conditions, according to the most recent staff report by IMF economists.
 
The IMF estimate (October 2008, WEO) that this years current account deficit will rise from 3.7% of GDP in 2007 to 7.2%. [To see the chart go to http://globaleconomydoesmatter.blogspot.com/index.html]

Fiscal policy has been dangerously expansionary in the face of the rising inflationary pressures and the deteriorating current account position. Nominal spending has risen by an average over 30 percent a year since 2003, stimulating domestic demand and increasing the size of the government sector. This growth reflected rapidly rising public-sector wages and social transfers and, in 2008, partial restitution of Soviet-era bank deposits that had been wiped out by hyperinflation.

Deficits have been moderate, as spending growth has been paid for by inflationary revenue windfalls that fiscal policy itself has helped bring about. Nevertheless, the fiscal stance has been procyclical and Ukraine is one of the few countries in Eastern Europe to have increased its fiscal deficit as capital inflows have surged.
STEEL DEPENDENT ECONOMY 
In what is now a sign of the times Ukraine’s biggest steel mill, owned by the ArcelorMittal group, reduced steel output by 10.5 percent to 5.471 million tonnes in January-September 2008, according to Ukraine news agency reports last week.
 
The reports suggested the ArcelorMittal mill had decreased rolled steel output by 12.4 percent to 4.663 million tonnes so far this year, while pig iron output fell by 9.3 percent to 4.935 million. The company had previously increased steel output to 8.103 million tonnes in 2007 from 7.6 million in 2006.
Just over the border, OAO Severstal, Russia’s largest steelmaker, also announced last week plans to slash output in Russia, the U.S. and Europe by as much as 30 percent in October and review full-year forecasts. Production is to be cut 30 percent in the U.S. and Italy, and 25 percent in Severstal’s home town of Cherepovets in Russia.
Steelmakers from China and South Korea to Austria and Russia are curbing output as demand for cars and buildings weakens, and as banks withdraw funding for new plants. OAO Magnitogorsk Iron & Steel, Russia’s third-largest producer, Posco, Asia’s biggest stainless steel maker, and Voestalpine AG, Austria’s top steel company, all signaled cuts in production plans this week.
The production and export of steel is an important pillar of the Ukrainian economy, and steel production accounts for more than a third of total goods exports (equivalent to some 12 percent of GDP). Thus real GDP growth in Ukraine is closely linked to steel prices. During the global economic upswing of the past few years, along with a wider surge in metals valuations, steel prices have risen dramatically, thus underpinning Ukraine’s mostly favorable export performance and impressive GDP growth ever.
 
Although steel prices had been holding up till very recently, the current global financial turmoil is having a dramatic impact on car, construction and investment activity, all of which impact steel prices and we may therefore expect significant adverse effects on Ukraine growth and export receipts. A key issue for the future is, of course, how Ukraine’s economy can be made less dependent on such global price volatility in one key product.
SHARP STEEL DOWNTURN 
As recently as Sept. 4 OAO Severstal had been suggesting that output would rise 31 percent to 23 million metric tons this year, so the slowdown has been very rapid indeed. Goldman Sachs Group Inc. yesterday cut its 2009 steel price forecast by 29 percent. Global export prices for hot-rolled coil steel, a benchmark, have declined 19 percent since July, according to Bloomberg Metal Bulletin data.
And the slump doesn’t only affect current output, investment is also affected. Thus Austrian steelmaker Voestalpine announced during last week that it is considering delaying a decision on building a new steel plant on the Black Sea due in part to the financial crisis. Voestalpine had been planning to build a plant with a 5.5 million tonne capacity in either Bulgaria, Romania, Turkey or Ukraine, with a cost which investment analysts estimate to be in the 5 to 6 billion euros ($6.7-8.2 billion) region.
HYRVNIA UNDER PRESSURE 
      While the official exchange rate is set as Hr 4.95 – plus or minus eight percent – to the U.S. dollar, some exchange booths were
       offering Hr. 5.5 to Hr 6 for $1. Kiev Post Report
The hyrvnia – Ukraine’s national currency fell to an eight-year low last Wednesday, following the decision of the National Bank of Ukraine to widen the currency’s trading band. The National Bank, which has $38 billion in foreign exchange reserves, is now engaged in a delicate balancing act since while on the one hand officials are promising “strong interventions” to keep the hryvnia at roughly five to the dollar, international financing sources are drying up and Ukraine is running a growing current account deficit, which hit nearly $8 billion in July.
The strategy appears to be not to waste foreign exchange reserves, defending an arguably un-defendable exchange rate, but to conserve reserves to support banks and corporates to meet external debt service payments falling due and, also, to more generally prop up the banking sector. The problem is that the NBU can either support the currency, or support the banks and corporates but it does not really have enough foreign exchange reserves to do both at once.
Ukraine’s central bank has weakened the currency’s official rate against the dollar and widened its trading limits on October 7. The currency’s new official rate until the end of the year was weakened to 4.95 per dollar from 4.85 and it will be allowed to rise or fall 8 percent from that level, compared with the previous 4 percent.
The hryvnia has slumped 18 percent against the dollar since Sept. 2, when President Viktor Yushchenko’s party broke from its coalition with Prime Minister Yulia Timoshenko. Yushchenko dissolved the parliament yesterday, calling for new elections.
The managed currency is also being pushed down by demand for dollars from local banks and companies who need to pay down debt which they can’t refinance so they have to buy dollars and pay back now. Exporters seeing this situation are also postponing selling dollars hoping for more local weakness down the road.
Nationalnyi Bank Ukrainy, which kept the hryvnia little changed against the dollar throughout 2007 and 2006, allowed it to trade more freely this year to help combat inflation, now at 26 percent. The bank strengthened the hryvnia’s official rate by 4 percent to 4.854 per dollar in June, after leaving it at 5.05 per dollar since April 2005.
DECLINING POPULATION THE ROOT OF ALL EVIL? 
One of the things we should all now be learning as we look out across what is currently happening right across Eastern Europe (and I do mean right across) is that what we have is an environment where a number of long term underlying problems persist.
 
These range from a lingering and heavy state presence in the economy, high and enduring inflation which steadily eats into the export competitiveness of manufactured goods and services, wage pressures which stem from labour supply shortages produced by out-migration and long term low fertility, and heavy balance sheet exposure due to an extensive euro- or dollarization of the banking sector (the later being the Ukraine case).
 
The large current account deficits which follow from the above, and the consequent ongoing dependence on the arrival of substantial capital inflows can create a vulnerability to short term shocks which puts the entire macroeconomic framework at risk. The current credit crunch is, of course, almost a text book example of just such a short term shock.
This danger of a strong correction in adverse times becomes even greater (as we are now seeing) if measures are not taken (which they weren’t in Ukraine’s case, see this post) to drain excess liquidity from the system (by running a fiscal surplus for example), to loosen labour supply constraints by facilitating inward migration of unskilled workers, and to accelerate the pace structural reforms – and particularly those which facilitate the development of “greenfield” investment sites which help channel capital flows towards productivity-enhancing uses and in so doing raise exports. Unfortunately, at least this time round, it would seem it is a little late in the day for this kind of advice.
So to answer the question I somewhat provocatively inserted at the head of this section, Ukraine’s declining population is not 100% of the problem, not by a long stretch it isn’t, but it is an important component, and does form a context in which the other parameters need to be situated, and this dimension of the current crisis in Ukraine is all the more important since it is one which is normally ignored, and even more to the point, has been left unattended for so long that it has become an issue which it is very hard to address.
 
A DECLINING AND AGEING POPULATION 
According to data from the State Statistics Committee , Ukraine’s population fell by 290,220 in 2007. That is a rate of only just short of a million people less every 3 years. Simply there are more people dying every year than are being born, with 472,657 births being registered (up 12,000 from 460,368 for 2006) and 762,877 deaths (down slightly from 758,093 in 2006).
 
What this means is that Ukraine’s population is now falling very fast, at an annual rate of 0.675%. And remember this is the natural decline, not counting out migration. As we can see in the chart below the Ukraine population peaked in 1993, and has been in some sort of free-fall ever since. [To see the chart go to http://globaleconomydoesmatter.blogspot.com/index.html]

There are a number of factors which lie behind this dramatic decline in the Ukrainian population.

 
[1] One of these is fertility, which is currently in the 1.1 to 1.2 Tfr range. In fact Ukraine’s fertility actually dropped below the 2.1 replacement level all the way back in the 1980s, but somehow people haven’t seen fixing this “bust” as being in any way particularly important.
[2] A second factor which is also important is life expectancy, and in the Ukraine case the trend in male life expectancy has been most preoccupying, since it has been falling rather than rising in recent years. In particular male life expectancy which is currently running at around 64.
 
Apart from stating the obvious here, we should note that the deteriorating health outlook which this low level of life expectancy reflects places considerable constraints on the ability of a society like Ukraine to increase labour force participation rates in the older age groups, and this presents a big problem since increasing later life employment participation is normally though to be one of the principal ways in which a society can compensate for a shortage of people in the younger age groups.
[3] The third factor influencing population dynamics is obviously migration. Ukranian out-migration since the turn of the century is distinguished by two key tends: a) a reduction in intensity when compared with the very dramatic population movements which were so characteristic of the 1990s, and b) a significant change in destinations. From migrating East the Ukrainians are now moving West.
 
There is little in the way of systematic data here, but there is national level data on the numbers of Ukrainians who now live and work in Portugal, Spain and Italy, together with plenty of anecdotal information about Ukranian migrant workers in Latvia, the Czech Republic, Poland and elsewhere in the EU 10.
According to information provided by Ukrainian diplomatic missions, 300,000 Ukrainian migrants may be working in Poland, 200,000 each in Italy and the Czech Republic, 150,000 in Portugal, 100,000 in Spain, 35,000 in Turkey, and another 20,000 in the US.
 
According to official information based on the number of permits issued by the Russian Federal Migration Service, some 100,000 Ukrainian citizens currently work in Russia, although the real number of Ukrainians working there is often estimated to be more in the region of 1million.
WITH FEWER AND FEWER PEOPLE AVAILABLE FOR WORK 
This out migration is very significant from the economic point of view, since the majority of those working abroad send money back on a regular basis (see chart below which shows World Bank estimates for Ukraine remittance flows) while at the same time are not present in the country to offer themselves for the work which this extra money creates.
 
So out migration and the accompanying remittances are one thing in a high fertility, growing population like that which is to be found in Ecuador or the Philippines, and quite another in the long term low fertility, declining population environment of Central and Eastern Europe. Hence all that demand driven wage inflation.
 
As we can see from the data in the chart below (which the World Bank Economists themselves recognise if surely a substantial underestimation) the flow of remittances into Ukraine has increased steadily in recent years. [To see the chart and a series of charts go to http://globaleconomydoesmatter.blogspot.com/index.html]
 
According to the World Bank remittances amounted to approximately 1% of Ukraine GDP in 2007, a number which seems rather small given the number of migrants involved, and one may suspect here that the data is rather underestimating the scale of the flows, but even as it is this amounts to a fiscal stimulus of 1% of GDP as a minimum.

As a result unemployment has been falling steadily over the last two years:

According to data from the Ukraine statistics office the official rate of unemployment stood at 1.8% of the economically active population in August 2008 (down from 2.4% in January).

 
Now these numbers are undoubtedly an underestimate of the true levels of unemployment (the ILO compatible rate is the much higher 6.2%, but given the very special health situation in Ukraine we need to ask ourselves just how many of those who are formally included in the ILO classification are actually fit for work in a modern economy) but they do give an indication of the trend, and it is clear that some parts of the Ukraine labour market have been suffering from acute labour shortages, and hence the wage-push inflation the country has been experiencing.
 
Wages have been rising (see chart below) [To see the chart go to http://globaleconomydoesmatter.blogspot.com/index.html] at a rate which has been way above the combined inflation and productivity increase levels for many years now, and although wages did start from a very low level, and some degree of “catch up” was not only inevitable but also desirable, the complacency of the relevant authorities (both nationally and internationally, IMF, World Bank etc) in the face of such levels AFTER inflation really started to take off really does strike the external observer as quite extraordinary.

In many ways Ukraine could be considered to be a rather important strategic component in the whole Eastern labour supply and demographic puzzle, as we are no about to see, since many have been hoping against hope that as the recent expansion steadily drained labour supply resources across the whole region, then Ukraine would simply be able to step up to the plate and offer countries as diverse as the Baltics, Poland, Hungary, the Czech Republic and Russia the labour they needed to keep their own inflation in check.

 
This view implied, in my opinion, that Ukraine was to become some kind of “fish farm” for the rest of Eastern Europe, and that view as we are seeing was always based on a huge misunderstanding, since a low fertility society simply cannot export labour indefinitely, and if it does try to do so, then internal wages simply explode.
IN CONCLUSION 
Of course, such demographic considerations may well seem to be rather distant from the very real and pressing drama which is breaking out in Ukraine.
 
Obviously there are a great many lessons to be learned from the current “undoing” of the Ukraine economy. One of these is undoubtedly the desirability of moving away from dependence on one or two key commodities (steel, agriculture) whose prices are known to be very volatile and tied-in intimately with the global business cycle.
 
Another would be the belated recognition that while FDI inflows are vital, such flows into the banking and financial sectors are not the same as inflows to fund greenfield industrial site development, and that an economy which is dependent on one or two primary commodities on the one hand, and construction associated business and financial services on the other simply is not a balanced or a stable one.
It is also clear that, whatever the well-wishing we would all like to make towards a rise in living standards for the Ukranian people, it is now abundantly clear that this cannot be achieved via a lack of vigilance towards the dangerous impact of spiraling wage-cost inflationary pressure, not can policy be adequately conducted under such circumstances by a central bank whose main priority is steering the value of a currency.
 
Laxity and tolerance towards the inflation menace ultimately comes at a very high price, especially when it is allowed to get out of control in the way it has been in the Ukraine.
Finally, even if in fighting the short-term battle for survival which is now going to confront the Ukraine economy and its banking sector longer term demographic concerns are inevitably going to take a back seat, I think we need constantly to keep in mind that a failure to come to grips with this key ingredient in Ukraine’s problem set will surely only lead to more of the same at some point in the future. So if you don’t especially like suffering – and who does – then act, and act now.
FOOTNOTE: Edward Hugh is a macro economist, who specializes in growth and productivity theory, demographic processes and their impact on macro performance, and the underlying dynamics of migration flows.

Edward is based in Barcelona, and is currently engaged in research on aging, longevity, fertility and migration, and the impact of all of these on economic growth. He is currently working on a book “Population, The Ultimate Non-renewable Resource?” He is a regular contributor to a number of economics weblogs, including India Economy Blog, A Fistful of Euros, Global Economy Matters and Demography Matters. He was, in fact, a founding member of all these weblogs.

Mr. Hugh follows in detail the Indian, Italian, Spanish, German and Japanese economies. He has a more than a passing interest in the economies of Turkey and Brazil and in the emerging economies of Eastern Europe. E-mail: ed.hugh@gmail.com

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8.  UKRAINE NEEDS TO SORT OUT ITS PROBLEMS ON ITS OWN

EDITORIAL: International Herald Tribune, Paris, France, Tuesday, October 14, 2008
 
Once again, the president of Ukraine, Viktor Yushchenko, has called for a parliamentary election – the third in as many years – in an attempt to resolve his never-ending political struggle with his two main rivals, Yulia Tymoshenko and Viktor Yanukovich, the current and former prime ministers.
We sympathize with Yushchenko and his vision of anchoring Ukraine economically and politically in the West. And if new elections help clear up the political mess in Ukraine, well and good. The main thing is to make sure these are elections by and for Ukraine, without meddling from Russia, or the West.
Yushchenko and Tymoshenko were favorites of the West in the 2004 “Orange Revolution.” Thousands of Ukrainians went into the streets to overturn the rigged election of Yanukovich, backed blatantly by Russia, as president. But the “Orange” allies soon fell out. Yanukovich was soon back in the Parliament and, for a spell, Yushchenko’s prime minister.
 
In all that time, the three rivals have dismally failed to find a way to share power, seriously hampering Ukraine’s development. Part of the problem is the division of Ukraine itself, with Yushenko supported in the European-looking west of the country, Yanukovich in the Russia-leaning east, and Tymoshenko moving back and forth.
The divisions are not going away anytime soon. And they will not be helped by any new meddling from Russia or the United States. After the nasty war in northern Georgia in August, both East and West should have no illusion about the danger of a conflict in the far larger and far better-armed Ukraine. The only way to avoid that, and to move toward political stability, is to leave the Ukrainians to sort out their own identities and prospects.
We still believe that Ukraine’s future is with the West. But we don’t believe that its Westward journey will be helped by pressures to join NATO so long as a sizeable portion of Ukrainians are against it.
 
At the same time, all three major political contenders have already declared their support for joining the European Union, which at this stage seems to be the best and most promising route for Ukraine.
 
Supporting the Ukrainians in this endeavor while staying out of their internal politics seems like the best support the EU and the U.S. could show for this young country.
 
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9.  SOFTSERVE, INC. JOINS THE U.S.-UKRAINE BUSINESS COUNCIL (USUBC)
Leading multinational software development and consulting company, member 93

U.S.-Ukraine Business Council (USUBC), Washington, D.C., October, 2008
 
WASHINGTON, D.C.
– SoftServe, Inc., a leading independent multinational software development and consulting company, has been approved for  membership in the U.S.-Ukraine Business Council (USUBC), according to the USUBC executive committee, in an announcement on behalf of the entire membership. SoftServe Inc. is USUBC member ninety-three.

 
SoftServe, Inc. helps global organizations enhance their customer’s competitive capabilities by providing the technology and processes that achieve strategic results. With over one thousand professionals on staff, SoftServe provides vendors with a wide range of software development, quality assurance, software maintenance and related services.
 
HEADQUARTERS IN LVIV, UKRAINE AND FORT MYERS, FLORIDA
SoftServe started in 1993 with two people in Lviv, Ukraine. SoftServe now has its European headquarters in Lviv while its development facilities are located throughout Ukraine.  As a next step in the implementation of its global strategy, SoftServe just recently opened its US headquarters in Fort Myers, Florida, expanding its strong presence in the region with numerous customers and two sales offices in Boston, Massachusetts, and Santa Ana, California.  
 
USUBC has been working with SoftServe now for several months according to Morgan Williams, SigmaBleyzer, who serves as president of USUBC.  “We
met in Lviv recently with Taras Vervega, Executive Vice President, Business Development, and Yuliya Kovalyova, PR Manager, to discuss the SoftServe program and their work in the United States. SoftServe can be very proud of what they have accomplished since 1993,” Williams said. Taras Vervega will represent SoftServe on the USUBC board of directors.
 
“The U.S.-Ukraine Business Council (USUBC) is very pleased to have SoftServe, Inc. as a new member. USUBC has grown very rapidly during the past 19 months and now has a membership base which allows USUBC to provide its members such as SoftServe with a full-time operation and a significantly expanded program of work,” according to president Williams.

 
EXPANSION INTO THE GLOBAL MARKETPLACE 
Through the years, SoftServe has been partnering with over hundred companies worldwide on a wide range of products and technologies offering superior level of capability in technical skills and project leadership. The company consistently succeeds by delivering to the highest levels of development outsourcing and by supporting clients with their long-term application support services.
 
Armed with solid commitment to supreme quality and world-class service delivery, SoftServe continues striving to further extend its expansion efforts into the global marketplace and develop new strategic partnerships in order to enable its distinguished client base around the world to yield even greater business value.
 
SoftServe’s state-of-the-art infrastructure, ISO- and CMMI-certified processes and unrivaled talent ensure the promise of excellence in even the most complex of projects.  The company clients gain the ability to accelerate their growth and expand their product offerings far beyond their internal capabilities, thereby increasing competitive advantage.
 
SOFTSERVE’S PARTNERS AND RANKINGS
Holding Microsoft Gold Certified Partner status since 2004, SoftServe has developed close partner relationship with Microsoft Corporation. In 2006 and 2007, SoftServe was chosen a Finalist of Microsoft Partner of the Year Award Program with its applications SalesWorks™ and RE3W.
 
In 2008, the company became the first exclusive Microsoft ISV NXT Partner in Central and Eastern Europe, and was recognized as Mobility Solutions Partner of the Year 2008 in this region.
 
In 2008, SoftServe was also ranked No. 5 in “Top 10 to Watch in Emerging European Markets” category by GlobalServices 100 – the elite rating of offshore outsourcing vendors based on leadership, innovation, and outstanding performance.
 
SOFTSERVE ACQUIRES ALVION UKRAINE
In September 2008, SoftServe announced the acquisition of Alvion Ukraine, a Sevastopol-based business intelligence services and ETL services provider. According to Taras Vervega, the EVP for Business Development at SoftServe, the move will enable the company to expand operations and services portfolio. The transaction is a part of SoftServe’s strategy to offer greater business value to the company’s clients along with expanding its presence in the southern part of Ukraine.

Post-acquisition, Alvion will be merged into SoftServe’s distributed development organization in Ukraine. In addition, the services portfolio of Alvion will be integrated into SoftServe’s portfolio, which will enable Alvion’s clientele to benefit from client partnerships of SoftServe. The acquisition will also allow SoftServe to achieve expertise in ETL technology and online customer support.

KEY SOFTSERVE EXECUTIVES: 

Chairman – Vilnis Ezerins
President – Taras Kytsmey 
Executive Vice President, Software Engineering – Yaroslav Lyubinets 
Executive Vice President, Business Development – Taras Vervega 
Executive Vice President, Delivery – Yura Vasylyk 
 
USA Address: SoftServe Inc., 13350 Metro Parkway, Suite 302, Fort Myers, FL 33966, USA; US tel.: 239 690 3111; 866 687 3588
European Address: SoftServe Inc., 52 V. Velykoho St., Lviv 79053, Ukraine; Europe tel.: +380-32-240-9090
Additional information about SoftServe can be found on their website: http://www.softservecom.com or by sending an e-mail to PR contact: Yuliya Kovalyova, PR Manager, info@softservecom.com.
 
USUBC MEMBERSHIP WILL TOP 100 IN 2008
SoftServe Inc. is the 43rd new member for 2008, and the 73rd new member since January of 2007. USUBC membership has quadrupled in the past 20 months, going from 22 members in January of 2007 to 93 members in September of 2008. Membership is expected to top 100 very soon.

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 and SoftServe Inc.

The complete USUBC membership list and other information about USUBC can be found at: http://www.usubc.org.

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10.  “OUR DAILY BREAD” HOLODOMOR EXHIBITION TO OPEN IN CHICAGO OCT. 24

Exhibition to feature fifty-four Holodomor artworks by Ukrainian artists
 
“They put a gun to your head and made you swear you would bring in grain the next day.
Everyone cried. There was nothing left to bring!” Hanna Ikasivna Cherniuk, Holodomor survivor
 
Ukrainian National Museum, Chicago, Illinois, Wednesday, October 15, 2008
 
CHICAGO – “Our Daily Bread”, an exhibition of artworks commemorating the Ukrainian Holodomor-Genocide, opens Friday, October 24th at the Ukrainian National Museum, 2249 West Superior, in Chicago. 
 
“Our Daily Bread” officially opens at 6:30 PM with a program that features a short video by Ukrainian singer Oksana Bilozir and an opening statement by the granddaughter of a Holodomor survivor, Ms. Oryna Hrushetsky-Schiffman. 
 
In 1932 and 1933, between seven and 10 million Ukrainians were deliberately starved to death during the “Holodomor” – or death by starvation. This genocide was masterminded by Joseph Stalin and his inner circle, and was carried out by Soviets who confiscated every last bit of food from Ukrainian peasants who were resistant to collective farming – and who represented the backbone of the Ukrainian people.
 
This year, 2008, marks the 75th anniversary of the Holodomor, and the government of Ukraine as well as Ukrainians around the world have been organizing events in an effort to expose and publicize this crime against humanity while there are still survivors young enough to recall its horrors.
 
EXHIBITION FEATURES 54 HOLODOMOR ARTWORKS
In Chicago, the latest event commemorating the Holodomor is an exhibition at the Ukrainian National Museum opening Friday, October 24th. “Our Daily Bread” features 54 artworks that are part of the “Holodomor: Through The Eyes of Ukrainian Artists” collection. 
 
The founder and trustee of the unusual collection, U.S. businessman Morgan Williams, gathered the over 350 original Holodomor artworks in the collection during the last 11 years in Ukraine.  Williams is director, government affairs, Washington, D.C., for the SigmaBleyzer private equity investment group and serves as president of the U.S.-Ukraine Business Council (USUBC).

 
Most of the artworks were created after 1988, when Ukrainians were finally free to evoke the suffering and horrors of the Holodomor in the last days of the USSR, right before Ukraine declared independence in 1991. Before 1988 no one was allowed to talk about this tragedy let alone express themselves through artwork or writings.  Many Ukrainian artists may very well have only learned of the Holodomor at that time, after decades of extreme Soviet suppression of the atrocities.
 
The government of Ukraine has officially declared the Holodomor a genocide against the Ukrainian people and is asking the United Nations to do so as well. Just this past September, the United States House of Representatives passed a Resolution condemning the Holodomor and the former Soviet government’s deliberate confiscation of grain harvests, which resulted in the starvation of millions of Ukrainian men, women, and children.
 
It was a devastating chapter of Stalin’s reign of terror that wiped out one quarter of the peasantry – and later included the intelligentsia and other leaders of Ukrainian society who were shot and exiled by the hundreds of thousands in an attempt to destroy the Ukrainian nation. And it was carried out at a time when Ukraine, then officially the Ukrainian SSR, had one of the richest farmlands in the world – “the breadbasket of Europe.” 
 
The exhibition will also include a room depicting what life was like in Ukraine prior to enforced collectivization—as well as an evocative walk-through installation depicting the horrors of the Holodomor.
 
The “Our Daily Bread” Holodomor exhibition is on view through Sunday, November 30, 2008. The Museum hours are Thursday to Sunday from 11:00 a.m. to 4:00 pm.  The Ukrainian National Museum is located at 2249 West Superior Street in the Ukrainian Village neighborhood. Call 312-421-8020 or visit the Museum’s website, www.ukrainiannationalmuseum.org for more information.
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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.  EXCERPTS FROM “SOVIET GENOCIDE IN THE UKRAINE”

Raphael Lemkin’s perception of the Ukrainian genocide is a solid recommendation to
the UN Assembly to finally recognize the Ukrainian tragedy for what it was – ‘a case
of genocide, the destruction of a nation. 
 
By Roman Serbyn, historian, professor, scholar, Montreal, Canada
Action Ukraine Report (AUR) #912, Kyiv, Ukraine, Saturday, October 18, 2008
 
MONTREAL – I have reproduced below, excerpts from “Soviet Genocide in the Ukraine”, the last chapter of a monumental History of Genocide, written in the 1950’s by the Jewish-Polish scholar Raphael Lemkin.
 
Unfortunately, the monograph has not yet been published and the chapter on Ukraine is known only to a few Lemkin scholars. The whole chapter (12 double-spaced pages) on Ukraine will soon be published in the original English language in the USA and eventually in other languages, in other countries.

Lemkin’s text deserves special attention by the Ukrainian community as it commemorates the 75th anniversary of the tragic events.

 
It should be noted that Lemkin, developed the concept and coined the term “genocide”, applies it to the destruction of the Ukrainian nation and not just Ukrainian peasants.
 
Lemkin speaks of:
 
a) the decimation of the Ukrainian national elites,
b) destruction of the Orthodox Church,
c) the starvation of the Ukrainian farming population, and
d) its replacement with non-Ukrainian population from the RSFSR as integral components of the same genocidal process.
 
The only dimension that is missing in Lemkin’s excellent analysis is the destruction of the 8,000,000 ethnic Ukrainians living on the eve of the genocide in the Russian Republic (RSFSR).

As Ukraine and the Ukrainian diaspora commemorates, in the coming months of October and November the 75th anniversary of the Genocide against the Ukrainians, it should be inspired by the all-encompassing approach to the analysis of the great Ukrainian catastrophe by the father of the concept of genocide and the man who did most to have it enshrined in the UN Convention of 1948.

 
Lemkin’s perception of the Ukrainian genocide is a solid recommendation to the UN Assembly to finally recognize the Ukrainian tragedy for what it was — “a case of genocide, the destruction of a nation.”

Roman Serbyn

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RAFAEL LEMKIN
 
SOVIET GENOCIDE IN UKRAINE (excerpts)
[…]
 What I want to speak about is perhaps the classic example of Soviet genocide, its longest and broadest experiment in Russification – the destruction of the Ukrainian nation. […]
 
[…] As long as Ukraine retains its national unity, as long as its people continue to think of themselves as Ukrainians and to seek independence, so long Ukraine poses a serious threat to the very heart of Sovietism. It is no wonder that the Communist leaders have attached the greatest importance to the Russification of this independent[-minded] member of their “Union of Republics,” have determined to remake it to fit their pattern of one Russian nation. For the Ukrainian is not and has never been, a Russian. His culture, his temperament, his language, his religion – all are different. […]
 
Ukraine is highly susceptible to racial murder by select parts and so the Communist tactics there have not followed the pattern taken by the German attacks against the Jews. The nation is too populous to be exterminated completely with any efficiency. However, its leadership, religious, intellectual, political, its select and determining parts, are quite small and therefore easily eliminated, and so it is upon these groups particularly that the full force of the Soviet axe has fallen, with its familiar tools of mass murder, deportation and forced labor, exile and starvation.
 
The attack has manifested a systematic pattern, with the whole process repeated again and again to meet fresh outburst of national spirit. The first blow is aimed at the intelligentsia, the national brain, so as to paralyze the rest of the body. […]
 
Going along with this attack on the intelligentsia was an offensive against the churches, priests and hierarchy, the “soul” of Ukraine. Between 1926 and 1932, the Ukrainian Orthodox Autocephalous Church, its Metropolitan (Lypkivsky) and 10,000 clergy were liquidated. […]
[…]
The third prong of the Soviet plan was aimed at the farmers, the large mass of independent peasants who are the repository of the tradition, folk lore and music, the national language and literature, the national spirit, of Ukraine. The weapon used against this body is perhaps the most terrible of all – starvation. Between 1932 and 1933, 5,000,000 Ukrainians starved to death, an inhumanity which the 73rd Congress decried on May 28, 1934. There has been an attempt to dismiss this highpoint of Soviet cruelty as an economic policy connected with the collectivization of the wheatlands, and the elimination of the kulaks, the independent farmers was therefore necessary.
 
The fact is, however, that large-scale farmers in Ukraine were few and far-between. As a Soviet writer Kossior [error: Kosior was party boss of Ukraine – R.S.] declared in Izvestiia on December 2, 1933, “Ukrainian nationalism is our chief danger,” and it was to eliminate that nationalism, to establish the horrifying uniformity of the Soviet state that the Ukrainian peasantry was sacrificed. The method used in this part of the plan was not at all restricted to any particular group. All suffered – men, women, children.
 
The crop that year was ample to feed the people and livestock of Ukraine, though it had fallen off somewhat from the previous year, a decrease probably due in large measure to the struggle over collectivization. But a famine was necessary for the Soviet[s] and so they got one to order, by plan, through an unusually high grain allotment to the state as taxes.
 
To add to this, thousands of acres of wheat were never harvested, were left to rot in the fields. The rest was sent to government granaries to be stored there until the authorities had decided how to allocate it. Much of this crop, so vital to the lives of the Ukrainian people, ended up as exports for the creation of credits abroad.
 
In the face of famine on the farms, thousands abandoned the rural areas and moved into the towns to beg [for] food. Caught there and sent back to the country, they abandoned their children in the hope that they at least might survive. In this way, 18,000 children were abandoned in Kharkiv alone. Villages of a thousand had a surviving population of a hundred; in others, half the populace was gone, and deaths in these towns ranged from 20 to 30 per day. Cannibalism became commonplace.
[…]
The fourth step in the process consisted in the fragmentation of the Ukrainian people at once by the addition to the Ukraine of foreign peoples and by the dispersion of the Ukrainians throughout Eastern Europe. In this way, ethnic unity would be destroyed and nationalities mixed. […]
 
These have been the chief steps in the systematic destruction of the Ukrainian nation. Notably, there have been no attempts at complete annihilation, such as was the method of the German attack on the Jews. And yet, if the Soviet program succeeds completely, if the intelligentsia, the priests and the peasants can be eliminated, Ukraine will be as dead as if every Ukrainian were killed, for it will have lost that part of it which has kept and developed its culture, its beliefs, its common ideas, which have guided it and given it a soul, which, in short, made it a nation rather than a mass of people.
 
The mass, indiscriminate murders have not, however, been lacking – they have simply not been integral parts of the plan, but only chance variations. Thousands have been executed, untold thousands have disappeared into the certain death of Siberian labor camps.
[…]
 
[…] This is not simply a case of mass murder. It is a case of genocide, of destruction, not of individuals only, but of a culture and a nation. […] Soviet national unity is being created, not by any union of ideas and of cultures, but by the complete destruction of all cultures and of all ideas save one – the Soviet.
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12.  HOLODOMOR MEMORIAL SITE APPROVED IN WASHINGTON, D.C.

 

Ukrainian National Information Service (UNIS), Washington, D.C. Friday, Oct 3, 2008
WASHINGTON, D.C.- On Thursday, October 2, 2008, the National Capital Planning Commission (NCPC) approved and awarded a parcel of federally owned land to the Ukrainian Government as the site for the Memorial to Victims of the Ukrainian Genocide of 1932-33. Public Law 109-340 authorized the memorial, as signed by President Bush on October 13, 2006.
 
The Ukrainian Famine-Genocide bill (HR562) was sponsored by Rep. Sander Levin (D-MI), co-chair of the Congressional Ukrainian Caucus, which
passed unanimously in the House of Representatives and Senate in 2005, 2006 respectively.
The adopted site is an approximately 3100 square foot triangular site located at the intersection of North Capital Street, Massachusetts Avenue, and F Street in NW Washington, DC. Office, government, institutional, and residential buildings characterize the general area surrounding the site.
 
The Postal Museum is across the street, and it is five blocks north of the U.S. Capitol. This open and visible site is situated in a busy and highly trafficked area that serves as a transition point between east and west Washington, DC.

The site is important as the first reservation west of Union Station, and is a significant entrance point from Union Station to NW DC through Massachusetts
Avenue, which is known for its international character.

Speaking about the accomplishment of the site selection, Alan Harwood a Principal with EDAW, Inc., the planning and design firm that is leading the
project team, “the Ukrainian memorial will be located on a wonderful and prominent site in the Nation’s Capital. It will be highly visible to many residents, employees, and visitors.”

Although the proposed memorial has not yet been designed, based on preliminary discussions, the Ukrainian Government has stated that it anticipates that the commemoration of this event will consist of a contemplative space with a memorial element appropriate for a landscaped setting. The proposed
memorial is anticipated to “include typical features such as an abstract or allegorical element in a landscaped setting.”

Initiated under the auspices of the Ukrainian Congress Committee of America in cooperation with Rep. Levin’s office, the process has been widely
supported by the Ukrainian American community. The National Committee to Commemorate the 75th Anniversary of the Ukrainian Genocide of 1932-1933 has taken upon itself financing of the Environmental Assessment for the project.

Its chairman, Michael Sawkiw, Jr., thanked the community for their continued financial support: “Without the support of Ukrainian Americans, our dream of having a memorial in Washington, DC would not have come to fruition yesterday during the site selection hearing.”

The Ukrainian Government is confident that it can create a successful and functional public space that befits the site’s prominence in the National Capital,
embracing the site’s natural openness, and seamlessly integrating the memorial into the surrounding environment.

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13.  CAN EUROPE SURVIVE GERMANY?

ANALYSIS & COMMENTARY: By Alexander Motyl

Professor of Political Science at Rutgers University-Newark
The Atlantic Council, New York, NY, Thursday, October 2, 2008  
If Europe ever dies, Germany will have killed it.

The community of values that Europe is supposed to be-one that claims to embody democracy and human rights and always gives preference to soft
power over hard-can survive only as long as its largest state shares those values.

Russia is the test that Germany failed. As Vladimir Putin steered his country in an unabashedly authoritarian and neo-imperialist direction, Germany showered him with praise.

 
When Chancellor Gerhard Schröder called Putin a “true democrat” at the height of Ukraine’s Orange Revolution in late 2004, he effectively declared democratic Ukraine’s Western aspirations incompatible with Germany’s relations with an authoritarian Russia and thereby repudiated democracy.

Last spring’s German declaration of solidarity with Putin’s opposition to Ukraine’s and Georgia’s possible NATO membership also revealed the triumph
of hard-nosed geopolitics over democratic values and soft power.

Chancellor Angela Merkel’s endorsement of the logic of Putin’s opposition-that foreign-policy decisions made by Ukraine’s democratically elected political elites are undemocratic while only those endorsed in popular opinion polls by its population are democratic-was a direct repudiation of Ukraine’s democratic institutions and a backhand endorsement of Putin’s dismantling of democracy in Russia.

Her September 10th designation of Russia’s invasion of Georgia as a mere “controversy” that should not overshadow Germany’s “shared interests” with Russia went even further than Schröder in sacrificing non-Russian democracy to Russian dictatorship.

Germany’s indifference to democratic values is a puzzle. After all, Germany should know better.

 
It devastated Ukraine, Belarus, and Poland in two world wars; it perpetrated the Holocaust along with a variety of other genocides against Roma and Slavs in Eastern Europe; and it was responsible for the deaths of almost 2 million Ukrainians in World War I and 8 million in World War II. (As Erich Koch, Hitler’s ruthless Reichskommissar of Ukraine, said, “I will pump every last thing out of this country. I did not come here to spread bliss.)

One would have expected Germany to be especially sensitive to the democratic aspirations and security concerns of the peoples it came closest to annihilating. Instead, Germany has consistently preferred authoritarian Russia to its democratic non-Russian neighbors.

Gas goes some way in explaining Berlin’s preferential option for the Kremlin, but not quite. After all, the Eastern Europeans most critical of Russia-such as Poland and the Baltic states-are far more dependent on Russian gas than Germany.

 
Lucrative pipeline deals and other commercial ties also don’t do the trick: economic logic should dictate a closer alliance with the United States, Germany’s largest trading partner, but instead German policy makers are frequently more anti-American in their rhetoric and policy than anti-Russian.

A closer look at history may help explain Germany’s anomalous behavior. In 1922, Weimar Germany signed the Treaty of Rapallo with Soviet Russia,thereby paving the way for extensive economic and military cooperation that isolated, and helped destabilize, the fledgling states of
East Central Europe. In 1938, the Molotov-Ribbentrop Pact led to the division of Poland by Hitler and Stalin.

 
Throughout the 1970s and 1980s, Germany willingly accepted Soviet hegemony in the satellite states (and even snubbed the Solidarity movement), in exchange for rapprochement with East Germany. The Schröder-Putin pipeline deal of late 2005 and Merkel’s endorsement of the logic of Putin’s opposition to Ukraine’s and Georgia’s integration into Euro-Atlantic structures continue this pattern.

In all five instances, radically different German regimes consistently pursued the same foreign policy goal. Whether unstable and democratic as in 1922, powerful and totalitarian as in 1938, stable and democratic as during the Cold War, or powerful and democratic as today-German elites, whether Christian Democrats, Social Democrats, or Nazis, forged alliances with an authoritarian Russia at the expense of their democratic neighbors in Eastern Europe.

 
This overarching vision of Germany’s interests is unabashedly geopolitical, pointing to a possible reassertion in today’s Germany of the Realpolitik political culture that dominated German foreign policy after unification in 1871 and that produced the disasters of the two world wars.

It’s hard to see how Europe-whether as an ethical community or as the European Union-can survive Germany’s return to great-power thinking and politics. A truly democratic club of countries cannot unconditionally prefer authoritarianism to democracy in all its dealings with its eastern neighbors.

 
A truly functioning EU-whether as a club of equals or as a super-state-cannot exist if its largest member is committed to its own interests above all others. (It was Schröder, after all, who in the run-up to the Iraq War declared that he would ignore a UN resolution to support the U.S. invasion.)

Since the problem is political culture, any effective solution must focus on it as well. The Holocaust points the way to just how German elites might be swayed to think differently about politics. The shame of six million dead Jews has kept Germany honest in its dealings with Israel.

 
The shame of the millions of Poles, Ukrainians, and Belarusians who were killed in two world wars may be the only way to remind Berlin that it cannot just ignore the values and interests of the countries that lie east of Germany and west of Russia in its ruthless pursuit of self-interest.
And the ethical community that is supposed to be Europe could only benefit from a recognition that human rights also exist outside the European
Union’s current borders.
 
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14.  TODAY’S STALIN CULT IN RUSSIA MORE INSIDIOUS THAN LATE SOVIET ERA ONE, ANALYSTS SAY

Window on Eurasia, by Paul Goble, Vienna, Friday, October 3, 2008

VIENNA – The cult of Stalin that has emerged in the Russian Federation over the last decade is more dangerous than its Soviet-era predecessor not only because it celebrates his crimes rather than ignoring them but also because it is finding an increasingly enthusiastic and almost completely uncritical audience among the young.

Christians have a special responsibility to counter this trend by promoting the restoration of historical memory among Russians, according to speakers at a Moscow conference on “Spiritual Resistance in the Church and in Society” organized by the Community of Orthodox Brotherhoods (www.blagovest-info.ru/index.php?ss=2&s=3&id=23080).  
The organizers asked participants to address three basic questions: Why after the opening of archives in the early 1990s did Russians not develop immunity” to the evil of Stalinism? “Why did our people turn out not prepared to do what, for example, Germans were able to do? And how can those who experienced Stalin’s rule find “a common language” with the young?
Irina Karatsuba, a historian at Moscow State University, told the meeting this week that Russia had lost 137 million lives during the 20th century from wars, revolutions and so on. Of that number, she continued, “the repressed formed a not insignificant fraction.” But today, all too few people are focusing on that.
Instead, she said, “surprising things are taking place in our time concerning recollections about this period of our history.” Indeed, she insisted, “now we are moving backwards in comparison even with how Khrushchev understood repressions.” In his time, Soviet textbooks “hid” what had happened. But now Stalin’s terror is presented as not only necessary but useful.
“In certain new textbooks,” she continued, the Soviet dictator’s actions “are presented as ‘an effective instrument without which industrialization and collectivization would have been impossible and without which the country would not have won the war and preserved its sovereignty – and [for the Kremlin and many ordinary Russians] sovereignty is ‘our all.'”
 
According to Karatsuba, the reason this has happened is that in the 1990s, “the root of [this] evil was not pulled out, the people did not repent, and there was not a Nurnberg Process against communism.” But she expressed the hope that “now it is still not too late” to do so and to ensure that Russians will be able “to distinguish good from evil.”
A second speaker, educator Yevgeny Knorre argued that “the waves of the revival of love for Stalin at the end of the 1960s and the first half of the 1970s and now in the 2000s … are connected with periods of ‘the crushing of hopes’ and stagnation” – Brezhnev’s “zastoy” in the first case and Vladimir Putin’s “stabilization” in the second.
In such times, which often are characterized by spiritual emptiness, people are looking for a father figure who can take care of them and lead them out of their difficulties, Knorre said. And he suggested that the Russian Orthodox Church must take a more active role in countering this emptiness much as the Catholic Church has done in Italy.
Oleg Ushakov, a lawyer who spoke third, agreed but suggested that many people in the Orthodox Church are themselves attracted to the idea of a little father tsar and remain attached to “a terrible monarchical ideal” which itself “is also connected with a loss of historical memory and spiritual understanding.”
 A fourth speaker, identified by Blagovest-Info.ru only as “an elderly artist from Yekaterinburg whose family was “subjected to repressions,” said she is shocked by the “nostalgia” for Stalin among his victims, but she added that she is even more “horrified” by school texts that seek to “justify” what Stalin did.
And a fifth speaker, Aleksandr Arkhangelsky, identified only as “not the television announcer,” said that these textbooks which argue that Stalin did the right thing are especially dangerous because in Russia today “there are already many young people who are ready to become active bearers of evil.”
“If the Church does not interfere,” he continued, “then the government will again make use of its ideological and repressive machine,” an action that could mean that many of the horrors of the 20th century in the Soviet Union will be repeated in the 21st century in the Russian Federation.
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15. OPENING OF SECURITY SERVICE (SBU) INFORMATION CENTER IN KYIV

Activities of the Security Service of Ukraine regarding declassification and publication
about the operations of the Soviet Union Securities Services and the history of the
Ukrainian Liberation Movement

 
NEWS RELEASE: OPENING OF SBU INFORMATION CENTER IN KYIV
Security Service of Ukraine (SBU), Kyiv, Ukraine, Thursday, October 2, 2008
SBU material translated into English for the Action Ukraine Report (AUR) #912
Morgan Williams, Editor & Publisher, Washington, D.C., Saturday, October 18, 2008
 
KYIV – In order to facilitate the impartial coverage of the Ukrainian history, consolidation of society and exposure of stereotypes and myths about the events of the 20th century, the Security Service of Ukraine, SBU, has engaged in the systemic work to declassify and publicize its archive documents throwing light on the operations of Soviet security services and the liberation movement in Ukraine.
 
Working group of historians to study OUN/UPA activities
In early 2008, a working group of historians to study OUN/UPA activities was set at the SBU. The group was made up of members of various state and public organizations: the Ukrainian Institute of National Memory, the State Committee of Archives of Ukraine, the Institute of History at the National Academy of Sciences, the Taras Shevchenko Kyiv National University, the SBU National University, the SBU archive and the Memorial Society.   
According to work group members, their research will focus on the liberation movement in Ukraine from 1920 through 1991. As separate aspects, the dissidents’ movement of the 1960s – 1970s as well as the democratic movement of the 1980s – 1990s will be examined. As a priority task, the group will study the documents of the SBU central and oblast archives. 
The work group goal is to attract scholars for the examination of archive materials and the implementation of joint research and publication projects.
The group’s chair is SBU head’s adviser Volodymyr Vyatrovych, Ph.D (History). His contact phone is (380 44) 239-70-93. 
 
Center for the study of documents related to the history of the Ukrainian liberation movement
At present, the SBU is possessor of the largest amount of materials related to OUN/UPA activities. However, these materials have been studied inadequately and were not accessible to the public. Given highly mixed and controversial feelings on these issues existing in Ukraine, the declassification and publication of archives is of crucial importance. 
Accordingly, the center for the study of documents about the history of the liberation movement was set up in June 2008. The center is part of the SBU state archive. The center’s main purposes are:
[1] searching, studying, systematization and declassification of archive materials related to the history of the liberation movement;
[2] creation of an annotated electronic directory of materials; 
[3] implementation of publication projects, preparation of books and articles, organization of public hearings related to OUN/UPA activities;
[4] enrollment of NGOs in the study of documents about the liberation movement, cooperation with domestic and foreign research and public organizations involved in the study of OUN/UPA history.
 
The center can be reached at: phone: (044) 256-98-32, fax: (044) 253-13-86, email: arhivsbu@ssu.gov.ua
SBU INFORMATION CENTER LAUNCHED OCTOBER 2, 2008 
On Oct. 2, 2008, the Security Service of Ukraine, SBU, launched its Information Center (IC) [in Kyiv] including an open electronic archive – to simplify access to materials stored in the SSU archive. [I attended this event in Kyiv, AUR Editor]
Over the past several years the SBU has been actively involved in declassifying documents related to the operations of Soviet security services and the history of liberation movement in Ukraine.
 
The IC provides an opportunity to get acquainted with electronic copies of archive documents. All documents have been arranged according to various topics (1932-1933 Holodomor, OUN/UPA Activities, Repression in Ukraine, Movement of Dissidents, etc.)
The IC also gives access to a large number of photographs, scientific journals and books, electronic versions of exhibitions and presentations. At present, the IC has 8 workplaces. The IC’s easy search system will be convenient to scholars, journalists and students of Ukrainian history working with original materials.
 
As declassification and conversion of materials into electronic form continues, the IC database is updated daily. Simultaneously, SBU has appealed to institutions, NGOs, and individuals who own archive documents related to the specified topics, asking them to make their materials available to IC visitors.  
 
The SBU Information Center is located at the following address: 4 Irynska St., Kyiv, Ukraine; Phone: 380 44 255-82-24.
 
Electronic archive of national memory
The SBU, jointly with the Ukrainian Institute of National Memory, has initiated the formation of an electronic archive of national memory. The archive will make it possible to facilitate the study of liberation movement history and contribute to the emergence of its uniform assessment by Ukrainians.
At present, the bulk of related materials is stored in state and law-enforcement agencies archives as well as the archives run by NGOs and individual researchers, both in Ukraine and abroad. The purpose of establishing the electronic archive is to create a unified database allowing a comprehensive study of the 20th century liberation movement history. Stage 1 of such work which is already under way is to convert SBU archive documents into electronic form.
Archive materials are being arranged according to the recommendations of Ukraine’s research institutions and scholars. The final analysis of documents is carried out by the Ukrainian Institute of National Memory, an authorized central executive body for restoring and preserving the national memory. The electronic archive database is to be published by the official sites of SBU and UINM.
 
Publication projects
A lot of attention is being given to the publication of documents from the SBU archive.
[1] The book titled “Declassified Memory. 1932-1933 Holodomor in Ukraine as reflected by GPU/NKVD documents” was prepared by the SBU with the assistance from the “Ukrayina 3000” international charity foundation, the country’s academic institutes and scholars as well as the Ukrainian Institute of National Memory.
The book, for the first time in the Ukrainian history, presents a complete range of Soviet security services documents (the State Political department, GPU, and the People’s Commissariat of Internal Affaires, NKVD), unveiling the causes, strategies and consequences of the 1932-1933 Holodomor, the most severe tragedy which afflicted Ukraine in the 20th century.
 
The documents throw light on massive political repression by state security agencies, including efforts to quash the truth about the Famine and providing a credible source for the study of activities by central and local executive officials and party leaders in 1932-1933. For over 70 years these materials were classified and not accessible to researchers.  The book also includes research articles analyzing various aspects of the Holodomor.
[2] “Roman Shukhevych in the Documents of Soviet State Security Agencies” is a collection of materials about various aspects of the life of UPA Commander-in-Chief Roman Shukhevych. The book was published jointly with the Center for Ukrainian Studies at Kyiv Shevchenko National University.
[3] Another book on the 1932-1933 Holodomor is currently being prepared jointly by the Interior Ministry and the Administration of Poland.  It is the 7th volume to be published within the framework of the “Poland and Ukraine in the 30s and 40s of the 20th century. Unknown documents in secret services archives,” research/publication project between Ukraine’s SBU and its Polish partners.
The book titled “1932-1933 Holodomor in Ukraine in the documents of Soviet and Polish secret services” will come out in the Ukrainian and Polish ahead of the 75th anniversary of the Holodomor. The book’s presentation is scheduled in Kyiv as part of the events to mark the Day of Memory for the victims of holodomors. Later, the book will be translated into English and presented in the United States, Canada and Europe.  
Volume 7 will include documents and materials presenting the points of view on the Holodomor taken by Polish and Ukrainian researchers. The book is unique as the materials have been studied by an international team of scholars. 
The book will contain materials from the SBU archive and Poland’s military archive. The Polish documents include the reports by the Polish police and diplomats hitherto unknown to the wide public. The documents provided by the SSU archive have also not been published before. This research/publication project, whose first volume came out in print in 1998, is supported by presidents Viktor Yushchenko and Lech Kaczynski.
 
Public hearings
With the participation of the work group of historians, the SBU launched a series of public hearings of scholars, journalists and members of the public in order to shed light and discuss the Ukrainian liberation movement, attracting newly declassified documents.
 
In 2008, for instance, the following public hearings were held: “Operations of secret agents and guerilla groups,” “UPA: its trail in history”, “Accusations against the Nachtigall Unit – historical truth or political games,” “OUN activities in Central and Eastern Ukraine,” “Role of Jews in the Ukrainian liberation movement.” Public hearings are open to interested individuals.   
 
Exhibitions
Based on declassified materials from SBU archives, three road-show topical exhibitions were arranged. Along with the already showcased “UPA: History of the Unconquered”, the two others are “Roman Shukhevych” and “Declassified Memory.” 
“Declassified Memory” which portrays the 1932-1933 Holodomor was showcased in all the regions of Ukraine, attracting about 100,000 visitors. Exhibition materials have been handed over to the foreign ministry for translation into other languages and presentation worldwide. 
 
LIST OF HOLODOMOR PERPETRATORS 
The SBU publicised and placed on its website the first list of high-ranking Communist party and state officials who were heads of punitive bodies OGPU (United State Political Department) and GPU (State Political Department) in 1932-1933 as well as the documents signed by these officials that formed a legal and organizational base for perpetrating the Holodomor and massive political repression. 
The documents give conclusive evidence of the fact that the 1932-1933 Holodomor-Genocide was deliberately engineered by the totalitarian Communist regime. 
To make the archive materials on the organizers and culprits of Holodomor as well as the documents signed by them more accessible, SBU offered website visitors an opportunity not only to familiarize themselves with the list of perpetrators but also access orders, Communist party politburo protocols, secret instructions to party activists, instructions on how to apply the notorious “Law on the Five Ears,” directives on arrests in the rural areas, etc.  
Such kind of publication initiates a new project involving SBU archives, and the Security Service of Ukraine urged the Ukrainian Institute of National Memory, the State Committee of Archives, lawyers, experts of other law-enforcement agencies’ archives, Holodomor researchers, members of NGOs to join in to evaluate the activities of Holodomor organizers and perpetrators and eventually bring them to justice for committing crimes in Ukraine.
 
Cooperation with other countries
The SBU is involved in cooperation with respective agencies in other countries of the world, primarily in the former CIS republics, with the purpose of finding and exchanging information about the victims of political repression by the totalitarian regime in the USSR.
Accordingly, the SBU cooperates with the Committee for National Security of Kazakhstan, having received information regarding 15,675 Ukrainians who were victims of repression and served their sentences in Kazakhstan in 1920s-1950s. 
Notably, the Kazakh security service provided a list of 7,103 Ukrainians and victims of the Steplah concentration camp and 915 victims of the Karlah camp (near Karahanda). In addition, regional branches of the CNS handed over lists of 7,657 Ukrainians who, according to their archives,  were kept in other concentration camps.
Simultaneously, the SBU handed over to Kazakh authorities a list of 85 natives of Kazakhstan who had been imprisoned or repressed in the Ukrainian SSR.   
Materials on the SBU website
Events announcements, news on SBU activities, electronic versions of publications and exhibitions, copies of archive documents, protocols of work groups and public hearings sessions are available on the SSU official site at www.ssu.gov.ua
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AUR#911 Sep 30 Yushchenko in Washington; Ukraine-U.S. Business Forum; Great March on Washington 25 years ago

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       
 
PRESIDENT VIKTOR YUSHCHENKO IN WASHINGTON, D.C.
Meets with President Bush and the U.S.-Ukraine Business Council

GREAT MARCH ON WASHINGTON, SUNDAY, OCTOBER 2, 1983
Twenty-five years ago 18,000 Ukrainians came to remember/protest
                   
ACTION UKRAINE REPORT – AUR – Number 911
Mr. Morgan Williams, Publisher and Editor, SigmaBleyzer
WASHINGTON, D.C., TUESDAY, SEPTEMBER 30, 2008
 
INDEX OF ARTICLES  ——
Clicking on the title of any article takes you directly to the article.               
Return to Index by clicking on Return to Index at the end of each article
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Tue, Sep 30, 2008
 
Press office of President Victor Yushchenko, Kyiv, Ukraine, Monday, September 29, 2008
 
The White House, Washington, D.C., Monday, September 29, 2008
 
Meets with Presidents of Lithuania and Ukraine
Olivier Knox, AFP, Washington, D.C., Monday,  September 29, 2008
Marks, Sokolov & Burd, Philadelphia, PA, Monday, September 29, 2008
 
6UKRAINE-U.S. BUSINESS FORUM TO BE HELD IN KYIV, UKRAINE
Friday, October 3, 9:30 a.m. to 3:30 p.m., with reception at 5:00 P.M., Kyiv
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Monday, September 29, 2008
 
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Tuesday, September 30, 2008
 
8UKRAINIAN AMERICANS COMMEMORATE FAMINE IN HOMELAND 50 YEARS AGO
By Caryle Murphy, Washington Post Staff Writer, The Washington Post, Wash, D.C., Sat, Oct 1, 1983
 
9GENOCIDE IN UKRAINE RECALLED WITH MARCH “FREEDOM FOR UKRAINE”
Ukrainian-Americans demonstrate against the Soviet Union
By Edmond Jacoby, Washington Times Staff, Washington Times, Wash, D.C., Oct 3, 1983
 
10AN OPEN LETTER TO THE KREMLIN
The 1932-33 famine in Ukraine was a deliberate act of genocide
Letter From Americans of Ukrainian Descent, read by Orest Deychakiwsky, Beltsville, Maryland
Soviet Embassy, Washington,, D.C., Oct 2, 1983, The Ukrainian Weekly, Oct 9, 1983, No. 41, Vol. LI
 
11 18,000 ATTEND UKRAINIAN FAMINE MEMORIAL EVENTS IN D.C.
Huge crowd rallies at Washington Monument
Roma Hadzewycz, The Ukrainian Weekly, Parsippany, NJ, Oct 9, 1983, No. 41, Vol. LI 
 
To make others aware of the Soviets’ horrible crime against humanity
By Marta Kolomayets, The Ukrainian Weekly, Parsippany, New Jersey, Sun, Oct 9, 1993. 
By George B. Zarycky, The Ukrainian Weekly, Parsippinany, New Jersey, Sun, Oct 9, 1983
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1
 UKRAINIAN PRESIDENT YUSHCHENKO MEETS WITH MEMBERS
OF THE U.S.-UKRAINE BUSINESS COUNCIL (USUBC)
 
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Tuesday, September 30, 2008
 
WASHINGTON, D.C. – The U.S.-Ukraine Business Council (USUBC) hosted the President of Ukraine, Victor Yushchenko, at a breakfast meeting in Washington attended by 100 members of USUBC and special guests on Monday, September 29.   
 
President Yushchenko spoke for almost an hour and addressed the main political and economic issues facing Ukraine.  He outlined his vision for Ukraine’s Euro-Atlantic integration, discussed the recent events in Georgia, spoke about Ukraine’s business environment, thanked the U.S. companies for their investments in Ukraine and indicated there were many more investment projects in Ukraine that would be interest to American investors.  
 
Yushchenko shared his optimism regarding the economic situation in Ukraine, mentioning that it had entered the World Trade Organization this year. He positively assessed the level of international investment in the Ukrainian economy. The president also shared his hope for an increase in U.S. investment to Ukraine. 
 
In his opinion, high-tech projects could be of a special interest to American investors. He praised the high level of Ukrainian computer professionals and program assistants. Ukraine and the U.S. could also cooperate more in the area of space, the president stated. He also called for American businessmen to invest in the agricultural sector of the Ukrainian economy, noting that it has a great potential.
 
BUSINESS AND EURO-ATLANTIC INTEGRATION
The president was introduced by Morgan Williams, SigmaBleyzer, president of USUBC.  Williams said in his opening remarks, “Mr. President, the businesses in attendance today have billions of dollars invested in Ukraine, have created thousands of jobs and are totally committed to an independent, strong, democratic, prosperous Ukraine, driven by an private, market-driven economic system, under the rule-of-law.”
 
“Ukrainian and international businesses are the best friend and partner the Ukraine government has to help Ukraine reach its goals and is making Euro-Atlantic integration a reality,” Williams continued. “For business to continue to move Ukraine forward a stable political and governmental environment is needed.  The government also needs to view business as a partner and friend and pass the many reforms needed to bring about a much stronger, pro-business environment in Ukraine.”
 
President Yushchenko stated the current political crisis in Ukraine is a “normal” democratic process. At the same time, he accused the “union”, as he put it, comprised of the Block of Yulia Tymoshenko, the Party of Regions and the Communists of having  another partner – Moscow.
 
President Yushchenko called the recent events in the Ukrainian parliament  “Georgia II,” the aim of which was to destabilize the situation in the country. Yushchenko also noted that he does not believe a coalition will appear among the Block of Yulia Tymoshenko, the Party of Regions and the Communists.  In his opinion the situation is moving toward elections and is not, as some have described it, a political tragedy.
 
MEMBER OF NATO
Yushchenko also stated once again that Ukraine should become a member of NATO. The crisis in Georgia proved that NATO should expand to the east, he said. The president noted that a referendum would be held on NATO accession.  This would be, he said, the most democratic way of solving such a difficult issue.
 
No one has invited Ukraine to join NATO so far, he said, but Ukraine should use this time to work on receiving such an invitation in the form of a Membership Action Plan (MAP). In President Yushchenko’s opinion, there is no other alternative for Ukraine than entering a system of collective security. He said that the Black sea region has become the area of instability.
 
SPECIAL GUESTS AND U.S. AMBASSADOR’S TO UKRAINE 
Special guests at the breakfast from the government of Ukraine included: Volodymyr Ogryzko, Minister of Foreign Affairs; Andriy Goncharuk, Deputy Head of the Secretariat of the President of Ukraine; Valentyn Nalyvaichenko, Acting Head of the Security Service of Ukraine, Raisa Bohatyreva, Head of the National Security and Defense Council of Ukraine and Dr. Oleh Shamshur, Ambassador of Ukraine to the United States.
 
Four of the six United States Ambassador’s to Ukraine since independence in 1991 were at the presidential breakfast.  They were: William Green Miller, Steven Pifer, John Herbst and William B. Taylor, who is now serving at the U.S. Ambassador in Ukraine.
 
ORIGINAL HOLODOMOR MARCH ON WASHINGTON POSTER FROM 1983
At the end of the breakfast USUBC presented President Yushchenko with a framed original copy of a poster used in the huge October 2, 1983 march on Washington, D.C. by the Ukrainian-American community to protest the Soviet occupation of Ukraine and to commemorate the 50th anniversary of the genocide against the Ukrainian people in 1932-1933 when millions were starved to death. The poster was designed by Roxolana Luczakowsky Armstrong. 
(To see a copy of the poster click on http://www.artukraine.com/famineart.armstrong.htm.)
 
Approximately 18, 000 Ukrainians gathered in the shadow of the Washington Monument on Sunday morning, October 2, to mourn those of their kinsmen who had perished in the Great Famine of 1932-33 and to renew their pledge to always remember and to never allow the world to forget the holocaust inflicted upon the Ukrainian nation by the Soviet regime. The Ukrainians also protested the Soviet occupation of Ukraine in front of the Soviet Embassy.  
 
COMPANIES/ORGANIZATIONS IN ATTENDANCE
Companies/organizations in attendance at the USUBC presidential breakfast included: 3M, AES, Aitken Berlin, American Continental Group, American Councils on International Education, Baker & McKenzie, BBC World Service/Ukrainian Service, Boeing, Bracewell & Giuliani, Bunge, Cargill, Chevron, Coca-Cola, ContourGlobal, Crumpton Group, DHL Express, DRS-Technical Services, Edelman, First International Resources, and Global Trade Development, Inc. 
 
Also in attendance were Halliburton, Harris Corporation, Heller & Rosenblatt, IBM, Intercontinental Commerce Corporation, Kyiv Post, Kraft Foods, Kyiv-Atlantic, Lockheed Martin, Magisters, Marathon, Marks, Sokolov, & Burd, MaxWell Biocorporation, McDonald’s, Merrill Lynch, Microsoft, Motorola, Nationwide Equipment, Northrop Grumman, Office of the Vice President, and Pratt & Whitney/United Technologies.
 
Also attending were: Procter & Gamble, Reservoir Capital, Salans, SigmaBleyzer, Squire Sanders & Dempsey, SE Raelin, Standard Chartered Bank, Sweet Analysis Services Inc., (SASI); TD International, The Heritage Foundation, The PBN Company, The Ukrainian Weekly, The Washington Group (TWG); The Washington Times, TNK-BP, Ukrainian American Bar Association, Ukrainian Development Company, Ukrainian Embassy/Trade and Economic Mission; Ukrainian International Airlines, Umbra, U.S. Civilian Research Defense Foundation (CRDF), U.S. Department of State, U.S.-Ukraine Foundation (USUF), Voice of America (VOA) and Westinghouse.
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2.  MEMBERS OF THE U.S.-UKRAINE BUSINESS COUNCIL (USUBC) MEET

WITH UKRAINE PRESIDENT VICTOR YUSHCHENKO IN WASHINGTON
 
Press office of President Victor Yushchenko, Kyiv, Ukraine, Monday, September 29, 2008
KYIV – Within the framework of his working visit to the USA President Victor Yushchenko met with representatives of the US-Ukraine Business Council [USUBC]. At the meeting the President said that American investments are very important for Ukraine, and invited the investors to deeper cooperation.
According to him there are many projects that might be of interest for American investors, particularly in the field of high-tech, agriculture, energy, preparation to holding EURO 2012, etc. He assured American businessmen that Ukrainian authorities conduct a consistent policy in providing stable and beneficial working conditions to foreign investors.
Also President Yushchenko reminded that the ninth meeting of Consultative Council on Foreign Investments under the auspices of the President of Ukraine is about to take place soon. The meeting of the council, in which the American businessmen have the broadest representation, will be dedicated to problems and obstacles, foreign investors are facing in their work in Ukraine.
 
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3.  U.S. PRESIDENT BUSH MEETS WITH PRESIDENT YUSHCHENKO OF UKRAINE

 
The White House, Washington, D.C., Monday, September 29, 2008
PRESIDENT BUSH: I was disappointed in the vote with the United States Congress on the economic rescue plan. We put forth a plan that was big because we got a big problem. I’m going to be talking to my economic advisors after my meeting here with the President, and we’ll be working with members of Congress — leaders of Congress on the way forward. Our strategy is to continue to address this economic situation head on. And we’ll be working to develop a strategy that will enable us to continue to move forward.
 Mr. President, welcome. I welcome you here to the Oval Office. I admire your steadfast support for democratic values and principles. A lot of Americans have watched with amazement how your country became a democracy. We strongly support your democracy. We look forward to working with you to strengthen that democracy.
You and I just had a good discussion about a variety of issues. We discussed, you know, the NATO and Membership Application Process. We discussed energy independence. We discussed ways that we can work together to bring stability and peace to parts of the world. And I thank you for joining us here in Washington in the Oval Office. And I send my respect to the people of Ukraine.
PRESIDENT YUSHCHENKO: (As translated.) First of all, Mr. President, I would like to thank you for the atmosphere that our negotiations were held in. We had our conversation in a very constructive manner.
 
We touched upon the range of issues, starting from our bilateral relations, and the implementation of U.S.-Ukraine action plan, and we consider this road map as being implemented in a successful way. A lot of attention was paid to the security component and security itself. And special attention was paid towards Ukraine integration into European and Euro-Atlantic structures.
We raised the issue of energy cooperation, which is a very urgent issue for us. And we believe that we’ve done excellent job on the adaptation of American nuclear fuel for our nuclear power units, and we intend to continue that.
We also discussed the domestic political situation in Ukraine, which in my opinion is far away from being tragic, and not dramatic. Ukraine has enough democratic resource and tools to give sufficient response to any crisis that may occur in the Ukrainian parliament. And this is probably where the Ukrainian strength and optimism is.
I also asked Mr. President to delegate the high-ranking delegation from the United States of America to participate in the commemorating event of the great famine in Ukraine of 1932 and 1933. The commemoration day will be on November the 22nd, and this will be the commemoration of the biggest humanitarian catastrophe in our country. And we need to do everything for that issue to be included in the UNGA agenda.
PRESIDENT BUSH: Thank you, sir.
PRESIDENT YUSHCHENKO: Thank you.
PRESIDENT BUSH: You’re welcome.
 
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4. BUSH WARNS MOSCOW AGAINST ‘BULLYING’ NEIGHBORS 

Meets with Presidents of Lithuania and Ukraine
Olivier Knox, AFP, Washington, D.C., Monday,  September 29, 2008
 
WASHINGTON – US President George W. Bush met Monday with the leaders of Lithuania and Ukraine to discuss the fallout from Russia’s war in Georgia and warned Moscow against “bullying” its democratic neighbors. 
 
In separate White House talks, Bush sought to reassure the former Soviet republics of US support in the face of a newly assertive Kremlin, which some analysts warn may be sizing up other neighbors after the August conflict.
Bush, meeting with Lithuanian President Valdas Adamkus, said they had “talked about Georgia-Russia, and the need for democracies to be able to stand on their own feet without fear of bullying.”
Bush also pledged help for Lithuania, as the former Soviet republic and NATO member looks to diversify its sources of energy, and restated the US obligation under the NATO charter to come to the aid of an alliance member under attack.
“It’s important for the people of Lithuania to know that when the United States makes a commitment through, for example, Article 5 of the treaty, we mean it,” the US president assured his guest.
With Lithuania seeking greater energy independence, Bush pledged the United States will “try to help you as best as we can.” And the US president expressed “hope” that, by mid-October, Lithuanians would be able to travel to the United States without first seeking a visa.
Adamkus thanked Bush for his support for Lithuania joining NATO, which it did in 2004, saying that would not have happened without US leadership “and the entire security question in the region would be in doubt.”
The Lithuanian leader also appealed for a lasting US presence in Europe, implying such a presence might be necessary to dissuade a newly assertive Moscow from any designs on former Soviet republics. “I hope that United States will be visible … just to show our neighbors that we’re definitely not alone, and we are building the democracy together,” said Adamkus.
In talks with Ukraine President Viktor Yushchenko, Bush evoked US support for Kiev’s accession to NATO over vehement objections from Russia, which has also denounced Washington’s backing of alliance membership for Georgia.
“We discussed the NATO and membership application process. We discussed energy independence. We discussed ways that we can work together to bring stability and peace to parts of the world,” said Bush.
Yushchenko sought to reassure his host about political turmoil in Ukraine, where the ruling post-Western alliance has collapsed and some officials warn that any snap elections could result in a victory for pro-Moscow forces.
The situation, “in my opinion, is far away from being tragic, and not dramatic. Ukraine has enough democratic resource and tools to give sufficient response to any crisis that may occur in the Ukrainian parliament,” he said. “We raised the issue of energy cooperation, which is a very urgent issue for us,” said the Ukrainian leader.
Moscow has seen relations with former Soviet republics and the West deteriorate sharply since its early August war with Georgia, after years of tensions over access to energy supplies controlled by Russia.
Russia has regularly been accused of using its control of a hefty slice of Europe’s market for political ends, allegedly turning off the taps to punish governments in Moscow’s communist-era stomping ground that are too critical of the Kremlin.
Lithuania, which broke free from the crumbling Soviet bloc in 1991 and joined the EU and NATO in 2004, has been sparring with Russia since August 2006, when the Russian pipeline monopoly Transneft cut supplies to the country’s only refinery. And supplies to Europe were briefly disrupted in January 2006 as a consequence of a gas price dispute between Russia and Ukraine.
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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 PRESIDENT YUSHCHENKO TO SIGN JOINT STOCK COMPANY LAW

 
Marks, Sokolov & Burd, Philadelphia, PA, Monday, September 29, 2008
WASHINGTON, D.C. – In a private conversation today President Yushchenko confirmed that he will sign the Joint Stock Companies Law. President Yushchenko was in Washington with the official visit to meet with President Bush. 
 
In the morning President Yushchenko attended a breakfast organized by the U.S. -Ukraine Business Council (USUBC) after which Gene Burd, managing partner of the firm’s Kyiv’s office discussed with him situation with the new Joint Stock Companies Law. 
 
The President confirmed to Mr. Burd that he will sign the law, which will apparently take place after the President’s return to Kyiv tomorrow.  The deadline for the President to sign the law is October 2.

The new law has been approved by the Supreme Rada amid political reshuffling on September 17 by over 80% vote.  Comparing to the old 1991 law, the new one provides significantly more detailed framework for organization, management and dissolution of the companies including clarifications of provisions governing Supervisory Boards, Auditing Committees, exclusive competence and procedures governing shareholders meetings, and simplification of procedures for companies with a sole shareholder.

While the existing law may not be a panacea for issues facing foreign companies in Ukraine, it clearly moves Ukraine closer to the European legal standards, improving the overall investment climate. 

 
According to USUBC President Morgan Williams, “It is hard to overestimate the relevance and importance of this piece of legislation for the improvement of the investment climate and the general economic situation in Ukraine.  Adoption of this law is a significant step forward in bringing Ukraine to world standards in the sphere of corporate governance and ownership issues.”
For the text of the law “On Joint Stock Companies” click on http://www.marks-sokolov.com/documents/Joint_Stock_Company_Law.pdf.
Marks, Sokolov & Burd is an international law firm with offices in Philadelphia, Pennsylvania, Moscow, Russia, and Kyiv, Ukraine.  The firm is known for its substantial experience in handling matters for Western clients doing business in Russia and Ukraine and Russian/Ukrainian clients doing business internationally.
For more information about the firm, visit firm’s web site at www.marks-sokolov.com. For more information about firm’s Ukrainian practice, please contact Gene M. Burd, managing director of the Kiev office at email: gburd@mslegal.com;  tel. +1 215 569 8901 (US) or +380 (44) 235-68-66 ( Ukraine ).
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6.  UKRAINE-U.S. BUSINESS FORUM TO BE HELD IN KYIV, UKRAINE
Friday, October 3, 9:30 a.m. to 3:30 p.m., with reception at 5:00 P.M., Kyiv

 
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Monday, September 29, 2008
 
WASHINGTON, D.C. – The U.S.-Ukraine Business Council (USUBC), in cooperation with the Ministry of Economy of Ukraine, is sponsoring a Ukraine-U.S. Business Forum in Kyiv in conjunction with the first meeting of the Ukraine -U.S. Council on Trade and Investments.  The Council is a new intergovernmental commission to promote bilateral business relations and was established during U.S. President George Bush’s recent trip to Ukraine.
 
This first meeting of the new Council and the Ukraine-U.S. Business Forum was initially going to be held in Washington but was recently moved to Kyiv. The Council meeting will be held on Thursday, October 2nd  followed by the Ukraine-U.S. Business Forum on Friday, October 3rd.  
 
YOU ARE INVITED TO PARTICIPATE
You are invited to attend and participate in the Ukraine-U.S. Business Forum on Friday, October, 3, 2008  from 9:30 a.m. to 3:30 p.m., to be held at the offices of the Ukrainian Chamber of Commerce and Industry, 33 Velyka Zhytomyrska St., Kyiv, followed by a reception at 5 p.m.
 
The co-chairmen of the Ukraine-U.S. Council on Trade and Investments, Minister of Economy of Ukraine Bohdan Danylyshyn and Deputy U.S. Trade Representative (USTR) Ambassador John K. Veroneau, will address the Business Forum. They will present information about the key bilateral business and economic issues and trends between the two countries. 
 
KEY ISSUES TO BE RAISED
Since the Business Forum will follow the government-to-government meeting, USUBC expects Minister Danylyshyn and Ambassador  Veroneau to give an update regarding some of the key issues of concern to USUBC members such as OPIC, vat tax refunds, corporate raidership, customs clearances, air safety legislation, reforms to allow private land purchases, inflation and other issues.
 
Representatives of the Ukrainian Chamber of Commerce and Industry, the Ukrainian Union of Entrepreneurs and Industrialists, the Ukrainian National Committee of the International Chamber of Commerce, as well as officials from the State Tax Administration of Ukraine, State Customs Service and the National Bank of Ukraine. The InvestUkraine/Ukrainian Center for Foreign Investment Promotion will speak about the investment climate in Ukraine.
 
EXPANDING EXPORT OPPORTUNITIES 
From the U.S. side a member of the USTR delegation, Madieth Sandler, GSP Program Director, USTR will make the presentation entitled “Expanding Ukraine’s Export Opportunities through the U.S. Generalized System of Preferences (GSP) Program.” Representatives of USUBC and U.S. businesses will also make presentations on the program.
 
The main session of the Forum will be followed by a networking session where those attending will be able to dialogue with each other and meet Ukrainian business leaders, Ukrainian officials, members of the USTR delegation and others.
 
RECEPTION
After the Business Forum program finishes there will be a reception in honor of the Ukraine-U.S. Council on Trade and Investments delegations and Business Forum participants.  The reception will be from 5:00 p.m. to 7:00 p.m. at the SigmaBleyzer offices (4-A Baseyna St., Mandarin Plaza, 8th Floor).
The reception is sponsored by the U.S.-Ukraine Business Council (USUBC) with USUBC member, SigmaBleyzer, as co-sponsor.
 
You are urged to attend the Ukraine -U.S. Business Forum and reception this Friday. If you are not able to attend please USUBC would appreciate you making arrangements for someone else to represent your company/organization.  If you have any questions please contact us.
 
RSVP PLEASE
Please RSVP YES or NO as soon as possible to Ludmyla Dudnyk, USUBC program manager in Kyiv, at: ldudnyk@usubc.org
Sincerely,

Morgan Williams, SigmaBleyzer
President, U.S.-Ukraine Business Council (USUBC)
 
Ukraine-U.S. Business Forum
Offices of the Ukrainian Chamber of Commerce and Industry
Friday, October 3,  9:30 a.m. to 3:30  p.m., reception at 5 p.m.
33 Velyka Zhytomyrska St., Kyiv, Ukraine

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7.  U.S. EMBASSY ISSUES STATEMENT REGARDING BORCHAGIVSKY PHARMACEUTICAL COMPANY

 
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Tuesday, September 30, 2008
 
WASHINGTON, D.C. – The U.S.-Ukraine Business Council (USUBC) has been informed by Edward Kaska, Economic Counselor, U.S. Embassy Kyiv that the following press release was issued by the U.S. Embassy in Kyiv on Friday, September 26, 2008. 
 
Mr. Kaska said the U.S. Embassy press release was given wide dissemination among the media in Ukraine and was in response to articles indicating the Borchagivsky Pharmaceutical Company may be sold.
 
USUBC notes that the Borchagivsky Pharmaceutical Company has been the subject of a long standing expropriation claim by R & J Trading, a United States company, which alleges that the Borchagivsky Pharmaceutical Company was established entirely with assets which were stolen from a Ukrainian company in which R & J Trading owned a 50% interest.  R & J Trading, mentioned in the U.S. Embassy press release, is a member of the U.S.-Ukraine Business Council (USUBC). 
 
The complete text of the U.S. Embassy press release follows:
 
PRESS RELEASE

 

“Press reports have been brought to the attention of the U.S. Embassy regarding the possible pending sale of the Borchagivsky Pharmaceutical Company.  R&J Trading, a U.S. firm, was an original investor in 1993 in this company, having entered into a joint venture in which it held 50 percent ownership in a local pharmaceutical plant.

 

R&J Trading has stated that the joint venture managers in 1995 issued new stock and diluted R&J Trading’s stake in the enterprise to 37.5 percent.  The managers then declared the joint venture bankrupt and fraudulently transferred its assets to another firm.  In September 2001, the City of Kyiv bought 30 percent of the Borchagivsky enterprise.

 

The U.S. investors since 1995 have sought to recover their loss, which they consider an expropriation.  R&J also has advised the Embassy it is determined to recover its lost assets, and will continue to make its claim known to any prospective buyers of the Borchagivsky Pharmaceutical Company.

 

The Embassy has followed this matter since the late 1990s.  Over this period, including recent months, U.S. State Department and Embassy officials have met with city of Kyiv and National Government officials at the highest levels to urge an equitable resolution of this case.  The Embassy will continue to remind prospective buyers of the Borchagivsky firm, as well as Ukrainian authorities, of the legitimacy of R&J Trading’s claim.

 

The Embassy urges a rapid resolution of this matter in a way that fairly addresses R&J Trading’s loss of assets.  Such a resolution would signal a commitment on the part of Ukrainian officials to the rule of law and the fostering of a business climate in which foreign investors in Ukraine’s economy can be assured of fair and equitable treatment.”

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9.  UKRAINIAN AMERICANS COMMEMORATE FAMINE IN HOMELAND 50 YEARS AGO

By Caryle Murphy, Washington Post Staff Writer, The Washington Post, Wash, D.C., Sat, Oct 1, 1983

WASHINGTON, D.C. – Hundreds of Ukrainian Americans are in Washington this week to commemorate a famine in their homeland 50 years ago in which millions died and to protest what they say is the Soviet Union’s continued refusal to acknowledge the breadth of the famine on the part of Soviet policies played in causing it.

The gathering will be the first national commemoration of the so-called “Great Famine” of 50 years ago, a crisis that is now a rallying point for anti-Soviet Ukrainians.

“We believe it was a genocide,” said Andrij Bilyk, one of the spokesman for the National Committee to Commemorate Genocide Victims in Ukraine 1932-33, a coalition of about 70 Ukrainian organizations that organized this week’s events.

“It’s a very important moment in Ukrainian history–an important as the Holocaust is in the history of the Jews,” said Omeljan Pritsak, director of the Ukrainian Research Institute at Harvard University, the largest center for Ukrainian studies in the United States.

Last Sunday [September 25, 1983], Ukrainian churches across the country held services inaugurating the commemoration, which also has included nightly candlelight vigils outside the Soviet Embassy and a panel discussion of the famine at the American Enterprise Institute. Organizers say they expect up to 5,000 people Sunday for the final event–a march from the Washington Monument to the Soviet Embassy.

In literature, Ukrainians have called their fertile homeland, now one of the 15 republics in the Soviet Union, “the second-largest European country.” There are hundreds of Ukrainian organizations among the estimated 1 million Ukrainian Americans and many of the younger ones still speak the language of their parents and grandparents.

Pritsak said that demographic studies have shown that between 5 and 6 million Ukrainians died in the famine that resulted from Stalin’s drive to collectivize agriculture. In his determination to crush Ukrainian peasant resistance to the collectivization and to break their anti-Russian nationalistic spirit, he ordered harsh measures by government troops against farmers.

Despite a drop in food production, harvests continued to be exported, food was confiscated from granaries and homes, there was a physical “blockade” on food imports to the Ukraine and the death penalty for “hoarding” food, according to academicians taking part in this week’s panel at the American Enterprise Institute. New internal controls on travel kept peasants from going to cities to search for food or from leaving the Ukraine. Resisting peasants were deported to Siberia. The result was widespread death by starvation.

Although Stalin’s policies affected all regions and were anti-peasant, not specifically anti-Ukrainian, they caused the most suffering in the Ukraine and were seen by its inhabitants as a policy of genocide to subjugate the Ukraine to communist rule. “There is no debate that this famine was manmade and encouraged by the authorities,” said Vojtech Mastny, a specialist in Soviet and East European affairs at Boston University.

“It was a major outrage and a major tragedy.” Soviet historical literature on the Ukrainian famine is almost nonexistent and there is nothing that approximates admission of government errors during that period according to James E. Mace and Robert Conquest, two experts on the famine who took part in the AEI panel.

The only admission they have found in any Soviet publication was in 1975 when V. I. Kozlov, writing on mortality rates in various parts of the Soviet Union in a book titled “Nationalities of the U.S.S.R.,” noted that ” a crop failure in 1932 in the Ukraine probably even led to a temporary increase in mortality.”
It is this failure to speak about the famine that angers many Ukrainians and has brought many of them to this week’s commemoration.

“It’s completely hushed up, it’s as if nothing happened.” said Jaroslawa Francozenko of Rockville, a Kiev-born woman who was at the candlelight vigil outside the embassy Wednesday night. She said she wants the Soviets “just to make a mention of it.”

Others, like Bilijk, however, demand more. Asked what he wants from the Soviets, Biljyk answered with one word: “Independence.”

 
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8.  GENOCIDE IN UKRAINE RECALLED WITH MARCH “FREEDOM FOR UKRAINE”
Ukrainian-Americans demonstrate against the Soviet Union

By Edmond Jacoby, Washington Times Staff, Washington Times, Wash, D.C., Oct 3, 1983

Thousands of Ukrainian-Americans from more than 50 American cities trekked to within a few hundred feet of the Soviet Embassy yesterday afternoon to read a “Letter to the Kremlin” accusing the Soviet Union of murdering 7 million of their fellow Ukrainians 50 years ago.

The demonstration timed to coincide with a similar march on the Soviet Embassy in Paris, was the culmination of a nine-month organizational effort by the National Committee to Commemorate Genocide in Ukraine.

Although yesterday’s march was without incident and no effort was made by marchers to breach police lines around the embassy, some of the demonstrators were openly angered at being prohibited from carrying their letter to the embassy itself. Instead, the statement was read through a bullhorn at 16th and K street NW by Orest Deychakiwsky of Beltsville.

More than 1,000 of the protesters were teens enrolled in one of three organizations that fielded uniformed marching units, the Ukrainian Scouts (boys and girls) and the Ukrainian Democratic Youth. They were kept on the periphery of the crowd during the confrontation at the barricades, one organizer said, “because there are some hotheads there.”

Most of the crowd was unable to hear Deychakiwsky read the letter over the public-address system set up for the purpose, and began chanting, “Svoboda Ukraini! Svoboda Ukraini!—Freedom for Ukraine!”

Metropolitan Police Capt. Louis Widawski said the official estimate of the crowd at the embassy was 8,000. March organizers claimed 15,000 to 20,000 at the Sylvan Theater on the grounds of the Washington Monument earlier in the day. They said they thought as many as 12,000 were at the embassy.

The march, and a concert at the Kennedy Center afterward, marked the end of a week of events in Washington commemorating the 50th anniversary of a devastating famine that Ukrainians have called “the forgotten holocaust.”

That famine was brought about largely by policies of Soviet dictator Josef Stalin–policies that led to collection of virtually the entire farm output of food and seed grain in the Ukraine, leaving the farmers who opposed communist collectivization of their farms, to starve.

Oscar Kain, chairman of the book of Monarch Mirror Door Co. of Chatsworth, Calif., a guest at the Capital Hilton were many of the marchers massed, said he was impressed with the turnout.

‘I’ve got two Russians who work for me.” Kain said. “They told me what happened to them when they tried to leave the Soviet Union. It makes me believe every word the Ukrainians say, America needs to remember this.

 
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10.  AN OPEN LETTER TO THE KREMLIN
The 1932-33 famine in Ukraine was a deliberate act of genocide

Letter From Americans of Ukrainian Descent, Read by Orest Deychakiwsky, Beltsville, Maryland
Soviet Embassy, Washington,, D.C., October 2, 1983, The Ukrainian Weekly, October 9, 1983, No. 41, Vol. LI

The following letter to the Kremlin from Americans of Ukrainian descent was read in front of the Soviet Embassy at the demonstration on October 2 [1983].
The statement was read by Orest Deychakiwsky, 27, of Beltsville, Md., a staff member of the Congressional Helsinki Commission.

We Ukrainian-Americans are 1 million strong, living in cities and towns throughout this great land of the United States of America. There are two additional millions of us living in other countries of the free world. You have enslaved 50 million of our brothers and sisters in Ukraine and countless millions more who live in daily terror of your dictatorship.

You hide behind a constitution that promises all freedoms, including independence for Ukraine, yet in the past 14 years your tanks have rolled across Czechoslovakia and Afghanistan. You continue to threaten Poland. One month ago you shot a Korean airliner out of the sky, cutting short 269 innocent lives.

Whenever the world questions your actions, your great propaganda machine is mobilized to twist the truth and to lie. Unfortunately, many people believe those lies. And among them are innocent children, like Samantha Smith, who says that she still trusts you.

We don’t trust you. We Americans of Ukrainian descent who survived your 1932-33 manufactured famine which destroyed 20 percent of the people of Ukraine; we Americans of Ukrainian descent whose forebearers immigrated to these shores, like millions of Americans before them, to enjoy the freedoms not available elsewhere; and, we Americans of Ukrainian descent who were born in Rochester, Los Angeles, Chicago, Philadelphia, Cleveland, New York and the other great cities and towns of America – we want you to know that this is just the beginning.

We who have lived in Ukraine or learned about our heritage from our parents and grandparents, we want you to know that we have come of age in America. We have come of age as Americans and as communicators. Utilizing all of the forums available to us in this land of liberty, we are going to tell our fellow Americans about the real Soviet Union.

And we are ready to meet head on the propaganda machine that we know you will launch against us. We know you want to discredit us. But you will not succeed. For when you shot down the Korean airliner, and lied about it, the world finally understood what you really are.

We have come here from more than 50 cities, more than 5,000 strong to remind the world that 50 years ago you murdered 7 million Ukrainians by purposely starving them to death.

Almost half – 3 million – were little innocent children, many of whom died alone, without their mothers and fathers, in mass camps. Their bodies have long since decayed in mass graves in the black earth of Ukraine. You took the breadbasket of Europe and you laid it to waste. And then you lied about it.

You refused international aid to the starving masses of Ukraine. You shot people who tried to find food You erected watchtowers across Ukraine to better be able to spot people fleeing the villages. You turned them back to starve.

We have come here to tell the world that this assault on the Ukrainian nation – its people, its language, its culture and its religions – continues today. You liquidated the Ukrainian Autocephalous Orthodox Church headed by Metropolitan Vasyl Lypkivsky, and you liquidated the Ukrainian Catholic Church headed by Patriarch Josyf Slipyj. Many of Ukraine’s finest writers, and the flower of its cultural elite languish in the gulag and psychiatric prisons in internal exile far from Ukraine.

The 1932-33 famine in Ukraine was a deliberate act of genocide – the only man-made famine in the history of the world. Although today your methods are different, your goal remains the same – you want to destroy the Ukrainian identity.

Your current leadership is aware of the genocidal famine and today’s Russification policies. But they continue to deny them. Your history books make no mention of them. The Ukrainian Famine of 1932-33 has not entered into Western consciousness as it should have. It became the “forgotten holocaust.” But it is forgotten no longer. In the tragic death of the 269 aboard the Korean airliner, there is a new awareness of what you are.

We, Americans of Ukrainian descent, together with all Americans and people of the world who respect human life, and value human liberty, will see to it that those who died in your man-made famine in Ukraine; that those who died aboard the Korean airliner, that those who continue to suffer under your dictatorship – we will see to it that they did not die, nor will they suffer, in vain.

LINK: The Ukrainian Weekly, Parsippany, NJ, October 9, 1983, http://www.ukrweekly.com/old/archive/1983/418313.shtml

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11.  18,000 ATTEND UKRAINIAN FAMINE MEMORIAL EVENTS IN D.C.
Huge crowd rallies at Washington Monument

By Roma Hadzewycz, The Ukrainian Weekly, Ukrainian National Association, Parsippany, NJ, Oct 9, 1983, No. 41, Vol. LI 

WASHINGTON – Thousands of Ukrainians gathered in the shadow of the Washington Monument on Sunday morning, October 2, to mourn those of their kinsmen who had perished in the Great Famine of 1932-33 and to renew their pledge to always remember and to never allow the world to forget the holocaust inflicted upon the Ukrainian nation by the Soviet regime.

They began arriving shortly after 9 a.m. in preparation for the 10 a.m. rally. By the time the program began, the grounds near the Sylvan Theater were filled with a sea of placards and banners, some identifying the hometowns of the groups in attendance or the organizations present, others scoring the USSR for crimes against humanity such as the artificially created famine, and still others warning the free world to beware of the ever-present Soviet threat.
During the two-and-a-half-hour rally, the participants heard speakers – including a representative of President Ronald Reagan and Rep. Don Ritter of Pennsylvania – expressing sympathy for the loss of 7 million lives and lauding the Ukrainian nation’s courage and continued resistance to Soviet Communist subjugation.
As the rally progressed and buses carrying Ukrainians from throughout the United States continued to arrive, the crowd of 6,000 tripled in size to an estimated 18,000, according to Washington police.
The rally and the subsequent march, demonstration and memorial concert at the Kennedy Center, were the culmination of a series of events held during the Great Famine Memorial Week in the nation’s capital.
The rally got under way with the singing of “The Star-Spangled Banner” by Jarema Cisaruk, a member of the Ukrainian Bandurist Chorus of Detroit, and brief welcoming remarks by Dr. Peter G. Stercho, chairman of the National Committee to Commemorate Genocide Victims in Ukraine, a community organization that sponsored the week’s events.
Invocations were then delivered in Ukrainian by Metropolitan Mstyslav of the Ukrainian Orthodox Church, and in English by Pastor Wladimir Borowsky of the Ukrainian Evangelical Alliance of North America.
Metropolitan Mstyslav was accompanied that day by three other Ukrainian Orthodox hierarchs: Archbishop Mark of New York, Archbishop Constantine of Chicago and Bishop Wolodymyr Didowycz of Germany.
Metropolitan Mstyslav noted in his prayer that the purpose of the rally was “to bow our heads before the known and unknown graves of the millions of Ukrainian martyrs who died 50 years ago in the agony of death by starvation.”
Three symbolic black coffins, each marked “7,000,000 Ukrainians murdered,” were carried onto the stage, as members of the Plast and ODUM Ukrainian youth organizations formed an honor guard. Pastor Borowsky then delivered the English-language invocation, stating: “we are here to redeem from oblivion” the 7 million who died in the Great Famine.
Conduct of the rally program was then assumed by Dr. Myron B. Kuropas, former special assistant for ethnic affairs to President Gerald R. Ford.
Dr. Kuropas welcomed the representative of President Reagan, Morton Blackwell, special assistant for public liaison.
 
Mr. Blackwell proceeded to read a message from the president, the full text of which follows.
PRESIDENT RONALD REAGAN’ MESSAGE
“I am pleased to join those gathered for this ceremony honoring the memory of the millions who died in the Ukrainian Famine of 1932-33.
“This event provides an opportunity to remember those who suffered and died during the farm collectivization and subsequent forced famine and period of severe repression. That attempt to crush the life, will and spirit of a people by a totalitarian government holds important meaning for us today.
“In a time when the entire world is outraged by the senseless murder of 269 passengers on Korean Airlines Flight 007, we must not forget that this kind of action is not new to the Soviet Union.
“That the dream of freedom lives on in the hearts of Ukrainians everywhere is an inspiration to each of us.
“I commend your participation in this special observance and the moral vision it represents. May it be a reminder to all of us of how fortunate we are to live in a land of freedom.”
U.S. CONGRESSMAN RITTER’S ADDRESS 
Next to address the rally was Rep. Ritter, who is chairman of the Ad Hoc Committee on the Baltic States and Ukraine and a member of the Congressional Helsinki Commission.
Rep. Ritter began his remarks in Ukrainian, saying: “Today, my dear friends, I honor the 7 million who died in the famine/holocaust and the millions who lived through those terrible years. But that is not enough. Today, I devote myself with all my heart and soul to the cause of freedom for our oppressed brothers and sisters living in Ukraine.”
“We are here to tell the story to the world of the people who suffered, the victims, the survivors,” he said. “Yes, we want the world to know about this crime against humanity, not that they may feel sympathy towards the victims. That is given. But, even more important is that the world better understand that the disease of totalitarian control over people longing to be free is what creates holocausts.”
He concluded his speech, too, in Ukrainian. “May the memory of those who died live on in our hearts and in the hearts of all Americans so that the flame of freedom for Ukraine will never die. Long live the flame of freedom. Glory to Ukraine,” he said. (The full text of Rep. Ritter’s address appears on page 6.,
A message of sympathy was delivered by Rabbi Andrew Baker, Mid-Atlantic regional chairman of the American Jewish Committee. “We share memories of suffering in the Soviet Union. We also share the hope that our brethren, locked behind an iron curtain, will one day be free,” he said.
He continued: “We are, of course, gathered here to recall a very specific event of unspeakable horror – the enforced famine and the intentional death of millions of Ukrainians. As one reads the first-person historical accounts, as one examines the photographic evidence, the shock and revulsion are nearly overwhelming. But it is not only the monstrous crime at which one recoils. It is the willingness of so many to look the other way, of governments to carry on with ‘business as usual,’ and of people quick to relegate such events to the dusty corners of distant history.
“We Jews share with you the experience of such horrors in our own recent history and the experience of a world quick to close its eyes, quick to forget what had taken place. We join with you in the firm belief that only through remembering can we hope to ensure that such evil deeds will not recur.”
Rabbi Baker then noted: “We share in your memories on this day and in your hopes that we all may learn from them. For our sake and the sake of our children we can do nothing less.”
KEYNOTE ADDRESS 
The keynote Ukrainian-language speaker was John O. Flis, newly re-elected chairman of the Ukrainian American Coordinating Council and supreme president of the Ukrainian National Association.
“When they were dying – the bells did not toll. And no one wept over them … And there were millions of them. At least 7 million, but there may have been 10 million or more. Millions of children, women and men, our sisters and brothers by blood – Ukrainians.
That is why, he said, “it is our sacred duty to ourselves remember and to make others aware of history’s greatest crime, its perpetrators and its victims.”
He then went on to point out that Ukrainians should recall “this dark night” of Ukrainian history with the hope that “a new morn” will bring with it a better fate for the Ukrainian nation.
In the memory of those millions of Ukrainian martyrs of the Great Famine, Mr. Flis urged, “let us pledge that we will do all that is possible to see to it that Ukraine does indeed get its own Washington with his righteous law.”
Former Soviet dissident Vladimir Bukovsky and Marek Czyselczyk, a representative of the Solidarity trade union, also spoke at the rally.
The KAL incident represents “just a drop of blood into the ocean of misery caused by the Soviets,” said Mr. Bukovsky, referring to the recent downing of a Korean passenger jet. Millions of others died in the collectivization campaign during the famine, the purges, the show trials, he noted, adding to this list of Soviet horrors the tragedies of the Baltic States, Ukraine, Hungary, Czechoslovakia, Afghanistan and Nicaragua.
The Solidarity representative expressed his sympathy for the famine victims, and, speaking as a Pole, noted that it is his sincere hope that both the Ukrainian and Polish nations will one day live in democracy.
“May the free flag of Poland fly over Warsaw, and may the free flag of Ukraine fly over Kiev,” he said. “Long live free Poland, long live free Ukraine.”
Other speakers who addressed the rally participants were: Chris Gersten, chairman of the Freedom Federation, a coalition of 19 ethnic organizations; Dr. Mario Lopez Escobar, Paraguayan ambassador to the United States and chairman of the Organization of American States; Maj. Gen. (ret.) George Keegan, former chief of intelligence of the U.S. Air Force and current chairman of the Congressional Advisory Board; Mykola Plawiuk of the World Congress of Free Ukrainians; Ulana Mazurkevich of the Ukrainian Human Rights Committee of Philadelphia; and Stephen Procyk, executive member of the National Committee to Commemorate Genocide Victims in Ukraine and chairman of its Washington branch.
Messages were received from many members of Congress, among them the following senators: Rudy Boschwitz (R-Minn.), Dave Durenberger (R-Minn.), John Glenn (D-Ohio), Mark O. Hatfield (R-Ore.), John Heinz (R-Pa.), Frank R. Lautenberg (D-N.J.), Carl Levin (D-Mich.), Charles McC. Mathias Jr. (R-Md.), Daniel P. Moynihan (D-N.Y.), Charles H. Percy (R-Ill.), Donald W. Riegle Jr. (D-Mich.), Arlen Specter (R-Pa.) and Edward Zorinsky (D-Neb.).
The following representatives also sent messages: Glenn M. Anderson (D-Calif.), Frank Annunzio (D-Ill.), Sherwood L. Boehlert (R-N.Y.), Philip M. Crane (R-Ill.), Brian J. Donnelly (D-Mass.), Hamilton Fish Jr. (R-N.Y.), Bill McCollum (R-Fla.), Henry J. Nowak (D-N.Y.), Mary Rose Oakar (D-Ohio), Frank R. Wolf (R-Va.) and Gus Yatron (D-Pa.).
Messages were later received from Reps. Joseph P. Addabbo (D-N.Y.), Mario Biaggi (D-N.Y.), Edward F. Feighan (D-Ohio) and Samuel S. Stratton (D-N.Y.).
In addition, Gov. Dick Thornburgh of Pennsylvania, and Canadian Member of Parliament Jesse P. Flis sent greetings to the rally participants.
At the conclusion of the rally Dr. Stercho once again took the podium, this time to thank all the participants. Msgr. Walter Paska, who appeared at the rally in the name of Archbishop-Metropolitan Stephen Sulyk who is in Rome at the World Bishops Synod, offered the benediction.
The program concluded with a performance by the Ukrainian Bandurist Chorus directed by Hryhory Kytasty, which presented two selections, a Ukrainian patriotic song and “God Bless America.” The rally was formally closed with the singing by all present of the Ukrainian national anthem.

NOTE:  http://www.ukrweekly.com/old/archive/1983/418301.shtml; Check out The Ukrainian Weekly’s extensive famine archives:  http://www.ukrweekly.com; (To see a copy of the official march poster click on http://www.artukraine.com/famineart.armstrong.htm.)
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12.  THEY CAME FROM NEAR AND FAR TO COMMEMORATE THE
VICTIMS OF THE GREAT FAMINE IN UKRAINE 1932-1933
To make others aware of the Soviets’ horrible crime against humanity
By Marta Kolomayets, The Ukrainian Weekly, Parsippany, New Jersey, Sunday, October 9, 1993. 
WASHINGTON – They came from all over the United States; they came by bus, by car, by train and by plane. They all converged upon the nation’s capital. Some 18,000 Ukrainian Americans gathered at the Washington Monument on Sunday, October 2, for one reason: they came to commemorate the millions of victims of the Great Famine in Ukraine 1932-33.
Some had carried the memory of the tragedy in their hearts and in their minds for 50 years. Some knew only of the genocide through stories told by parents and relatives. Still others, second- and third-generation Ukrainians learned of the holocaust through English-language accounts in the Ukrainian press and through word of mouth. They all came to honor the memory of innocent victims – Ukrainian brothers and sisters – and to make others aware of the Soviets’ horrible crime against humanity.
Pawlo Malar, of Syracuse, N.Y., was an eyewitness to the famine in the Poltava region. He, along with a full bus of Plast members and parishioners of St. John’s Ukrainian Catholic and St. Luke’s Ukrainian Orthodox churches, traveled to Washington to rightfully commemorate the great tragedy.
“As a 22-year-old student in the city, I saw the trucks coming around to pick up the corpses, I saw death all around me,” he stated, recalling the famine years. “And through the years I have tried to spread the word about the famine,” he added. Mr. Malar said he participated in the 15th, 25th and 40th year commemorations of the famine held in the diaspora. He is the author of a trilogy “Zolotyi Doshch,” in which he devotes several chapters to the famine.
On Sunday he came to Washington because he feels the Reagan administration is not apathetic to the politics of the Soviet Union, as administrations in the past were.
He was one of many demonstrators who arrived as early as 9:30 a.m. The chartered buses from various cities kept pulling up near the Washington Monument to let rally-goers off. The dark sky, scattered with rain clouds, seemed almost appropriate for the somber event.
By 10:30 a.m. the masses extended to either side of the stage and stretched way back to the Washington Monument, a distance of several hundred feet. The sun started breaking through the clouds and the umbrellas were folded and put away.
The people still kept coming; chartered buses from all parts of the United States – the Rochestarians carried their symbolic coffins, imprinted with the words “7,000,000 Ukrainians Murdered”; the Plast members assembled, staking out a good piece of land to accommodate 1,000 uniformed members of all ages.
Women in embroidered blouses and dark skirts, members of the Ukrainian National Women’s League of America and the Ukrainian Gold Cross listened attentively to the speakers on the stage. Eleven full buses from the Philadelphia area carried both young and old to the commemorations in Washington.
Among the sea of faces, signs proclaiming all the cities and towns represented emerged. They read San Diego; Los Angeles; Chicago; Dayton, Solon, Youngstown (Ohio); Pittsburgh, Monessen (Pa.); Buffalo (N.Y.); Hartford (Conn.); Detroit; Richmond (Va.); Trenton (N.J.); Boston; New York and Baltimore. The list of cities grew longer and longer as the rally continued past noon. Ukrainians from Texas, Florida, Rhode Island, and Washington made their way through the crowds.
Signs, some meticulously printed and others scrawled in a hurried fashion, were carried by many of the demonstrators. They carried such slogans as “The West Must Not Forget,” “Whole Ukrainian History is Holocaust,” “7,000,269 Murdered – 1933 Soviet Genocide in Ukraine, 1983 Soviet Attack on KAL 007.”
As the solemn march to the Soviet Embassy began the demonstration took on a somber tone. The uniformed members of Plast and ODUM gave the march a formal air, followed by representatives of women’s organizations and communities.
The Ukrainian Orthodox League, numbering over 200 from New Jersey, Pennsylvania, Indiana and Illinois, marched together, caught up in the spirit of unity which, their president Dr. Gayle Woloschak remarked, has prevailed since their summer convention.
Marching the mile-long route from the Washington Monument to the Soviet Embassy, the Ukrainian Americans conscientiously informed passers-by of the great tragedy perpetrated upon the Ukrainian people by the Soviet regime.
A young marcher from St. Mary’s parish in Solon, Ohio, remarked “I’ll bet you could not even find a handful of people on the street who know about this tragedy,” and continued marching on proudly with his group, which had traveled 10 hours to get to Washington.
“We’re a small community in Richmond, Va.,” remarked Ihor Taran in a southern drawl, “but we’re aware of the famine and we came here today to commemorate the memory of the victims. My parents came from Zaporizhzhia and Kiev and I’ve grown up being aware of the tragedy of the genocide,” he said.
A handful of marchers from Kentucky, representing the cities of Louisville and Lexington, were organized by the local UNA branch and had traveled to Washington to commemorate the event on a national level. “We’ve had local television and press coverage in Kentucky,” Oksana Mostovych stated.
Road-weary Chicagoans who spent 17 hours on a chartered bus, their travels extended due to bad weather in Pennsylvania, arrived in Washington on Friday. Many of them spent the day visiting U.S. senators and congressmen with fellow members of Americans for Human Rights in Ukraine.
The first-, second- and third-generation Ukrainian Americans who have never experienced the tyranny of the Soviet system took part in the commemorations. So did newly arrived Soviet emigres. Former dissident Nadia Svitlychna and her entire family showed up in Washington, as did former political prisoner Valentyn Moroz, who now resides in Toronto with his wife, and recent defector Victor Kovalenko, presently a Plast member in Philadelphia.
The United States Ukrainian community was not the only Ukrainian community represented. Torontonians came down by bus to observe U.S. national famine commemorations. One Canadian student remarked that he thought it was important for Canadians also to take part in one of the largest commemorations of the 50th anniversary of this holocaust. Ukrainians from Australia and Europe took part in the commemorations as did many non-Ukrainian friends of Ukrainians.
Maria Petrauskas – dressed in traditional Lithuanian garb – and her daughter Solamaja, joined the masses of Ukrainians at the Washington Monument. “We have always known about the famine, today we come out to the demonstration in solidarity with our oppressed brothers,” Solamaja said.
Some of the marchers, too old to walk the route of the march, were driven to the embassy to watch the crowds assemble and hear the statement addressed to the Kremlin. Hlib Naumenko of St. George’s Church in Yardville, N.J., who was 23 at the time of the famine, said that his family in Poltava was saved by eating gruel even dogs refused to eat. “Today, I come to remind myself of those days and to make others aware,” he said, slowly making his way to a bench.
 
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13.  18,000 UKRAINIANS PROTEST NEAR SOVIET EMBASSY IN WASHINGTON

By George B. Zarycky, The Ukrainian Weekly, Parsippinany, New Jersey, Sunday, October 9, 1983
WASHINGTON, D.C. – An estimated 18,000 Ukrainians, marching in a phalanx that at one point stretched nearly a mile, assembled within 500 feet of the Soviet Embassy here on Sunday afternoon, October 2, to commemorate the 50th anniversary of the artificial famine in Ukraine which killed 7 million people in 1932-33.
As the marchers moved down 16th Street toward the embassy, many carrying colorful banners castigating the Soviet regime, they were met by a large contingent of uniformed police, who had cordoned off the block between K and L streets near the embassy, which is between L and M streets. Over 15 blue Metro Police cruisers lined the street, while others were parked bumper to bumper sealing off both ends of the block.
Police had expected a group of some 5,000 people, but as row after row of demonstrators continued to stream down 16th Street, it soon became clear that at least three times as many were at the rally. The first to arrive at the police barricades were members of the Plast Ukrainian Youth Organization – 1,000 strong – who marched in uniformed formations behind a large banner. It took another 40 minutes for the rest of the huge crowd to make its way from the Washington Monument.
As the crowd continued to swell, many groups were forced to fan out on either side of K Street to keep the intersection clear.
At about 2 p.m., Orest Deychakiwsky, a 27-year-old staff member of the Congressional Helsinki Commission, read an open letter to the Kremlin.
 
Surrounded by a sea of demonstrators and reporters, Mr. Deychakiwsky called the Soviet-engineered famine “a deliberate act of genocide” against the Ukrainian people, and warned the Kremlin that the Ukrainian community in the United States would continue to “tell our fellow Americans about the real Soviet Union.” (For the full text of Mr. Deychakiwsky’s remarks, see page 6.)
Chastising the Soviets for the invasion of Afghanistan, the shooting down of Korean Airlines Flight 007 and the continuing policies of Russification in the non-Russian republics, Mr. Deychakiwsky said that the world is finally becoming more aware of the nature of the Soviet system.
“We Americans of Ukrainian descent, together with all Americans and people of the world who respect human life – and value human liberty – will see to it that those who died in your man-made famine in Ukraine, that those who died aboard the Korean airliner, that those who continue to suffer under your dictatorship – we will see to it that they did not die, nor will they suffer, in vain,” he said.
The march itself began at the Washington Monument following a special famine commemorative program. With parade marshals wearing blue-and-gold armbands issuing instructions, the demonstrators marched north up 15th Street, the southbound lanes of which were closed to traffic. As motorists looked on, marchers made their way past government buildings for several blocks before turning left onto Pennsylvania Avenue.
While the demonstrators filed past Presidential Park directly across the avenue from the White House, curious onlookers came forward to ask what the march was all about or to take famine literature being distributed by several parade marshals.
From the White House, the marchers snaked through tree-lined residential streets with elegant brownstones before turning north again on 16th Street.
Although the march was called to commemorate the Great Famine, many of the demonstrators carried placards denouncing Soviet aggression, calling for freedom of religion in Ukraine or protesting the downing of the Korean passenger plane.
 
One sign read “Koreans and Ukrainians united against the USSR,” while another said “Stop KGB infiltration in U.S. courts,” a reference to the government’s use of Soviet-supplied evidence in denaturalization proceedings against East Europeans suspected of collaborating with the Germans during World War II.
Most, however, dealt with the anniversary of the famine and its 7 million victims, with inscriptions such as “The West must not forget” and “Moscow before tribunal of justice.” One group, from Rochester, N.Y., carried three makeshift black coffins inscribed with white lettering which read “7,000,000 Ukrainians murdered.”
While the vast majority of the demonstrators were Ukrainian Americans, some from as far away as Chicago, Ohio and upstate New York, there was a large contingent from Canada. A few of the protesters were non-Ukrainians including a Lithuanian mother and daughter who carried a sign, complete with a hammer and sickle, that read “Wanted for murder.”
Although the over-all tone of many of the signs was one of anger and outrage, the pervasive mood of the demonstration was one of seriousness and restraint in deference to the somber anniversary of what many demonstrators called the “unknown holocaust.” Although there were intermittent chants of “Freedom for Ukraine,” most of the demonstrators marched in silence or talked quietly among themselves in keeping with the wishes of rally organizers.
Once assembled at the intersection of K and 16th streets, about one and a half blocks from the Soviet Embassy, the demonstrators presented an impressive sight, with marchers massed against the police line and on K Street on both sides of the intersection. Several, including eyewitnesses who had survived the famine, clustered around reporters and photographers from the news media.
After Mr. Deychakiwsky read the open letter to the Kremlin, rally participants sang the Ukrainian national anthem, “Shche ne vmerla Ukraina,” and scores released the black balloons they had been carrying as mournful symbols of the famine and its victims. As the ballons drifted gently into the clear Washington sky, the demonstrators began to disperse, many to get ready for a 3 p.m. memorial concert at the Kennedy Center. Most seemed to conclude that the rally had been orderly, dignified and an unequivocal success.
 
LINK: http://www.ukrweekly.com/old/archive/1983/418302.shtml; to see a copy of the official poster created for the freedom march click on http://www.artukraine.com/famineart.armstrong.htm.
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AUR#910 Sep 24 Ukraine Macroeconomic Update; Joint Stock Company Law; IBM Ukraine, Russian Passports

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       
 
NEW JOINT STOCK COMPANY LAW, MAJOR STEP FORWARD
“It is hard to overestimate the relevance and importance of this piece of legislation for
the improvement of the investment climate and the general economic situation in Ukraine. 
Adoption of this law is a significant step forward in bringing Ukraine to world standards
in the sphere of corporate governance and ownership issues.”
                     
ACTION UKRAINE REPORT – AUR – Number 910
Mr. Morgan Williams, Publisher and Editor, SigmaBleyzer
WASHINGTON, D.C., WEDNESDAY, SEPTEMBER 24, 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
Monthly Analytical Report: By Olga Pogarska, Edilberto L. Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group, Kyiv
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wed, Sep 24, 2008
 
ANALYSIS: By Armen Khachaturya, Partner, Asters and Asters law firm legal team, Kyiv
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wed, Sep 24, 2008
 
Sokrat Daily, Sokrat Financial Company, Kyiv, Ukraine, Thursday, September 18, 2008
 
4NEW JOINT STOCK COMPANY LAW ADOPTED BY VERKHOVNA RADA OF UKRAINE 
“Hard to overestimate the relevance and importance of this piece of legislation.”
Analysis & Commentary: Arzinger & Partners Ukraine, Kyiv, Ukraine, Thu, Sep 18, 2008                                                                         
 
Adam Smith Conferences’, London, UK, Monday, September 22, 2008
 
International Investment Summit of Donetsk Region, Donetsk, Ukraine, Wed, Sep 24, 2008
 
Large international computer technology and consulting corporation is member ninety-two 
U.S-Ukraine Business Council (USUBC), Washington, D.C., Monday, September 22, 2008
 
8PROCREDIT RECEIVES US$20 MILLION LOAN AGREEMENT FROM INTERNATIONAL FINANCE CORPORATION (IFC)
International law firm Salans acts as legal advisor to IFC (International Finance Corporation)
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wednesday, September 17, 2008
 
Jackie Stewart, Viasat, Stockholm, Sweden, Tuesday, September 23, 2008
 
Too many indicators are deteriorating and too many warning lights flashing
LEX TEAM: Macroeconomics and Markets, Financial Times, London, UK, Sun, Sep 21 2008
 
11 UKRAINE AND GEORGIA IN NATO NOT SEEN TO BE IN U.S. INTEREST 
Former U.S. ambassador to Moscow Jack Matlock said on Tuesday 
By Susan Cornwell, Reuters, Washington, Tuesday, September 16, 2008 
Interfax, Moscow, Russia, Saturday, September 20, 2008 
 
Reuters, New York, New York, Monday, September 22, 2008 
BYuT’s priority is to re-establish the democratic coalition
BYuT Newsletter Inform, Issue 86, Kyiv, Ukraine, Monday, 22 September 2008
 
15 DON’T BE FOOLED AGAIN
Commentary: BYuT Newsletter Inform, Issue 86, Kyiv, Ukraine, Mon, 22 Sep 2008
 
Window On Eurasia: by Paul Goble, Vienna, Tuesday, September 9, 2008
 
17 RUSSIAN PASSPORTS AS MOSCOW’S GEOPOLITICAL TOOL
Kremlin uses handing out of Russian passports to destabilize Ukraine
Analysis & Commentary: By Taras Kuzio, Eurasia Daily Monitor, Volume 5, Issue 176
The Jamestown Foundation, Washington, D.C., Wednesday, September 15, 2008
Window on Eurasia: by Paul Goble, Vienna, Tuesday, September 23, 2008

 

Interfax Central Europe, Warsaw, Poland, Tuesday, September 23, 2008
20 THE HISTORY IS COMPLEX, BUT THERE’S NO DOUBT CRIMEA IS PART OF UKRAINE 
The border with Russia was agreed at the UN, and talk of moving it now is dangerous.
Letter-to-the-Editor: By Ihor Kharchenko, Ambassador of Ukraine to the United Kingdom
The Guardian, London, UK, Wednesday, September 24, 2008
 
Analysis & Commentary: by Mihai Hareshan
Nine o’Clock, Bucharest, Romania, Monday, September 22, 2008
 
Op-Ed: By Mikheil Saakashvili, President of Georgia, The Washington Post
Washington, D.C., Tuesday, September 23, 2008; Page A21
 
23FUTURE OF VIKTOR YUSHCHENKO AND POLITICAL CRISIS IN UKRAINE
Analysis & Commentary: by Vadim Karasyov, Vitaly Portnikov, Kyiv
Eurasian Home, Moscow, Russia, Tuesday, September 16, 2008
===================================================
1
 UKRAINE MACROECONOMIC SITUATION, SEPTEMBER 2008
 
Monthly Analytical Report: By Olga Pogarska, Edilberto L. Segura
SigmaBleyzer Emerging Markets Private Equity Investment Group, Kyiv
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wed, Sep 24, 2008
 
The entire Ukraine Macroeconomic Situation analytical report for September 2008, from SigmaBleyzer/The Bleyzer Foundation, a member of the U.S.-Ukraine Business Council (USUBC), www.usubc.org, is found below.  It is also found in the attachment to this e-mail in pdf format which includes seven detailed statistical charts in color.
 
SUMMARY
[1] In July, economic growth accelerated to 7.3% yoy due to a strong recovery in agriculture, bringing the cumulative growth back to 6.5% yoy. At the same time, continuing value added growth deceleration in other sectors gives reason to expect moderation of economic growth to about 6.3% yoy for 2008, despite a record high harvest.
[2] Thanks to above-target revenues and controlled expenditures, the consolidated budget balance was positive, reporting a 1.5% of GDP surplus in the first half of 2008. Despite good fiscal performance so far, the fiscal outlook for the rest of the year remains uncertain considering the sluggish privatization process, tighter borrowing conditions, increased expenditures related to unfavorable weather conditions and government plans to amend the 2008 budget raising further social liabilities.
 
[3] Inflationary pressures continued to soften as consumer prices fell by 0.5% month-overmonth in July. However, reducing annual inflation  below 20% may still be a challenging task for Ukrainian authorities.
 
[4] On the back of surging world commodity prices, Ukraine demonstrated record high export growth. However, the growth of imports  kept outpacing
exports, triggering further deterioration of foreign trade and, thus, current account balances.
 
[5] Though the economic links between Ukraine and Georgia are quite modest, the recent Russia-Georgia conflict may have far-reaching  consequences for the Ukrainian economy.
 
ECONOMIC GROWTH
 

Abrupt GDP growth deceleration in June was taken as a tentative sign of macroeconomic adjustment. However, GDP growth bounced back in July to 7.3% from a year earlier, bringing cumulative growth to 6.5% yoy.
 
The upsurge is mainly attributed to a recovery in agriculture, which more than offset weakening growth in industry and domestic trade, as well as a continuing slowdown in construction, education and healthcare.
Value added growth in agriculture reached 10.8% yoy for January-July backed by an outstanding harvest this year. As of August 1st, Ukraine had harvested 26.3 million tons of grain from about 60% of the total area under grain crops. Despite the recent floods that affected western Ukraine (which accounted for
about 15% of total grain production in 2007), the grain crop is expected to top 43 million tons, a 15-year record amount.
 
The increase in the overall harvest is attributed to good weather as well as an increase in planted area as the rise in food prices (both domestically and globally) was a strong incentive for agricultural producers.
The rich harvest this year will help to ease inflationary pressures in the country as soaring food prices were the main driver of consumer inflation since the second half of 2007. At the same time, while consumers take advantage of falling agricultural prices, producers (particularly small farm enterprises) may not fully reap the expected profits.
 
In July, the average price of wheat on the domestic market was UAH 807.5 ($166.5) per ton, representing a fall of almost 20% from June’s level and about 27% from March’s peak.
 
Given strong external demand, Ukraine’s grain exports may reach about 17.5 million tons (1), which would prevent a sharp fall in domestic prices, thus maintaining the financial stance of agricultural producers.
However, due to limited storage capacities and outdated and/or insufficient infrastructure, this potential may not be fully realized. Consequently, falling domestic prices on the back of rising production costs (due to more expensive fuel, fertilizers, freight, storage, etc.) may drag agricultural production down in the future. Indeed, despite possessing extensive black soil and having favorable climate conditions, Ukraine’s agricultural performance has been rather disappointing.
Insufficient investments, stemming from slow structural reforms, have turned Ukraine into a net importer of grain during 2000/2001 and 2003/2004. Over the last five years, the average crop yield was 45–50% lower than in the EU-27. (2) Supply side constraints and existing inefficiencies in the agricultural sector were among the main causes of recent spikes in food prices.
Timely and consistent implementation of comprehensive agricultural reform will help to expand crop production and other agricultural products, ensure a smooth food supply on the domestic market and build a competitive agricultural sector.
Over January-July, value added growth in the mining sector accelerated to 5.7% yoy. Faster growth in the sector was achieved thanks to an 8.2% yoy rise in output of non-energy minerals production and a 2.4% yoy increase in extraction of fossil fuels. Ukrainian producers and exporters of iron ore are taking advantage of booming iron ore prices, underpinned by strong demand for steel products in developing countries (particularly China, Russia and India).
 
High world energy prices (crude oil and natural gas) on the back of falling domestic production of these commodities stimulated extraction of thermal coal, which grew by 6.8% yoy in the first half of the year. Production of other fossil fuels, however, continued to decline.
 
Thanks to robust domestic and foreign trade, rising household disposable income (up by a real 14.7% yoy over the first half of 2008), value added in transportation and communication grew by 8.4% yoy, an unchanged rate compared to the first six months of the year.
Other sectors, however, demonstrated weaker growth. Industrial production continued to decelerate, demonstrating a 7.3% yoy increase in January-July compared to 7.5% yoy in 1H 2008. Growth in food processing slowed to 4.4% yoy, as a poor 2007 harvest continued to exact a toll on the industry. At
the same time, the outstanding harvest this year will help to improve industry performance in the second half of the year.
 
Despite soaring world steel and fertilizer prices, metallurgy and the chemical industry reported moderate 3.5% yoy and 5.2% yoy increases in production. Domestic shortages of coking coal, though partly compensated for by imports, and rallying iron ore prices continued to suppress metallurgical production. Rising production costs are the main reason for slower output growth in the chemical industry.
At the same time, the industry benefited from high world chemical prices, demonstrating growing export values and, consequently, profitability. According to State Statistics Committee of Ukraine, the share of profitable enterprises in the industry grew to 69.4% over the first five months of the year compared to 67.2% in the respective period last year, while the declared profits were 2.3 times higher in nominal terms.
 
Machine-building has remained the growth leader as its production grew by 28.7% yoy in January-July. At the same time, the growth was slightly weaker compared to 29.3% yoy demonstrated in 1H 2008, which may be attributed to weaker domestic demand for these products affected by slower credit
growth.
 
The coke- and oil-refining industry continued to be among the main contributors to a growth slowdown in the industrial sector as it reported a 21.4% yoy decline in output production, mainly on account of lower production of oil products.
Wholesale and retail trade performance continued to worsen as value added in the sector sharply decelerated to 11.8% yoy in January-July, down by 3 percentage points compared to 1H 2008. Deceleration in retail trade (turnover rose by 26.6% yoy in January-July vs. 29.8% yoy in January-June) may be attributed to slowing growth of real household disposable income as well as consumer credits.
 
However, as retail trade accounts for less than 30% of total domestic trade, (3) wholesale trade dynamics should be blamed for the sharp deceleration in
the sector. Despite buoyant foreign trade and improved agricultural performance, the sector’s performance may be attributed to a continuing decline in the construction sector (by almost 5% yoy in the first seven months of the year), decelerating industrial production, a high statistical base as well as changes in the administration of VAT.
 
Electronic administration of VAT, introduced in April this year, has impeded the functioning of company-mediators, artificially created to minimize VAT payments and/or receive fraudulent VAT refunds. The situation resembles that in 2005, when a drastic change in administration of taxes caused a sharp reduction in the number of mediators in the wholesale trade, thus leading to a notable decline in value added in the sector. (4)
 
As the new system of tax administration just recently started to function, it is expected that value added growth in domestic trade sector will continue to decelerate. In turn, this will negatively contribute to total GDP growth, as the sector accounts for almost 13%. Given also weaker growth of industrial production and continuing depression in construction, GDP growth may slow to 6.3% yoy for the whole year, regardless of the remarkable harvest this year.
 
FISCAL POLICY 
Over the first half of 2008, the consolidated budget posted a surplus of UAH 6.5 billion ($1.3 billion), which is equivalent to 1.5% of period GDP. The surplus was achieved thanks to over-fulfillment of consolidated budget revenues and below-target expenditures. Consolidated budget revenues were up by about 44% yoy in nominal terms, primarily on account of an almost 50% yoy rise in tax collections.
 
Proceeds from VAT rose by a nominal 60.4% yoy over the first half of 2008, reflecting robust economic growth, high inflation, buoyant imports, and improved tax administration.
 
Modernized customs procedures secured a 91% yoy increase in import duties, while strong growth in household income and improving profitability of
Ukrainian enterprises allowed for collection of 41% yoy and 53.3% yoy higher proceeds from personal income and corporate profit taxes respectively.
At the same time, the growth rate of tax collections in January-June was slightly lower than in the preceding period, which may be attributed to gradual cooling of the economy (in June, economic growth notably decelerated to 5.4% yoy versus 7.2% yoy in May).
Despite strong growth in fiscal revenues, the consolidated budget surplus shrunk almost in half in January-June compared to January-May, which may be attributed to better execution of budget expenditures as well as higher spending from the reserve fund.
 
In particular, expenditures from the general fund of the state budget were under-fulfilled by 5.5%. At the same time, the annual growth of consolidated budget expenditures slowed to a nominal 46.8% in January-June versus about 50% in the previous period.
 
The deceleration may be attributed to a high statistical base effect as the government started the second stage of implementing the Unified Tariff Scale for setting public sector employee salaries in June of last year, while realization of the next stage is planned for this fall. In contrast, the growth of capital expenditures notably accelerated in January-June 2008, picking up by almost 19% yoy in nominal terms compared to about 12% yoy growth in January-May.
 
Additional funds from the budget were allocated to finance infrastructure repair works following a storm that swept over western Ukraine in June of this year. Moreover, July’s severe flooding in western Ukraine may cause notable acceleration of budget expenditures in the coming months. At the end of July,
the parliament amended the budget, raising expenditures by UAH 5.8 billion ($1.2 billion), or by 2.5%, to liquidate in the aftermath of floods.
 
Though budget revenues were raised as well, leaving the targeted deficit unchanged, the likely revenue-expenditure execution mismatch will cause rapid deterioration in fiscal balance performance in the coming months.
Above-target revenues and under-fulfilled expenditures led to accumulation of substantial budget funds on the State Treasury accounts. By July 1st, the State Treasury had accumulated UAH 14.4 billion ($2.9 billion). This amount as well as continuing strong growth in budget revenues will be sufficient to meet increased government liabilities in the coming months. Moreover, the government still plans to amend the 2008 budget this fall, further raising social security payments.
 
The increase is substantiated by the need to adjust living standards with the inflation rate, which proved to be much higher than forecasted in the current budget law. At the same time, even if the budget is left unchanged, the outlook for the rest of the year looks quite uncertain. The government may fall short of the required funds to finance the targeted budget deficit due to the sluggish privatization process. Indeed, about 47% of the expected budget deficit is planned to be financed through privatization receipts.
 
However, as of August 1st only UAH 350 million ($71.5 million), or less than 4% of the targeted amount, was received into state coffers. Furthermore, it is planned that new domestic and external borrowing will constitute UAH 7.8 billion and UAH 8.1 billion respectively. For January-June, only 5.1% and 21% of the planned amounts respectively were received.
Moreover, due to tighter liquidity on both domestic and external markets, new borrowings might turn out to be a rather costly source of deficit financing. So far, the stock of public and publicly guaranteed debt grew by less than 1.0% year-to-date (ytd) to $17.7 billion at the end of June.
 
Due to hryvnia appreciation with respect to the US dollar and therefore other currencies, hryvnia denominated public and publicly guaranteed debt has declined by 3.2% since the beginning of the year and was less than 9% of projected full-year GDP.
 
MONETARY POLICY
 

The anti-inflationary program, which included stricter monetary policy, appreciation of the national currency and tight control over fiscal expenditures,
started to bear fruit amid an increasing supply of new harvest products. For the first time since April 2006, consumer prices fell by 0.5% month-over-month (mom) in July 2008. In annual terms, the disinflation trend strengthened as consumer price index growth declined to 26.8% in July, down from 29.3% in the previous month.
 
Deceleration of consumer price increases was attributed to a declining trend for foodstuff prices. Last year, unfavorable weather conditions, loose credit conditions as well as expansionary fiscal policy caused a sharp acceleration in food prices. Conversely, the good harvest this year coupled with NBU/government measures to curb inflation contributed to a 1.3% mom reduction in food prices, which brought annual growth down to 39% versus almost 44% yoy in June.
 
Fruits, vegetables and meat products respective price growth decelerated to 70.6% yoy, 3% yoy and 52.9% yoy in July versus 79.1% yoy, 33.1% yoy and 54.3% yoy in June. This was the most significant contributor to easing food inflation, offsetting the continuing increase in prices for bread, fish and fish products, sugar and confectionary. However, despite a positive trend, it is too early to see inflation relief.
 
[1] First, non-food and service tariffs inflation continued to pick up. In particular, growing utility tariffs (up by 12.3% yoy in July vs. 11.5% yoy in June), more expensive household appliances (up by 7.2% yoy in July), city transportation (up by 33.4% yoy), education and recreation services (up by 19.3% yoy and 15.4% yoy respectively) led to higher overall prices in the economy. Moreover, despite easing world crude oil prices, Ukraine’s retail fuel prices continued to pick up (by 47% yoy in July vs. 42.5% yoy a month before).
 
[2] Second, easing inflation provided some room for government authorities to allow a gradual pass-through of higher energy prices to consumers. Starting September 1st, tariffs for natural gas will be raised by about 13%-14% for households, the public sector and heating enterprises. The tariffs have remained unchanged since the end of 2006, although the price for imported natural gas (which accounts for almost ? of Ukraine’s total natural gas consumption) grew by about 38% at the beginning of 2008. (5)
 
[3] Third, producer price inflation continued to accelerate, reaching 46.3% yoy in July (up from 43.7% yoy a month ago).  Producers have been increasing their prices compensating for growing input costs, particularly surging raw materials prices and rising transportation costs. Strong external demand also contributed to a pick up in producer prices.
 
The divergence in the growth trajectories between producer and consumer prices may be explained by the existence of price regulations as well as the high share of exported goods. However, twice as high producer inflation creates significant pressures for consumer price growth in future periods.
 
[4] Fourth, monetary and exchange rate policies bore mixed results so far. The tightening of reserve and capital requirements, raising the NBU discount rate to 12%, sizable sterilization operations at the end of 2007/beginning of 2008 and appreciation of the national currency helped to subdue buoyant money supply and credit growth, thus contributing to easing inflation.
These measures, however, led to notable liquidity strains in the Ukrainian banking sector, requiring the NBU to support commercial banks with extra liquidity through its refinancing operations. During May-July, the NBU provided commercial banks with UAH 27.1 billion ($5.6 billion). Moreover, high domestic interest rates attracted robust foreign capital inflow to Ukraine.
 
To prevent a sharp national currency appreciation, the NBU had to intervene on the inter-bank forex market by buying out the surplus of foreign exchange. In July alone, net NBU purchases of foreign currency amounted to $2.5 billion and reached $4.5 billion for the last three months. Sizable forex interventions
spurred the National Bank to partially sterilize these amounts.
 
In July, it withdrew UAH 10.3 billion ($2.1 billion) from the market. The combined
result of these measures, however, was acceleration of monetary base growth to 41.6% yoy in July (up from almost 39% yoy in June).
 
At the same time, money supply (M3) growth decelerated to 47.5% yoy, down from 48.7% yoy in June, which was attributed to slower deposit growth. The latter, in turn, may be explained by a reduction of the hryvnia deposit rate amid improved banking sector liquidity.
 
At the same time, the importance of this source for banks’ credit creation may increase in the coming months as starting August 1st the NBU raised reserve requirements for commercial banks’ foreign funds attracted for less than 6 months to 20% (up from previous 4%).
 
So far, the growth of commercial banks credit portfolios slowed to 61.1% yoy in July. The NBU has been purposely cooling credit growth, in response to
growing concerns over banking sector vulnerability to various risks as well as the realization that the credit boom over the last several years notably contributed to inflationary pressures by driving consumption.
At the beginning of July, the government revised its year-end inflation forecast upwards to 15.9% yoy, up from the previous 15.3% yoy. However, given the above arguments, even the revised forecast looks overly optimistic, despite easing inflationary pressures in June-July. We forecast inflation to reach about 20% yoy this year.
INTERNATIONAL TRADE AND CAPITAL
 
Surging world commodity prices supported Ukraine’s strong export performance. In June, export of goods picked up by a record high 62.7% yoy, bringing the cumulative merchandise export growth to 40.7% yoy. By product breakdown, ferrous metals (up by 57% yoy over January-June), chemicals (up by 28.4% yoy), machinery and transport equipment (up by 44.3% yoy) were the main contributors to total export growth.
 
Following the enlargement of grain export quotas in April and their elimination at the end of May, export of agricultural products accelerated to 31.8% yoy in January-June, up from 27.8% yoy in the previous period.
In addition, growth of mineral products exports (mainly gasoline and coal) contributed strongly to the overall growth of merchandise exports, as their sales to foreign partners increased by 56.8% yoy in the first half of 2008, up from 27.3% yoy in January-April.
Despite remarkable export performance, Ukraine’s foreign trade balance continued to deteriorate as imports growth also sped up. On the back of high commodity prices and strong domestic consumption, imports of goods grew by 69.3% yoy in June, bringing cumulative growth to 55.3% yoy. Energy resources and machinery and transport equipment, the import values of which were up by 51% yoy and 60% yoy respectively, were the main contributors to total merchandise import growth.
 
As a result, the FOB/CIF merchandise trade deficit reached $9.8 billion, 2.3 times higher than in the first half of 2007. Considering merchandise trade performance, the current account gap this year may reach $14.4 billion. However, strong FDI inflow and still robust private sector borrowing from abroad will cover the forecasted CA gap.
OTHER DEVELOPMENTS AFFECTING INVESTMENT CLIMATE 
At the beginning of August, Moody’s Investors Service affirmed Ukraine’s long-term foreign and local currency ratings. The agency acknowledged declining external public debt, controllable fiscal situation and high international reserves. However, the rapidly widening current account gap amid volatile international financial markets was among the main reasons for keeping the rating unchanged.
 
According to agency estimates, FDI inflow will cover the CA deficit by 80% in 2008, increasing the country’s dependence on foreign financing in an uncertain environment.
The recent military confrontation between Georgia and Russia may have mixed but crucial consequences for Ukraine. Impact in the short-term on the Ukrainian economy is likely to be minimal as the economic links between Ukraine and Georgia are quite modest, but the conflict uncovered the latent flashpoints that could affect investor sentiments about Ukraine.
 
With a prolonged common history with Russia and a large ethnic Russian minority, Ukrainian society remains highly divided in choosing pro-Western or pro-Russian development.
 
Following Viktor Yushchenko’s victory in the 2004 presidential elections, the country declared its desire to join NATO and seek EU integration, a direction discordant with Russia’s efforts to retain its influence on former Soviet republics.
 
Moreover, according to the lease agreement signed in 1997, Russia’s Black Sea fleet, which was directly involved in the Russia-Georgia conflict, will be based in Crimea until 2017. Many political forces in Ukraine believe that this agreement should not be renewed, a position that would antagonize Russia.
 
Furthermore, the conflict may spur Ukraine’s aspirations to join NATO, which may further worsen Ukraine-Russia relations. Although it is very unlikely
that the “Georgian scenario” can play out in Ukraine, the rising geopolitical tensions in the region may adversely affect investor sentiment, which in turn may translate into lower FDI inflow and growing costs of borrowed resources for Ukraine.
 
Furthermore, Ukraine’s energy-extensive economy is almost entirely dependent on Russia’s energy imports. Deterioration of Ukraine-Russia relations in the aftermath of the Russia-Georgia conflict may result in a sharp increase in imported natural gas prices next year.
Though Ukraine demonstrated strong resilience to energy price shocks, a combination of higher energy prices, the coming presidential election and a fragile external environment caused by financial distress on international markets and a generally over-heated domestic economy may drag down economic growth in the coming year.
 
FOOTNOTES:
(1) An estimate of the Ukrainian Grain Association.
(2) Source: EC Memo/08/537 on Annual Crop Yield Forecast for 2008 as of August 7, 2008; State Statistics Committee of Ukraine, The Bleyzer Foundation estimate.
(3) Estimate based on wholesale and retail trade turnover data for 2007.
(4)  According to data released from the State Tax Administration of Ukraine at the beginning of July, thanks to the introduction of electronic administration of VAT, it identified about 170 companies that manipulated taxation in just one month.
(5) Natural gas tariffs for heating and power engineering enterprises remained unchanged since mid-2006.
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NOTE: To read the entire SigmaBleyzer/The Bleyzer Foundation Ukraine Macroeconomic Situation update report for September 2008 in a PDF format, including color charts and graphics click on the attachment to this e-mail or go to the following link, and click on Ukraine September 2008,
http://www.sigmableyzer.com/publications/monthly_reports
 
UKRAINE, BULGARIA, ROMANIA, & KAZAKHSTAN REPORTS
SigmaBleyzer/The Bleyzer Foundation also publishes monthly Macroeconomic Situation reports for Bulgaria, Romania and Kazakhstan. The present and past reports, including those for Ukraine can be found at http://www.sigmableyzer.com/en/page/532.
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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2.  UKRAINE: MAJOR FEATURES OF THE NEW LAW ON JOINT STOCK COMPANIES

 
ANALYSIS: By Armen Khachaturya, Partner, Asters and Asters law firm legal team, Kyiv, Ukraine
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wednesday, September 24, 2008
 
KYIV – On 18 September 2008 Ukrainian Parliament, the Verkhovna Rada, adopted by 358 affirmative votes the long awaited Law on Joint Stock Companies (the “New Law”).
 
As this voting coincided with political crisis in Ukraine it is to be seen if and when the President of Ukraine and the Chairman of the Verkhovna Rada complete all post-voting procedures required for the Law to come into force.
 
The New Law shall become effective six months following its official publication, which is expected to occur within 15 days of its execution by the President of Ukraine who must formally receive it from the Verkhovna Rada’s Chairman for review.
 
FOLLOWING NEW FEATURES INTRODUCED INTO THE CURRENT REGULATION
The New Law introduces the following major novelties to the current regulation of joint stock companies, as provided in the Civil Code of Ukraine, the Commercial Code of Ukraine, and the Law of Ukraine on Business Associations (collectively, the “Current Law”):
 
(1)  Two types of joint stock companies, an open joint stock company and a closed joint stock company, are renamed in the New Law into a public joint stock company and a private joint stock company. The number of shareholders in a private joint stock company may not exceed 100.
 
(2)  The founders of a joint stock company will be required to pay the full value (not 50 percent, as provided by the Current Law) of initially issued shares before convocation of the founding meeting of a joint stock company.
 
(3)  The founding meeting of a joint stock company will need to be held not later than three months (not two months, as provided by the Current Law) after the founders pay for the first share issue in full.
 
(4)  There should be unanimous vote of all founders for adopting resolutions on establishment of a joint stock company (currently 3/4 of the founders’ votes is required), on appraisal of in-kind contribution to the capital fund (currently simple majority of the founders’ votes is required) and on approval of the joint stock company’s charter (currently 3/4 of the founders’ votes is required).
 
(5)  There is a long list of mandatory provisions in the charter of a joint stock company, such as the company’s name, the amount of its capital and the reserve fund, the general information regarding the company’s issued shares, the composition and competence of the company’s corporate governing bodies, etc.
 
(6)  The shareholder’s pre-emptive right to subscribe for newly issued shares is preserved only for shareholders of a private joint stock company (currently shareholders of both open and closed joint stock companies have pre-emptive rights to subscribe for newly issued shares).
 
(7)  The New Law expressly stipulates that shareholders of a private joint stock company do not have pre-emptive right to buy shares transferred to a heir-at-law or a legal successor of a current shareholder.
 
(8)  The joint stock company’s reserve fund shall not be less than 15 percent (currently 25 percent) of its capital fund.
 
(9)  Joint stock company’s shares shall be issued only in non-documentary form (this provision will take effect upon expiration of a two-year period after official publication of the New Law).
 
(10)  Joint stock company’s preferred shares may be now issued in one or several classes providing different rights to their owners.
 
(11)  A joint stock company is entitled to issue shares or bonds with the purpose to convert its obligations into securities.
 
(12)  A public joint stock company is obliged to list its shares and to be registered at least at one stock exchange. On the contrary, shares of a private joint stock company may not be listed.
 
(13)  Dividends may be paid to shareholders only in the monetary form (currently dividends may be paid either in the monetary form or in-kind).
 
(14)  The exclusive competence of a general meeting of shareholders will now include, inter alia, all questions regarding issue of shares and approval of the joint stock company’s internal regulations.
 
(15)  A written notice on convocation of the general meeting of shareholders shall be sent to the shareholders not later than 30 days (not 45 days, as currently required) before the planned date of the meeting.
 
(16)  The general meeting of shareholders shall be held in the city/town where a joint stock company is incorporated (while under unfair interpretation of the Current Law, shareholders of a company have an option to hold a general meeting of shareholders at any place in Ukraine), unless a joint stock company is a wholly owned subsidiary of a foreign parent, including an international organization or a stateless person.
 
(17)  Voting at the general meeting of shareholders of a joint stock company with more than 100 shareholders shall take place only by means of voting bulletins signed by a shareholder or shareholder’s proxy.
 
(18)  If there are not more than 25 shareholders in a joint stock company, they may adopt resolutions by polling in lieu of the general meeting of shareholders (the Current Law does not provide for such option).
 
(19) A supervisory council in a joint stock company is mandatory, if there are 10 or more (50 or more under the Current Law) shareholders.
 
(20) The supervisory council’s exclusive competence is significantly increased to include, inter alia, placement and buy out of the company’s securities other than shares, election and recall of the head and members of the executive and other corporate bodies of the company, and various issues regarding general meeting of shareholders.
 
(21)  The New Law introduces a position of the corporate secretary of a joint stock company who is elected by the supervisory council and is in charge of the company’s relations with shareholders and third parties..
 
(22)  The New Law introduces the notion of a “significant contract” of a joint stock company defined as its contract valued at more than 10 percent of the company’s assets, provided that conclusion of a significant contract with the value up to 25 percent of the company’s assets requires a preliminary approval of the supervisory council (if established), conclusion of a significant contract with the value from 25 to 50 percent of the company’s assets must be approved by a simple majority of the shareholders’ votes at a general meeting of shareholders, and a significant contract exceeding 50 percent of the company’s assets must be approved by 3/4 of the shareholders’ votes at a general meeting of shareholders.
 
(23)  An acquirer of 10 or more percent of the capital fund of a joint stock company shall notify a joint stock company and the State Commission on Securities and Stock Market of Ukraine at least 30 days prior to the anticipated acquisition.
 
(24)  An acquirer of 50 or more percent in the capital fund of a joint stock company shall (a) within 20 days from the acquisition date send to all other shareholders a public irrevocable offer to purchase their shares and (b) send an acquisition notification to the State Commission on Securities and Stock Market of Ukraine and the stock exchange where joint stock company’s shares are listed.
 
(25)  A shareholder may demand that a joint stock company buy out this shareholder’s shares, in case of a general meeting of shareholders’ decision on (a) the reorganization of a joint stock company, (b) the change of the capital fund, and (c) entering into a significant contract, provided that this shareholder voted against the respective decision.
 
(26)  Joint stock companies with up to 100 shareholders may elect a sole auditor, while in other cases election of an audit committee is mandatory.
 
(27) The New Law provides for certain simplified corporate procedures in joint stock companies with one shareholder, e.g., there is no necessity to execute the founders’ agreement or to comply with the general procedure on convocation and holding of the general meeting of shareholders.
 
Under the Law, charters and internal regulations of existing joint stock companies shall be made compliant with the new requirements within two years of its effective date.
 
FOOTNOTE:  Asters law firm is a member of the U.S.-Ukraine Business Council (USUBC), www.usubc.org.  Asters was established in Kyiv, Ukraine in 1995 by two partners – Igor Shevchenko and Oleksiy Didkovskiy – and bore their names for 12 years, Shevchenko Didkovskiy & Partners. Shevchenko Didkovskiy & Partners announced on February 21, 2008 that it changed its name to Asters. Today, with 9 partners, more than 70 lawyers and 110 employees, Asters is one of the largest Ukrainian law firms (www.asterslaw.com).

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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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3.  UKRAINE PARLIAMENT ACCEPTS JOINT STOCK COMPANY LAW 

 
Sokrat Daily, Sokrat Financial Company, Kyiv, Ukraine, Thursday, September 18, 2008

KYIV – On Wednesday, September 17, 2008 The Parliament accepted a law regulating the activity of joint stock companies. The law defines the order for the creation, activity and liquidation of JSCs, as well as their legal status, rights and responsibilities of the shareholders.
Specifically, the law especially protects the rights of minority shareholders and is aimed at JSC protection against raiders and more efficient decision-making.  The law requires any JSC with more than 100 shareholders to use signed ballots when voting at the GMs.
 
Additionally, shareholders’ meetings may be organized only at the JSC’s venues, thus reducing risks of raiders’ attacks. The meeting quorum is achieved whenever shareholders owning more than 50% of the voting rights participate. The law also describes a number of other JSC procedures regulating these companies.
Most parts of the law will come into force in six months, except of the part requiring stocks to exist in electronic form only, which will come into force in two years’ time instead of the initially proposed term of five years.
The law was supported by 358 parliamentarians out of 450.  This number is more than enough to bail the President’s veto out if it occurs. The Parliament has tried to accept the JSC law several times already since 1996, but it has been vetoed by both President Leonid Kuchma and, later, by President Viktor Yuschenko.
The lack of such a law has often been named as the main reason for the Ukrainian stock market’s underdevelopment and for the problem with raiders.  International financial organizations have stressed the necessity of such a law and argued that its absence impedes foreign investment in the Ukrainian market.
SOKRAT FINANCIAL COMPANY VIEW: We applaud the passing of the JSC law and anticipate that its acceptance will send a positive signal to foreign investors.  We also anticipate that the law’s passing will improve Ukraine’s sovereign ratings and will reduce domestic stock market risks.
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
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4.  NEW JOINT STOCK COMPANY LAW ADOPTED BY VERKHOVNA RADA OF UKRAINE 
Hard to overestimate the relevance and importance of this piece of legislation

ANALYSIS & COMMENTARY: Arzinger & Partners Ukraine, Kyiv, Ukraine, Thu, Sep 18, 2008                                                                         
 
KYIV – We are very pleased to announce that on September 17th the Verkhovna Rada of Ukraine has adopted The Joint Stock Company Law.
 
The law will come into force six (6) months from the moment it is officially published. Existing joint stock companies must bring their statute documents in compliance with the law within two years from the date the law comes into force. The joint stock companies that will be created after the law comes into force must be established in compliance thereof.
 
NEW LAW IS A SIGNIFICANT STEP FORWARD
It is hard to overestimate the relevance and importance of this piece of legislation for the improvement of the investment climate and the general economic situation in Ukraine.  Adoption of this law is a significant step forward in bringing Ukraine to world standards in the sphere of corporate governance and ownership issues.
 
The law removes many gaps in current legislation in the sphere of establishment, operating, governing and cessation of joint stock company activity. In particular according to the new legislation:
 
[1]
 Clearer and more comprehensible requirements concerning formation and activity of the management bodies such as the Supervisory Board and the
       Revision Commission of joint stock companies are envisaged;
[2] This will allow for the implementation of more flexible operative management procedures: the most important issues which concern shareholders’
       interests remain in the exceptional competence of General Meetings; many issues have been transferred to the competence of the Supervisory Board;
[3] The procedure for summoning and holding the General Shareholders’ Meeting is simplified;
[4] The procedure for managing the Company with one shareholder is implemented for the first time: the law envisages issuance of a written decision made
       by a shareholder.
 
Changes of legislation about joint stock companies will allow the implementation in Ukraine of modern principles of corporate governance. In particular, according to the new law, the importance of the Supervisory Board which will be elected by cumulative voting is significantly strengthened. The Supervisory Board will consist of individuals that will allow it to appoint unbiased non-executive directors.
 
The Law envisages the right of the Supervisory Board to organize committees and commissions and to elect a corporate secretary. One of the issues of the exceptional competence of the General Shareholders’ Meeting will be adopting The Code of corporate governance.
 
Adoption of the law significantly moves Ukraine forward towards the protection of interests of both minority shareholders and major investors restricting at the same time possibilities of usage of ‘raiding’ mechanisms. In particular the law implements:
 
[1] The transfer to non-documentary (electronic) circulation of shares that will take place within two years from the moment the Law is in force and is
       aimed at restricting the possibilities of manipulating the register of shareholders;
[2] The responsibilities of shareholders to inform about the intention to acquire shares and as a result of this acquisition they together with the affiliated
       persons will control more than 10% of shares of the company. And after the acquisition of the controlling stock, such a shareholder will be obliged to
       offer to the other shareholders the option to sell the shares they possess;
[3] The detailed mechanism of realization by the shareholders of the preemptive right for the acquisition of shares of the additional emission, which will
       provide protection of existing shareholders from ‘dilution’ of their shares;
[4] The definition of significant transactions, interested party transactions and the procedure for the approval of entering into such transaction;
[5] Additional in comparison to the current legislation guarantees for the shareholders for obtaining information concerning the company’s activity.
 
INCREASE INVESTMENT ATTRACTIVENESS

We are reckoned that the adoption of the law facilitates the increasing investment attractiveness of Ukraine due to the implementation of civilized mechanisms of protection of investors’ interests, increasing the positive image of Ukraine as a country with a market economy, growth of capitalization of joint stock companies and further adjustment of the legislation of Ukraine to that of the European community.
 
The Law company Arzinger & Partners provides the necessary advice and legal support to all interested parties in the process of adjusting the activity of already existing companies and newly established companies to the requirements of the new Joint Stock Companies Law which will allow them to take full advantage of the new possibilities of this important piece of legislation in corporate governance. 
 
NOTE: Arzinger & Partners Ukraine with offices in Kyiv and Lviv is a full service law firm with a professional staff of 70 specializing in all major areas of business law and serving large international, as well as domestic companies, in Ukraine and beyond.  [www.arzinger.ua]
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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.  UKRAINIAN PHARMACEUTICAL FORUM IN KYIV, OCTOBER 14-15 
Pharmaceutical market grows rapidly in Ukraine
 
Adam Smith Conferences’, London, UK, Monday, September 22, 2008
 
KYIV – Today, the Ukrainian pharmaceutical market is in second place after the Russian Federation, according to the rating of pharmaceutical markets of post-Soviet countries, and is, without a doubt, the fastest growing and the most actively developing. Regular monitoring and analysis have convinced all sector participants, both domestic and international, of the existence of huge potential for pharmaceutical business in the region.

Various factors affect the development trends of the Ukrainian pharmaceutical market today: Ukraine’s WTO accession, compulsory implementation of GMP production standards from the 1st January 2009, plans to introduce obligatory medical insurance, and many more. Government regulation and the formation of a corresponding regulatory framework play the most significant role in determining the market’s direction.

 
UKRAINIAN PHARMACEUTICAL FORUM IN KYIV
The Ukrainian Pharmaceutical Forum will serve as a platform for networking, discussing existing opportunities and challenges facing the sector. Many leading company executives of the Ukrainian pharmaceutical sector have been invited to attend, as well as organisations interested in the sector’s development, for example: representative of government regulation bodies; Ukrainian and international company-producers, distributors and retail operators, active and potential investors, analysts, and many more.
The Ukrainian Pharmaceutical Forum is run in parallel with one of the biggest Adam Smith Institute Events – “The Pharmaceutical & Healthcare Sector in Russia” forum. After 13 years of success, each year attracting over 350 participants from all over the world, the forum has established itself as the most prestigious event for pharmaceutical professionals. The Forum will be held Tuesday and Wednesday, October 14th and 15th. 
 
This experience, together with numerous recommendations from sector representatives, has allowed to organise a timely and productive conference for all industry leaders, which will take place in October in Kiev.  Besides plenary sessions and presentations, the forum’s programme will include group discussions in various formats, which will, in turn, ensure that the forum is packed full of thought-provoking information.
MAIN TOPICS …
[1] Formulating an effective development strategy for the Ukrainian pharmaceutical market – what are the problems facing the industry today, what
      obstacles do companies perceive exist in the Ukrainian pharmaceutical market?
[2] How to choose the right strategy to ensure your position as industry leader
[3] How to significantly increase domestic production efficiency
[4] An overview of the development of the Ukrainian distribution market and retail sector
[5] Building an effective marketing structure – how to achieve optimal sales volumes and ensure a good turnover
[6] Product portfolio optimisation – how to create an optimal structure aimed at increasing profit
[7] “Personnel are the be all and end all” – Human resources; how to determine the right set of requirements; training and motivation … and many more.
 
If you have any questions please contact Lyudmyla Durneva on +44 207 0177339/7444 or write to Lyudmyla@adamsmithconferences.com
 
You can access the latest information about the Forum by visiting web-site http://www.adamsmithconferences.com/HU1DUS.  The U.S.-Ukraine Business Council (USUBC), www.usubc.org, Washington, D.C., is one of the promotional sponsors of the Ukrainian Pharmaceutical Forum.
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6.  UKRAINE: INTERNATIONAL INVESTMENT SUMMIT OF DONETSK REGION, OCT 29-31

 
International Investment Summit of Donetsk Region, Donetsk, Ukraine, Wed, Sep 24, 2008
DONETSK – The International Investment Summit of the Donetsk Region, “Donbass Investment Destination,” will take place on Wednesday through Friday the 29th -31st of October 2008 in Donetsk, Ukraine. The Presidents of Ukraine and Poland Viktor Yushchenko and Lech Kaczynski are expected to take part in the Summit. You are invited to attend.
 
The Investment Summit will be held on the initiative of Deloitte, Ernst & Young and Altera Finance companies, with participation of the leaders of Ukrainian business, System Capital Management and the Industrial Union of Donbass.  The Summit is supported by the Donetsk Region Council, Donetsk Region State Administration and Donetsk City Council.
 
PRESENT OPPORTUNITIES OF THE DONETSK REGION
The main goal of the Summit is to present the opportunities of the Donetsk Region, which is one of the most dynamically developing industrial regions of Ukraine, is to demonstrate the largest investment projects and discuss conditions and prospects for foreign companies’ activity in the Region. The participants will get acquainted with the opinions of the leading European experts about the prospects of the Region’s development and its investment opportunities.
 
DEDICATED TO THREE MAIN THEMES
Representatives of the government and key players in Ukrainian politics and business are expected to take part in the Summit’s work. The Summit will be dedicated to several themes: 
 
(1) International Conference “Real Estate & Infrastructure Euro-2012” by Deloitte
(2) International Conference “Investments into Real Estate Sector of Donbass” by Ernst & Young
(3) International Conference “Innovations and Energy-Saving Technologies” by Altera Finance
The biggest investment projects of the Region, such as the new micro district in Donetsk city, the airport in the regional town, recreational towns in Svyatogorsk and on the Sea of Azov coast, motorways, large brick and concrete works, and more than 100 projects, will be presented in the framework of the Conferences and the exhibitions accompanying the event.
 
The International Investment Summit of Donetsk Region is expected to host more than 300 participants from 20 countries and will become one of the most significant investor meeting in Ukraine over the next few years.
 
The technical organizer of the Summit, Conference House Company (www.ch.kiev.ua), is ready to provide you with more detailed information about the Summit Program and the terms of participation. We will help you organize your representatives’ participation in the event.
 
The Summit contact person is Alexi Mirontchouk mirontchouk@ch.kiev.ua, tel/fax+38 044 541 18 38. You will find more detailed information and participant registration form on the Summit web site www.investment.donetsk.ua.
 
We are looking forward to having you participate in the Summit and to you being in Donetsk, Ukraine, from the 29th to the 31st of October 2008.
 
On behalf of the Organizing Committee, General Director of Conference House Company, Igor Zavilinsky.
 
AUR FOOTNOTE:  Ernst & Young Ukraine is a member of the U.S.-Ukraine Business Council (USUBC). USUBC, www.usubc.org, is one of the promotional sponsors of the “Donbass Investment Destination,” Forum.
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7.  IBM UKRAINE JOINS U.S.-UKRAINE BUSINESS COUNCIL (USUBC)
Large international computer technology and consulting corporation is member ninety-two 

U.S-Ukraine Business Council (USUBC), Washington, D.C., Monday, September 22, 2008

WASHINGTON, D.C. – The executive committee of the U.S.-Ukraine Business Council (USUBC), on behalf of the entire membership, is most pleased to announce that IBM Ukraine has been approved for USUBC membership.  IBM Ukraine is USUBC member ninety-two. 

IBM is a multinational computer technology and consulting corporation head-quartered in Armonk, New York, USA.  IBM manufactures and sells computer hardware and software, and offers infrastructure services, hosting services, and consulting services in areas ranging from mainframe computers to nanotechnology.

IBM has been known through most of its recent history as the world’s largest computer company; with over 388,000 employees worldwide, IBM is the largest information technology employer in the world.

 
A representative office of IBM’s Russian subsidiary was opened in the Ukraine in 1992 and then a separate IBM subsidiary was established in Kyiv in October of 2006. The Ukrainian IT market worth over 2 billion dollars and is growing at an average of close to 20% per year. Over two thousand Ukrainian companies have purchased IBM products or services over the years.

IGOR PASTUSHENKO HEADS IBM UKRAINE
USUBC has been working with Igor Pastushenko, Country General Manager for IBM for over a year.  Igor has attended a number of USUBC meetings in Kyiv.  Igor has developed a very solid business program for IBM in Ukraine, one that is growing rapidly.  IBM is well-known in Ukraine for the top professional services they provide to the business community. 

Christopher G. Caine, is Vice President, Governmental Programs, for the IMB office in Washington, D.C. Chris attended a recent luncheon USUBC sponsored in Washington with the U.S. Ambassador to Ukraine, William Taylor. USUBC has also been working closely with Luba M. Labunka, Senior Project Manager, Emerging Markets Financing, Global Finance Treasury, at the IBM headquarters in Armonk, New York.

IBM INNOVATION CENTERS FOR BUSINESS PARTNERS 
The IBM Innovation Center for Business Partners is “your” IBM in Ukraine. The Center advises and guides customers through the development process.
Through workshops clients can build skills and leverage IBM’s architecture consultations. IBM’s IT specialists help clients with proof-of-concept, integration, migration and testing needs. There is no charge for most of the offerings.

IBM Innovation Center assistance with: IBM Systems and software enablement. Products offered include: Hardware; IBM BladeCenter; IBM System i; IBM System p; IBM System x; IBM storage technologies Software; Information Management (DB2); Linux® (System p, x and z); Lotus; Tivoli; WebSphere.

IBM Innovation Center for Business Partners
IBM Ukraine, Artem Business Centre, 4 Hlybochytska Street,
Kyiv 04050 Ukraine, Telephone: +38 044 501 18 88; Fax: +38 044 501 18 89

E-mail: iic_kiev@ua.ibm.com; Hours of operation: 9 a.m. – 5 p.m.

Additional information about IBM can be found at: http://www-304.ibm.com:80/jct09002c/isv/spc/kiev.html and at www.ibm.com/ibm/gp.

“The U.S.-Ukraine Business Council (USUBC) is most pleased to have IBM Ukraine as a member.” said Morgan Williams, SigmaBleyzer,  who serves as President of USUBC. “USUBC has grown very rapidly during the past 19 months and now has a membership base which will allows USUBC to be a full-time operation with an expanded program of work.” 
 
USUBC MEMBERSHIP WILL TOP 100 IN 2008
IBM Ukraine is the 41st new member for 2008, and the 71st new member since January of 2007. USUBC membership has quadrupled in the past 21 months, going from 22 members in January of 2007 to 92 members in September of 2008. Membership is expected to top 100 very soon.

The other new members in 2008 are 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, IMTC-MEI, 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, ContourGlobal, Winner Imports LLC (Ford, Jaguar, Land Rover, Volvo, Porsche), 3M, Edelman, CEC Government Relations and RZB Finance LLC (Raiffeisen). 

The complete USUBC membership list and other information about USUBC can be found at: http://www.usubc.org.

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8.  PROCREDIT RECEIVES US$20 MILLION LOAN AGREEMENT FROM
INTERNATIONAL FINANCE CORPORATION (IFC)
International law firm Salans acts as legal advisor to IFC (International Finance Corporation)

U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wednesday, September 17, 2008

WASHINGTON, D.C. – The international law firm Salans acted as legal advisor in Ukraine to IFC, a member of the World Bank Group, in relation to a loan agreement with ProCredit Bank Ukraine (the Bank) for the amount of US$ 20 million.  This loan is intended to enable the Bank to extend financing for
energy efficiency improvements to micro, small, and medium-size enterprises and individuals.

IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing
private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. IFC’s
vision is that people should have the opportunity to escape poverty and improve their lives.

In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through syndications and structured finance for 299 investments in 69
developing countries. IFC also provided advisory services in 97 countries.

Ukraine became a shareholder and a member of IFC in 1993. As of March 31, 2008, IFC had invested around $887 million in 38 projects in the country.
IFC’s investment program is expanding rapidly, with a focus on Ukraine’s financial, agribusiness, construction materials, retail trade and services, energy, and infrastructure sectors.
 
IFC also offers advisory programs in the country on leasing, agribusiness, mortgage finance, and on improving the business environment. For more information, visit  www.ifc.org/ukraine.
 
PROCREDIT BANK UKRAINE
Founded in early 2001, ProCredit Bank Ukraine is part of ProCredit Group. Its target market consists of micro-and SME customers and its core product
is lending.  The bank’s head office is located in Kyiv.  ProCredit Bank was ranked 39th in Ukraine by assets at end of September 2007.

The Bank has over 60 branches throughout the country and plans further expansion of the network.  Since its foundation, ProCredit Bank Ukraine has
grown rapidly in absolute terms and by number of customers.

 
SALANS LAW FIRM UKRAINE
Salans’ Banking and Finance Group of lawyers: Natalia Selyakova, Vladilsav Kysil, and Nikolay Zhovner acted as legal advisors to IFC on the loan
agreement with the ProCredit Bank Ukraine.

AUR FOOTNOTE:  Salans law firm is a member of the U.S.-Ukraine Business Council (USUBC), www.usubc.org. Salans has over 35 lawyers in Kyiv, assisting domestic and cross-border clients with their corporate, M&A, banking, tax and competition needs across a range of sectors including real estate, financial services, energy and natural resources as well as capital markets. With 37% growth in revenues globally for the 2007 financial year, Salans now has 176 partners worldwide as part of over 750 lawyers globally operating from 18 offices.  Salans has been active in Ukraine since 1988, and officially opened an office in Kyiv in 1992 (www.salans.com).
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9.  VIASAT UKRAINE NAMES NEW CEO, DIGITAL PREMIUM SATELLITE TV COMPANY

 
Jackie Stewart, Viasat, Stockholm, Sweden, Tuesday, September 23, 2008
STOCKHOLM – Oksana Ferchuk has been appointed as the new CEO of Viasat Ukraine.  Richard Caproni, who has been the CEO will assume the position of chief financial officer of the company.
 
Previously Ferchuk was the marketing and sales director of the national telecommunications systems provider PEOPLEnet in Ukraine, commercial director of MSG and its nationwide retail chains Astel & Mobilochka, and prior to that worked for more than six years in various positions within Ukrainian Mobile Connection. 
 
“Oksana Ferchuk has extensive experience from related business in telecom as well as from start ups, which we consider a perfect background for when Viasat Ukraine goes into the next, commercial phase,” said Ulrik Bengtsson, the CEO of Pay TV for emerging markets at MTG.

 
Caproni has been CEO of Viasat Ukraine since it was founded as Vision TV in 2006. “Aligned with the plans, Richard Caproni remains in the company in a position where we can continue to utilize his top expertise in finance and administration, ” said Bengtsson.
 
Viasat Ukraine, a joint venture between Modern Times Group (MTG) and Strong Media Group, was the first digital premium DTH satellite TV operator in Ukraine when it launched in April 2008.  LINK: http://www.worldscreen.com:80/newscurrent.php?filename=viasat092308.htm
AUR FOOTNOTE:  Vision TV is a member of the U.S.-Ukraine Business Council (USUBC), www.usubc.org.
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10.  NOT-SO-DYNAMO KIEV: BAD ECONOMIC INDICATORS FOR UKRAINE

Too many indicators are deteriorating and too many warning lights flashing
 
LEX TEAM: Macroeconomics and Markets, Financial Times, London, UK, Sun, Sep 21 2008
After all the mayhem, where is the world’s worst-performing market so far this year? Russia’s 43 per cent decline is beaten, among others, by Shanghai’s 66 per cent fall – but all are outstripped by the 70 per cent plunge of Russia’s neighbour, Ukraine.
 
At first blush, that looks odd. Ukraine’s growth, forecast at 6.5 per cent this year though slowing to 5 per cent next, remains among Europe’s best. The problem is, too many indicators are deteriorating and too many warning lights flashing – several connected with the lumbering bear on its borders.
Number one is falling prices of metals – which contribute one-quarter of gross domestic product and more than 40 per cent of exports. Meanwhile, the gas-guzzling metals industry, and other Ukrainian mainstays such as chemicals, have long enjoyed subsidised energy prices from Russia. Moscow has progressively cut subsidies – provoking the spat that notoriously saw Russia turn off the gas in January 2006.
 
Russia is threatening to double prices to western European levels next year; Moscow’s mood has not been improved by President Viktor Yushchenko’s vociferous support for Georgia. Ukraine’s smokestack industries have offset higher prices by raising woeful standards of energy efficiency, but scope for further improvement is limited.
 
Higher energy prices will complicate taming inflation, which peaked at 31.1 per cent, year on year, in May – fuelled by soaring government spending. They will also worsen the mushrooming current account deficit. Political instability has been a constant since the 2004 Orange Revolution, but the latest coalition’s recent collapse – in part because of squabbles over Russia policy – could provoke early elections.
 
And while conflict with Russia is unlikely, Moscow has scope for mischief-making through, for example, trade restrictions or fomenting unrest among ethnic Russians in Crimea. With the MSCI Ukraine index trading on about 6 times current earnings, Ukraine looks less oversold than Russia – only on 5.5 times even after Friday’s astonishing 30 per cent bounce in its market.
 
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11.  UKRAINE AND GEORGIA IN NATO NOT SEEN TO BE IN U.S. INTEREST 
Former U.S. ambassador to Moscow Jack Matlock said on Tuesday 

 
By Susan Cornwell, Reuters, Washington, Tuesday, September 16, 2008 
 
WASHINGTON, D.C. – NATO membership for Georgia and Ukraine is not in Washington’s or the alliance’s interest, former U.S. ambassador to Moscow Jack Matlock said on Tuesday as he and other ex-U.S. envoys decried the poor state of ties with Russia.
 
At a gathering of five former U.S. and Russian ambassadors, Matlock, the last U.S. envoy to the Soviet Union, questioned a central tenet of Bush administration policy: its firm support for the NATO membership bids of both Georgia and Ukraine.
 
Some European countries have doubts about the policy, and some U.S. analysts have blamed it for helping provoke the brief war last month between Russia and Georgia over the breakaway region of South Ossetia.
 
Since Russian troops crushed Georgian forces in that conflict, U.S. ties with Moscow have plummeted. “To simply say every country should have the right to apply to any alliance it wants, that’s true. But an alliance and its members should also have the right to determine whether it’s in their interests to take in a member,” Matlock told the forum in Washington, sponsored by the Carnegie Endowment for International Peace.
 
“I’m saying it’s not in the United States’ interests, and it’s not in NATO’s interests,” said Matlock, who was ambassador to Moscow from 1987 to 1991 under former President George H.W. Bush, the current president’s father. Georgia had not settled territorial disputes with its neighbours, and appeared to want to use the NATO military alliance to help resolve them, Matlock said, in a reference to its conflict with Russia.
 
As for Ukraine, which like Georgia is a former Soviet republic, most of its population opposed membership and joining NATO would risk splitting the country, Matlock said. He added that genuine strategic cooperation with Moscow, which vehemently opposes NATO membership for the two former Soviet republics, would be nearly impossible “as long as we’re pushing this.”
 
In New York on Monday, U.S. Secretary of State Condoleezza Rice met Ukraine’s foreign minister and pledged Washington’s firm support for Ukraine’s bid to join NATO. But in Washington, Matlock and former U.S. envoys to Moscow James Collins and Arthur Hartman pointed to the consequences of ignoring Russia’s attitude on NATO expansion.
 
They shared a platform with two former Soviet ambassadors to Washington, Alexander Bessmertnykh and Yuri Dubinin, who denounced the NATO expansion policy as a major irritant in relations. “I personally believe that we need to go slow. … If we don’t, we will find that this is not something that stabilizes but rather divides,” Collins said.
 
Hartman said that at the time the Soviet Union was collapsing in the early 90s, it was a “great failure” that the West didn’t think creatively about a structure to replace NATO — because the main purpose of its existence, to defend against a Soviet threat, no longer existed.
 
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12.  RUSSIA’S FM SAYS WEST HAS TO MAKE STRATEGIC CHOICE IN RELATION TO UKRAINE

 
Interfax, Moscow, Russia, Saturday, September 20, 2008 
 
MOSCOW – The West will have to make a strategic choice in relation to Ukraine, bearing in mind that Ukraine’s possible accession to NATO would lead to a deep rift between Moscow and Kyiv and most negatively affect security of the whole of Europe, said Russian Foreign Minister Sergei Lavrov.

“Ukraine’s accession to NATO will lead to a grave crisis in Russian-Ukrainian relations. This crisis will have a most negative effect on the common European security. Thus, the West should make a choice, and this choice will be strategic,” Lavrov said in an article published in the Ukrainian weekly
2000.

“Assigning the role of a buffer between Europe and Russia to Ukraine is to belittle Ukraine itself,” Lavrov said. “It would be much more constructive to build relations with the surrounding world together,” he said.

Ukrainian Foreign Minister Volodymyr Ohryzko’s remarks in favor of Ukraine’s integration into NATO are “part of a common trend of shameless exploitation of the Caucasus crisis for unscrupulous political ends, primarily with the aim of dragging Ukraine into NATO against the will of an overwhelming majority of its population and in violation of the basic democratic procedures,” he said.

In particular, Lavrov pointed out that Ohryzko pushed ahead with the idea of “a NATO-centric system of European security,” while “it is exactly NATO-centrism that is splitting the Euro-Atlantic community and has proven to be absolutely flawed and unpromising,” Lavrov said.
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13.  U.S. SECRETARY OF STATE RICE GIVES STRONG BACKING FOR UKRAINE NATO BID 

 
Reuters, New York, New York, Monday, September 22, 2008 
 
NEW YORK – U.S. Secretary of State Condoleezza Rice on Monday pledged Washington’s firm support for Ukraine’s bid to join the NATO military alliance despite strong Russian opposition to the move.
In a meeting with Ukraine’s foreign minister on the sidelines of the U.N. General Assembly, Rice said the United States stood by a commitment made at a summit in Bucharest last April for Kiev to join NATO’s Membership Action Plan (MAP) — a first step toward membership of the military alliance.
“We, of course, are, have been and will continue to be supportive of Ukraine’s Transatlantic ambitions. And of course, the U.S. position on MAP was very clear,” said Rice, with Ukraine’s Foreign Minister Volodymyr Ohryzko at her side. “I should just say the Bucharest declaration is also very clear,” she added.
At the April summit, NATO leaders stopped short of putting Ukraine and Georgia immediately on the path to membership of the alliance, but pledged the two ex-Soviet states would one day become members.
Russia strongly opposes Ukraine’s proposed membership of NATO, as well as that of Georgia. Russia and Georgia fought a brief war last month after Tbilisi sent in troops to try to seize back the rebel region of South Ossetia, provoking massive retaliation by Moscow and a plummet in U.S.-Russia relations to their lowest level since the end of the Cold War.
While the United States has strongly backed both Georgia and Ukraine’s membership bids, allies including Germany, France and smaller NATO states have opposed it for fear of further provoking Russia.
The idea of membership has not been fully embraced in Ukraine either. Polls show a majority of Ukrainians oppose NATO membership and the leader of the country’s biggest parliamentary party has said the issue should be decided by the Ukrainian people. (Reporting by Sue Pleming; editing by Todd Eastham)
 
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14.  UKRAINE: DPM HRYHORIY NEMYRIA ON BBC TV’S HARD TALK

BYuT’s priority is to re-establish the democratic coalition
 
BYuT Newsletter Inform, Issue 86, Kyiv, Ukraine, Monday, 22 September 2008

KYIV – Hryhoriy Nemyria, Ukraine’s Deputy Prime Minister appeared on BBC TV’s Hard Talk last week. It was his second appearance this year on the programme that puts leading politicians at the mercy of a 30 minute grilling by Stephen Sackur – a seasoned interviewer famed for his “take no prisoners” approach.
  
The deputy premier responsible for European integration answered questions on the political crisis in Ukraine, driving home the message that his bloc’s priority was to re-establish the democratic coalition. “It was not the prime minister who pulled out of the coalition. We are persistent in our line that we would welcome back our partners in the coalition, and we are ready to negotiate a strategic compromise for the sake of Ukraine’s European future,” said Mr Nemyria.
  
The interview was highly topical given the collapse of the democratic coalition that day and the opening of a 30 day window to enable parliamentary factions to form a new coalition government. If no new government is formed in that time, the president has the right, if he decides to exercise it, to disband parliament and call a pre-term parliamentary election.

 
BYuT WISHES TO AVOID ANOTHER ELECTION
Mr Nemyria made it clear that BYuT wished to avoid another election and requested the democratic partners put aside their personal differences and unite. He also indicated that an outline agreement had already been reached with the centrist Lytvyn block to be part of a reconstituted democratic coalition.
  
When asked if BYuT would be prepared to join a coalition with the Party of Regions he answered, “We are still in the space where we haven’t exhausted all the possible ways for reaching a strategic compromise.” However, he doubted a coalition with the Party of Regions would occur, saying that, in any event, BYuT’s principles were non-negotiable.  
   
On the issue of the Georgia-Russia conflict he expressed concern that the security vacuum in the post-Soviet space had expanded and argued that Ukraine pursue a dual strategy. He suggested integration into the EU security and defence policy and said that the NATO Membership Action Plan remains an option, while stressing that any question of membership be subject to a national referendum.
  
RUSSIAN PASSPORTS
Quizzed over reports that Russian passports were being handed out in the Crimea, he told the BBC that the government had insisted on a full report from the Russian authorities. He noted that early indications reveal there was no spike in the rise of passports being made available.
  
Mr Nemyria was emphatic that Crimea will remain part of Ukraine. “We are against irresponsible statements of some odious Russian politicians that questioned Crimea’s future or Sevastopol’s future. We were very pleased when Prime Minister Putin clearly said that the Russian Federation does not question that Crimea belongs to Ukraine – this is a very important statement. The principle of territorial integrity should be respected by all players.”
 
NOTE: The BBC Hard Talk interview can be viewed at: http://www.bbc.co.uk/iplayer/episode/b00dnzh9
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15.  DON’T BE FOOLED AGAIN

Commentary: BYuT Newsletter Inform, Issue 86, Kyiv, Ukraine, Mon, 22 Sep 2008

KYIV – If you ask people in the West what the Orange Revolution was about, it is likely they will tell you it concerned a fraudulent election and the future orientation of Ukraine. Many still believe it was a tussle between East and West and the self-determination of the people to finally break free from Russia’s yoke. This of course was never true, but the line was often reported in the western media.
  
Central to the Orange Revolution was the simple demand for justice – ordinary people fed up with being deceived and standing up for democracy against autocracy. 
  
With the collapse of the democratic coalition, some headline writers are once again putting two and two together and coming up with six. Several headlines last week pinned the collapse of Ukraine’s governing coalition on the recent war in Georgia. What is disturbing is that the Bankova Street spin machine appears to be in overdrive, doing everything it can to propagate this curious positioning.
  
It is true that the coalition partners were not in full accord in their response to the Georgia-Russia conflict. Although analysis will reveal they agreed on many points of principle, Prime Minister Yulia Tymoshenko took a measured response, refraining from the tough-talking language adopted by President Viktor Yushchenko. Nevertheless she did condemn the unilateral actions and disproportionate use of force, calling for Russia to “respect the sovereignty of Georgia and its territorial integrity.” 
 
A major bone of contention was the president’s hard-line policy restricting the Russian Black Sea Fleet’s use of Sevastopol. Ms Tymoshenko believed that Ukraine should honour its contractual obligations – Russia has leased use of the port until 2017 – and cited that the president’s policy was unworkable as it lacked the necessary procedures to verify breaches of the new rules.
  
Not missing a trick, the presidential secretariat then accused Ms Tymoshenko of kowtowing to Russia in return for the Kremlin bank-rolling her future bid for the presidency. But this was bluster, an unsophisticated smokescreen aimed at de-positioning Ms Tymoshenko ahead of the 2010 presidential election. It belies the fact that the prime minister fully supports the EU position on the conflict – a position endorsed by the president.
  
So if the war was not the reason for the coalition’s collapse, what was?
 
THWARTING OF REFORMS  
The difference of opinion over the Georgia-Russia conflict was merely the most recent manifestation of a long-running feud between Ukraine’s two branches of executive power.
 
This feud is not based on policy differences. Indeed, Hryhoriy Nemyria, Deputy Prime Minister responsible for European integration said, “The policy differences between the two Orange partners are miniscule compared to the policy differences between the Christian Democrats and Social Democrats in Germany’s grand coalition government.”
 
 The nub of the issue is “constitutional.” Sadly Ukraine has not one government but three. There is the parliamentary government, the office of the president and the National Security and Defence Council (NSDC). The latter is headed by Raisa Bohatyryova (recently expelled from the Party of Regions), whose appointment was seen widely as a counterweight to the Tymoshenko government.
  
The NSDC is unashamedly a political tool of the president and has backed him in throwing up roadblocks that have brought the government’s reform agenda to a grinding halt. Privatisation plans, anti-inflation initiatives and anti-corruption measures have all been stopped in their tracks, paralysed by a flurry of presidential decrees and NSDC resolutions.
  
For months Ms Tymoshenko endured searing criticism and seeing her reforms vetoed. She eventually spoke out publicly against the president in May, by which time the attacks had become increasingly personal. The final straw was an accusation of “treason” – an allegation subsequently investigated and dismissed by the deputy prosecutor general.
  
Driving this criticism is the desire of the secretariat to turn public opinion against the premier so as to scupper any bid by her for the presidency in 2010. But most people view it as persecution and the strategy has backfired, serving only to depress further the president’s ratings.
 
CONSTITUTIONAL CHANGE: THE HEART OF THE MATTER   
The response by the Bloc of Yulia Tymoshenko (BYuT) to the paralysis of government was to side tactically with the Party of Regions to pass laws (on 2 September) that prevent the president and NSDC from overturning the lawful decisions of parliament. This, and the establishment of an unambiguous process for presidential impeachment, proved to be too much for the president.
  
Mr Nemyria explained why BYuT lawmakers voted for the new laws. “The decision was about a clear division of power. What we have had unfortunately is a phenomenon of parallel government, two or three at once, namely a National Security and Defence Council and a secretariat of the president trying to intervene in the competency of the government.” This uneasy division of power was key to the last political crisis nearly a year ago, which culminated in the dismissal of parliament and pre-term elections.
  
Clearly, this corrosive constitutional arrangement that pits president against parliament must be resolved. “Our position is clear,” said Ms Tymoshenko, “we have to amend the constitution and bring Ukraine to a type of parliamentary system enjoyed by most European democracies.  

 
Of course the subject of constitutional reform is far less glamorous to the media than a David and Goliath West vs. East tug-of-war. For a start, the issues are complex and require detailed explanation.
  
Yet we should not blame journalists. The president’s constant sabre rattling with Russia does nothing to dissuade those coming fresh to the story. Indeed, the president’s secretariat is content to propagate the myth that the collapse is owed purely to a West-East power struggle over the future direction of Ukraine.
  
But Ms Tymoshenko is in no doubt about Ukraine’s future direction. “We are totally committed to Ukraine’s European integration and we’ll do whatever we can to bring Ukraine closer to the EU,” she said.
 
Perhaps the few skewed headlines prove the old adage: never let the truth get in the way of a good story.
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16.  MOSCOW’S USE OF RUSSIAN PASSPORTS IN GEORGIA DISTURBS OTHER POST-SOVIET STATES

 
Window On Eurasia: by Paul Goble, Vienna, Tuesday, September 9, 2008
VIENNA – Even if Moscow does not employ again the strategy it used in Georgia of intervening militarily after extending dual citizenship and Russian passports to people in neighboring countries, that action has transformed the Russian passport into “something like a dangerous germ” whose spread can “lead to catastrophic consequences,” a Russian analyst says. 
“The first time” the Russian passport “unexpectedly” took this form, Anton Orekh’ writes in today’s “Yezhednevniy zhurnal,” was in Abkhazia and South Ossetia. Apparently “having landed there almost by chance, the passport began to multiply in these regions with such speed that it led to an epidemic or even pandemic” (www.ej.ru/?a=note&id=8381). 
After only a short time, he continues, “there did not remain in these places anyone who had not received this passport.  Then the war began.  And it turned out that the Russian passport [almost by itself and] in a surprising way made possible its development, escalation and intensification.”
Not surprisingly, many of the leaders of the countries neighboring Russia began to ask whether Moscow would use such a passport strategy against them.  The Ukrainian foreign ministry, for example, has regularly warned that “in Crimea a general Russian passportization is gaining ground.”
For the time being, Orekh’ argues, Kyiv’s fears are without any foundation.  The Kremlin has explicitly declared that it respects the territorial integrity of Ukraine, but especially given what has happened in Georgia and what has appeared in the Russian media, it is no surprise that officials there and elsewhere should be concerned.
After all, Russian President Dmitry Medvedev has said that Russia has a right and an obligation to protect its citizens wherever they live – a statement that Orekh’ implies should not be taken literally given the constraints Moscow is operating under.  And he adds that Russia would not attack Estonia because that would involve Russia in a war with NATO.
That of course is how all this looks from Moscow’s side, the Moscow writer says, but for those on whose territories Russian passports are spreading, “barricades are already being prepared” in response to what the Russian government is doing, something that heightens tensions and thus creates new dangers.
Both Russia’s use of passports in Georgia and Ukraine’s suggestions that Moscow is doing the same thing in Crimea have sparked a serious discussion not only about such passports themselves but about the implications of the dual citizenship for both the countries on which such people live and the countries to which they are thus linked.
In a commentary on the Babr.ru portal this week, Anna Mesherova considers the debate over whether “dual citizenship is a good thing or a bad one” and offers the perhaps unsatisfying conclusion that under some conditions, it is a good thing and draws nations together and under others, it pushes them apart
 
Dual citizenship is not a universal right. Rather it is in every case up to now the product of interstate agreements, with some states agreeing and others not. Nonetheless, she writes, it is not all that rate.  “What is rare is when the MAJORITY of citizens of a certain country or its region have the passport of a neighboring country.”
With Russia’s actions in Georgia, Moscow has invoked a principle which has not yet been accepted by the international community or even by the Russian government as a universal precedent has been created that suggests a country has the right to intervene in a territory on which “compactly live” its dual citizens.
Many countries, such as Ukraine, prohibit dual citizenship either in their constitutions or by law because their governments fear that the most dangerous situation would be to have a large number of people on their territories who sometimes could act as citizens of their country and sometimes as citizens of another.
And that danger only increases, Mesherova continues, when one country secretly or semi-secretly passes out passports as the Russians did in Abkhazia and South Ossetia and reportedly are doing so in Crimea as well despite the laws of the country in which Russian officials are acting in this way.
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17.  RUSSIAN PASSPORTS AS MOSCOW’S GEOPOLITICAL TOOL
Kremlin uses handing out of Russian passports to destabilize Ukraine
 
Analysis & Commentary: By Taras Kuzio, Eurasia Daily Monitor, Volume 5, Issue 176
The Jamestown Foundation, Washington, D.C., Wednesday, September 15, 2008
The official protest by the Russian Ministry of Foreign Affairs (MFA) on September 11 over the allegedly “unfriendly” attitudes of the Ukrainian authorities to Russia was met by a stern response on the same day by Ukraine’s Foreign Ministry (www.mfa.gov.ua).
 
Russia’s MFA protested about President Viktor Yushchenko’s support for Georgia, including supplying “heavy military hardware”; Ukraine’s drive to join NATO “against the will of the Ukrainian people”; “attempts by the Ukrainian authorities to reconsider our common history in an anti-Russian spirit”; and the standard complaint about official hostility to the Russian language.

Ukraine’s response pointed to Russia’s inability, despite nearly two decades of Ukrainian independence, to accept Ukraine as an “independent state.” Ukraine’s MFA also described Ukraine as “under no circumstances belonging to the so-called ‘privileged interests’ of any country.”

The Russian protest also complained about the “practice of banning Russian deputies and eminent politicians from entering Ukraine.” The following day Russian Duma deputy Viktor Vodolatsky was refused entry into Ukraine to attend a coordinating council meeting of Cossack Hetmans (leaders) from Ukraine, Russia, Belarus, and Moldova’s Trans-Dniestr region. The week before, Russian political technologist Sergei Markov was refused entry into Ukraine.

Russia has retaliated by creating a long list of Ukrainian politicians and businessmen banned from entering Russia. It includes the head of NUNS Vyacheslav Kyrylenko, Petro Yushchenko (the president’s brother and a NUNS deputy), the governors of Kyiv and Kharkiv, BYuT head of the parliamentary committeeon foreign affairs, heads of the armaments company Ukrspetsexport, and others (www.korrespondent.com.ua, September 15).

Ukraine’s MFA warned “that attempts by Russia to destabilize the situation in Ukraine through fifth columnists who for some reason position themselves as the ‘healthy political forces of the country’ have no prospects.” The accusations and the very tone of the exchange are at odds with Prime Minister Vladimir Putin’s assurances that “Crimea is not disputable territory” (German ARD television, August 29).

Leon Aron of the Washington-based American Enterprise Institute warned in The Wall Street Journal (September 10) that “Russia’s Next Target Could Be Ukraine.” The Moscow city council is providing $34 million in support of “compatriots” abroad.

Aron warns of a scenario in which Russia takes control over-night of the port of Sevastopol, which might be “impossible to reverse without a large-scale war.” The EU’s unwillingness to deal with Russia’s new assertiveness since August 8 has demonstrated the vacuous nature of its European Common Foreign and Security Policy. If the EU has permitted Russia to get away with de facto annexation of South Ossetia and Abkhazia, why would it react any differently to a Russian annexation of the Crimea?

The September 9 EU-Ukraine summit threw “away a golden opportunity to stabilize [Ukraine’s] eastern frontier and encourage political and economic reform in Kiev” (Financial Times, September 10). The EU “foolishly ducked a chance to throw the country a political and economic lifeline” (The Economist, September 11).

Two arguments why West European states, such as Germany, Italy, and France, have not supported NATO or EU enlargement to Ukraine and Georgia do not stand up.

 
[1] First, Germany, Italy, and France do not support either NATO or EU enlargement, although it is only the former that is usually considered likely to “antagonize” Russia.
 
[2] Second, energy links to Russia are not a factor in appeasing Russia. France, Italy, and Germany are only reliant for 26 percent, 30 percent, and 39 percent, respectively, of their gas imports from Russia. Poland, Lithuania, Bulgaria, and Slovakia, which support NATO and EU enlargement to Ukraine, import respectively 61 percent, 84 percent, 94 percent, and 100 percent of their gas from Russia.

Ukrainian authorities have become highly sensitive to the threat of a Russian policy of destabilization since the Kremlin invasion of Georgia. One particular area of concern is the issuing of Russian passports to Ukrainian citizens in the light of Russia’s pretext of coming to the “defense” of Russian citizens in the two frozen conflicts where Russia had illegally distributed passports.

Ukraine’s Minister of Foreign Affairs Volodymyr Ohryzko said that Ukraine’s repeated protests to the Russian consulate in Simferopol over its distributing of passports continue to be ignored. Ohryzko announced that the Security Service, prosecutor’s office, Interior Ministry, and MFA were now investigating the problem (www.mfa.gov.ua, September 6).

 
Ukraine’s Ambassador to Slovakia Inna Ohnivets, who previously worked on this issue, told of repeated Ukrainian demands to the Russian Consulate in the Crimea to halt the practice (www.bbc.co.uk/Ukrainian, August 28).

A week after Ohryzko’s comments, 34 inhabitants of Sevastopol who maintain dual citizenship had their Ukrainian citizenship withdrawn. Further investigations have located 1,595 inhabitants of Sevastopol, primarily serving on the Black Sea Fleet, who have dual citizenship, which is banned by Ukrainian law (www.pravda.com.ua, September 13).

Both political forces in the Orange coalition have raised the issue of the distribution of Russian passports as a threat to Ukrainian security. Our Ukraine-Self Defense deputy Volodymyr Stretovych warned that increasing the number of Russian citizens in the Crimea would give Russia, as in Georgia, a pretext to come to the “defense” of its citizens (www.nuns.com.ua, August 13, 15).

 
Deputy Nuns faction leader Borys Tarasiuk described the distribution of passports as Russia’s “secret aggression against Ukrainian citizens.” Yulia Tymoshenko Bloc deputies have drawn up a draft law making the obtaining of dual citizenship a criminal offence (www.pravda.com.ua, September 9).

The problem Ukrainian authorities are faced with is that they do not have concrete data on the number of Russian passports distributed in the Crimea. During Leonid Kuchma’s decade in office from 1994 to 2004 the Ukrainian authorities turned a blind eye to the illegal practice. Estimates of the number of Russian passport holders in the Crimea range from a low of 6,000 (Newsweek, August 23) to 100,000 (Los Angeles Times, August 25).

Consequently, the EU is ignoring the fact that the consequences for European security of Russian destabilization in the Crimea would be far more severe than that of Russia’s invasion of Georgia. [http://www.jamestown.org]

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18.  MOSCOW CAN  NOW OFFER RUSSIAN CITIZENSHIP TO EIGHT MILLION UKRAINIANS

 
Window on Eurasia: by Paul Goble, Vienna, Tuesday, September 23, 2008

 

VIENNA – Under the terms of new legislation nominally intended to promote the repatriation of “Russian compatriots” and thus help solve Russia’s demographic problems, Moscow can now offer Russian Federation citizenship to more than eight million Ukrainians, even though the Ukrainian constitution prohibits dual citizenship.     

 

Had Moscow taken this step six months ago, Verkhovna Rada deputy Kseniya Lyapina told Kyiv’s “Delo” yesterday, “it might have been possible to consider this as part of Russia’s domestic policy.” But after Moscow’s invocation of its right to protect Russian citizens in South Ossetia, these changes look like “preparation for aggressive actions” (delo.ua/news/87411/).

 

According to that newspaper, “those who want to receive a Russian passport do not need to live on the territory of the [Russian] Federation for five years, provide evidence of the source of their incomes or demonstrate a knowledge of Russian” if they are former citizens of the USSR and were born on the territory of Russia.

 

If Ukrainians were to give up their Ukrainian citizenship in order to take Russian citizenship and then move to the Russian Federation, as some demographers and political analysts have suggested is the reason behind the new rules, that would not necessarily create a problem for Kyiv, especially since the number of those likely to do so would not be large.

 

But if because of these simplified procedures, more Ukrainians take Russian citizenship without giving up their Ukrainian citizenship in violation of the Ukrainian constitution and then remain in Ukraine, Moscow would likely be able to exploit them in the same way it used the presence of dual citizens of Abkhazia and South Ossetia to justify military action.

 

Unfortunately, the comments of Russian officials in recent days suggest that there is little reason to put a positive interpretation on this new act. Indeed, in an article carried in Ukrainian papers over the weekend, Russian Foreign Minister Sergey Lavrov provides the basis for just the opposite reading (www.mid.ru/brp_4.nsf/0/5F3D95AD906E3A42C32574CA002A4FA2).

 

The Russian minister sharply criticized Kyiv for its failure to criticize Georgia and for its assumptions that what Moscow had done there was not “a response to aggression” but rather an indication of some kind of grand imperial design that gives Ukraine no choice but to seek protection from the West.

 

Not only is this insinuation entirely false, Lavrov said, but it is being made by those in Kyiv who want to push Ukraine into NATO “in spite of the opinion of the overwhelming majority of its population and elementary democratic procedures” but one that will divide Ukraine from its Russian neighbor.

 

And Russia has demonstrated, the minister argued, that it is interested only in protecting people as it did in Georgia and making sure that “Tbilisi will not use force again.” Moscow has no “hidden agenda,” something he said had been proved by President Dmitry Medvedev’s agreement with French President Nicholas Sarkozy.

 

But in words that many Ukrainians and others will see as an indication that Moscow does have a broader agenda if no longer a “hidden” one, the Russian foreign minister  said that “the entrance of Ukraine into NATO would bring its wake a deep crisis in Russian-Ukrainian relations” and have “the most negative” impact on European security more generally.

 

And then the minister added that Russia has some “serious concerns” about how Ukraine is acting domestically:

 

[1] First of all, he said, Moscow is very disturbed by “the discrimination and exclusion from all spheres of life of the Russian language,” which restrict “the rights of millions of Russian-language citizens of Ukraine.

 

[2] Second, he said, “we can hardly agree with the pseudo-historical treatment by Kyiv of the events connected with the famine of the 1930s in the USSR  as some kind of ‘genocide of the Ukrainian people’,” an approach which slanders the memories of “millions of famine victims of other nationalities.”

 

[3] And third, Lavrov concluded what many in Kyiv and elsewhere will see as a bill of indictment of the current Ukrainian government, the Russian government currently notes “with regret, “the growth of Russophobic and also anti-Semitic attitudes among the nationalistically inclined organizations of Ukraine.”

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19.  UKRAINIANS UNNERVED BY RUSSIAN MOVE TO EASE NATIONALITY RESTRICTIONS

 
Interfax Central Europe, Warsaw, Poland, Tuesday, September 23, 2008
WARSAW – Russian moves to ease passport restrictions for those of Russian heritage in Ukraine is seen as “a first  step  in  aggression” toward Ukraine, Ukrainian experts and politicians warn, as cited by the Tuesday edition of the Polish daily Gazeta Wyborcza.
“A fight over the Crimea would be a battle of crazy men,” said Ukrainian columnist  Vitali Portnikov, according to the paper. “However, we cannot
rule this out because there is no lack of crazy men in Russia.”
 
Ukrainian politicians in Kiev have called a move to allow those with Russian  background instant nationality and passports provocative – even though the  Kremlin insists that those wanting nationality must move to Russia to gain a passport,  according  to  Gazeta Wyborcza.
 
Ukrainian politicians have also warned that “half  of  Ukrainians” could theoretically apply for such a passport, with experts stating that Russia is  attractive for many because wages are twice as high as in Ukraine.
Ukrainians  have  also  made much of Russian President Dmitry Medvedev’s call to  defend  “Russian  brothers” in Georgia and see the instant
nationalization as a possible lead up to come to the defense of Russians living in Ukraine.
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20.  THE HISTORY IS COMPLEX, BUT THERE’S NO DOUBT CRIMEA IS PART OF UKRAINE 
The border with Russia was agreed at the UN, and talk of moving it now is dangerous.

 
Letter-to-the-Editor: By Ihor Kharchenko, Ambassador of Ukraine to the United Kingdom
The Guardian, London, UK, Wednesday, September 24, 2008
 
LONDON – Your report from Sevastopol, “the historic home of Russia’s Black Sea fleet”, gave the impression that Ukraine should be feeling guilty because the Crimean peninsula falls within its own territory (Divided peninsula plays host to Russian warships and Ukrainian pride, September 16).
“On the streets of Sevastopol, the mood is defiantly pro-Russian,” you report. “It is also vehemently opposed to Ukraine’s President Viktor Yushchenko and his plans to join Nato.” You then go on to quote several locals who claim that Crimea should be part of Russia, with no counterbalance. One of these, an MP in Crimea’s parliament, goes on to question the status of Ukraine itself. “It’s a myth that Ukraine is not part of Russia,” he says. “We don’t believe it.”
It is true, as you say, that the decision of the then Soviet authorities in 1954 to incorporate Crimea into the Ukrainian Soviet Socialist Republic is still is regarded as a mistake by some Russians as well as some Ukrainians. Moreover, in the list of historical “invaders” of Crimea one may find Scythians, Greeks, Ottoman Turks, Russians, even British and French, but no Ukrainian trace at all. So it may appear surprising that Crimea belongs to Ukraine.
However, the history is complex, and the fact is that the Crimean Autonomy is now a constituent part of Ukraine. Since 1954 this status has been reconfirmed twice – in the treaties between Russia and Ukraine of 1990 and 1997, stipulating the inviolability of existing frontiers. Probably that is why the Russian official you quote says firmly that Russia “doesn’t lay any claims on Sevastopol”.
Probably one other reason is the fact that, back in 1993, the Russian parliament tried to revisit the issue of Sevastopol’s affiliation and put the city, by means of parliamentary decree, back into Russian sovereignty.
The Ukrainian government sought advice from the UN security council, and I was a part of its delegation. On July 20 1993 the security council adopted a statement stressing that “in the treaty of 1990 Russia and Ukraine committed themselves to respect each other’s territorial integrity within their currently existing frontiers”, and adding that the Russian decree “is incompatible with this commitment as with the principles of the charter of the UN, and without effect”.
Given current events on Russia’s borders, it is surely ill-advised for you to speculate that “staging a coup in Sevastopol would be easy”.
Your report mentions “optimists” who “believe talk of Russia wrestling back Crimea from Ukraine is simply overblown”. It is said that pessimists in fact are well-informed optimists. Nevertheless, I remain optimistic and dare to believe that optimists on the issue are in the vast majority in both Ukraine and Russia.
In 1993 the UN security council’s note ended with a statement that “the security council will remain seized of the matter”. Irrespective of that, optimists hope that the security council won’t ever need to look into the matter again.
 
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21.  UKRAINE BETWEEN THE WEST AND THE EAST

 
ANALYSIS & COMMENTARY: by Mihai Hareshan
Nine o’Clock, Bucharest, Romania, Monday, September 22, 2008

The Georgian crisis, erupting on the international scene with the ‘five-day war’ between Russia and Georgia on August 7, 2008, has registered a new and one of the most significant episodes last week.

 
Yulia Timoshenko’s Government has been dismissed by President Viktor Yushchenko on September 16 on the backdrop of the latter’s accusations that the Prime Minister has an ambiguous – verging on treasonous – attitude towards the war that pitted Georgia against Russia last month, accusations amounting to no less than being in the pay of Moscow.
 
What is of course strange, to say the least, is the fact that Viktor Yushchenko and Timoshenko are the heroes of the 2003 ‘orange’ revolution in Ukraine, a revolution that led to the installation of a reformist power in Kiev, and that the current Government was formed in Parliament after the latest snap elections last year, through an agreement between the parties of the aforementioned politicians.

The crucial question in the case of the current Government crisis and that of the political crisis that subsequently erupted – the second crisis registered in the three years of the current Parliament, the previous one having to do with a conflict between them too and being resolved through snap elections – is the following: what is the main cause?

The answers that can be given to this question cannot rule out references to Russia, nor to the Ukrainian political system and to the conflict between the two politicians.

Could Russia be behind the current Government crisis? The answer is difficult. Moscow’s stance towards the complex problems of the former Soviet area is known. President Dmitry Medvedev has shown very clearly that Russia has special interests in this area and even beyond it and that his country will defend the dignity of Russians living in adjacent states (over 10 million of them in Ukraine).

 
Likewise, he reiterated Russia’s unyielding opposition to NATO’s expansion towards the Russian borders, and Moscow’s behaviour vis-à-vis Georgia emphasizes that when it comes to this issue, Russia is ready to go up to the final consequences.
 
As known, Ukraine is one of the countries that are due to undergo a NATO evaluation in December in order to receive the MAP statute that precedes the accession to the alliance. Moreover, port facilities for the Russian fleet in the Black Sea have been rented in Ukraine’s Crimea until 2017, and the fleet’s ships have been used in the war against Georgia.
 
In recent weeks embryos of separatist movement have made themselves felt in the Crimea – with most of the locals being ethnic Russian or Russophiles – and in Moscow one could hear voices asking for the reclaiming of the peninsula that Russia ceded to Ukraine as a ‘gift’ in 1954.

On the other hand, even President Viktor Yushcenko issues unveiled hints referring to Russia’s involvement in the current crisis. In a recent interview he did not exclude this possibility, pointing out that such a scenario certainly exists in Moscow. ‘Will they repeat the Georgian scenario?’ Yuschenko asked. ‘For sure, no. Ukraine is not Georgia’ he said. ‘I think that today to deal with a country like Ukraine in such an inconsiderate manner… is not a good idea for anyone.’

Hence, a true and complex political background that presents Russia as the beneficiary of the political crisis in Kiev, now that Moscow has shown simultaneously with the recognition of South Ossetia’s and Abkhazia’s independence that the political rearrangement of the former Soviet area has begun.

 
The more the crisis is prolonged, the more the chances of Ukraine’s positive evaluation for a MAP in December drop, the more it splits the country in two antagonist parts – anti and pro Russian, the more the country’s destabilization deepens and the more Ukraine’s orientation towards Russia could gain consistency. And NATO would be unlikely to accept within its ranks o country that is in the midst of political crisis and that has tense relations with the Russian neighbour.

It’s just that standing to gain from it does not automatically mean you are the initiator of the crisis – whether through covert or a different kind of action – with Russia having the benefit of the doubt until proven otherwise. However one cannot ignore the accusations that President Viktor Yushcenko brought against the Prime Minister, accusations regarding the latter’s double dealing stance towards Russia, nor could one ignore Timoshenko’s statements.

 
Unlike Yushcenko, who openly condemned the Russian aggression and politically backed Georgia by restricting the movements of Russian ships from the Crimea, she said that although she does not support Moscow’s recognition of the separatist entities in Georgia, nevertheless she considers that Kiev needs good relations with its neighbour to the east.

Other recent developments come to give credence to the possible implications of the Russian action in escalating the crisis in Ukraine. Thus, Victor Yanukovich, the leader of the Party of Regions, Yushcenko’s former strong counter-candidate in the previous Presidential elections and the future candidate in the 2010 presidential elections and a politician known for his pro-Russian orientation, is considered to have chances of building a new Parliamentary majority along with Yulia Timoshenko.

 
When it comes to Russia, their stances are close to identical – the neighbor to the east should not be irked, there is a need of good relations with it – and their anti-Presidential position has recently become staunch. Recently he stated that ‘the Ukrainians feel no threat coming from Russia.
 
Speaking about such a threat, I think, are only those people that were cloned by the ‘orange’ revolution experiment. I don’t know how to call them – mutants, monsters. The rest normal people want to live in peace with their neighbours.’

If we refer to the servitudes of the Ukrainian political system and to the traits of the personalities involved in this crisis the picture is likewise complex. On the one hand, there is a strong current in support of amending the Constitution and limiting the President’s prerogatives was tried out (a move that has basically led to the current crisis, Timoshenko’s party voting alongside the opposition in support of limiting the Presidential prerogatives, in what Viktor Yushchenko called ‘a political coup’).

 
On the other hand, Yushchenko and Timoshenko are strong personalities whose will for exclusive power brings them into conflict. That is what happened almost a year ago when snap elections had to be called in order to end another political crisis. An official stated that: ‘It’s not about being pro-Western or pro-Russian. It’s about who gets to sit on the pipe,’ referring to the state’s large revenues obtained from the transit of fossil fuels.
 
‘Timoshenko is only interested in what serves her. She wants a monopoly on power. She was pro-Western when she needed the West’s support. Now she is trying to be pro-Russian.’ Both Yushchenko and Timoshenko are emerging as opponents in the Presidential elections of 2010, and the current crisis could be the beginning of their split for that competition.

According to the Constitution, by mid-October the Parliament has to come up with a new Government based on a new majority. If it fails then early elections will be next.

Irrespective of how it comes about, most of the political analysts foresee a prolonged crisis and a deepening instability in Ukraine in the near future, since Moscow revealed its intentions in the former Soviet area after the war in Georgia.

 
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22.  ANSWERING RUSSIAN AGGRESSION

 
OP-ED: By Mikheil Saakashvili, President of Georgia, The Washington Post
Washington, D.C., Tuesday, September 23, 2008; Page A21
 
TBILISI, Georgia — When tens of thousands of Russian troops and armored vehicles overwhelmed our country last month, the international community rallied to support us. Had Georgia been just another autocracy on Russia’s border, it is unlikely that so many world leaders would have traveled to Tbilisi to stand with the Georgian people.
This show of solidarity reinforced our belief that Georgia’s survival depends on becoming an ever more open and democratic society, firmly embedded in the community of free nations. How we respond is also pivotal to the future of the West.
Georgia was a corrupt, failing country that transformed itself into a liberal and promising nation in only a few years. To be sure, our democracy is still a work in progress. But it is a beacon in a difficult part of the world. And because Georgia lies at a crucial energy crossroads, an open, transparent government is even more vital.
Georgia also stands for the ability of the free world to respond with resolve to Moscow’s violent attempts to roll back democracy, reassert its empire and control European energy resources.

In hurrying to recognize the “independence” of our regions of South Ossetia and Abkhazia, Moscow erased universally recognized borders and challenged the system of sovereignty that underpins international law. It also concealed the ethnic cleansing that was undertaken by Russia and its proxies.

The West’s challenge now is to stand up to Russia without resorting to its brutal tactics. Our best protection lies in the ideas and values that guide our community of nations.
My government understands that how we conduct our affairs is a matter of consequence not only for us but also for our allies. We recognize that Russia’s insistence on using force has left it isolated politically and vulnerable economically.
Our belief in openness is not mere rhetoric. Despite the ruins created by the invasion — hundreds dead; nearly 200,000 displaced, according to the United Nations; our economy disabled — my government is putting our convictions into practice.
Transparency must begin with an understanding of how the war started. For years, Russia sought to slander Georgia and my government while also blocking any meaningful negotiations with the separatists. This was part of a campaign to weaken international support for Georgia and lay the groundwork for invasion. As has been reported, Russia began a sharp military buildup this spring in both conflict zones, leading to armed attacks this summer by its proxy militias.
 
Russia then started its land invasion in the early hours of Aug. 7, after days of heavy shelling that killed civilians and Georgian peacekeepers. At the time, Russia announced that 2,100 South Ossetian civilians had been killed by Georgians, thus forcing Moscow’s “humanitarian intervention.” This lie, subsequently debunked by Human Rights Watch (which estimated 44 dead) and others, was an attempt to conceal Moscow’s true motives.
On Aug. 17, standing next to German Chancellor Angela Merkel, I called for an international investigation into the origins of the war. My government is ready to share every piece of evidence and provide access to every witness sought by investigators. Is Russia willing to do the same?
Our second front in pursuing openness and transparency is at home. Last week, I announced a series of measures to strengthen Georgia’s democracy, giving opposition parties a central role in our reconstruction and defense planning.
 
We are working to foster pluralism in media and civil society, including giving opposition parties more funding and greater influence over public broadcasting. Initiatives also aim to make our judicial system more independent.
We are committed to transparency with our partners as well. My government has established rigorous mechanisms to ensure the accountable use of the aid that has been pledged so generously by, above all, the United States as well as by Europe, Japan, Canada, Australia and others.
But the West also must respond to Russia with conviction. We cannot allow Russia’s annexation of South Ossetia and Abkhazia to stand. Nor can Moscow be permitted to continuously flout the cease-fire to which it has repeatedly agreed.
My government welcomed the European Union’s decision to accelerate Georgia’s integration into European institutions. Last week, we were heartened by the first official visit to Georgia by the North Atlantic Council, and we hope that NATO will move forward with our membership application.
We Georgians will continue building our democratic future. We are focused on strengthening the community of democratic nations. The world must not permit Russia or others to assert spheres of influence and thus deny the right of free people to associate with like-minded nations.
 
LINK: http://www.washingtonpost.com/wp-dyn/content/article/2008/09/22/AR2008092202581.html
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23.  FUTURE OF VIKTOR YUSHCHENKO AND POLITICAL CRISIS IN UKRAINE

ANALYSIS AND COMMENTARY: By Vadim Karasyov, Vitaly Portnikov, Kyiv

Eurasian Home, Moscow, Russia, Tuesday, September 16, 2008

[1] By Vadim KARASYOV, Director of the Institute of Global Strategies, Kyiv

Among all Ukrainian top politicians only President Viktor Yushchenko regards the presidency as an opportunity to realize the nation-building project. For Yuliya Tymoshenko and Viktor Yanukovych, the presidency is the project of seizing supreme power. In other words, they see the presidency as a goal rather than a tool. Tymoshenko and Yanukovych are effective and popular policy-makers and party leaders. But unlike Viktor Yushchenko they are not statespersons.
What is the difference between a statesman and a politician? A statesman, even if he is not popular now, can gain wide popularity in the future, while a popular politician who has no national project can lose his or her rating quickly.
In Ukraine only Viktor Yushchenko demonstrates statesmanship and has a historical vision of presidency, but he is unpopular now, which is quite explainable. The idea of the Ukrainian nation is not consistent with the divided country (the same is true for Georgia). Ukraine is a country of minorities,
which are forced to create the parliamentary majority. This is the disadvantage that keeps causing the permanent political crisis in the country.
Before discussing the future of Viktor Yushchenko within the framework of the current political crisis in Ukraine, there is a need to say a couple of words about his presidency.
In 2004 Ukraine must have finished its post-Soviet development. Russia did that in 2000, when Vladimir Putin came to power.
Any president of Ukraine, who would have come to power in 2004, should have decided what policy the state would follow after the finishing of Ukraine’s post-Soviet development. A new leader should face new challenges. Viktor Yushchenko chose the nation building project. However, he had no enough powers to implement it. Since 2006 Viktor Yushchenko has had neither parliamentary majority nor loyal Cabinet of Ministers.
But I believe that Yushchenko’s situation is not hopeless. Everything will depend on how the election campaign will be conducted. If Yuliya Tymoshenko concludes an official coalition agreement with the Party of Regions, she may lose the support of the West Ukrainian electors who will vote for Yushchenko again.
 
If Tymoshenko does not conclude the agreement with Viktor Yanukovych and three major political forces take part in the elections, Yushchenko will have every chance of taking about 15 percent of the vote and then the main intrigue will take place in 2009-2010.
[2] By VITALY PORTNIKOV, “Svoboda” broadcasting station’s observer, Kyiv
Viktor Yushchenko’s high popularity rating in 2004 was neither based on the nation building project, nor on the study of the Cucuteni archeological culture, from which the Ukrainian people is said to descend, nor on the condemnation of the Great Famine (Holodomor) in Ukraine.
 
During his premiership in 1999-2001 he was the first Prime Minister in the independent Ukraine who paid off arrears of wages and pensions. So, he was the first social Premier who in 2004 was expected to become the first social President.
 
What did he promise when running for President in 2004? He promised the people wellbeing and prosperity. He also promised to fight against corruption, to create favorable conditions for the development of small business and many other things that were supposed to improve the ordinary people’s living. Viktor Yushchenko’s high rating was based on the broad social programmes of his election campaign. The voters regarded him as, above all, a successful economist and banker. 
Did he position himself as an anti-Russian presidential candidate? No, he didn’t, except in the propaganda of his political opponents and the Russian mass media maybe. Yushchenko himself tried his best to show that he wanted good relations with Russia. As the Prime Minister of Ukraine, he made such unprecedented concessions to maintain friendly relations with Russia that no Ukraine’s Premier had ever made.
Yushchenko’s opponents said: “He is against Russia. He hates Russia. He wants Ukraine to join NATO to defend it from Russia”. Viktor Yushchenko and his adherents denied those accusations. But Yushchenko’s position during the recent Russian-Georgian conflict indicates that all his previous projects, which were aimed at improving relations with Russia, are fading. Now Yushchenko is associated only with his anti-Russian project, while Yuliya Tymoshenko has become the social leader of Ukraine instead of him.
As a matter of fact, her position is the same as Yushchenko made public in 2004. She is a European-oriented politician and opposes the confrontation with Russia. Apart from that, she advocates improving the wellbeing of the people, fighting corruption, in a word all those things Yushchenko supported in 2004.
 
Currently there are a few people in Ukraine backing Viktor Yushchenko’s nation building and cultural project, and the votes at the early elections if they were called could be distributed, in the main, between the Party of Regions and Yuliya Tymoshenko Bloc.
I am not sure that the early parliamentary elections will take place in Ukraine. I concede that the Party of Regions and Yuliya Tymoshenko Bloc can come to an agreement with each other in the Parliament and form a coalition that will exist till the next elections. It can be called “the coalition of national reconciliation” or “the stability coalition”.
 
Those politicians will decide that the general presidential elections divide the country and they will not be held any more. Then Viktor Yanukovych will be nominated Ukraine’s President, Yuliya Tymoshenko will become Prime Minister and Viktor Yushchenko will be sidelined.
But Yushchenko can avert that, calling the presidential elections. Undoubtedly, he will lose them. In that case, Tymoshenko will be elected as President, and Yanukovych will become Prime Minister. This makes almost no difference.
Does Viktor Yushchenko have any allies in this struggle? Yes, he does. Surprisingly, the two previous Presidents of Ukraine Leonid Kravchuk and Leonid Kuchma won the presidential elections thanks to the East Ukrainian voters and, later on, they gained the Western Ukraine’s support. On the contrary, Viktor Yushchenko was elected by the Western and Central Ukraine and he won the Eastern electorate’s favour without changing ideologically.
 
In terms of ideology, he continues to be the President of the Central and Western Ukraine, but he has got support from the businessmen from the Southeast of Ukraine, first and foremost, from Rinat Akhmetov and Boris Kolesnikov, Ukrainian tycoons who are the sponsors of Viktor Yanukovych’s Party of Regions.
 
Yushchenko has come to realize that he should be the President of only the rich Ukrainians, which helped him to remain in power. But it is worse to be the President of the rich Ukrainians than the President of all the Ukrainians, since, unlike the rich Ukrainians, the ordinary Ukrainians do not dupe you. And rich people, when seeing that Yushchenko is unable to preserve their capital, seek to find a replacement for him.
For all that, Yushchenko’s future positive role is that he can prevent the state from becoming authoritarian. The coalition of Yuliya Tymoshenko Bloc and the Party of Regions would be an ideal pattern existing in Russia: effective Prime Minister (in Russia – Vladimir Putin, in Ukraine – Yuliya Tymoshenko), respected President (in Russia – Dmitry Medvedev, in Ukraine – Viktor Yanukovych) and security of the financial and industrial groups that came to terms with those political forces.
NOTE: The material is based on the experts’ addresses to Moscow-Kyiv television bridge “The future of Viktor Yushchenko and political crisis in Ukraine” organized by the Russian Agency of International Information RIA Novosti on September 10.
 
LINK: http://www.eurasianhome.org/xml/t/expert.xml?lang=en&nic=expert&pid=1729
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AUR#909 Sep 21 Genocide Against the Ukrainians Within the Whole Soviet Empire 1929-1938

 
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       
 
GENOCIDE AGAINST THE UKRAINIANS
The genocide was against the Ukrainians as a national/ethnic group
living within the whole Soviet empire over a period of years 1929-1938
 

Ukraine Remembers -The World Acknowledges 
2008 – 75th Commemoration Of The Holodomor 1932-1933
“Induced Starvation, Death for Millions, Genocide”

                     
ACTION UKRAINE REPORT – AUR – Number 909
Mr. Morgan Williams, Publisher and Editor, SigmaBleyzer
Founder/Trustee, “Holodomor: Through the Eyes of Ukrainian Artists”
WASHINGTON, D.C., SUNDAY, SEPTEMBER 21, 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
Ukraine government says Soviet Union orchestrated shortage
By Russell Working, Reporter, Chicago Tribune, Chicago, Illinois, Sat, Sep 20, 2008
 
Interfax Ukraine News, Kyiv, Ukraine, Thursday, September 18, 2008
 
Interfax Ukraine News, Kyiv, Ukraine, Friday, September 19, 2008
 
UNIAN, Kyiv, Ukraine, Monday, September 15, 2008
 
Ukrinform, Kyiv, Ukraine, Thursday, September 18, 2008
 
6HOLODOMOR EXHIBIT OPENS AT THE U.S. DEPARTMENT OF STATE
Presentation: David J. Kramer, Assistant Secretary for Democracy, Human Rights, and Labor
U.S. Department of State, Holodomor Exhibit Opening
Ralph J. Bunche Library, Washington, DC, Tuesday, September 16, 2008
 
The Ukrainians call it the Holodomor – the Hunger.
By Simon Sebag Montefiore, award winning author of “Young Stalin”
The Mail on Sunday, London, United Kingdom, July 26, 2008
 
Commentary: By Professsor Roman Serbyn, Montreal, Quebec, Canada, Sunday, July 27, 2008
 
The Day Weekly Digest #21, Kyiv, Ukraine, Tuesday, 8 July 2008 
 
10REGARDING THE RESOLUTION OF OSCE ON THE HOLODOMOR IN UKRAINE
Commentary: Professor Roman Serbyn, Montreal, Quebec, Canada, Thursday, July 3, 2008
 
Interfax, Moscow, Russia, Wednesday, June 4, 2008

12 UKRAINE IRKS RUSSIA WITH PUSH TO MARK STALIN FAMINE AS GENOCIDE
By Daryna Krasnolutska & Halia Pavliva, Bloomberg, Kyiv, Ukraine, New York, NY, Fri, Jan 4, 2008 

 
13 RUSSIA: 1930’S FAMINE MAINLY IN SOVIET UKRAINE WAS NOT GENOCIDE 
By Steve Gutterman, Associated Press Writer, AP, Moscow, Russia, April 2, 2008
 
Analysis & Commentary: By Peter Borisow
Kyiv Post newspaper, Kyiv, Ukraine, July 16, 2008
The Ukrainian Weekly newspaper, Parsippany, NJ, Sunday, August 17, 2008
 
New book edited by Lubomyr Luciuk: A series of essays by leading scholars and

journalists on the causes and consequences of the Great Famine of 1932-33 in Soviet Ukraine.
By Morgan Williams, Publisher and Editor, Action Ukraine Report (AUR)
Washington, D.C., Sunday, September 21, 2008
 
New issue of the Canadian American Slavic Studies Journal, Fall 2008
By Morgan Williams, Publisher and Editor, Action Ukraine Report (AUR)
Washington, D.C., Sunday, September 21, 2008

17.  UKRAINE: NEW BOOK BY THE LATE NOTED HISTORIAN JAMES MACE 

Collection of scholarly and journalistic works entitled “Your Dead Choose Me”
By Olha Risheltylova, The Day Weekly Digest, Kyiv, Ukraine, Tue, Sep 16, 2008

18LAW OF UKRAINE No.376-V “ON HOLODOMOR IN UKRAINE IN 1932-1933”

Parliament of Ukraine, Verkhovna Rada, November 28, 2006, Kyiv, Ukraine
English translation by Action Ukraine Report (AUR), Washington D.C., Sun, Sep 21, 2008
 
An orphan in Kiev in 1934. Her parents had died of starvation and she survived on charity from a neighbour
Tony Halpin in Kiev, The Times, London, UK, Sunday, June 22, 2008
20 75 YEARS LATER, HORROR STAYS FRESH, 1930’S FAMINE IN UKRAINE MARKED
Melissa Dunne, The Windsor Star, Windsor, Ontario, Canada, Saturday, May 24, 2008
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1
HISTORIANS, SURVIVORS HOPE TO DRAW ATTENTION TO UKRAINIAN FAMINE
Ukraine government says Soviet Union orchestrated shortage
By Russell Working, Reporter, Chicago Tribune, Chicago, Illinois, Sat, Sep 20, 2008
 
CHICAGO – Behind Neonila Scherstiuk Lychyk’s school in the Ukraine of her childhood, there was a cemetery and, sometimes during recess, horse carts arrived loaded with corpses.  At first, Lychyk said, the teacher would shoo the children indoors. In time, she didn’t bother.

The entire Ukraine was experiencing the horror anyway: the corpses in the streets, the villages emptied of people, the little ones who disappeared—rumored to have been kidnapped by cannibals.

This fall, Chicago-area Ukrainians like Lychyk of River Forest are commemorating the 75th anniversary of the Holodomor, or death by hunger, which the Ukrainian government says was a Soviet-engineered famine that killed as many as 10 million people in 1932-33.

Anniversary events include seminars, an exhibition, memorials and requiem masses. Organizers and survivors said their efforts to spread the word are urgent. Like those who lived through the Holocaust, survivors of what has been called the “genocide famine” are growing fewer by the day.

Unlike the Holocaust, which was exposed and recorded by conquering armies, the Holodomor was hidden for at least two generations by a communist regime that had no qualms about using food as a weapon but didn’t want the world to know, historians said.

Historians and the Ukrainian government say the famine was engineered by the Kremlin, which sent communist thugs door to door to steal food out of pantries and off of tables. Meanwhile, the government exported Ukrainian grain to the West throughout the famine.

This summer, the Ukrainian government released historical documents it says prove the Holodomor was an intentionally manufactured genocide. Moscow has resisted the label of “genocide,” saying Russians and others in the Soviet Union—not just Ukrainians—suffered under Stalin’s iron rule.

Taras Hunczak, a Ukrainian-born history professor emeritus at Rutgers University, has studied original documents related to the famine. Estimates of deaths have ranged widely and are difficult to prove, but Hunczak said he believes 7 million to 10 million people probably died.

The Chicago-based Ukrainian Genocide Famine Foundation USA annually memorializes the victims of the Holodomor through talks in schools and a memorial service. But this year the foundation is making an extra push to remind the world, foundation president Nicholas Mischenko said.

Mischenko was born in Ukraine a year after the Holodomor. He never met two older siblings who starved to death. “They took away our farm. Took away everything that we had: cows, horses, chickens—everything. And after that they took away all the foodstuffs.”

During World War II, his family fled Ukraine, spending three years traveling across central Europe before gaining refugee status in Austria and emigrating.

Anatole Kolomayets, a Chicago artist who was born in 1927 and survived the famine with his younger brother, George, said his family lived on a farm in a devastated rural area. His father fled out the back door as the police arrived to arrest him. Kolomayets’ father soon found a job at a Poltava railroad station, where he received a bread ration and the family rejoined him.

Lychyk’s family survived because her father was a state employee and received a food ration. But every day as a 7-year-old, she saw the fate of families who couldn’t feed their children.

For years, Lychyk didn’t tell her children about what she had survived. But recently, she wrote down her memories for them.

“This is something that is very hard to discuss, because you just don’t want to take the joy of life from young generations,” she said. “But I think that’s wrong. We should tell our children and grandchildren so this doesn’t happen again.” [rworking@tribune.com]

 
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2. DRAFT RESOLUTION ON HOLODOMOR FAMINE IN UKRAINE

TO BE DISCUSSED AT UNITED NATIONS GENERAL ASSEMBLY
 
Interfax Ukraine News, Kyiv, Ukraine, Thursday, September 18, 2008

KYIV – A draft resolution on the Holodomor Famine in Ukraine in 1932-1933 will be discussed at the next sitting of the General Committee of the 63rd session of the UN General Assembly, the press service of Ukrainian Foreign Ministry reported on Thursday.

The Foreign Ministry said the draft resolution “contains an appeal to honor the memory of the victims of the Holodomor famine in Ukraine in 1932-1933, which took the lives of millions of Ukrainians, and people of other nationalities who lived in Ukraine during that time.”
The draft resolution also calls on UN member states “to include information on the Holodomor famine in Ukraine in 1932-1933 in their educational programs aimed as preventing future generations from [repeating] a sorrowful lesson from a tragic page in global history.”
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3.  RUSSIA THINKS UKRAINE’S ATTEMPTS TO PROMOTE HOLODOMOR ISSUE IN UN GA ARE INCORRECT

 
Interfax Ukraine News, Kyiv, Ukraine, Friday, September 19, 2008

MOSCOW – Moscow thinks that Ukraine’s attempts to promote the so-called Holodomor in the UN General Assembly is incorrect and flawed.

The General Committee made a decision “to postpone the inclusion of the Holodomor issue on the agenda [of the UN General Assembly], which is actively promoted by the Ukrainian delegation” at the UN headquarters in New York a day earlier, a spokesman of the Russian Foreign Ministry Andrei Nesterenko told a news conference on Friday.
“Russian representatives in the General Committee told that the attempt of the Ukrainian side to usurp tragic pages of common history of many USSR nations are incorrect and are flawed from a moral point of view,” Nesterenko said.
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4.  COMMUNIST REGIME FOUGHT AGAINST HOLODOMOR IN UKRAINE WITH RESOLUTIONS
 
UNIAN, Kyiv, Ukraine, Monday, September 15, 2008

KYIV – Russia declassified some documents about the hunger in USSR in 1930-1940ies, which took place because of the collectivization of farms and industrialization, in particular, in Ukraine, Kazakhstan, Belarus, and Ural. Copies of the declassified documents were posted at the official web site of the Russian Foreign Affairs Ministry.

 
The declassified documents indicate that, beginning from May of 1930, the Central Committee of the All-Union Communist Party of Bolsheviks (VKP(b)) received information about hunger, deficit of grain and bread from Senior Political Departments of Soviet Union republics.
 
On the basis of the received information, the Political Bureau of VKP(b) issued resolutions on aid to suffering regions almost every day. Thus, as for Ukraine, they made decisions to give help with seeds, to lift reservation on rye flour and to buy additional grain from eastern regions, etc..

On the other hand, the official web site of the Russian Foreign Ministry posted materials showing inactivity of the Ukrainian party leadership in solving the food crisis in the republic.

 
In particular, M.Zhyvanov [his position is not specified – UNIAN], wrote in his letter to Stanislav Kosior, first secretary of the Central Committee of the Communist Party in Ukraine: “Open your eyes to the reality. What are you doing with your policy, you, silent slaves of Moscow? You have ruined Ukraine and its agriculture within two years: you turned the Ukrainian party organization into a flock of parrots, who have learnt that it’s forbidden to say “unreal”, it’s opportunism.
 
“Last year these parrots left the Ukrainian economy without any slice of bread, without potato, without corn. At least, calculate, how many children and aged people have died from hunger here. At least you could show courage and calculate those victims, and familiarize Moscow with the results of our carefree and irresponsible “struggle for socialism”.

At the same time, a report from Mendel Khatayevych, Secretary of the Central Committee of the Ukrainian Communist Party, sent to the VKP(b), reads about a rise of epidemics in Ukraine, as of January 2, 1933:

“A rise of epidemics, in particular, typhus, has been recorded in Ukraine. The total number of cases for the whole year 1931 made up 8 thousand 384, during January-November of 1932 -15 thousand 458”, M.Khatayevych wrote.
 
As early as on March 17, 1933, the secret political department of the United State Political Directorate prepared a special report about hunger in the Ukrainian SSR, with indicating cases of mass death and cannibalism.
 
“Volodarskiy district of the Kyiv Oblast. In Rude village, a mother left her three children home alone. Having absolutely nothing to eat, a 9-year old boy, together his elder sister, killed their 3-year old younger sister. The children cut off her head and began to eat the raw meat of the dead body”, the special report informs. Very many such cases were listed in numerous reports from different regions of Ukraine.

The Russian Foreign Ministry informs that the publicized digital copies of original documents were received from funds of Russian federal archives. “These are just a part of a huge documental array about the hunger in USSR”, reads the preface to the declassified materials.

 
LINK: http://www.unian.net/eng/news/news-272942.html
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5.  HEAD OF UKRAINIAN INSTITUTE OF NATIONAL MEMORY BLAMES RUSSIA
FOR BIASED PUBLICATION OF DOCUMENTS ON HUNGER IN EARLY 30’S 
 
Ukrinform, Kyiv, Ukraine, Thursday, September 18, 2008
KYIV – X-file documents on the hunger of early 1930s in the USSR, recently put on the Russian foreign ministry website, were selected tendentiously, as among them there are no resolutions and directives most brightly proving the deliberate character of the Great Famine (Holodomor) in Ukraine, Academician Ihor Yukhnovskyi, acting head of the Ukrainian Institute of National Memory, told a press conference Thursday.
“We are greatly pleased that the Russian party, particularly its foreign ministry, showed interest in the issues of hungers in the Soviet Union and published the documents. We were glad to use some of them that we did not have before. Yet, I insist with authority that the set of documents is biased,” he said.
The Russian MFA website published 200 documents, saying it was just a small part of the mass of information about the hunger in the USSR in early 30s.
Ukrainian historians say the publication bears secondary papers and lacks principal ones, on the real nature of famine in Ukraine that was struck most of all.
Yukhnovskyi said his Institute would send to the Russian ministry documents from Ukrainian archives attesting to masterminded hunger in Ukraine. “It is up on to them whether to put those documents on the web or not,” the Academician noted.
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6.  HOLODOMOR EXHIBIT OPENS AT THE U.S. DEPARTMENT OF STATE

Presentation: David J. Kramer, Assistant Secretary for Democracy, Human Rights, and Labor

U.S. Department of State, Holodomor Exhibit Opening
Ralph J. Bunche Library, Washington, DC, Tuesday, September 16, 2008
 
WASHINGTON, D.C. – Ambassador Shamshur, honored guests: Thank you for the opportunity to take part in the opening of this exhibition to commemorate the 75th anniversary of the Holodomor tragedy.

Seventy-five years ago, the world witnessed a horrific episode of human suffering and deprivation in Ukraine. The Holodomor is an extraordinarily sad chapter in human history, all the more tragic because it was man-made.  It is necessary that we honor the memory of the lives lost as a result of this communist oppression. I join with you and people everywhere in remembering the victims of this terrible tragedy, one that never should have happened.

A year ago, we co-sponsored a resolution on the Remembrance of Victims of the Great Famine in the United Nations Educational, Scientific, and Cultural Organization, to call for promoting awareness of the Great Famine through educational and research programs.

We are also committed to permanently recognizing the victims in the United States. In October 2006, President Bush signed legislation authorizing a Holodomor memorial in Washington, D.C. This memorial will stand as a tribute to all people who suffered from the injustices of totalitarian regimes.

President and Mrs. Bush visited the Holodomor monument in Kyiv during their trip earlier this year, and Vice President Cheney earlier this month paid his respects as well. 

 
In the words of President Bush, during the Holodomor, “… millions died because they resisted Stalin’s brutal regime. We honor their memory and pledge to never forget their suffering. As we remember their struggle, we also condemn all authoritarian governments who have terrorized their people in the past and who continue to do so, thus continuing the fight for freedom and safety of all people.”

Since those dark days, Ukraine has regained its status as an independent nation and today is marked by political freedom and economic growth. The political situation is never dull but very importantly has remained peaceful. The United States strongly supports Ukraine’s efforts to strengthen democracy, rule of law, and good governance in order to better bring the fruits of representational government to the Ukrainian people.

The opening of this exhibition is a time for remembrance, and a time for moving forward. As we reflect on this tragic event in history, we should also celebrate Ukraine’s progress and look to the future with hope and confidence. Thank you.  [AUR Footnote: Your editor attended the Holodomor Exhibition event at the U.S. Department of State.]

LINK: http://www.state.gov/g/drl/rls/rm/2008/109839.htm
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7.  HOLOCAUST BY HUNGER: THE TRUTH BEHIND STALIN’S GREAT FAMINE

The Ukrainians call it the Holodomor – the Hunger.
 
By Simon Sebag Montefiore, award winning author of “Young Stalin”
The Mail on Sunday, London, United Kingdom, July 26, 2008
 
The demented Roman Emperor Caligula once mused that if all the people of Rome had one neck he would cut it just to be rid of his troublesome people.
The trouble was there were simply too many Romans to kill them all.
Many centuries later, the brutal Soviet dictator Josef Stalin reflected that he would have liked to deport the entire Ukrainian nation, but 20 million were too many to move even for him.
 
So he found another solution: starvation.
 
Now, 75 years after one of the great forgotten crimes of modern times, Stalin’s man-made famine of 1932/3, the former Soviet republic of Ukraine is asking the world to classify it as a genocide.
The Ukrainians call it the Holodomor – the Hunger.
 
Millions starved as Soviet troops and secret policemen raided their villages, stole the harvest and all the food in villagers’ homes. They dropped dead in the streets, lay dying and rotting in their houses, and some women became so desperate for food that they ate their own children. If they managed to fend off starvation, they were deported and shot in their hundreds of thousands.
 
So terrible was the famine that Igor Yukhnovsky, director of the Institute of National Memory, the Ukrainian institution researching the Holodomor, believes as many as nine million may have died.
 
For decades the disaster remained a state secret, denied by Stalin and his Soviet government and concealed from the outside world with the help of the ‘useful idiots’ – as Lenin called Soviet sympathisers in the West.
 
RUSSIA IS FURIOUS THAT UKRAINE HAS RAISED THE ISSUE OF THE FAMINE
Russia is furious that Ukraine has raised the issue of the famine: the swaggering 21st-century state of Prime Minister Putin and President Medvedev see this as nationalist chicanery designed to promote Ukraine, which may soon join Nato and the EU. They see it as an anti-Russian manoeuvre more to do with modern politics than history. And they refuse to recognise this old crime as a genocide.
They argue that because the famine not only killed Ukrainians but huge numbers of Russians, Cossacks, Kazakhs and many others as well, it can’t be termed genocide – defined as the deliberate killing of large numbers of a particular ethnic group. It may be a strange defence, but it is historically correct.
So what is the truth about the Holodomor? And why is Ukraine provoking Russia’s wrath by demanding public recognition now?
The Ukraine was the bread basket of Russia, but the Great Famine of 1932/3 was not just aimed at the Ukrainians as a nation – it was a deliberate policy aimed at the entire Soviet peasant population – Russian, Ukrainian and Kazakh – especially better-off, small-time farmers.
It was a class war designed to ‘break the back of the peasantry’, a war of the cities against the countryside and, unlike the Holocaust, it was not designed to eradicate an ethnic people, but to shatter their independent spirit.
 
RANKS AS ONE OF THE MOST TERRIBLE CRIMES OF THE 20TH CENTURY
So while it may not be a formal case of genocide, it does, indeed, rank as one of the most terrible crimes of the 20th century.
To understand the origins of the famine, we have to go back to the October 1917 Revolution when the Bolsheviks, led by a ruthless clique of Marxist revolutionaries including Lenin, Trotsky and Stalin, seized power in the name of the workers and peasants of the Russian Empire to create a Marxist paradise, using terror, murder and repression.
The Russian Empire was made of many peoples, including the Russians, Ukrainians, Kazakhs and Georgians, but the great majority of them, especially in the vast arable lands of Ukraine, southern Russia, the northern Caucasus, and Siberia, were peasants, who dreamed only of owning their own land and farming it.
Initially, they were thrilled with the Revolution, which meant the breakup of the large landed estates into small parcels which they could farm.
But the peasants had no interest in the Marxist utopian ideologies that obsessed Lenin and Stalin.
Once they had seized their plots of land, they were no longer interested in esoteric absurdities such as Marx’s stages in the creation of a classless society.
The fact is they were essentially conservative and wanted to pass what little wealth they had to their children.
This infuriated Lenin and the Bolsheviks, who believed that the peasantry, especially the ones who owned some land and a few cows, were a huge threat to a collectivist Soviet Russia.
 
LENIN’S HATRED OF THE PEASANTRY BECAME CLEAR
Lenin’s hatred of the peasantry became clear when a famine occurred in Ukraine and southern Russia in 1921, the inevitable result of the chaos and upheaval of the Revolution. With his bloodthirsty loathing for all enemies of the Revolution, he said ‘Let the peasants starve’, and wrote ranting notes ordering the better-off peasants to be hanged in their thousands and their bodies displayed by the roadsides.
Yet this was an emotional outburst and, ever the ruthless pragmatist, he realised the country was so poor and weak in the immediate aftermath of its revolutionary civil war that the peasants were vital to its survival. So instead, he embraced what he called a New Economic Policy, in effect a temporary retreat from Marxism, that allowed the peasants to grow crops and sell them for profit.

It was always planned by Lenin and his fellow radicals that this New Economic Policy should be a stopgap measure which would soon be abandoned in the Marxist cause. But before this could happen, Lenin died in 1924 and Stalin defeated all his rivals for the Soviet leadership.

Then, three years later, grain supplies dropped radically. It had been a poor crop, made worse by the fact that many peasant farmers had shifted from grain into more lucrative cotton production.

Stalin travelled across Russia to inspect supplies and ordered forcible seizures of grain from the peasantry. Thousands of young urban Communists were drafted into the countryside to help seize grain as Stalin determined that the old policies had failed.

Backed by the young, tough Communists of his party, he devised what he called the Great Turn: he would seize the land, force the peasants into collective farms and sell the excess grain abroad to force through a Five Year Plan of furious industrialisation to make Soviet Russia a military super power.

He expected the peasants to resist and decreed anyone who did so was a kulak – a better-off peasant who could afford to withhold grain – and who was now to be treated as a class enemy.

DESTRUCTION OF THE KULAKS AS A CLASS
By 1930, it was clear the collectivisation campaign was in difficulties. There was less grain than before it had been introduced, the peasants were still resisting and the Soviet Union seemed to be tottering. Stalin, along with his henchman Vyacheslav Molotov and others, wrote a ruthless memorandum ordering the ‘destruction of the kulaks as a class’.

They divided huge numbers of peasants into three categories.

[1] The first was to be eliminated immediately; the

[2] second to be imprisoned in camps; the
[3] third, consisting of 150,000 households – almost a million innocent people – was to be deported to wildernesses in Siberia or Asia.

Stalin himself did not really understand how to identify a kulak or how to improve grain production, but this was beside the point. What mattered was that sufficient numbers of peasants would be killed or deported for all resistance to his collectivisation programme to be smashed.

In letters written by many Soviet leaders, including Stalin and Molotov, which I have read in the archives, they repeatedly used the expression: ‘We must break the back of the peasantry.’ And they meant it.

In 1930/1, millions of peasants were deported, mainly to Siberia. But 800,000 people rebelled in small uprisings, often murdering local commissars who tried to take their grain. So Stalin’s top henchmen led armed expeditions of secret policemen to crush ‘the wreckers’, shooting thousands.

The peasants replied by destroying their crops and slaughtering 26 million cattle and 15 million horses to stop the Bolsheviks (and the cities they came from) getting their food. Their mistake was to think they were dealing with ordinary politicians.

But the Bolsheviks were far more sinister than that: if many millions of peasants wished to fight to the death, then the Bolsheviks were not afraid of killing them. It was war – and the struggle was most vicious not only in the Ukraine but in the north Caucasus, the Volga, southern Russia and central Asia.

The strain of the slaughter affected even the bull-nerved Stalin, who sensed opposition to these brutal policies by the more moderate Bolsheviks, including his wife Nadya.
 

STALIN KEPT SELLING GRAIN ABROAD
He knew Soviet power was suddenly precarious, yet Stalin kept selling the grain abroad while a shortage turned into a famine. More than a million peasants were deported to Siberia: hundreds of thousands were arrested or shot. Like a village shopkeeper doing his accounts, Stalin totted up the numbers of executed peasants and the tonnes of grains he had collected.

By December 1931, famine was sweeping the Ukraine and north Caucasus. ‘The peasants ate dogs, horses, rotten potatoes, the bark of trees, anything they could find,’ wrote one witness Fedor Bleov.
 
By summer 1932, Fred Beal, an American radical and rare outside witness, visited a village near Kharkov in Ukraine, where he found all the inhabitants dead in their houses or on the streets, except one insane woman. Rats feasted on the bodies. Beal found messages next to the bodies such as: ‘My son, I couldn’t wait. God be with you.’

One young communist, Lev Kopolev, wrote at the time of ‘women and children with distended bellies turning blue, with vacant lifeless eyes. ‘And corpses. Corpses in ragged sheepskin coats and cheap felt boots; corpses in peasant huts in the melting snow of Vologda [in Russia] and Kharkov [in Ukraine].’

Cannibalism was rife and some women offered sexual favours in return for food.  There are horrific eye-witness accounts of mothers eating their own children.

In the Ukrainian city of Poltava, Andriy Melezhyk recalled that neighbours found a pot containing a boiled liver, heart and lungs in the home of one mother who had died. Under a barrel in the cellar they discovered a small hole in which a child’s head, feet and hands were buried. It was the remains of the woman’s little daughter, Vaska.

A boy named Miron Dolot [pen name] described the countryside as ‘like a battlefield after a war. ‘Littering the fields were bodies of starving farmers who’d been combing the potato fields in the hope of finding a fragment of a potato. ‘Some frozen corpses had been lying out there for months.’

On June 6, 1932, Stalin and Molotov ordered ‘no deviation regarding amounts or deadlines of grain deliveries are to be permitted’. A week later, even the Ukrainian Bolshevik leaders were begging for food, but Stalin turned on his own comrades, accusing them of being wreckers. ‘The Ukraine has been given more than it should,’ he stated.

When a comrade at a Politburo meeting told the truth about the horrors, Stalin, who knew what was happening perfectly well, retorted: ‘Wouldn’t it be better for you to leave your post and become a writer so you can concoct more fables!’ In the same week, a train pulled into Kiev from the Ukrainian villages ‘loaded with corpses of people who had starved to death’, according to one report.

Such tragic sights had no effect on the Soviet leadership.

When the American Beal complained to the Bolshevik Ukrainian boss, Petrovsky, he replied: ‘We know millions are dying. That is unfortunate, but the glorious future of the Soviet Union will justify it.’
 
Stalin was not alone in his crazed determination to push through his plan. The archives reveal one young communist admitting: ‘I saw people dying from hunger, but I firmly believed the ends justified the means.’

Though Stalin was admittedly in a frenzy of nervous tension, it was at this point in 1932 when under another leader the Soviet Union might have simply fallen apart and history would have been different.
 
Embattled on all sides, criticised by his own comrades, faced with chaos and civil war and mass starvation in the countryside, he pushed on ruthlessly – even when, in 1932, his wife Nadya committed suicide, in part as a protest against the famine.

‘It seems in some regions of Ukraine, Soviet power has ceased to exist,’ he wrote. ‘Check the problem and take measures.’ That meant the destruction of any resistance. Stalin created a draconian law that any hungry peasant who stole even a husk of grain was to be shot – the notorious Misappropriation of Socialist Property law.
 

“IF WE DON’T MAKE AN EFFORT, WE MIGHT LOSE UKRAINE”
‘If we don’t make an effort, we might lose Ukraine,’ Stalin said, almost in panic. He dispatched ferocious punitive expeditions led by his henchmen, who engaged in mass murders and executions.

Not just Ukraine was targeted – Molotov, for example, headed to the Urals, the Lower Volga and Siberia. Lazar Kaganovich, a close associate of Stalin, crushed the Kuban and Siberia regions where famine was also rife.

Train tickets were restricted and internal passports were introduced so that it became impossible for peasants to flee the famine areas. Stalin called the peasants ‘saboteurs’ and declared it ‘a fight to the death! These people deliberately tried to sabotage the Soviet stage’.
 
BETWEEN FOUR AND FIVE MILLION DIED IN UKRAINE
Between four and five million died in Ukraine, a million died in Kazakhstan and another million in the north Caucasus and the Volga. By 1933, 5.7 million households – somewhere between ten million and 15 million people – had vanished. They had been deported, shot or died of starvation. As for Stalin, he emerged more ruthless, more paranoid, more isolated than before.
 
Stalin later told Winston Churchill that this was the most difficult time of his entire life, harder even than Hitler’s invasion. ‘It was a terrible struggle’ in which he had ‘to destroy ten million. It was fearful. Four years it lasted – but it was absolutely necessary’. Only in the mind of a brutal dictator could the mass murder of his own people be considered ‘necessary’.

Whether it was genocide or not, perhaps now the true nature of one of the worst crimes in history will finally be acknowledged.

AUR FOOTNOTE: Simon Sebag Montefiore is the award-winning and critically acclaimed author of the bestselling books “Young Stalin”, “Stalin: The Court of the Red Tsar” and “Catherine the Great & Potemkin.” “Sashenka,” a novel of love, family, death and betrayal in 20th century Russia, by Simon Sebag Montefiore, is out now. [http://www.simonsebagmontefiore.com/]

LINK: http://www.mailonsunday.co.uk/news/worldnews/article-1038774/Holocaust-hunger-The-truth-Stalins-Great-Famine.html

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8.  ROMAN SERBYN: MONTEFIORE ON HOLODOMOR AND MY COMMENT 

 
COMMENTARY: By Professor Roman Serbyn, Montreal, Quebec, Canada, Sun, Jul 27, 2008
From: “Roman Serbyn” serbyn.roman@videotron.ca
To: “aaus” aaus-list@ukrainianstudies.org
Sent: Sunday, July 27, 2008 7:14 PM
Subject: [aaus-list] Montefiore on Holodomor & my comment

MONTREAL: There is an article by Simon Sebag Montefiore “Holocaust by hunger: The truth behind Stalin’s Great Famine.”  
http://www.mailonsunday.co.uk/news/worldnews/article-1038774/Holocaust-hunger-The-truth-Stalins-Great-Famine.html.

I wrote a comment on the online publication, but I don’t know if it will appear, so I am joining it here, in case someone would care to read it.

This is a welcome addition to popular literature on the Great Famine. The author is right to stress the ruthlessness of Stalin, his henchmen and the
Bolsheviks, who were not afraid to kill people by the million.

 
The author accurately identifies the goals of collectivization: “to break the backbone of the peasantry”, “to shatter their independent spirit” and with the stolen grain from the starving peasants to industrialize and “make Soviet Russia a military super power”.

Montefiore’s description of “the Great Turn” – the destruction of the peasantry, the horrors of the famine, with dekulakization, deportation, starvation, cannibalism, and so forth – can be appreciated.

There are, however, errors in his historical narrative that should be pointed out, and unwarranted assertions that must be challenged. Stalin’s musings about deporting Ukrainians revealed by Khrushchev refer to the post WW II period and not to the time of the famine. Ukrainians, according the 1926 census numbered  28.5 million (as citizens of Ukr. SSR) and 31 million (as an ethnic minority in USSR). If anything, the figures would be a million or so higher in 1932.

NEP was introduced in the beginning of 1921 because agriculture was collapsing, and not in response to the famine, which began only towards the end of that summer and continued until 1923. The first famine (1921-1923) was, to a large extent, due to the requisitions practiced by the Red Army during the Russian civil war (and wars of reconquest of the seceding republics like Ukraine); peasants’ delight over the Bolshevik seizure of power was rather short-lived.

Some of the author’s descriptions and claims lack precision or completeness. The author fails to take into account that while “the Cossacks” formed a more or less homogenous social group, they belonged to two different nationalities.

 
MOST KUBAN COSSACK WERE OF UKRAINIAN BACKGROUND
Most of the Kuban Cossack were of Ukrainian background and in the deportation of the Kuban Cossack stanytsias (settlements) the national factor played a decisive role. At the beginning of the famine there were some 8,000,000 ethnic Ukrainians living in RSFSR, mostly along the Ukrainian border: the Kuban was 62% Ukrainian, the Don about 40 %.

The rise of Ukrainian national consciousness, and the “infiltration” of the party and state institutions in these regions by “Ukrainian nationalists” was blamed for the problems in grain procurement (read confiscations).

 
As a result, on 14 December 1932, the Ukrainian language was banned in all schools, local administration, mass media throughout the RSFSR. This and other national factors in 1932-1933 tragedy are ignored by the author, thus giving the whole presentation a rather lopsided interpretation.

Montefiore states that train tickets were restricted and internal passports were introduced so that it became impossible for peasants to flee the famine areas.

 
Here he confuses two different issues:

1) passport system whose purpose was to the main urban centres from growing and which came into effect towards the end of the main period of the famine, and

2) a Stalin/Molotov directive of 22 January 1933 closing cordoning off Ukrainian SSR and the North Caucasus Territory (chiefly aimed at the Kuban) from the rest of the Soviet Union to any peasant movement. This directive had a specifically anti-Ukrainian factor which is completely ignored by the author.

 
PRESENTS ARGUMENT HEARD FROM RUSSIAN DENIERS
The author presents the argument often heard from Russian political and academic deniers of the Ukrainian genocide, namely that, “because the famine not only killed Ukrainians but huge numbers of Russians, Cossacks, Kazakhs and many others as well, it can’t be termed genocide — defined as deliberate
killing of large numbers of a particular ethnic group.” What is surprising, is that the author then defends this illogical position: “It may be a strange defence, but it is historically correct.”

Well, I beg to differ: it is not correct, either logically or historically. Logically, the question of the Ukrainian genocide has to be decided on its own merit.

 
Whether Russians and Kazakhs (ethnically the Cossacks were either Russians or Ukrainians – there was no Cossack nationality) were victims of genocide has no bearing on Ukrainian genocide, any more than the destruction of Gypsies and Poles had any influence on the recognition of the genocide of the Jews.
Each case has to be decided on its own merit. Bringing Russians and Kazakhs into the discussion of Ukrainian genocide is to confuse the issue.
 
Historically, the Russians’ argument is incorrect for the simple reason that the famine was not the sums total of the genocidal atrocities and the Ukrainian peasantry was not the sum total of the Ukrainian victims of the genocide. The genocide was against the Ukrainians as a national/ethnic group living within the whole Soviet empire.
 
MONTEFIORE LEAVES OUT MILLIONS OF UKRAINIANS
Montefiore leaves out not only the 8 million Ukrainians in the RSFSR but also the other segments of the Ukrainian population (national elites, professional class etc,) that were also part of the overall target of Stalin’s genocidal policies.
 
We cannot go into detail here, and I shall make just two short comments.

[1] First, concurrently with the destruction of the village elites in 1929-1930 (“dekulakization”) the regime began the elimination of the  national elites with the roundup of hundreds of intellectuals accused of organizing a Union for the Liberation of Ukraine (Soiuz Vyzvolennia Ukrainy). One of their “crimes” was organizing cells in the countryside. There was no corresponding witch-hunt of Russian elites accused of Russian nationalism.

[2] Second example. Montefiore (mis)quotes Stalin’s letter to Kaganovich (whose role in Ukraine Montefiore underestimates, in favor of Molotov),

“Unless we begin to straighten out the situation in Ukraine, we may lose Ukraine” and leaves it dangling because two paragraphs further he insists that “not just Ukraine was targeted – Molotov … headed to the Urals, … Kaganovich … crushed the Kuban”.
 
It is what Montefiore leaves out that gives sense to the Stalin’s reference to Ukraine. “Keep in mind that the Ukrainian Communist Party (500,000 members, ha-ha) has quite a lot (yes, quite a lot!) of rotten elements, conscious and unconscious Petliura adherents … As soon as things get worse, these elements will waste no time opening a front inside (and outside) the party, against the party.”
 
The sequence to this declaration was the second series of elimination of Ukrainian elites, this time from the faithful party cadres, suspected of siding with the Ukrainian peasantry “as soon as things get worse” (no better indication that Stalin was anticipating widespread starvation). The national factor always present in Stalin’s genocidal policies in the 1930s. It behooves the commentators on those years to present the full picture of events.
 
AUR FOOTNOTE: Roman Serbyn, is a leading and well known Canadian professor, scholar, researcher, author (Universite du Quebec a Montreal).  He is one of the world’s foremost authorities on the history of Soviet Ukraine from 1920 through 1939. He is the editor with Bohdan Krawchenko of a book entitled “Famine in Ukraine 1932-1933” published by the Canadian Institute of Ukrainian Studies, University of Alberta, Edmonton, 1986.  He is the author of the book “The Famine of 1921-1923 [Ukraine] and the Canadian Press in Canada.”  The book was published in Ukrainian by the Ukrainian Canadian Research and Documentation Centre, Toronto, 1995. 
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9. OSCE PARLIAMENTARY ASSEMBLY (PA) RECOGNIZED HOLODOMOR OF 1932-1933
 
The Day Weekly Digest #21, Kyiv, Ukraine, Tuesday, 8 July 2008 

KYIV – The 17th session of the OSCE [Organization for Security and Co-operation in Europe] Parliamentary Assembly (PA) passed a resolution on the Holodomor of 1932-1933 in Ukraine last Sunday in Astana.

 
OSCE PA “pays tribute to the innocent lives of millions of Ukrainians who perished during the Holodomor of 1932 and 1933 as a result of the mass starvation brought about by the cruel deliberate actions and policies of totalitarian Stalinist regime”, “welcomes the recognition of the Holodomor in the United Nations, by the United Nations Educational and Scientific Organization and by the national parliaments of a number of the OSCE participating States,” “endorses the Joint Statement of 31 OSCE participating States on the 75th anniversary of the Holodomor of 1932-1933 in Ukraine, delivered at the 15th Meeting of the OSCE Ministerial Council,” the resolution says in particular.
 
Besides, OSCE PA “supports the initiative of Ukraine to reveal the full truth of this tragedy of Ukrainian people, in particular, through raising public awareness of the Holodomor at international and national levels, organizing the commemorations of the Holodomor as well as academic, expert and civil events aimed at discussing this issue.”
 
OSCE PA “invites the parliamentarians of the OSCE Member States to participate in the events, commemorating the 75th anniversary of the Holodomor of 1932-1933 in Ukraine” and “strongly encourages all parliaments to adopt acts regarding recognition of the Holodomor.”
COMMENTARY —
Stanislav KULCHYTSKY , Deputy Director, Institute of the History of Ukraine (National Academy of Sciences):
“For the world community to recognize the 1932-1933 Holodomor as genocide, we should cooperate more with unbiased foreign historians. As it has already been reported, the book “Why Was He Destroying Us? Stalin and the Holodomor in Ukraine” of The Day Library series was recently launched in Bucharest.
 
Speaking at this ceremony, member of the Rumanian Academy of Sciences Florin Constantinium noted that it is strange that the polemics, which has lasted for 20 years now since the publication of Robert Conquest’s Harvest of Sorrow , is inadequately based on the findings of Ukrainian historians.
 
As is known, in this polemics the Ukrainian side does not deny the fact of an all-USSR famine in 1932-1933, but it speaks about something entirely different – the Holodomor in Ukraine, and it has enough facts to differentiate between the two phenomena. As for the attitude of Russia to this subject, we should react to the way it treats this ticklish question by way of third countries’ mediation.”

LINK: http://www.day.kiev.ua/203967/

The OSCE [Organization for Security and Co-operation in Europe] Parliamentary Assembly [PA]
Seventeenth Annual Session, Astana, Kazakhstan, June 29 – July 3, 2008
 
RESOLUTION ON THE HOLODOMOR OF 1932-1933 IN UKRAINE

1. Reiterating the crucial role of the OSCE in the promotion of human rights and values,

2. Reminding that parliamentary institutions play a decisive role in defining humanitarian policies and legislation and represent the will of the people of relevant countries,

3. Emphasizing that raising public awareness of humanitarian tragedies of our history is an important tool of restoring the dignity of victims through acknowledgment of their suffering and preventing similar catastrophes in the future,

4. Reminding the OSCE participating States of their commitment to “clearly and unequivocally condemn totalitarianism” (1990 Copenhagen Document),

5. Recalling that the rule of the totalitarian Stalinist regime in the former USSR had let to tremendous human rights violations depriving millions of people of their right to live,

6. Recalling also that crimes of the Stalinist regime have been already revealed and condemned and some still require both national and international recognition and unequivocal condemnation,

The OSCE Parliamentary Assembly:

7. Pays tribute to the innocent lives of millions of Ukrainians who perished during the Holodomor of 1932 and 1933 as a result of the mass starvation brought about by the cruel deliberate actions and policies of totalitarian Stalinist regime;

8. Welcomes the recognition of the Holodomor in the United Nations, by the United Nations Educational and Scientific Organization and by the national parliaments of a number of the OSCE participating States;

9. Endorses the Joint Statement of 31 OSCE participating States on the 75th anniversary of Holodomor of 1932 and 1933 in Ukraine, delivered at the 15th Meeting of the OSCE Ministerial Council;

10. Supports the initiative of Ukraine to reveal the full truth of this tragedy of Ukrainian people, in particular, through raising public awareness of the Holodomor at international and national levels, organizing the commemorations of the Holodomor as well as academic, expert and civil events aimed at discussing this issue;

11. Invites the parliamentarians of the OSCE Member States to participate in the events, commemorating the 75th anniversary of the Holodomor of 1932-1933 in Ukraine;

12. Strongly encourages all parliaments to adopt acts regarding recognition of the Holodomor.

 
Click on Read More then click on 2008 Astana Declaration available here in English
Go to page 45 and you will get the RESOLUTION ON THE HOLODOMOR OF 1932-1933 IN UKRAINE
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10. SERBYN: REGARDING RESOLUTION OF OSCE ON THE HOLODOMOR IN UKRAINE

Commentary: Professor Roman Serbyn, Montreal, Quebec, Canada, Thursday, July 3, 2008

From: Roman Serbyn
To: Orysia Tracz; Stefan Romaniw & Members of the International Holodomor Committee (IHC)
Sent: Thursday, July 03, 2008 1:28 PM
Subject: Re: OSCE Resolution

MONTREAL – OSCE RESOLUTION: This is not the full recognition of genocide that the Ukrainians want to hear. However it can be a step in the right direction if properly pursued. The substitution of Holodomor for Famine in the declaration is of great significance. The notion of “Famine” (even if called the Great Famine or man-made famine) was too limitative, the Holodomor is more open-ended.

 
GENOCIDE AGAINST THE UKRAINIANS
However, it should NOT be treated as only a more monstrous Holod, but a more encompassing catastrophe of which HOLOD was the main part in terms of human lives lost but not the only component of the GENOCIDE AGAINST THE UKRAINIANS.
 
In this sense, THE HOLODOMOR must be seen in the same way that THE HOLOCAUST is conceived: a genocide against a ethno/national group, in one case the Jews and in the other case the Ukrainians. This means treating as part of the genocidaires’ target and as part of the genocide victims.

[1] ALL the Ukrainians that were killed during the genocide not only by forced starvation but by other means (execution, exposure, etc) from among the other sectors of Ukrainian population (intellectuals, liberal professions, workers).

[2] Secondly, the whole Ukrainian population under the rule of Stalin’s communist regime (including the 8 million ethnic Ukrainians in Kuban’ and elsewhere in the RSFSR) must be included in this notion of victims of Holodomor. 

Until Ukrainian scholars, Ukrainian politicians and the Ukrainian community in general begins to view and speak about the Holodomor in these terms (which then fit into the UN Convention and its definition of genocide), we shall not be able to convince the world academic community and the politicians on the highest echelons of power that Ukraine had been victim of a genocide.

Ukraine must start speaking about the Ukrainians in the RSFSR, who were 8 million according to the census of 1926 but were reduced to 4 million by the census of 1937.

In this sense, the most interesting articles of this OSCE resolution are points 9 to 12:

10. Supports the initiative of Ukraine to reveal the full truth of this tragedy of Ukrainian people, in particular, through raising public awareness of the Holodomor at international and national levels, organizing the commemorations of the Holodomor as well as academic, expert and civil events aimed at discussing this issue;

The Ukrainian people in 1932-1933 included the 8 million Ukrainians in the RSFSR, and the whole truth cannot be revealed by leaving them out of the tragic picture.

 
WE MUST RECONCEPTUALIZE THE CONCEPT OF THE HOLODOMOR
Ukrainian academics must RECONCEPTUALIZE the Holodomor to include:
 
a) Ukrainian victims of the RSFSR, and
 
b) the other sectors of the Ukrainian society of those years who became victims of the Soviet  regime  by other means of destruction than starvation.

11. Invites the parliamentarians of the OSCE Member States to participate in the events, commemorating the 75th anniversary of the Holodomor of 1932-1933 in Ukraine;

In these commemorations Holodomor must be presented as an all encompassing genocide. If Ukraine cannot speak openly about the all encompassing Holodomor on its own turf, then where can it do so?

12. Strongly encourages all parliaments to adopt acts regarding recognition of the Holodomor.

The lobbying of parliaments to adopt such acts is an excellent opportunity to educate, first of all the Ukrainian community (most people have very vague knowledge about the famine, and almost none about the rest of the genocide. The Act passed by the Canadian Parliament can serve as a model, but it can be improved upon.

The door has been opened just a little more, will we be able to take advantage of this opportunity to push it still wider?

 
AUR FOOTNOTE: Roman Serbyn, is a leading and well known Canadian professor, scholar, researcher, author (Universite du Quebec a Montreal).  He is one of the world’s foremost authorities on the history of Soviet Ukraine from 1920 through 1939. He is the editor with Bohdan Krawchenko of a book entitled “Famine in Ukraine 1932-1933” published by the Canadian Institute of Ukrainian Studies, University of Alberta, Edmonton, 1986.  He is the author of the book “The Famine of 1921-1923 [Ukraine] and the Canadian Press in Canada.”  The book was published in Ukrainian by the Ukrainian Canadian Research and Documentation Centre, Toronto, 1995. 
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11.  EX-SOVIET LEADER CRITICIZES UKRAINE FOR CALLING FAMINE GENOCIDE 

Interfax, Moscow, Russia, Wednesday, June 4, 2008

MOSCOW – The former Soviet president, Mikhail Gorbachev, has said that the attempts of Ukrainian politicians to qualify the famine of the 1930s as the genocide of Ukrainian people are politically motivated.

“I think there are certain political accents here,” Gorbachev said today at a news conference held at the Interfax news agency. In particular, he emphasized that the famine affected not only Ukraine but other Soviet regions, too.

“What was the famine of the 1930s? It was on the south of Russia. I will tell you that 40 per cent of population in my native village of Privolnoye (Stavropol Territory) perished. Three of six children of my paternal grandfather died of hunger,” Gorbachev said. He said that the famine was caused by severe draught and collectivization.

The head of the Memorial society, Arseniy Roginskiy, held a similar opinion. “Memorial’s position is very simple. It was a series of terrible crimes. But the concept of genocide seems to us somewhat inaccurate,” Roginskiy said.
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12.  UKRAINE IRKS RUSSIA WITH PUSH TO MARK STALIN FAMINE AS GENOCIDE

By Daryna Krasnolutska & Halia Pavliva, Bloomberg, Kyiv, Ukraine, New York, NY, Fri, Jan 4, 2008 

Maksym Kravets remembers watching hunger kill his father, then his mother.

Kravets, who was 14 when famine struck Ukraine in 1932, says he survived by eating a dog. About a third of the 1,000 people in his village, Lozova, perished as Soviet leader Josef Stalin cut off food supplies to force peasants onto collective farms.
“A special group of people was in the village taking away all the food we had,” says Kravets, now 89, sitting in his kitchen in Kamyanets-Podilsky, 300 kilometers (186 miles) from where he almost starved to death. “There were cases when people ate their dead children and parents.”
The yearlong famine, which killed at least 7 million people, is now the focus of books, exhibitions and documentaries marking the 75th anniversary.
 
Ukraine’s government is asking the United Nations to recognize the disaster as an act of genocide, worsening already frosty relations with Russia, which says the famine resulted from drought.
 
Russian nationalists vandalized an exhibit at the Ukrainian embassy in Moscow in November. While the Russian government didn’t condone the attack, it called Ukraine’s depiction of the famine a “one-sided falsification of history.”
“It’s completely impossible to treat it as genocide,” says Dmitry Peskov, spokesman for Russian President Vladimir Putin. “What happened there happened not only in Ukraine but in many parts of the former Soviet Union.”
STATE OF DENIAL 
Ukraine’s famine was kept out of official history until 1991, when the country of 47 million won independence. It is recognized as genocide by countries including the U.S.
“Russian society is, broadly speaking, still in a state of denial about the crimes of the communist past,” says Robin Shepherd, a senior research fellow at the Royal Institute of International Affairs at Chatham House in London. Putin and his government see the drive to label the famine genocide as “an insult to Russian pride.”
Ukraine didn’t do much to put the famine on the historical map until the pro-European Union President Viktor Yushchenko took power in the 2004 Orange Revolution. Ukraine commemorated the victims for the first time two years ago.
Yushchenko now plans to make it an offence to deny the famine was an act of genocide. Violators would be subject to as much as two years in jail and a fine of 5,100 hryvnia ($1,020). The move would mirror Germany, where it’s a crime to deny the Holocaust.
POLITICAL BATTLE 
Communist Party leader Petro Simonenko says Yuschenko is “stirring up hatred” as Ukrainian and ethnic Russian politicians battle for control of the government.
Putin openly supported the pro-Russian candidate in the 2004 presidential election before the result was overturned as rigged by a Ukrainian court. Russia is opposed to the policies of the Orange coalition now in government, which is seeking closer ties to the North Atlantic Treaty Organization and the EU.
The anniversary events started Nov. 24, when thousands of people gathered in Kiev and on the main squares of other cities.
“The main killer was the totalitarian communist regime,” Yushchenko told the crowd in the capital. “Fear is at the root of today’s political and social problems.”
In 1929, Stalin decreed that all agricultural workers had to join collective farms, bringing with them their livestock and tools. They were to plant and harvest together, so that the state could ship food to industrial areas. Some farmers resisted leaving their land, and many were sent to labor camps. Those who remained risked death from starvation.
GRAIN SEIZED 
Across the Soviet Union, more than 10 million people died from hunger during the collectivization drive, according to research by historian Robert Conquest. The majority of the deaths were in Ukraine, the second most populous republic in the Soviet Union and the largest grain producer after Russia.
Stalin wrote in August 1932 to one of his politburo members expressing concern that Ukraine wasn’t complying and must be forced into submission. “If we don’t fix the situation in Ukraine immediately, we may lose Ukraine,” he wrote. The letter was published by Russia’s Nezavisimaya Gazeta in 2000.
While the harvest was poor because of drought, as much as half of the grain was shipped out, says Vasyl Marochko, head of the Center for Ukrainian Genocide Studies in Kiev.
“The 1932 harvest was swept away completely,” says Halyna Mendzyak, who was 9 and lived in Mynkivtsi, western Ukraine. “When they put it in rail wagons, an orchestra was playing with slogans like `Let’s give all grain to our state!”’
Kravets says peasants in his area refused five orders to collectivize their farms in the years before the famine began. His parents finally went to work on a state farm in 1932, leaving him alone in their house.
When two aunts came to his parents’ home to check for survivors, they found only his emaciated body. Kravets recalls hearing them say he wouldn’t last the night before they walked away, leaving the door ajar.
“A dog then entered and started to lick me, so I got up very slowly, tied him to a bed with a towel and then took an axe and killed him,” he says. “I still can’t understand where I got the energy. I was eating that dog for several days.”
To contact the reporter on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; ; Halia Pavliva in New York at hpavliva@bloomberg.net
 
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13.  RUSSIA: 1930’S FAMINE MAINLY IN SOVIET UKRAINE WAS NOT GENOCIDE 

By Steve Gutterman, Associated Press Writer, AP, Moscow, Russia, April 2, 2008

 
MOSCOW – The 1930s famine that killed millions of peasants, mainly in Soviet Ukraine, should not be considered genocide, Russia’s lawmakers said in a resolution Wednesday.
Renowned writer and Soviet-era dissident Alexander Solzhenitsyn backed the Kremlin line on the divisive issue, dismissing Ukrainian claims that the famine was genocide as a “fable.”
The 370-56 vote in Russia’s lower parliament house and the rare comment from the 89-year-old Solzhenitsyn were a pointed rejection of claims by Ukrainian leaders that the Soviet authorities engineered the famine to target Ukrainians.
They came amid Russian anger over the pro-Western Ukrainian leadership’s drive to join NATO, which will decide at a summit this week whether to grant the nation a road map for membership.
Russia has opposed the Western alliance’s eastward expansion and is particularly concerned about potential membership for Ukraine, a large country with far closer cultural and historical ties to Russia than any other that has joined NATO.
Historians agree that the 1932-33 famine was engineered by Soviet authorities under dictator Josef Stalin to force peasants to give up their private plots of land and join collective farms.
Ukraine, with its rich farmlands, suffered the most. Authorities confiscated grain from village after village and prohibited residents from leaving, effectively condemning them to starvation.
Some are convinced the famine targeted Ukrainians as an ethnic group. Others argue authorities set out to eradicate private landowners as a social class and say the Soviet Union sought to pay for its rapid industrialization with grain exports at the expense of starving millions of its own people.
“There is no historical proof that the famine was organized along ethnic lines. Its victims were million of citizens of the Soviet Union, representing different peoples and nationalities living largely in agricultural areas of the country,” the Russian State Duma resolution said.
Ukrainian President Viktor Yushchenko is leading a bid to gain international recognition of the famine as an act of genocide.
Solzhenitsyn criticized that effort in a front-page comment in the daily Izvestia, writing that the famine also affected Russia’s neighboring Kuban region.
“This provocateur’s cry of ‘genocide’ began to germinate decades later — first secretly, in the moldy minds of chauvinists maliciously set against (Russia), and now elevated to government circles of today’s Ukraine,” he wrote.
Solzhenitsyn suggested the Ukrainian appeal might be supported by Western governments for geopolitical purposes. “They have never understood our history, all they need is a ready fable, even if it is an insane one,” he wrote.
In Ukraine on Tuesday to stress U.S. support for its leaders’ NATO aspirations, President Bush visited a memorial honoring famine victims along with Yushchenko and their wives.
A document signed during Bush’s visit said that “Ukraine and the United States will closely cooperate to promote remembrance and increase public awareness of the 1932-33 man-made Great Famine (Holodomor) in Ukraine, including within the framework of the international organizations.” Holodomor, or death by hunger, is what Ukrainians call the famine.
The Duma warned the West to stay away from the issue. “This tragedy does not have — and cannot have — any internationally recognized indications of genocide and should not be used as a tool for modern political speculation,” it said.
President Vladimir Putin’s government has clashed with former Soviet bloc nations over interpretations of 20th century events, accusing them of seeking to rewrite history and cast Moscow as a culprit.
Yushchenko has said up to 10 million Ukrainians died of hunger in 1932 and 1933. Stanislav Kulchitsky, a respected Ukrainian historian, believes the number is closer to 3.5 million.
Under Stalin, who ruled from 1922 until his death in 1953, some 20 million people are estimated to have been executed, imprisoned or deported to other parts of the former Soviet Union under Stalin, and more than 10 million of those are believed to have died. [Associated Press writer Mike Eckel contributed to this report.]
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14.  VLAD AND THE SPINMEISTER: THE ABC’S OF HOLODOMOR DENIAL 

 
ANALYSIS & COMMENTARY: By Peter Borisow
Kyiv Post newspaper, Kyiv, Ukraine, July 16, 2008
The Ukrainian Weekly newspaper, Parsippany, NJ, Sunday, August 17, 2008
 
By 2003 the movement for Holodomor recognition has gathered enough steam to draw serious attention from non-Ukrainian quarters.  Walter Duranty’s Pulitzer was a major issue: Important exhibits and major conferences were held from Columbia to UCLA. 
 
Ukrainians were beginning to gain momentum and ambitions plans were laid for 2008, the Holodomor’s 75th anniversary.  With few exceptions, the big bang everyone expected for 2008 has turned out to be a whimper. The torch came and went without notice; the conferences have been at significantly lesser venues; there is no memorial in Kyiv or anywhere else.  What happened?
 
I submit that this year’s failure to meet many Ukrainians’ expectations and promises is neither the result of Ukrainian incompetence nor the result of the world’s general lack of interest.  I submit it is the result of a campaign by those behind the Holodomor in the first place to dull, divert, diminish and extinguish Ukrainian efforts. 
 
I suggest the anti-Holodomor efforts may have been hatched in discussions such as an exchange of fictional letters along the following lines.  And, of course, as they say, any resemblance to any person living or dead is purely coincidental.  However, if the shoe fits……… [Peter Borisow]
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December, 2004
My Dear Dr. Spinmeister,
Last year we had a close call with this Holodomor business. These pesky Ukrainians have started to get some serious attention and almost got our beloved Duranty’s Pulitzer Prize revoked. We must make sure this momentum does not bring serious consequences in 2008 when they will try to push even harder on their 75th “Anniversary.”
Can you imagine what would happen if these Ukrainians actually managed to convince the world the Holodomor was Genocide? Even if it is all blamed on the USSR and the Party, we are still the Successor State. When the USSR fell apart, we took all the assets. Someone is bound to say we should take the liabilities as well. And, look at me – I’m KGB, successor to the NKVD that did the dirty work! Can you imagine Nuremburg trials for senior Party members?
We could even be held accountable in some crazy civilian court in the USA or Europe! I’ll be damned if I’m going to send my petrodollars to some Ukrainian Victims and Survivors’ Fund! We need to bring Ukraine back into the Russian Empire, not finance its independence! Without Ukraine there is no Empire anyway! What can we do to make sure this Holodomor stuff doesn’t mess up all our futures?
Yours faithfully,
Vladimyr Volodymirovich
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Moscow
January, 2005
My Dear Vladimyr Volodymirovich,
We need not fret too much. This is a rather straightforward matter which we can handle with existing resources. After all – History is written by the Victors – and we, or I should say, our dear Comrade Stalin, did win the Great War! If Hitler had won the war, who would have ever heard of the Holocaust? The advantage is ours. Here’s what we need to do:
A frontal assault denying the genocide will NOT work. It may, in fact, backfire as the core sentimentality of the public will always bond with the image of starving babies. Rather than challenge that sentimentality, we must redirect it – away from Ukrainians. This is best done by first diluting the issues with small steps – like water constantly dripping on a rock; it will eventually wear a hole in the rock and allow us to crack it. It will be death to the Holodomor by a thousand little cuts.
Holodomor Dilution is prerequisite to Holodomor Denial. It starts with questioning the basic facts. When enough doubts are raised about the details, we can put it all to rest.
1) Challenge the numbers. Let them count the sculls! It’s a fool’s errand as the numbers can not be proven mathematically for any genocide. The nature of the beast is such that it destroys its own evidence. We’ve had 75 years to “correct” the records. We can debate any number! Whatever the number, we will water it down. The more times we water it down, the less credibility they will have. For us, this is a perfect debate.
2) Challenge the victims. We must claim this was at a time of great social upheaval. We were making history’s greatest omelet! Of course, we broke eggs! And, we suffered as much as these Ukrainians did, maybe more! Talk about Kuban – lots of victims there and it’s in Russia!! Who will know they were almost all Ukrainians? And, if the Ukrainians say that, deny, deny, deny!
 
Insist this was Russia and they were Russians! Remember, after we killed off the Ukrainians, we repopulated entire regions of Eastern and Central Ukraine with our own loyal Russians. Point to the children of these Russian brothers still living in Ukraine. Proclaim loudly “they are the real Ukrainians!” Complain how they suffer to this day under Ukrainian rule!
3) Challenge the “genocide.” Demand they prove it technically beyond a shadow of a doubt. Debate the details of that UN definition. The more we debate the details, the more we can wrap them up in their own underwear! Keep talking about collectivization. Keep talking about tragic errors by bureaucrats, incompetent administrators, bad commissars – anything but the “G” word.
4) Always talk about the “Famine” – Even better, the “Great Famine.” Keep talking about Russian and Soviet victims of a whole series of “famines.” Talk about “famine” in Kazakhstan (who will care it was a year later and 5,000 miles away?)
 
Surround Holodomor with other “famines,” other “human tragedies.” When people hear the word “famine,” they think of drought and locust, not genocide. They think Ethiopia, not Auschwitz. For us, “artificial famine” and “famine genocide” are wonderfully confusing terms. Leave it to the Ukrainians to give us some of our best weapons against them!
5) Join in, cosponsor, co-opt resolutions at the United Nations and other international bodies, civic organizations, etc., to remember the events in Ukraine as a “tragedy,” always insisting on watering down with other nationalities. Always make sure the “G” word is never used. We all know once a mealy mouthed resolution is passed, it is virtually impossible to change it later. No one likes to redo old business. Once it’s done, it’s done. The Ukrainians will be so eager to get something, even anything, done they will go along. Later, we will ram it down their throats.
6) We have considerable weight in international forums, even in the U.S. Congress, especially with the lobbyists we’ve hired with our newly found oil wealth. We must use this to make sure no one offends the Great Russian People. Having suffered themselves in the Great War and the “Great Famine Tragedy,” the Great Russian People are sympathetic to All its victims. Let’s get that sympathy working for us.
7) Invite (or challenge) them to “scholarly” and “scientific” conferences of “experts.” We still have lots of our old fellow travelers (or their progeny) in influential places, especially in Western universities and “think tanks” (see, I told you that would be a good investment!) They will keep these Ukrainians debating how many devils can dance on the head of a pin until doomsday! We don’t need to prove anything. As long as we keep them debating, they have proven nothing!
8) These Ukrainians are such polite little lambs, like wide-eyed little children, so eager to prove their case. Let’s just hope no one tells them some things are simply not debatable. The Jewish community would never allow Alfred R. Butz or exNazis to speak about the Holocaust! But Ukrainians will allow any Communist or Ukrainian hating Holodomor denier a forum – Even Us!
9) Co-opt some of their “experts” and “scholars.” This is a lot easier than most people think. Start now by building relationships, especially with those in second tier universities out in the provinces. Tell them they are underappreciated geniuses. Invite them to speak at conferences.
 
They all have unpublished manuscripts. Tell them you will get their books published; you will get them tenure; even that coveted Chairman of the Department position. You will get the world to finally appreciate their real genius!
Then, here’s the pitch – “Gee, there’s just one problem. It’s this Holodomor bit. You’re just too radical on it and people aren’t comfortable with radical scholars. Yet, your work is such genius – maybe if you’d just tone down that Holodomor stuff a little – maybe use a more ‘realistic’ number? And, at the end of the day, are you that absolutely positive it was genocide? I mean, were you there? It was so long ago, who can really prove it?”
Before you know it they’ll be meow-meowing any tune you suggest. And, others will follow. And, here’s the best part – once they’re done, you’ll never have to publish any of their crap anyway!
10) Waste their resources on little things while blocking serious efforts. In Kyiv, there must be No Holodomor Memorial complex by 2008. Let them talk about monuments, but remember to make sure nothing ever stands taller than our Titanium Queen.
There must be no major Ukrainian movie on Holodomor. You never know, it might just catch on. Look what Anne Frank did for the Holocaust! We can’t have anything like that! There must be Nothing that can really catch the imagination of the world.
We have enough agents of influence in Ukraine and in the Diaspora to channel this. In Ukraine, make sure there’s no State funding and keep reminding their Oligarchs that WE are their business partners. Keep them busy chasing their own tails within their own little circles.
 
In the Diaspora, let them waste their time and money on chasing monuments no one will see anyway. Let them sing in the showers! Never let them near a stage. Make sure nothing happens that can impact on the real world.
11) Use our influence on media in Ukraine to block out news and programs about the Holodomor. Counterprogram — put Holodomor stuff on little watched channels, at odd times in the middle of the night, etc.
 
Start complaining this Holodomor stuff is getting wearisome, that it’s anti-Russian propaganda by fascists, traitors, enemies, etc. “Enough already with this Holodomor stuff – this is starting to sound like a broken record! It’s all nonsense anyway!”
12) Use our influence on media in the West to block out news and programs about the Holodomor. Counterprogram with stuff on other genocides. Call for more programming on the Holocaust – a “real” genocide! Pressure the television and news executives that this Holodomor stuff is not proven, that it’s anti-Russian propaganda, hate mongering legends.
 
Promote stories of anti-Semitism in Ukraine instead. Most U.S television is owned by corporations. Remind them of Russian wealth and influence, the importance of the Russian market for their programs and movies. Do they really want to insult all these innocent people, offend this huge emerging market?
13) Drag out those documents we forged in the 50s with the East Germans about collaboration between Ukrainians and Germans during the war – the stories we invented about how they turned our Jewish friends over to the Nazis. Keep talking about Ukrainian Nazi collaborators, over and over. We’ve been telling those lies for so long now that even I am starting to believe them!
 
No one will know the opposite is true, that the Ukrainians issued orders to protect Jewish people from the Nazi! Even if the Ukrainians figure out our documents are forged lies, by the time they get their act together to tell the world about it, the debate will be over. What a brilliant idea that was! What a great way to shift blame from the perpetrators to the victims!
14) Remember that kid’s finger your grandfather cut off and tossed into the sausage machine? It became more ubiquitous than Kilroy! Remember the photographs of “cannibals” they staged for the press? Always talk about cannibalism. How can cannibals be “victims” of anything? Who would ever feel sorry for a cannibal? The more we talk about cannibalism, the less sympathy they get from all those dead babies. Always attack the victims, make them the guilty ones!
15) Let’s find some naive Ukrainian pups (or some of our own) out there to promote a “Truth and Reconciliation Commission” on Holodomor. This will channel Ukrainian energies into a dead end. They will talk their hearts out into a void no one will remember. We will control the “genocide” bit and focus on little individual tragedies.
 
The world doesn’t really want to deal with genocide any more. After Cambodia, Rwanda, Darfur, the sticker shock of genocide is gone. This will put it all into an easy little box no one will have to look into anymore. For us, it will be contained, harmless and over. The world will never miss it.
Look at South Africa – all “Truth and Reconciliation” did was white wash the guilty in exchange for “confessions.” Can you imagine if Nuremburg had been a “Truth and Reconciliation Commission”? Why, we’d be having drinks on the terrace with old Adolf at his villa in Versailles! I can live with that!!
So, here we have it – It wasn’t that many; we all suffered; it wasn’t genocide; no one is really sure what happened – they can’t even agree among themselves! Waste their time and resources. Frustrate their best efforts. They’re such bad people any way, maybe they even did it to themselves!
 
If need be, let’s embrace them to help them “find the truth.” We suffered too! Let’s work together, let’s reconcile and all live together happily ever after. Let’s put a positive future on all this. Enough of the negative past!!
We have the best propaganda machine in the world. We sold “Communism” to half the planet! Only that damned Coca-Cola has done better! Ukrainians aren’t like Jews or Armenians. Those people will never forget and will never let anyone else forget. In time, Ukrainians will get over it. They don’t really like these unpleasant things anyway.
 
They really will be happiest back in the Russian Empire. It’s always been their place. They need to feel the master’s hand on their leash as it tightens around their necks! And, if they’re obedient, we will reward them, just like in the old days!
Trust me. We can do this.
Your faithful servant,
Herman V. Spinmeister et al
New York, Londongrad and St. Leningrad
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FOOTNOTE: Peter Borisow is president of the Hollywood Trident Foundation and a member of the board of directors of the Center for U.S. Ukrainian Relations. Borisow’s business is film finance risk management. He travels frequently to Ukraine to advise the film sector as well as to support Ukrainian identify and independence.  His interest in Holodomor came from his parents, both of whom were Holodomor survivors.  He says his mantra is straightforward: “Holodomor – Genocide – 10 million killed.”
 
LINKS: Kyiv Post: http://www.kyivpost.com/opinion/29260; The Ukrainian Weekly, Ukrainian National Association, Parsippany, NY.  Editor-in-chief: Roma Hadzewycz.  The Ukrainian Weekly archive: www.ukrweekly.com
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15.  HOLODOMOR: REFLECTIONS ON THE GREAT FAMINE OF 1932-1933 IN SOVIET UKRAINE
New book edited by Lubomyr Luciuk: A series of essays by leading scholars and
journalists on the causes and consequences of the Great Famine of 1932-33 in Soviet Ukraine.

Morgan Williams, Publisher and Editor, Action Ukraine Report (AUR)
Washington, D.C., Sunday, September 21, 2008

WASHINGTON, D.C. – Lubomyr Luciuk, a leading scholar, researcher, analyst, and author, who is professor of political geography at The Royal Military College of Canada in Kingston, has edited a new book entitled “Holodomor: Reflections on the Great Famine of 1932-1933 in Soviet Ukraine.” The book is a series of essays by leading scholars and journalists on the causes and consequences of the Great Famine of 1932-33 in Soviet Ukraine.

 
The anticipated publication date is October 31, 2008. Information about ordering the new book edited by Professor Luciuk:

Please send me ___ copy(ies) of “Holodomor: Reflections on the Great Famine of 1932-1933 in Soviet Ukraine” (Kashtan Press, 2008) at $45 per copy, plus $10 Shipping and Handling. The anticipated publication date is 31 October 2008. I enclose a cheque or money order made payable to “The Kashtan Press” in the amount of $_________.

Name (please print), Address, Street, City, State/Province, Country, Postal Code/Zip Code; Telephone Number. Please mail this completed form to: The Kashtan Press, 849 Wartman Avenue, Kingston, Ontario, Canada, K7M 2Y6. Thank you for your order.

 
AUR FOOTNOTE:  Lubomyr Luciuk is the editor of the book “Not Worthy, Walter Duranty’s Pulitzer Prize and The New York Times,” published for the Ukrainian Canadian Civil Liberties Association by The Kashtan Press in 2004. 
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16.  HOLODOMOR: THE UKRAINIAN GENOCIDE 1932-1933
New issue of the Canadian American Slavic Studies Journal, Fall 2008
 
Morgan Williams, Publisher and Editor, Action Ukraine Report (AUR)

Washington, D.C., Sunday, September 21, 2008

WASHINGTON, D.C.- Charles Schlacks, Jr., publisher, Canadian America Slavic Studies journal, is preparing a special new issue of the journal, Vol. 42, No. 3, Fall 2008, in honor of the 75th commemoration of the Ukrainian genocide of 1932-1933. The new edition is entitled “Holodomor: The Ukrainian Genocide, 1932-1933.” 

 
The publication will contain articles and documents by scholars in Ukraine, Poland, Australia, Canada and the USA. The guest editor is Roman Serbyn, a leading and well known Canadian professor, scholar, researcher, author (Universite du Quebec a Montreal).  Publication date is scheduled for mid-October, 2008.
 
TABLE OF CONTENTS: CANADIAN AMERICAN SLAVIC STUDIES JOURNAL, FALL 2008
Yurij Shapoval. “Foreign Diplomats on the Famine in Ukraine”;
Heorhii Papakin. “‘Blacklists’ as a Tool of the Soviet Genocide in Ukraine”;
Hennadii Yefimenko. “The Soviet Nationalities Policy Change of 1933, or Why ‘Ukrainian Nationalism’ Became the Main Threat to Stalin in Ukraine”;
Mykola Riabchuk. A review article about David Marples. Heroes and Villains: Creating National History in Ukraine (2007);
Rafael Lemkin. “Soviet Genocide in Ukraine” (with an introduction by Roman Serbyn);
Robert Kusnierz. “The Question of the Great Famine in Ukraine of 1932-1933 in Polish Diplomatic and Intelligence Reports”;
Siriol Colley. “A Curtain of Silence: An Essay of Comparison”;
Lesa Morgan. An article about Western Australian studies of memories of people in Ukraine in the 1930s;
Cheryl Madden. An article about disease in Ukraine in the 1930s;
Peter Borisow. Interviews of Ukrainians who lived in Ukraine in the 1930s, and stills from his documentary film about Kravchenko.
Morgan Williams. Holodomor: Through The Eyes Of Ukrainian Artists;
Some documents with translations of leaders’ letters and orders of 1932-1933 (Stalin, Kaganovich, Molotov).
Some of articles were translated by Marta Olynyk in Montreal.
The Guest Editor is Roman Serbyn, Universite du Quebec a Montreal.
 
TO ORDER THE NEW EDITION OF THE JOURNAL:
Copies of this special “Holodomor” edition of the Canadian American Slavic Studies Journal (Fall, 2008) are available for purchase by the general public.
Please send in your order as soon as possible as the number ordered in advance will determine the number to be published.
 
The price is $20.00 each plus $10 shipping and handling (U.S. dollars). Appropriate additional shipping costs should be added for multiple orders. Orders by post should be sent to Charles Schlacks, P.O. Box 1256, Idyllwild, CA 92549-1256, USA. Orders can be sent by e-mail.  They should be sent to Charles Schlacks at Schlacks.Slavic@Greencafe.com.  Journal will be available in mid-October, 2008.  If you have any questions please contact Charles Schlacks.
 
AUR FOOTNOTE:  The Fall 2003 edition of the Canadian American Slavic Studies, published by Charles Schlacks, was also a special edition entitled, “Holodmor, The Ukrainian Genocide 1932-1933.
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17.  UKRAINE: NEW BOOK BY THE LATE NOTED HISTORIAN JAMES MACE 

Collection of scholarly and journalistic works entitled “Your Dead Choose Me”
 
By Olha Risheltylova, The Day Weekly Digest, Kyiv, Ukraine, Tue, Sep 16, 2008

LVIV – At the ceremony to launch the book James Mace: “Your Dead Chose Me,” held during the 15th Lviv Forum of Publishers, the American scholar’s widow, Natalia Dziubenko-Mace, said her husband was eager to publish this book in Uk­raine.

 
“Unfortunately, I am the one who is launching it, and he is gone. But I think this is James’s second arrival in Ukraine – through these books, his work, his colleagues, through the fact that he has finally reached your hearts and minds.”
The Lviv launch is the first in a series taking place in many cities of Ukraine, timed to coincide with the 75th anniversary of the 1932-1933 Holodomor.
 
The Day has already reported that the 670-page book is the first collection of scholarly and journalistic works about the Holodomor and lingering sociopolitical issues by James Mace, the renowned US academic and researcher of the Ukrainian Holodomor. According to Mace’s widow, however, this is not a complete collection of the author’s immense legacy.
The Day is planning to have the book translated into several languages, and government agencies and NGOs in every region of Uk­raine have already placed orders for it.
 
During the launch it was correctly noted that publications about the Holodomor are no longer a novelty. The situation was different in the 1990s, when few people wanted to know about the Great Famine. In his articles for The Day, Mace was the first to blaze a trail with his research on this tragic page in Ukraine’s history.
Mace was well known in Lviv, the city where his widow was born and which the couple frequently visited. Many of Mace’s colleagues from this western Ukrainian city attended the launch.
 
Among them was Oleh Romanchuk, the writer and editor of the journal Universum, the well-known Lviv entrepreneur Oleksandr Dziubenko, the writers Yaroslav Pavliuk, Yurii Hurhula, and Vitalii Protsyk, who is researching the period of Soviet repressions.
Stanislav KULCHYTSKY, historian and author of the book:
“As an historian, James ap­proached research problems from a historical viewpoint. This was interesting and convincing. This book now contains his total legacy. The publication was funded by The Day, which sells these books but, more often than not, gives them away to interested organizations. I hope this book comes out in English.
“In his report on the Holodomor to the US Congress, Mace said, ‘The use of food as a political weapon by despotic regimes is not a thing of the past.’ When he was trying to persuade the world to recognize the Holodomor, he meant that this was a lesson for Ukraine. This lesson is also useful for Russia, Venezuela, and other countries.
 
Unfortunately, the 4th session of the UN General Assembly postponed the question of the Ukrainian Holodomor for one year. And although there will be no round date to time this question to, we will do our utmost to tell the world about what happened in Ukraine in the winter of 1932-1933. We will be able to do so thanks to this collection of political articles that James Mace contributed to The Day.”
Petro KRALIUK, professor and pro-rector, National University of Ostroh Academy:
“We have a lot of phony Heroes of Ukraine now, while the man who is truly a hero of Ukraine was not awarded this title, much to our regret. When we talk about James Mace, I remember the 1990s. Ukraine was in a deep crisis and nobody knew if we would ride it out. An American arrived in Ukraine, settled here, and began working for the benefit of our country. It is a shame that we failed to raise the problem of the Holodomor.
 
The first to study it was a person of non-Ukrainian parentage. Thanks to Mace, the subject of the Holodomor began to be discussed in the media and became a subject of research. To most Ukrainians at the time this was nonsense. The truth is that even today many of our compatriots do not accept the fact that the Holodomor took place. Ukraine was Mace’s life, and this book is our modest tribute to a true Hero of Ukraine.”
Oleksandr DZIUBENKO, close friend of James Mace:
“As long as the Soviet Union existed, the Americans were interested in studying the Holodomor. Once the USSR broke up, the US no longer needed Mace’s research. James was not a rich man; he came to Ukraine with very limited finances. But he brought his knowledge of the Holo­do­mor. To our bureaucrats, James was like a pesky fly. He persistently published articles on the Holodomor.
 
I clearly remember how many parliamentarians became indignant about his articles. It is primarily his doing that the Holodomor has been recognized in Ukraine. Restoring our historical memory is what unites Ukrainians. Mace worked on this topic in the US and he continued to work on it in Ukraine. It was his life’s vocation.”
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18.  LAW OF UKRAINE No.376-V “ON HOLODOMOR IN UKRAINE IN 1932-1933”
 
Parliament of Ukraine, Verkhovna Rada, Nov 28, 2006, Kyiv, Ukraine
English translation by Action Ukraine Report (AUR), Washington D.C., Sep 21, 2008
 
THE LAW OF UKRAINE No.376-V “ON HOLODOMOR IN UKRAINE IN 1932-1933”
Verkhovna Rada rules:

– commemorating millions of Ukrainians who fell victims to the Holodomor in 1932-1933 and its consequences;

– commemorating the sufferings of people who survived this terrible tragedy in the history of the Ukrainian nation;

– being aware of the moral duty towards the past and future generations of Ukrainians and recognizing the need to restore historical justice and uproot
tolerance to any forms of violence;

– recognizing that the tragedy of the Holodomor in 1932-1933 in Ukraine has been officially denied by the Soviet authorities for many decades;

– condemning criminal deeds of the totalitarian regime in the USSR aimed at engineering the Holodomor and thereby killing millions of Ukrainians,
destroying the social base of the Ukrainian people, its age-long traditions, spiritual culture and ethnic identity;

– sympathizing with other peoples of the former USSR who suffered as the result of the Holodomor;

– highly appreciating the solidarity and support of the international community in denouncing the Holodomor of 1932-1933 in Ukraine which has been
reflected in declarations made by the parliaments of Australia, Republic of Argentina, Republic of Georgia, Republic of Estonia, Republic of Italy, Canada, Republic of Lithuania, Republic of Poland, the United States of America, Republic of Hungary as well as in the Joint Declaration on the 70th anniversary of the Holodomor – the Great Famine in Ukraine in 1932-1933 – which was released as an official document by the  58th session of the UN General Assembly and signed by Republic of Argentina, Republic of Azerbaijan, People’s Republic of Bangladesh, Republic of Belarus, Republic of Benin, Republic of Bosnia and Herzegovina, Republic of Guatemala, Republic of Georgia, Arab Republic of Egypt, Islamic Republic of Iran, Republic of Kazakhstan, Canada, State of Qatar, Republic of Kirghizia, State of Kuwait, Republic of Macedonia, Mongolia, Republic of Nauru, Kingdom of Nepal, United Arab Emirates, Islamic Republic of Pakistan, Republic of Peru, South African Republic, Republic of Korea, Republic of Moldavia, Russian Federation, Kingdom of Saudi Arabia, Syrian Arab Republic, United States of America, Republic of Sudan, Republic of Tadjikistan, Turkmenistan, Democratic Republic of Timor-Leshti, Republic of Uzbekistan, Ukraine, and Jamaica, as well as was supported by Australia, Israel, Republic of Serbia and Montenegro and by 25 member states of the European Union;

– proceeding from the recommendations taken in the wake of parliamentary debates on commemorating the Holodomor victims of 1932-1933 which were
approved by Verkhovna Rada resolution No. 607-IV of March 6, 2003 and the Appeal to the Ukrainian people by the participants of VR ad hoc session on
May 14, 2003 on commemorating the victims of the Holodomor which was endorsed by VR resolution No. 789-V of May 15, 2003 in which the Holodomor is recognized as an act of genocide against the Ukrainian people deliberately engineered by the totalitarian repressive Stalinist regime and aimed at massive killings of a part of the Ukrainian people and other peoples of the former Soviet Union;

– recognizing the Holodomor of 1932-1933 in Ukraine, pursuant to the Dec. 9, 1948 Convention on preventing genocide and imposing punishment for it as a
deliberate act of the massive murdering of people, Verkhovna Rada passes this Law.

Article 1. The Holodomor of 1932-1933 in Ukraine is genocide against the Ukrainian people.

Article 2. Public denial of the Holodomor of 1932-1933 in Ukraine is an outrage upon the memory of millions of victims of Holodomor, abasement of the dignity of the Ukrainian people and is, thereby, against the law.Article 3. Central and local governments are obliged within the scope of their authority:

–  to participate in mapping out and implementing the state policy aimed at restoring and preserving the national memory of the Ukrainian people;
–  to promote consolidation and development of the Ukrainian nation, its historical consciousness and culture as well as raise awareness about the Holodomor of 1932-1933 in Ukraine among the citizens of Ukraine and worldwide,
–  to ensure the study of the tragedy of the Holodomor in the educational institutions of Ukraine,
–  to take steps to keep alive the memory about Holodomor victims, specifically, to install monuments and commemoration plaques,
–  to ensure access to archive and other sources of information related to the Holodomor for research and public organizations, scholars, individuals who are involved in studying the Holodomor and its consequences.
Article 4. The Ukrainian government is to promote research and implementation of programs aimed at commemorating the victims of the Holodomor of 1932-1933 by launching an appropriate all-Ukrainian program for which funding must be earmarked in the state budget of Ukraine.

Article 5. Closing provisions.

1.  This Law comes into force on the day of publication.
 
2.  The Cabinet of Ministers of Ukraine is obliged:
1) to determine the status and functions of the Ukrainian Institute of the National Memory as an authorized central executive agency in the area of restoring and preserving the national memory of the Ukrainian people, and ensure its funding from the state budget;
 
2) within three months of this Law coming into force:
–  to submit to Verkhovna Rada proposals on harmonizing the Ukrainian legislation with this Law;
–  to ensure the revision and cancellation by the executive of the by-laws contradicting this Law;

3) jointly with the Kyiv city state administration to enact a resolution to erect a memorial to the victims of the Holodomor in Kyiv by the 75th anniversary of the Famine.

President of Ukraine Viktor Yushchenko
November 28, 2006
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19.  THE UKRAINIAN ‘GENOCIDE BY STARVATION’ ‘

An orphan in Kiev in 1934. Her parents had died of starvation and she survived on charity from a neighbour
Tony Halpin in Kiev, The Times, London, UK, Sunday, June 22, 2008
KIEV – Grigori Garaschenko remembers seeing his classmates starve slowly to death in a famine that killed millions of people in Ukraine. A neighbour driven mad by hunger killed her six-year-old daughter and began to eat her, he said, after Soviet soldiers confiscated all the food in their village during house-to-house searches.
Mr Garaschenko, 89, is one of the few remaining survivors of the famine of 1932-33. Now, 75 years on, Ukraine wants the world to recognise that what it calls the Holodomor was a deliberate act of genocide by Stalin’s Soviet Union.
It is a campaign that infuriates modern Russia. Moscow argues that there was no such crime because Russians and other nationalities also starved under Stalin’s policy of turning peasant farms into large state-run collectives. 
 
The Institute of National Memory, the Ukrainian body responsible for researching the Holodomor, calculates that three million people died in the months after Stalin punished the collective farms for failing to meet grain production targets in 1932. Soviet troops confiscated the harvest and all the food in villagers’ homes.
Igor Yukhnovsky, the director of the institute, told The Times that as many as nine million may have died as a result of the famine and its aftermath. Stalin’s intention, he said, was to break Ukraine’s national identity.
 
“The land gives birth to the nation. During the Holodomor, the nation was destroyed, and this was the basic purpose,” Mr Yukhnovsky, 82, said. “Now that Ukraine has restored its statehood, the first thing we must do is restore our history.”
 
He said that preparations would begin next week for a judicial inquiry to establish who was guilty of implementing the Holodomor. He said the institute had received government approval to conduct the investigation, based in part on Soviet-era archives.
“We must know the names of the people in authority who were in charge of this criminal enterprise. They must be convicted. Of course, a lot of these people are already dead or too old, but they must have sentence passed so that their descendants can be freed from guilt,” Mr Yukhnovsky said.
The institute is also overseeing the construction of a memorial complex in Kiev as part of commemorations to mark the 75th anniversary of the Holodomor in November.
Its campaign to name the guilty men is likely to exacerbate tensions with Russia, which does not deny that millions died, but insists that the famine was not a weapon aimed only at Ukrainians.
The Russian parliament, the Duma, passed a resolution in April rejecting claims that the famine “was organised along ethnic lines”, and warning Ukraine against using the tragedy as “a tool for modern political speculation”. Alexander Solzhenitsyn was equally vociferous, condemning the “provocateur’s cry of ‘genocide'” in a newspaper article.
Discussion of the Holodomor was taboo in Soviet times. But the Ukrainian parliament backed a declaration put forward by President Yushchenko in 2006 that the famine was genocide, rejecting an attempt by pro-Russian deputies to characterise it simply as a “tragedy”.
 
Mr Garaschenko remembers helping to bury the dead and says that he survived only because a teacher managed to obtain tiny rations of bread for children who attended school. The teacher was later shot as an “enemy of the people”.
He adds that people over the border in Belarus, close to his village, did not starve. Mr Garaschenko said: “There were only Ukrainians in the villages. When they tell you it wasn’t a genocide against the Ukrainian people, it’s all lies. The Soviet soldiers went house to house taking away all our food. They left the people nothing to eat and left them to die.”
Katerina Kholivach, 80, another survivor, was only 4 when her family left her in an orphanage because she was too weak to travel as they fled the famine. When her mother returned to collect her later, Soviet officials told her that Katerina had died. Mrs Kholivach discovered that her brother and sister were alive only in 2002. She said: “The Holodomor was a huge crime and I was a victim of it. I have suffered the consequences all my life.”
THE GREAT HUNGER
At the height of the Ukrainian famine in 1933, an estimated 25,000 people died each day
By the end of 1933, almost 25 per cent of the Ukrainian population is thought to have perished
An estimated 80 per cent of Ukraine’s population were small-scale farmers
By mid-1932 almost 75 per cent of farms had been seized by the state to force Ukrainian peasants into the Soviet system of land management
Grain exports were raised dramatically and agents were sent to villages to confiscate grain, bread and any other food they could find
The Soviet Union exported 1.7million tonnes of grain to the West during the famine. Nearly a fifth of a tonne of grain was exported for each person who died of starvation
Holodomor, the Ukrainian name for the famine, means murder by hunger
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20.  75 YEARS LATER, HORROR STAYS FRESH, 1930’S FAMINE IN UKRAINE MARKED

Melissa Dunne, The Windsor Star, Windsor, Ontario, Canada, Saturday, May 24, 2008

WINDSOR – If not for finding some buried dead horses and empty corn husks, Stefanie Korostil and most of her family may not have made it through the Ukrainian famine. Korostil was only 12 when her family had to survive on horse meat and ground-up husks, mixed with tree leaves.

 
EATING CORPSES
Many of her neighbours, near the Dnieper River about 321 kilometres south of Kiev in Ukraine, resorted to eating human corpses, pets, and grass to stay alive during the Ukrainian famine in the mid-1930s.

Eventually, Korostil would lose six relatives, including one of her two brothers, to the what they say was a genocide, also known as the Holodomor.
“There was no bread, no nothing,” recalled Korostil after a ceremony in Jackson Park Friday, aimed at raising awareness of the Holodomor. “People were dying everywhere … the bodies were everywhere.”

This period in Soviet history was kept silent for decades. From 1932-33 approximately seven million Ukrainians were starved to death in what is called the breadbasket of Europe. Ukrainians say it was an act designed to undermine the social basis of Ukrainian national resistance.

Mainly peasants and farmers, like Korostil’s family, were stripped of all of their food, animals, and most of their possessions. At the height of the famine, Ukrainian villagers were dying at the rate of 17 per minute, 1,000 per hour, 25,000 per day.

 
ONLY KNOWN SURVIVOR IN WINDSOR
Now, as the only known survivor of the famine living in Windsor, Korostil does her part to pressure the local, national, and international community to publicly acknowledge the Holodomor as an act of genocide, not a famine.

As part of this movement to raise awareness, an international remembrance flame is travelling across 33 countries leading up to the 75th anniversary of the famine this November.

When the flame came to Windsor Friday about 50 people, along with Brian Masse (NDP — Windsor West) and Joe Comartin (NDP — Windsor-Tecumseh), held a ceremony at the Holodomor Monument in Jackson Park, which was erected in 2005 to commemorate the 72nd anniversary.

In Canada a bill to recognize the Holodomor as a genocide and to designate an official annual day of remembrance is set to be approved just before the 75th anniversary this fall.

The Soviets denied the famine until 1989, when then-president Mikhail Gorbachev spoke publicly of the tragedy.

Despite everything, Korostil has built a rich life for herself in Windsor. With Hitler’s invasion of Russia in 1942, Korostil was shipped to Bavaria to a slave labour camp. After the war, she married and immigrated first to the U.S., and later to Canada.

 
“PEOPLE EATING PEOPLE – YOU DON’T FORGET”
She went on to have three children with her husband, who died last month, three grandchildren and three great-grandchildren. But the events of her early life still haunt her. “I remember everything,” said Korostil, now an octogenarian. “People eating people — you don’t forget.”
 
LINK: http://www.canada.com/windsorstar/news/story.html?id=d77e4d96-4e5f-4ab3-8099-b594b482d523
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AUR#908 Sep 19 Yushchenko to New York; Joint Stock Law; Software Outsourcing; Crime Against Humanity & Genocide

 
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       
                
ACTION UKRAINE REPORT – AUR – NUMBER 908
Mr. Morgan Williams, Publisher and Editor, SigmaBleyzer
WASHINGTON, D.C., FRIDAY, SEPTEMBER 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
Meeting with top U.S. business leaders in NYC suddenly cancelled
Interfax Ukraine, Kyiv, Ukraine, Wednesday, September 17, 2008
 
Ukrainian News-on-line, Kyiv, Ukraine, Wednesday, September 17, 2008 
 
Ukrainian president sees no Russian military move
Exclusive Interview: Viktor Yushchenko, President of Ukraine
Natalia A. Feduschak, The Washington Times, Washington, D.C., Thu, Sep 18, 2008

Interfax Ukraine News, Kyiv, Ukraine, Thursday, September 18, 2008

Reuters,  Kiev, Ukraine, Wednesday September 17 2008
 
6NATION’S DEPENDENCE ON RUSSIAN ENERGY SUPPLIES HURTING ECONOMY, SECURITY 
Ukraine’s leaders should step up production of natural gas and invest in renewable energy
Yuliya Melnik, Special to Kyiv Post, Kyiv, Ukraine, Thursday, September 18, 2008
 
7UKRAINE IS BECOMING A TOP SOFTWARE OUTSOURCING DESTINATION
But some experts warn that education system needs improvement.
Elena Plekhanova, Staff writer, Kyiv Post, Kyiv, Ukraine, Thursday, September 18, 2008
 
Jonathan Holmberg, Editor, Kyiv Post, Kyiv, Ukraine, Thursday,  Sep 18, 2008 
 
FACTOR FOR WEAKENING OF HRYVNIA EXCHANGE RATE, SAY FINANCIERS
Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, September 18, 2008
 
Gongadze who has become a symbol of the struggle for freedom of speech and human dignity.

Abridged version of an article at www.umoloda.kiev.ua
Kharkiv Human Rights Protection Group, Kharkiv, Ukraine, Tue, Sep 16, 2008
 
Analysis & Commentary: Yevhen Zakharov, Kharkiv Human Rights Protection Group, Kharkiv, Ukraine, Sat, Sep 13, 2008
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1
PRESIDENT YUSHCHENKO TO LEAVE FOR UN MEETING IN NEW YORK 
 
Interfax Ukraine, Kyiv, Ukraine, Wednesday, September 17, 2008
 
KYIV –  Ukrainian President Viktor Yuschenko will leave for the United States on September 22 to take part in the 63rd session of the UN General Assembly, the presidential press service reported on Wednesday. Yuschenko will present the position of Ukraine on vital issues of the modern world during the general debates of the 63rd session, the press service said.
“Bilateral meetings are also scheduled with the heads of delegations of other states, with representatives of the Ukrainian community in the United States, representatives of business circles of the United States, and members of the Atlantic Council of the United States,” the press service said.

FOOTNOTE:  President Yushchenko’s Meeting with Top U.S. Business Leaders in NYC Suddenly Cancelled
NEW YORK – Twenty-seven top U.S. business leaders, whose companies have hundreds of millions of dollars invested in Ukraine and who have created thousands of jobs in Ukraine, were scheduled to meet with Ukrainian President Victor Yushchenko, at a working luncheon next Tuesday in New York City. 
The leaders of U.S. business were invited to have a discussion with the President about expanding their trade, business and investment in Ukraine.  The top U.S. business leaders were suddenly informed this week that their working luncheon with President Yushchenko has been cancelled by the Presidential Administration.  
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2.  PRESIDENT YUSHCHENKO TO VISIT U.S. FOR UN GENERAL ASSEMBLY SESSION 

 
Ukrainian News-on-line, Kyiv, Ukraine, Wednesday, September 17, 2008 

KYIV – Ukrainian President Viktor Yuschenko intends to visit the United States for participation in the UN General Assembly session in September, the Ukrainian presidential press service reported referring to Yuschenko’s phone conversation with US President George Bush.

The parties reached agreement to instruct their foreign ministers to elaborate the question by the time of the Ukraine – US summit meeting in the course of Yuschenko’s participation in the scheduled session of the UN General Assembly.
President Yuschenko said in an interview with The Washington Times that the major topics of the Ukraine-U.S. talks would be questions of the strategic cooperation, security, the energy sector, trade and investment cooperation [as reported previously the meeting on trade and investment cooperation was cancelled by the Presidential Administration].
While commenting on the political situation in Ukraine, Yuschenko said it was important to achieve a solution to the crisis through a democratic way.
In his opinion, a coalition between the Bloc of Yulia Tymoshenko and the Party of Regions, which has formed in the Verkhovna Rada de-facto, is an unnatural one, as it is based on agreements on sharing posts in the central government and regional governments.
Meantime, Yuschenko said the formalization of the coalition was being delayed by the participants in the coalition, as they acknowledge absence of public approval of the alliance. The 63rd session opened on September 16.
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3.  UKRAINE: VIKTOR YUSHCHENKO ADVOCATES NATO AS BALANCE
Ukrainian president sees no Russian military move
 
Exclusive Interview with Viktor Yushchenko, President of Ukraine
Natalia A. Feduschak, The Washington Times, Washington, D.C., Thu, Sep 18, 2008

KIEV – Ukrainian President Viktor Yushchenko blamed the Russia-Georgia war on a security imbalance in the Black Sea region that he said could be corrected by NATO’s further expansion to the East.

But he downplayed fears that his country is vulnerable to military aggression by Moscow even if it does not gain admission to the Western alliance.

“I don’t believe that kind of danger exists for Ukraine, because Ukraine is not Georgia,” Mr. Yushchenko told The Washington Times Wednesday. “Ukraine has a different potential, different possibilities. In other words, our relations [with Russia] can only bring about a dialogue.”

Asked about recent remarks by Republican vice-presidential candidate Sarah Palin that NATO membership for Georgia would require a military response from the Western alliance, Mr. Yushchenko spoke in broader terms of the need for collective security throughout the region.

“This showed that the Black Sea region is unbalanced and that it can be a source of danger,” Mr. Yushchenko said. “This is a problem not only for Georgia.

I am convinced this is a problem not only for our region. This is a problem for the European continent and, in a wider sense, even a world problem.”
Looking composed and relaxed, the silver-haired Mr. Yushchenko, 54, has regained the youthful vigor for which he was famous before dioxin poisoning left his face badly scarred in a purported 2004 assassination attempt.

He answered questions for nearly an hour, touching on a wide range of issues, including his nation’s quest for membership in NATO and the European Union and his desire for Russia’s Black Sea Fleet to eventually leave its base in the Ukrainian port of Sevastopol.

He also expressed disappointment at the rivalry with a one-time political ally, Prime Minister Yulia Tymoshenko, that led to the collapse of a parliamentary coalition this week.

Ukraine’s relationship with Russia sparked the dispute, with Mrs. Tymoshenko accusing Mr. Yushchenko of unnecessarily antagonizing Moscow after last month’s invasion of Georgia.  The two are expected to run against each other for the presidency when Mr. Yushchenko’s five-year term ends in January 2010.

 
UKRAINE’S QUEST FOR NATO MEMBERSHIP
Mr. Yushchenko will travel to the United States next week to attend the 63rd session of the U.N. General Assembly, where he will have an opportunity to discuss with dozens of world leaders the war in Georgia and its impact on the centerpiece of his four-year presidency: Ukraine’s quest for NATO membership.
“When we talk about the best answer for Ukraine, including its territorial integrity, and the inviolability of our borders, the answer is only one – joining a collective system of defense,” he said. Russian President Dmitry Medvedev has stated repeatedly that former Soviet republics lie in his country’s sphere of interest. 
 
“I’m not going to say, however, that there aren’t going to be ways for destabilization. In this country, there are instruments, and there are many of them,” Mr. Yushchenko said of Russia. He said he was unhappy that the leadership in Moscow has kept silent when some Russian politicians have laid claim to Crimea.
The peninsula has a large ethnically Russian population and was ceded to Ukraine in 1956. Both the Ukrainian and Russian Black Sea fleets are based there, on opposite sides of the same harbor at Sevastopol.
Mr. Yushchenko said it was critical that Kiev and Moscow shore up the agreement that allows Russia to base its fleet in Sevastopol until its lease expires in 2017. “The Black Sea Fleet should not be a negative in our relationship with the Russian Federation,” Mr. Yushchenko said. At the same time, he said, he prefers that the fleet leave Ukraine when its lease ends.
The president expressed frustration that Ukraine has fallen short in its bid for eventual NATO membership. He chided NATO for not offering his country a membership action plan at an April summit in Bucharest.
Many analysts think the Russian invasion of Georgia last month will make it more difficult for Ukraine and Georgia to join NATO or even gain a membership action plan when NATO foreign ministers meet again in December.
“Everyone needs to understand that everything Ukraine needed to do to obtain a positive answer [on NATO membership], if we speak openly and honestly, it has done that,” he said.
Today, he said, “when we aren’t talking about NATO membership, we’re talking about a partnership agreement, that we want to have tighter cooperation. … We need to get a signal from the alliance itself that we are respected, that we are valued.”
Mr. Yushchenko, however, saved his harshest words for Ukraine’s prime minister, Mrs. Tymoshenko, his ally in the 2004 Orange Revolution that toppled a pro-Russian government.
Their relationship has since dissolved. Earlier this month, Mrs. Tymoshenko pulled out of a coalition government and joined forces with Viktor Yanukovych, the president’s political nemesis who heads the pro-Russia opposition.
“It’s disgusting to speak about this because what happened in the last two months is an example of how easily national interests can be demolished with blackmail … and how easily internal politics and external politics can be changed to suit one’s own self interest,” Mr. Yushchenko said of his former ally.
Mrs. Tymoshenko, in turn, has accused Mr. Yushchenko of ruining Ukraine’s relationship with Russia. She urged Ukraine to follow a “balanced” policy with Moscow and blamed Mr. Yushchenko of antagonizing Russia.  “I think that the president carries personal responsibility for everything bad that will happen in relations between Ukraine and Russia,” Mrs. Tymoshenko told reporters in Kiev on Wednesday, the Associated Press reported.
 
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4.  DRAFT RESOLUTION ON HOLODOMOR FAMINE IN UKRAINE
TO BE DISCUSSED AT UNITED NATIONS GENERAL ASSEMBLY
 
Interfax Ukraine News, Kyiv, Ukraine, Thursday, September 18, 2008

KYIV – A draft resolution on the Holodomor Famine in Ukraine in 1932-1933 will be discussed at the next sitting of the General Committee of the 63rd session of the UN General Assembly, the press service of Ukrainian Foreign Ministry reported on Thursday.

The Foreign Ministry said the draft resolution “contains an appeal to honor the memory of the victims of the Holodomor famine in Ukraine in 1932-1933, which took the lives of millions of Ukrainians, and people of other nationalities who lived in Ukraine during that time.”
The draft resolution also calls on UN member states “to include information on the Holodomor famine in Ukraine in 1932-1933 in their educational programs aimed as preventing future generations from [repeating] a sorrowful lesson from a tragic page in global history.”
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5.  UKRAINE PASSES JOINT STOCK COMPANY LAW

Reuters,  Kiev, Ukraine, Wednesday September 17 2008
KIEV – Ukraine’s parliament passed on Wednesday a joint stock company law, sought for years by foreign and Ukrainian investors to protect shareholders through regulation of the basic business entity.
The law will regulate the creation of joint stock companies, the rights and obligations of shareholders and management, the payment of dividends and access to information.
It also says shareholder meetings can only take place at the premises of the company, avoiding what has become to be known as “raiders’ hits” — when control of a firm has been wrested by a few big shareholders through ad hoc meetings and votes. Such incidents have led to lengthy court procedures, much to the frustration of hundreds of shareholders.
The law was passed by 358 deputies out of 450 in the absence of a ruling coalition which collapsed this month. This latest political crisis may lead to the third parliamentary election in as many years, dampening foreign investor sentiment.
President Viktor Yushchenko, whose party left the coalition, has yet to sign the bill. According to the securities regulator, there are 35,000 joint stock companies in Ukraine. (Reporting by Yuri Kulikov; Writing by Sabina Zawadzki; Editing by Quentin Bryar)
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6. NATION’S DEPENDENCE ON RUSSIAN ENERGY SUPPLIES HURTING ECONOMY, SECURITY 
Ukraine’s leaders should step up production of natural gas and invest in renewable energy.

Yuliya Melnik, Special to Kyiv Post, Kyiv, Ukraine, Thursday, September 18, 2008

WASHINGTON, D.C. – Ukraine’s economy and national security remain vulnerable to energy imports from a hostile northern neighbor, experts warned at a Sept. 15 press conference in America’s capital city. Unfortunately, energy specialists said, Ukraine’s leaders have repeatedly squandered opportunities to break free from Moscow’s grip.

Currently, Ukraine depends on Russia for roughly 80 percent of its energy supplies – mainly oil, natural gas and nuclear fuel. However, experts said that if Ukraine’s leaders would take the right steps, renewable energy sources – such as solar power – could supply up to 30 percent of the nation’s needs.

While the nation’s politicians have missed many opportunities, experts at the “Energy Options for Ukraine” conference said it’s not too late. They urged the country’s leaders to lure fresh investments to boost domestic hydrocarbon production, cut wasteful consumption and increase the usage of alternative power.

There is little time to waste, according to the event’s organizers, who said the five-day war between Russia and Georgia in August underscores the need for Ukraine to swiftly “slash reliance on imports of Russian energy.”

Organizers of the event held at John Hopkins University included The Washington Group [TWG], the U.S.-Ukraine Foundation [USUF], the U.S.-Ukraine Business Council [USUBC], and the Ukrainian American Environmental Association [UAEA].

One place for Ukraine’s leaders to start, according to panel speaker and U.S. energy consultant Edward Chow, is to boost domestic production of conventional fuels.

Chow, a 20-year veteran of Chevron Corporation who has also advised Ukraine’s government on energy strategy, reminded the audience that Ukraine used to export natural gas to Russia in Soviet days. Significant investments could boost domestic production once again to help fill the nation’s demand, Chow said.

DOMESTIC GAS PRODUCTION CAN EASILY BE INCREASED
“Domestic gas production can easily be increased,” he said, adding that Ukraine’s unique geographic location gives it leverage in future price talks with Russia. An estimated 80 percent of Russia’s Europe-bound gas goes through Ukraine, and its vast natural gas pipeline system remains the largest transit channel for supplies to European markets.

Unfortunately, Ukraine did not use the momentum of the Orange Revolution to bargain tough on gas prices with Russia. “Some current political leaders are still trying to convince the public that [subsidized] gas prices instead of modern market prices are the goal,” Chow said, explaining that such a policy makes the country less attractive for hydrocarbon exploration and production ventures.

 
NUCLEAR POWER IMPORTANT
Another priority, experts said, should be nuclear power.

Ukraine inherited a vast nuclear power generation capacity built in Soviet days. It currently satisfies about half of the country’s electricity needs and there are plans to build new nuclear blocs. But it is highly dependent on Russia to import fresh and process spent nuclear fuel. The country pays Russian companies some $100 million per year to process spent nuclear fuel, and much more to purchase fresh supplies used in generating nuclear power.

Hence the importance of a project led by U.S.-based Holtec International, which is building a spent nuclear fuel storage facility for Ukraine at the closed Chornobyl atomic power plant, home to the worst nuclear disaster. The  first storage capacity is expected to be completed in 2011. Facilities to process spent nuclear fuel, making it reusable, could follow.

William Woodward, vice president of Holtec International, described his company’s project in Ukraine as a “key to independence.” But some panel participants underlined the necessity for Ukraine to be cautious with its massive nuclear power expansion plans, pointing to potential terrorist threats and a water deficit.

IMPROVING ENERGY EFFICIENCY
Brian Castelli, executive vice president of the Alliance to Save Energy, a non-partisan non-governmental organization, said Ukraine is gradually improving its energy efficiency at a rate of 4 to 6 percent per year, but remains very wasteful.

The lack of simple technologies such as power meters, basic building insulation, erratic payments by consumers and poor service provided to them remain large challenges to be tackled by the country in future years. To speed up the process, the Alliance urged Ukraine to introduce meter-based billing, privatize energy companies and increase tariffs to levels that would allow energy companies to generate enough profits to modernize.

Castelli pointed to carbon finance, repair and maintenance funds, vendor credits and housing renovation loans among possible solutions. The Alliance boasts successful experience in helping to pass a district heating law in Lithuania, introducing bill collection software in Kyiv and carbon financing in Ivano-Frankivsk, among other projects.

Castelli also underlined the importance of launching a nationwide energy efficiency project for schools in order to create awareness among children and bring up a new generation of responsible energy consumers.

So for Ukraine to become more energy independent, it will have to also boost the production of alternative, renewable energy. Current figures show the country lags far behind, with renewable power sources accounting for 2 percent, a fraction of the 7 percent in the United States, 12 percent in Germany and 70 percent in some regions of Spain, according to Ken Bossong, co-director of the Ukrainian-American Environmental Association.

“Ukraine was the center of solar thermal research in the former Soviet Union and it has arguably better potential than Germany, which is a solar power leader,” he said, adding that it is reasonable for Ukraine to get some 17-31 percent of its energy needs from renewable sources by 2030.

 
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7.  UKRAINE IS BECOMING A TOP SOFTWARE OUTSOURCING DESTINATION
But some experts warn that education system needs improvement.

Elena Plekhanova, Staff writer, Kyiv Post, Kyiv, Ukraine, Thursday, September 18, 2008

Well–known for a relatively inexpensive yet professional work force, Ukraine’s software development business is steamrolling ahead, posting
double-digit growth and cashing in on lucrative contracts from both foreign and domestic customers.

However, some software developers are beginning to complain about the deteriorating professional level of information technology graduates and
predict industry growth will slow unless the education system improves. Currently, there are more than 300 companies working in Ukraine’s software
development field and growth has been impressive.

According to SoftServe, a Lviv-based software development company, the software market in terms of sales grew by 75 percent, from $175 million in
2005 to $310 million in 2006.

By the end of last year, the industry had increased to more than $350 million, SoftServe said, but other estimates put it at much higher. While growing fast, Ukraine’s software development potential in dollar terms is tiny compared to world leader India, which earns more than $17 billion annually. Yet it competes with Russia, where developers handle some $1.75 billion in contracts.

While Russia has more information technology labor resources, and Western Europe leads in the level of information technology education and infrastructure, Ukraine wins a significant share of international software development contracts because its labor rates are comparatively low.

“The demand for Ukrainian software development services is growing steadily in the West. Our main customers are the United States and Western Europe. In the last several years, the Ukrainian brand has become internationally recognized and there is no doubt that Ukraine is in the top ten software
development countries of the world,” said SoftServe’s executive vice president Taras Vervega.

Since independence in 1991, Ukrainian developers have focused much of their effort on landing lucrative foreign contracts. But domestic demand is picking up, as is competition.

“The time of hyper-profits is over and competition in the local market is rapidly growing. In order to keep their market positions, local companies need high-quality software, for example, cost control programs and other IT (information technology) products to solve different economic issues,” Vervega added.

Ukrainian programmers commonly produce information technology solutions for health care, industrial and commercial niches. One of the most promising
sectors today is project management and consulting software, according to experts.

Today, seven percent of Ukrainian commercial enterprises have introduced automated business processes designed specifically for them, says Lana
Chabakha, business development director at Terrasoft, a customer relationship management software solutions provider.

“The potential in this area is very big. We do not expect the market to reach a saturation point for several years. The interest in customer relations management technology is growing both in small and medium enterprises and in the major Ukrainian companies,” she said.

Despite the Ukrainian software development industry’s cost competitiveness, a new weakness – poor education levels – may dent growth.

“Today about 30,000 young information technology professionals graduate from Ukrainian universities annually, but the skill level is far from the demands
of the outsourcing market,” Vervega said. He believes increasing the education budget to 6.5 percent of GDP would solve the problem and brighten
long-term prospects.

Liudmila Kuzmenko, the head of human resources at NetCracker, a software company that provides solutions to the industry, believes the weak education
standards are already curtailing growth.

“The information technology education system in Ukraine is in dire need of investment from the government and private enterprise. It should be a top
priority in Ukraine’s national strategy, because information technology outsourcing is one of the country’s international successful niches,” she added.

LINK: http://www.kyivpost.com/business/29763

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8.  UKRAINE COULD BE A SECOND INDIA SAYS HEAD OF MICROSOFT 

 
Jonathan Holmberg, Editor, Kyiv Post, Kyiv, Ukraine, Thursday,  Sep 18, 2008
  
The director of Microsoft Ukraine believes the nation will play a big role in software development. Eric Franke has been the general director of Microsoft Ukraine since December 2007. The Dutch national has more than 20 years of information technology industry experience.
 
No stranger to Ukraine, Franke led the development of UMC, now MTS, from a mobile phone subscriber base of 400,000 to more than 11 million between 2001 and 2005. During his interview with the Kyiv Post, Franke said that Ukraine has the potential to become a second India in software development outsourcing. 

KP: What is the situation in Ukraine’s software development industry today?
EF: Ukraine is a unique country when it comes to software development. There are 30,000 to 40,000 individual software developers in Ukraine. It has huge potential and is well­placed, close to Russia and Europe. Infrastructure is relatively OK. It could be better, but it is OK. And there is a lot of intellectual potential.

 
From our point of view – from a sales and marketing perspective ­ we see the potential as we’re selling them the developmental tools. A number of these developers are actually working on products for Microsoft. We have identified at least 400 developers working on Microsoft products actually writing code, integrating, supporting, localizing and adapting software.
 
Ukraine is in an exceptional position because when Microsoft looks for developers they look to the huge countries like India, Russia, China and, of course, the United States. Compared to these countries, Ukraine is relatively small, but there are a lot of good programmers here.

KP: The universities are producing highly qualified programmers?
EF: Yes, they are producing high quality programmers. When [Microsoft CEO] Steve Ballmer was here, he was surprised by a question a student asked about robotics and parallel processing. He was astonished that the student asked a question that usually only gets asked at Microsoft labs.

 
We have formed partnerships with the 10 core universities in Ukraine. We also opened the Microsoft Innovation Center at National Taras Shevchenko University. We supply them with development tools and provide free training to help incubate talent.

KP: How mature is the software development market in Ukraine?
EF: About 85 percent of the IT (information technology) business is in hardware. Software is still is a small slice. This shows Ukraine is at the beginning of the developmental cycle. If you look at Europe, the ratio is 50­60 percent hardware the remainder in software.

 
The IT (information technology) business is growing at about 40 percent each year. We are growing even faster. Microsoft Ukraine started with four employees in 2003, and now we have 150. The growth will not slow for at least three years.

KP: Your growth is coming from which segments?
EF: The biggest growth is from solutions sales and partners. Our main target is to increase the reach of the company by working with partners. At the moment we have over 1,000 partners.

KP: What are the outsourcing trends? Is Ukraine attracting clients?
EF: Outsourcing represents about 80 percent of software development work in Ukraine. That can be anything from integration jobs, quality assurance and conversion projects. They come because the high quality work is less expensive than it would be in the U.S. or Western Europe.

 
Ukrainians are hard working people who know how to work towards targets. They know how to dig into the earth. They know how to do things with their own hands and, in this case, their brains.

KP: Is there a “brain drain” problem?
EF: The IT (information technology) job market is overheated at the moment. It is no longer an employers’ market. It is a job candidate’s market. We see that in our company as well. Talented people with Microsoft on their resume can get any job they like.

KP: How is the piracy situation today?
EF: It is a problem. No company would dream about launching a product here because the next day it will be pirated. The piracy rate in Ukraine is 83 percent of the installed base. Last year it was 84 percent, so it is a huge problem that is not improving quickly. We do see improvement with the big companies, but small and medium sized companies, companies with five to 50 computers, are a challenge.

KP: Where do you see the software development market in five to 10 years?
EF: While Ukraine isn’t as big as India, I think it can play a big role in outsourcing and development. Looking at the potential, looking at the 40 percent annual growth, I think Ukraine could be a second India. It has all the ingredients: huge intellectual capital and proximity to the West.

 
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9.  WITHDRAWAL OF FOREIGN INVESTORS FROM UKRAINIAN MARKET IS KEY
FACTOR FOR WEAKENING OF HRYVNIA EXCHANGE RATE, SAY FINANCIERS

Interfax Ukraine Economic, Kyiv, Ukraine, Thursday, September 18, 2008

KYIV – Foreign investors are leaving the Ukrainian market, and this is a strong factor behind the fall in the hryvnia exchange rate to the dollar, according to financiers interviewed by Interfax-Ukraine on Wednesday.

“Investors are leaving the Ukrainian market, selling shares, corporate bonds and gradually selling state foreign loan bonds. Due to the global financial
crisis, access to long-term resources is blocked to the banks, and most economic entities stock up the currency, fearing a deficit in the future,” said the director for strategic development of Kyiv-based UFC-Capital Investment Company, Serhiy Kulpinsky.

“The situation on the interbank has mainly been provoked by the reaction of the Ukrainian market to the financial crisis on the international markets, and, in particular, on the Russian market. The factor of the withdrawal of capital from the Russian market affected the Ukrainian market,” said the board chairman of Kyiv-based CJSC Daughter Bank of Sberbank of Ukraine, Vyacheslav Yutkin.

The experts expect that the exchange rate situation on the interbank will stabilize, and hope that the NBU will intervene. “I think that in the next two months the hryvnia exchange rate will not fall lower than UAH 5.05/$1, and the panic that is forcing the exchange rate down will disappear soon,” Yutkin said.

“It is likely that the NBU will enter the interbank soon, and a further sharp devaluation of the hryvnia is unlikely,” Kulpinsky said, however.
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10.  GONGADZE ANNIVERSARY WITHOUT BURIAL OR PUNISHMENT

Gongadze who has become a symbol of the struggle for freedom of speech and human dignity.

Abridged version of an article at www.umoloda.kiev.ua
Kharkiv Human Rights Protection Group, Kharkiv, Ukraine, Tue, Sep 16, 2008
It is eight years today, 16 September, since Georgy Gongadze disappeared. Those who ordered the killing have not been brought to justice, and the victim has not been buried.
This evening, as has become traditional (however terrible that sounds) concerned individuals will light candles on Maidan [Nezalezhnosti – Independence Square] and honour the memory of Georgy Gongadze and all Ukrainian journalists who have died.  It is also tradition now that many will ask the authorities “Where is Gongadze?” and will receive no reply. This year there will be eight moments silence, one for each year since the journalist’s disappearance and brutal murder.
It has become standard for various politicians, etc to gain publicity on this day.  The author mentions some of the likely events. The organizing committee for the meeting on Maidan has consistently asked people to come as individuals and leave any politicizing for other issues.
As already reported here, one difference from last year is that three of the four men accused of carrying out the killing, former police officers, are now serving sentences of 12-13 years.
Whether those who ordered the killing remember Gongadze on this day nobody knows, and they remain unnamed. Among those remembered on this day in a most unfavourable light is at least one ex-Prosecutor General Mykhailo Potebenko.
 
Head of the Institute for Mass Information Victoria Sumar is not alone in expressing bemusement at the authorities’ lack of response to public outcries when Potebenko was awarded the Order of Yaroslav Mudry [the Wise]. 
 
Not to speak of the promotion to judge of the Kyiv Court of Appeal of Maria Pryndyuk who was responsible for revoking a resolution of the Prosecutor General’s Office regarding General Pukach and releasing him from custody.
 
Pukach is the fourth man accused of carrying out the crime and is now on the international wanted list.  His evidence, as head of the department the other three worked in would be vital.
Georgy Gongadze’s body has not yet been laid to rest. His mother Lesya Gongadze does not believe that the body held in a Kyiv morgue is that of her son.  His widow believes it is.
For those in Kyiv:  on Tuesday evening at 19.00 on Maidan Nezalezhnosti, a meeting will be held in memory of Georgy Gongadze and all Ukrainian journalists killed.
It is a meeting of remembrance.  Please bring candles to honour the memory of Georgy Gongadze who has become a symbol of the struggle for freedom of speech and human dignity.
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11.  MOSCOW’S EFFORT TO PRESENT ITSELF AS DEFENDER OF CRIMEAN TATARS FALLS FLAT

 
Window on Eurasia: Paul Goble, Vienna, Wednesday, September 17, 2008

VIENNA – Last week, Russian news portals and blogs featured reports that a group of the Crimean Tatars had called on Russian President Dmitry Medvedev and Tatarstan President Mintimir Shaimiyev to defend their nation’s rights against Ukraine’s “unceasing genocide,” a story that some Western media outlets picked up from Russian media reports.

But yesterday, the Crimean Tatar party that supposedly wrote and distributed this appeal said that it had not done so, pointing out that the individual member of the group that had taken this step was not authorized to do so and would be subject to discipline, a denial that so far has appeared only on the Crimea-L discussion list. 
Thus, the original report and the way many have handled it provide yet another example of the kind of disinformation campaign Moscow has again been engaged in as well as a transparent effort to put pressure on Ukraine by coming up with another justification for Russian intervention there – the protection of an ethnic minority.
On September 8th, a document purportedly reflecting the views of the Milli Firqa Party in Crimea surfaced in the Russian media. It called on the governments of the Russian Federation and Tatarstan to “defend the indigenous and other numerically small ethnic communities of Crimea” against the “genocidal” policies of Ukraine (www.nr2.ru/crimea/196012.html).
The appeal said that the situation in Crimea had become serious because the Crimean Tatars had exhausted “all possible means of defense in Ukraine” against the “rampant nationalism” there and that the Milli Firqa Party plans to appeal to the European Union, Turkey and the Turkic republics of the former Soviet Union as well.
Signed by Vasvi Abduraimov, who identified himself as a leader of the party, the document said that he and his party were not afraid of being accused of having “adopted a pro-Russian position in Crimean Tatar politics” because without outside support, there was little possibility that the Crimean Tatars will be in a position to flourish.
Consequently, “if it so happens that the interests of Crimea and the interests of the Crimean-Tatar people correspond with the interests of Russia for example,” Abduraimov concluded, “then why not use this [coincidence] for the resolution of the chief problems of the nation.”
Russian media quickly picked up the story, and Russian politicians and commentators reacted. Konstantin Zatulin, the first deputy chairman of the Duma’s committee on CIS affairs and compatriots abroad, said that this appeal certainly did not reflect the views of all Crimean Tatars but was important from Moscow’s point of view (www.nr2.ru/moskow/196179.html).
It showed that at least some Crimean Tatars are now unhappy both with the way in which Kyiv has used them as a political football for the last 20 years and with what he described as the often extreme statements made by some of the members of the Milli Mejlis, the Crimean Tatar parliament.
Obviously, he continued, Moscow could not casually interfere in the internal affairs of Ukraine “but the Russian Federation is carefully following what is taking place in Crimea since it is interested in the well-being of Crimea, the largest region beyond the borders of the Russian Federation where Russians live.”
And Zatulin added that Russia’s consul general in Crimea will be open to receiving more formal requests for Russian assistance and in the meantime “beyond doubt will receive the assignment of clarifying the situation,” one that he doubted was as extreme as genocide but nonetheless is serious enough to be a matter of concern. 
Meanwhile in Crimea itself, Mustafa Dzhemilyev, the leader of the Milli Mejlis, said that the appeal of Milli Firqa does not reflect the position of all Crimean Tatars.  “Every nation has the right to have a certain number of fools,” he said, noting that the Milli Firqa is “not an enormous party.” It has only 20-25 members.
But yesterday the Milli Firqa disowned the statement, declaring in a message posted on the Crimea-L list that the appeal “was drafted, signed and forwarded” in violation of “all Milli Firqa rules, and therefore cannot be considered an official document of the organization” as it purports to be.  It added that Abduraimov would be subject to party discipline.
Today, in Simferopol, a group of Crimean Tatar organizations held a press conference to denounce the Milli Firqa declaration. But these statements emanating from Crimea are unlikely to receive the same wide dissemination that the original “appeal” to Medvedev and Shaimiyev did. And consequently, that document has already been useful to Moscow for two reasons.
On the one hand, it has given some in the Russian government the chance to test the waters for the notion that Moscow is prepared to defend not just Russian citizens abroad, something that is a more difficult case to make in Ukraine given that country’s constitutional ban on dual citizenship.
And on the other, it has given Moscow another chance both to blacken the reputation of Ukraine and at least potentially to set at odds the Ukrainian and Crimean Tatar communities in Crimea, something that the Russian community there and Moscow itself could in the event of a crisis exploit.
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12.  LEGAL CLASSIFICATION OF HOLODOMOR 1932-1933 IN UKRAINE
AND IN KUBAN AS A CRIME AGAINST HUMANITY & GENOCIDE
 
ANALYSIS & COMMENTARY: Yevhen Zakharov, Kharkiv Human Rights Protection Group, Kharkiv, Ukraine, Sat, Sep 13, 2008

This opinion is intended to demonstrate that Holodomor 1932-1933 in Ukraine and Kuban has elements of a crime against humanity in accordance with the Rome Statute of the International Criminal Court [hereafter RC ICC) from 17 July 1998, and of genocide according to the Convention on the Prevention and Punishment of the Crime of Genocide (hereafter the Convention), adopted on 9 December 1948. 

According to Article 7 – 1 of the RC ICC “crime against humanity” means “any of the following acts when committed as part of a widespread or systematic attack directed against any civilian population, with knowledge of the attack:
(a) Murder;
(b) Extermination;
(c) Enslavement;
(d) Deportation or forcible transfer of population;
(e) Imprisonment or other severe deprivation of physical liberty in violation of fundamental rules of international law;
(f) Torture;
(g) Rape, sexual slavery, enforced prostitution, forced pregnancy, enforced sterilization, or any other
     form of sexual violence of comparable gravity;
(h) Persecution against any identifiable group or collectivity on political, racial, national, ethnic, cultural, religious, gender as defined in paragraph 3,
      or other grounds that are universally recognized as impermissible under international law, in connection with any act referred to in this paragraph or any
      crime within the jurisdiction of the Court;
(i) Enforced disappearance of persons;
(j) The crime of apartheid;
(k) Other inhumane acts of a similar character intentionally causing great suffering, or serious injury to body or to mental or physical health.”
According Article 7 – 2 of the RC ICC
“For the purpose of paragraph 1:

 (b) “Extermination” includes the intentional infliction of conditions of life, inter alia the deprivation of access to food and medicine, calculated to bring about the destruction of part of a population;”

The Convention on the Prevention and Punishment of the Crime of Genocide (hereafter the Convention) was adopted by Resolution 260 (III) A of the U.N. General Assembly on 9 December 1948 and entered into force on 12 January 1951.  It was ratified by the Presidium of the Supreme Soviet of the USSR on 18 March, 1954.

According to Article 6 of the RC ICC and Article II of the Convention genocide means: “any of the following acts committed with intent to destroy, in whole or in part, a national, ethnical, racial or religious group, as such:
(a)  Killing members of the group;
(b)  Causing serious bodily or mental harm to members of the group;
(c)  Deliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part;
(d)  Imposing measures intended to prevent births within the group;
(e)  Forcibly transferring children of the group to another group.”
According to the Article III of the Convention the following acts shall be punishable:
(a)  Genocide;
(b)  Conspiracy to commit genocide;
(c)  Direct and public incitement to commit genocide;
(d)  Attempt to commit genocide;
(e)   Complicity in genocide.

SUMMARY OF THE HISTORICAL FACTS 

 

For a correct assessment of Holodomor 1932-1933 we need to consider the historical events in Ukraine and Kuban and determine whether the policy of the Soviet regime was deliberate, whether it included an ethnic factor, and whether it was aimed at creating a mass-scale artificial famine resulting in the death of millions of people. The results of numerous studies of the Famine of 1932-1933 by Ukrainian, Russian and other foreign scholars can be summed up as follows.
After the completion of total collectivization, a system was introduced under which the kolkhoz had first to settle with the State according to a quota issued from above (“The first commandment” in Joseph Stalin’s words), and only later divide what remained among the workers for their labour. However the quotas imposed were unrealistic and as a result the kolkhozes were unable to compensate people for their labour. T
 
his created a huge shortage of grain in the countryside. The kolkhoz workers could only count on what they could gather on their garden plots – potatoes, vegetables, etc, and went unwillingly to the kolkhoz with no certainty that they would be paid. 
 
The grain shortage was created by Stalin’s policy of “geeing up” (“podkhlyostyvanye” – Stalin’s term): the initial quota which was already unattainable was unexpectedly increased to mobilize people to achieve the first quota. That led to an even greater shortage of grain and in the long run to famine.
When people talk of the famine of 1932-1933, three different periods of hunger need to be differentiated. Each of them, in addition to common features, had their own specific causes, characteristics and consequences which varied in their scale. The famine in the first half of 1932 was caused by non-fulfilment of the grain requisition quota from the 1931 harvest and the Kremlin policy with regard to rural areas due to their not meeting the quotas.
 
That famine was stopped by the return from ports of a part of the grain intended for export, as well as purchase of grain from abroad. In the third quarter of 1932, the famine occurred again as the result of non-fulfilment of the requisition quotas from the harvest of 1932. 
 
 It must be stressed that the nature of the famine in Ukraine up till November 1932 was the same as in other agricultural regions of the USSR. Starvation during the famine of the first and second periods should be considered as a crime against humanity.
Famine during the third period was caused by the confiscation of grain and any food products which was carried out only in the rural areas of Ukraine and in Kuban. This confiscation in November – December 1932 was partial, but became total in January 1933.  Moreover, due to measures organized by the Party and Soviet leadership of the USSR and Ukrainian SSR people were prohibited from leaving in search of food or receiving it from outside. 
 
Left without any food, the peasants died of starvation. From February 1933 this developed on a mass scale and from February to August in Ukraine millions died of starvation in Ukraine, and hundreds of thousands in Kuban.
 
According to demographic statistics the direct losses to Ukraine from famine of 1932-1933 were according to some data 3-3.8 million, while other figures suggest 4-4.8 million. Wide-scale famine was combined with political repression against the intelligentsia and national communists in 1933, as well as the stopping of the policy of Ukrainization.  Death from starvation during the famine of the third period and from political repression should be viewed as a crime against humanity and as the crime of genocide.
To establish that crimes against humanity and of genocide were committed in Ukraine and Kuban, one needs to consider the events of 1930-1933 in total. A brief description of the historical facts is provided in Appendix.

DEATH FROM STARVATION DURING THE PERIOD

FROM JANUARY TO OCTOBER 1932
– A CRIME AGAINST HUMANITY 

A determining factor in classifying Holodomor 1932-1933 as a crime against humanity is proving conscious acts aimed at  “the intentional infliction of conditions of life, inter alia the deprivation of access to food and medicine, calculated to bring about the destruction of part of a population” (Article 7 – 2.b of the RS ICC)
As mentioned in items 1 and 2[1] , the grain requisition quota for 1930 was already excessive, however the Soviet leadership increased it still further from 440 to 490 poods, and the 1930 quota was fulfilled already in spring 1931, taking away all grain reserves. It did not prove possible to meet the increased quota, although 127 million poods of grain were collected, this being 127 million poods more than in 1929. 
 
The grain requisition quota for 1931 issued from the Kremlin according to Stalin’s policy of “geeing up” once again significantly exceeded Ukraine’s capacity, being 510 million poods. At the end of the year the quota had been 79% met (Item 3).
 
To fulfil the “first commandment” – first meet the quota and only then settle with people for their labour – in January 1932, on Molotov’s instructions, grain began being taken away, this leading to famine in the first half of 1932.  As a result of the grain being taken away, tens of thousands of peasants in Ukraine died of starvation during this period (Items 4, 5 and 6). It was only at the end of April 1932 that the State became providing food aid to the starving (Item 7).
The “first commandment” and “geeing up” showed that the Soviet leadership had a purely functional attitude to the villages, seeing them as merely a source of grain supplies for accelerating industrialization. Furthermore the food produced on the kolkhozes was considered to be just as much State property as the products from sovkhozes.
 
Yet sovkhoz employees received wages, while those who worked on kolkhozes were supposed to receive produce for their labour. Since all the grain had been handed over to the State to meet the quota and almost nothing remained, the kolkhoz workers were simply working for nothing. Kosior reports that half the kolkhozes did not pay anything at all for people’s labour in 1931.[2]
H. Petrovsky and V. Chubar in their letters to Stalin and Molotov at the beginning of June wrote of famine in the villages resulting from the impossibility of meeting an unrealistic quota and the need to increase food aid.  The response was an irritated reaction from Stalin and the cessation of food imports into Ukraine (Items 7-9).
 
Despite the request from the Ukrainian Party organization to reduce the grain requisition quota for 1932 and the presentation at the III All-Ukrainian Party Conference on 6-7 July of graphic accounts of cases of starvation and criticism of policy in the villages, Molotov and Kaganovich forced the conference to adopt the unrealistic quota from the Kremlin (Item10).
In justifying the need for additional food aid, both Chubar and Petrovsky in their letters wrote of possible theft of grain from the new harvest. Chubar warned: “So as to be better stocked up for the winter then last year, wide-scale grain thefts will begin. What is being seen at present – digging up planted potatoes, beetroot, onion, etc – will take on much greater proportions during the period when the winter crops ripen since the food stocks from the resources provided will not last beyond 1 July”[3]. 
 
Petrovsky wrote about the same thing: “Assistance needs to be provided also because the peasants will be driven through starvation to pick unripe grain and a lot of it will be wasted”.[4].  Stalin and Kaganovich responded by stopping food aid and initiating the draconian “5 ears of corn law” – the Resolution “On the protection of property of State enterprises, kolkhozes and cooperatives, and the consolidation of socialist property”. 
 
For theft of kolkhoz and cooperative property this envisaged the death penalty with the confiscation of all property, with the possibility of commuting this to a term of imprisonment of no less than 10 years where there were mitigating circumstances (Item 11).
One can conclude that Stalin’s policy in the villages meant the deliberate deprivation of access by kolkhoz workers and independent farmers to the grain they had grown unless they had fulfilled the grain requisition quota with this leading to a part of the population dying of starving. This part of the population was eliminated through the conscious policy of the Soviet State.
 
The death of a part of the population thus took place as a result of their knowingly being deprived of access to food products, this constituting a crime against humanity. The State policy of grain requisitions applied to all rural regions of the USSR, therefore this conclusion covers all those who died of starvation on the territory of the Soviet Union during that period.

HOLODOMOR 1932-1933 – THE CRIME OF GENOCIDE 

THE OBJECT OF THE CRIME OF GENOCIDE 

According to the Convention, genocide is understood as certain “acts committed with intent to destroy, in whole or in part, a national, ethnical, racial or religious group, as such”.  “According to the International Criminal Tribunal for Rwanda, the term ‘national group’ refers to ‘a collection of people who are perceived to share a legal bond based on common citizenship, coupled with reciprocity of rights and duties'”[5].
The interpretation of “national group” gives grounds for viewing as the object of the crime of genocide a part of the Ukrainian people – the total of victims of Holodomor and of political repression in Ukraine during the period from November 1932 to August 1933, regardless of ethnic, religious or other features.
At the same time, the element of destruction of a part of the group lies in “the destruction of a considerable part of the specific group … the part of the group should be sufficiently large to have an impact on the group as a whole”[6] 
 
The practice of the international tribunals demonstrates that for the action to be classified as genocide it is sufficient that the perpetrator of the crime intended to eliminate a significant part of the group. In determining what part of a group can be considered significant, both quantitative and qualitative indicators need to be applied.
 
For example, the Trial Chamber of the International Tribunal for Former Yugoslavia in a judgment on the case of Jelisic (1999)[7] stressed that:
 
“82. /…/ As a crime directed towards a group, the genocidal intent is necessarily directed towards mass crimes. The genocidal intent must therefore cover a substantial part of the targeted group. 
 
According to the Trial Chamber, this can take two forms: 1) the intent can be to destroy a large number of members of the targeted group or 2) to target a limited number of selected people, whose disappearance would endanger the survival of the group”.
An analysis of demographic statistics undertaken by Ukrainian and foreign researchers indicates that the direct losses to the Ukrainian people as a result of Holodomor 1932-1933 according to some calculations constitute 3-3.9 million people, and according to others – 4-4.8 million.[8].  The largest number of deaths is for the period under consideration (November 1932 – August 1933) since during the period from January to October 1932 tens of thousands died of starvation.
 
In any case the number of people who died of starvation during the period in question is not less than 10% (according to other figures – 15%) of the total population of Ukraine. This percentage of the Ukrainian people is considerable and can be considered as the object of the crime of genocide in accordance with the Convention on Genocide of 1948.
It should be stressed that the secret resolutions of the Central Committee of the All-Soviet Communist Party [Bolshevik] (Item 26) totally changed the policy of Ukrainization and placed the responsibility for the food crisis not only on the peasants, but on the leaders of Ukrainization, marking the beginning of the elimination of Ukrainian national communists.
 
During this period numerous representatives of the cultural, economic and political elite were repressed (cf. Items 39, 40 and 41). This had enormous impact on the development of the Ukrainian people. In describing the group, therefore, we should include not only peasants who died of starvation, but also those who died as victims of political repression.
According to the definition of the International Tribunal for the Former Yugoslavia in the case of Bosnia Herzegovina v. Serbia and Montenegro, an “ethnic group” is “a cultural, linguistic or other clearly marked feature distinguishing a minority, both within the country, and outside it.”[9].
This understanding of “ethnic group” with regard to the position of Ukrainians living in Kuban and the events of 1932-1933 gives grounds for considering Ukrainians of Kuban as an ethnic group which became the object of the crime of genocide. The following arguments provide confirm the justification of this assertion.
Ukrainization of territory with a dense population of ethnic Ukrainians had been the official policy of the USSR. According to the All-Soviet Census of 1938 there were 915 thousand Ukrainians in Kuban, this being 62% of the population. They had generally retained their language and culture.
 
729 thousand of them said that Ukrainian was their native language. In some areas of Kuban Ukrainians made up 80% or even 90% of the population[10], while overall in the North Caucuses there were 3,06 thousand Ukrainians.
The policy of Ukrainization was supported by the Ukrainian population of the North Caucuses Territory. The number of Ukrainian school students studying in Ukrainian schools increased from 12% in the 1928/1929 academic year to 80% in 1931/1932[11]. The cultural-educational policy was developed under the management of the People’s Commissariat for Education of the UkrSSR and of Mykola Skrypnyk directly, and was funded from the Ukrainian State Budget.[12].
 
However the secret resolution of the Central Committee of the Soviet Communist Party from 14 December 1932 put an end to Ukrainization. Ukrainian cultural life in Kuban came under attack: all Ukrainian schools and publishing was now in Russian, newspapers and journals in Ukrainian were closed down, as in fact were many other Ukrainian cultural institutions.
 
Many of the people working in them were repressed as enemies of the Soviet regime (Items 46. 47 and 48). Another secret resolution of the Central Committee of the Soviet Communist Party from 15 December also stopped Ukrainization in other regions where there were dense populations of Ukrainians.

THE ELEMENTS OF THE CRIME OF GENOCIDE

The death from starvation of millions of Ukrainian peasants as well as hundreds of thousands of peasants from Kuban was caused by the following actions of the Party-Soviet-economic leadership of the USSR:

1. The deliberate forced imposition of an unrealistic grain requisition quota from the 1932 harvest, despite the protests from Ukrainian leaders (Item 10);
2.  The passing by  the Central Executive Committee and the Council of People’s Commissars of the USSR [Sovnarkom] of the Resolution  “On the protection of property of State enterprises, kolkhozes and cooperatives, and the consolidation of socialist property” (“The 5 ears of corn law”) (Item 11);
3. The Directive passed by the CC CPU  on 29 October at the initiative of Molotov, and the telegram from Molotov and Khataevych from 5 November on intensifying repressive measures (Items 16 and 17);
4. The Resolutions of the CC CPU from 18 and of the Council of People’s Commissars of the Ukrainian SSR from 20 November “”On measures to increase grain requisitions» prepared by the Molotov Commission (Items 18, 19 and 20) and the resolutions of the politburo of the North Caucasus Territory Committee of the All-Soviet Communist Party (Bolshevik) of Russia, prepared by the Kaganovich Commission which ordered the confiscation of grain previously distributed, and the introduction of fines in kind.
5. The creation of “troikas” and Special Commissions which were given the power to carry out accelerated examinations of “grain cases” and to apply the death penalty (Items 21, 22)..
6. The practice of placing villages and kolkhozes on “black boards” at Kaganovich’s initiative, first in Kuban (through resolution of the politburo of the North Caucasus Territory Communist Party from 4 November  (Item 4), and then in Ukraine (Resolution of the All-Ukrainian Central Executive Committee and the Council of People’s Commissars of the UkrSSR from 6 December, (Item 23)).
7. Blanket searches of peasant’s farmsteads in December 1932 in order to find “squandered and stolen grain” on the basis of the resolutions from 18 and 20 November 1932 (Items 23 and 27), intensification of repression over “grain cases” in Ukraine (Item 28) and  Kuban (Item 45).
8. The secret resolutions of the Central Committee of the Soviet Communist Party from 14 and 15 December on intensifying repression against “saboteurs with Party tickets in their pockets” and stopping Ukrainization in Kuban and other regions with a dense Ukrainian population in the USSR . These resolutions set in motion repression of those Ukrainian communists active in all aspects of Ukrainization. (Items 25 and 26).
9. Deportation to the North of more than 62 thousand Kuban peasants for “sabotage” (Item 44).
10. The Decision of the CC CPU on confiscating seed funds from 29 December 1932, passed under pressure from Kaganovich (Item 27).
11. Stalin’s telegram from 1 January 1933 which demanded that grain be handed over and threatening with repression those who did not comply (Items 29 and 30).
12. The Directive from Sovnarkom and the Central Committee of the Soviet Communist Party from 22 January which imposed a blockade of those starving in Ukraine and Kuban and introduced patrol units at railway stations and roads (Items 32 and 33).
13. Through a government resolution from 17 February 1933, initiated by Khataevych and Postyshev, collection of seeds was carried out through grain requisitions, with a part of what was collected being given to those who confiscated the grain (Item 36)..
14. According to a Resolution of the Central Committee of the Soviet Communist Party from 31 March 1933, initiated by Postyshev, food aid was provided only to those capable of working (Item 37).
15. The political repressions of 1933 against the intelligentsia and those communists linked with Ukrainization, initiated by Postyshev, and the campaign against “”skrypnykovshchyna” [from the name of Mykola Skrypnyk, a key figure in Ukrainization – translator] (Items 39, 40 and 41).
16. The total destruction of all ethnic-cultural forms of existence for Ukrainians in Kuban (Item 48).
In their entirety  the actions listed here mean inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part (Article II (c) of the Convention).  It is also possible to prove that these acts were deliberate. It will similarly be proven that Holodomor 1932-1933 was a crime against humanity since in the given circumstances the death of a significant part of the population took place as the result of the intentional deprivation of access to food (Article 7 – 1.b of the RC ICC).
The course of events which led to genocide can be briefly outlined as follows. After the unrealistic grain requisition quota was not met, Stalin placed the blame for this on the peasants who, in his view, had sabotaged the gathering of the harvest, and on the Ukrainian communists who had encouraged them in this.
 
Party and government decisions were taken demanding that grain be returned, paid for in kind for labour from the next harvest. They also introduced fines in kind and allowed searches aimed at confiscating grain already distributed, as well as encouraging the GPU to intensify political repression through accelerated procedure and the use of the death penalty.
Blanket searches and other punitive measures did not bring the result, and therefore at the beginning of 1933, the peasants received an ultimatum: either voluntarily hand over all grain or be severely punished.  For this searches and fines in kind were merged into one punitive action, with the peasants having all food confiscated.  On 22 January 1933, a blockade was imposed preventing peasants leaving in search of food in areas which were in a better position.
 
This led to mass starvation and the death of millions of people in the villages. At the same time a campaign of political repression was launched against Ukrainian national communists, those linked with Ukrainization. They were blamed for sabotaging the grain requisition quotas and were declared enemies of the people. Ukrainization was stopped, and Ukrainian cultural life in areas where there was a dense Ukrainian population effectively stood still.
Determined and forced russification of Ukrainians resulted in a formal reduction in their number. According to the census of 1937 3 million citizens of the Russian SSR called themselves Ukrainians (as opposed to 7.8 million in the 1926 Census). 
 
With the cessation of Ukrainization the younger generation of Ukrainians lost the possibility of preserving their own ethnic identity. It can therefore be said that in the case of Ukrainians from Kuban children of the group were forcibly transferred to another group (Article II(e) of the Convention.

MOTIVES FOR THE CRIME OF GENOCIDE

The Convention on Genocide does not demand proof of the perpetrator’s motives. At the same time, establishing the motives for why a crime was committed can help determine the criminal intent of the perpetrator of a crime.
The key to understanding the motives for creating an artificial Holodomor can be found in a letter from Stalin to Kaganovich from 11 August 1932.  We quote the relevant extract.
:  […] 3) The most important thing now is Ukraine. The current situation in Ukraine is terribly bad. It’s bad in the Party. They say that, in two regions in Ukraine (Kiev and Dnipropetrovsk, I think) around fifty district committees have spoken out against the grain requisition quota, calling it unrealistic. Things are no better, so they say, in the other district committees. What is this? It’s not a party, but a parliament, and a caricature of a parliament.
 
Instead of managing the districts, Kosior has been manoeuvring between the directives of the Party Central Committee and the demands of the district committees: Now look where he’s ended up. Lenin was right that a person who doesn’t have the courage to go against the tide at the necessary time can’t be a real Bolshevism leader. Things are bad with the soviets. Chubar is no leader. And it’s bad with the GPU.
 
Redens isn’t up to being in charge of the fight against counter-revolution in a republic as large and specific as Ukraine. If we don’t immediately set to straightening out the situation in Ukraine, we could lose Ukraine. Remember that Pilsudski never rests, his espionage capabilities in Ukraine are far stronger than Redens and Kosior realize.
 
And remember too that, in the Ukrainian Communist Party (500 000 members, ha ha !), there are not just a few (no, not a few!) rotten types, conscious and unconscious ‘petliurites’, and also direct agents of Pilsudski. As soon as things get worse, these elements will lose no time in opening up a front within (and outside) the Party, against the Party. The worst thing is that the Ukrainian leaders don’t see these dangers
It can’t continue like this.
It’s necessary:
a) to take Kosior away from Ukraine and for you to replace him, while remaining secretary of the Central Committee of the Soviet Communist Party;
b) after this transfer Balytsky to Ukraine for the post of head of the Ukrainian GPU (or the Authorized Representative of the GPU in  Ukraine, since there isn’t, I don’t think, the post of head of the GPU of Ukraine), while keeping his position as deputy head of the SGPU, and make Redens Balytsky’s deputy for Ukraine;
c) in several months after this replace Chubar with another comrade, say, Hrynko or somebody else, and make Chubar Molotov’s deputy in Moscow (Kosior can be made one of the secretaries of the Central Committee of the Soviet Communist Party;
d) Set ourselves the task of turning Ukraine as soon as possible into a real fortress of the USSR, into a truly exemplary republic. No money should be spared on this.
Without this and similar measures (economic and political consolidation of Ukraine, in the first instance its border raions, and so forth), I repeat, we could lose Ukraine.
The economic and social crisis which gripped the USSR at the beginning of 1932 threatened the Soviet regime. Famine caused by the campaign against kulaks, forced collectivization, bad organization of the kolkhozes, their poverty, the merciless and never-ending confiscation of grain for export so as to pay back foreign debt, resistance from the peasants who didn’t want to recognize the “new serfdom” and work without pay, problems with industrialization, all of these things aroused doubts in the Party and in the correctness of the chosen path, concealed, or sometimes open opposition. An economic crisis could become political.
Some Russian government officials – O. Smirnov, V. Tolmachov, M. Eismont – expressed the view that Stalin was responsible for the failure of grain requisitions, and blamed him. On 27 November 1932 Stalin called a joint session of the Politburo and the Presidium of the Central Committee of the Soviet Communist Party at which he spoke out against Smirnov’s group.
 
He said that anti-Soviet elements had penetrated kolkhozes and sovkhozes in order to organize sabotage and destructive measures, and that a significant percentage of rural communists had the wrong attitude to kolkhozes and sovkhozes.
 
Stalin called for the use of coercion to eradicate sabotage and anti-Soviet phenomena, and stressed: “It would be unwise if communists, , working on the premise that the kolkozes are a socialist form of management, did not respond to the blow inflicted by these particular kolkhoz workers or kolkhozes with a devastating blow”.[13].
The greatest threat to Stalin’s power was in his view Ukraine. He was clearly disturbed by the resistance of the Ukrainian Politburo to the passing of a grain requisition quota and the adoption of the “5 ears of wheat law” (see Items 15, 16 and 17). Stalin was afraid of a union between “petlurites” and Pilsudski, and suspected Ukrainian communists of having connections with the Poles. It is typical that having written “The most important thing now is Ukraine”, he put the words “most important thing” in italics.
 
Stalin was most afraid of losing Ukraine which over the period of Ukrainization had developed its own nationally oriented communist –Soviet elite (Ukrainians made up the absolute majority of the members of the Ukrainian Communist Party) and was trying to get the territories of adjoining regions of Russia and Byelorussia where there was a majority Ukrainian population, for example, Kuban joined to Ukraine.
 
This elite was carrying out an active policy of Ukrainization there, and could generally in the conditions of crisis exercise its rights and declare its withdrawal from the USSR.
The policy of Ukrainization by the end of the 1920s had gone well beyond the boundaries set by the Bolsheviks. Ukrainian national consciousness had by that stage taken on proportions which placed the united structure of the USSR in jeopardy.  Ukraine was endeavouring to carry out autonomous policy, including with regard to international relations.
 
One of the leaders of the CC CPU, Volodymyr Zatonsky, asserted that the first aim of Ukrainization was the consolidation of the Ukrainian SSR as a State organization within the framework of a Union of Soviet Socialist Republics.
 
Such a course of events could not suit Stalin and his henchmen. If the process in Ukraine continued in the same direction, this would significantly influence all processes in the USSR, since Ukraine at that time was a single national and State unit which could stand up to pressure from the Kremlin. For these reasons Stalin went out for direct war against Ukrainian peasants as the social resistance to the State organism.
 
He decided to pay the villages a preventive devastating blow so as to eliminate the threat to his regime. As James Mace very accurately expressed it back in 1982: “Stalin wanted to destroy the Ukrainian people as a political factor and as a social organism[14].  This was the motive of the crime.
Kuban was the second after Ukraine and single region of the USSR where more than two thirds of the population were ethnic Ukrainians. .Of all regions with a dense Ukrainian population, it was the one most under the influence of Ukraine. Kuban was also a centre for Cossacks who were no less favourite targets for Stalin than Ukrainians and were constantly subjected to repression by the Soviet regime.
 
Furthermore, like in Ukraine, there was great resistance to collectivization. It was thus no chance that Stalin considered the Kuban Cossacks to be a source of danger for his power.

INTENT

The definitive element for a crime being classified as genocide according to the Convention is that there was direct intent to eliminate the members of a particular group by virtue of their being part of the group.

 
The actions set down in the provisions of Article II of the Convention clearly demand the presence of certain subject factors, including intent, to make the crime that of genocide: “the actions indicated in Article II must have been committed with intent to eliminate [the defended] group totally or a part of it”.[15]
Did Stalin have the intention to organize an artificial famine? Scholars are divided in their answer to this question. One group of researchers believes that the mass famine was begun deliberately, organized from back in 1930 in order to reduce the vital capacity of the Ukrainian people, turning them into slaves who would meekly work in kolkhozes and not make any encroachments against the Soviet regime.
 
Another group considers that Stalin’s policy was criminal however explains the famine as being caused by a complex political situation, the wish to modernize the economy, and payment of interest on foreign loans. This group denies direct intent to organize an artificial famine and does not agree with the classification of Holodomor 1932-1933 as an act of genocide.
In our view it is not possible to say definitely whether Stalin had a plan in advance for eliminating a part of the Ukrainian peasants by organizing an artificial famine. Here it is useful to apply the approach taken by researcher into famine in the USSR Andrea Graziosi who made a summary of different explanations given for the cause of Holodomor.[16].  He asserts that the famine in the third quarter of 1932 had the same causes as the famine in the first half of 1931 – non-fulfilment of an excessive grain requisition quota.
 
While in October 1932 Stalin took the decision to use famine to destroy the peasants of Ukraine and Kuban who provided the greatest resistance to the “new serfdom”.  For example, all the actions of the Communist Party leadership of the USSR beginning from October 1932 suggest direct intent to organize Holodomor and political repression against those who obstructed these plans.
On 22 October 1932 Stalin gave the Molotov and Kaganovich Commissions special powers with regard to Ukraine and Kuban in order to meet the grain requisition quota.  The decisions adopted by Party and Soviet bodies at the initiative of these commissions (Items 16-22, 43-47) show the intent to deprive the peasants of the grain distributed to them as remuneration for work done, and to confiscate other food (meat, potatoes) by means of blanket searches and fines in kind.
 
Harsh punishments were introduced for peasants and local functionaries (“saboteurs” with Party tickets in their pocket”) who distributed grain to starving peasants for their labour. Hundreds of them were executed and thousands arrested and convicted (Item 28).
Indication of the intention to destroy the Ukrainian “opposition” and place responsibility on it for deliberately organizing famine can be found as well in the plans of OGPU and their implementation. At the end of November 1932, Stalin sent Vsevolod Balytsky from OGPU with special powers to Ukraine.
 
His task, set out in “Operational Order of the GPU of the Ukrainian SSR No. 1” which spoke of “organized sabotage of the grain requisitions and autumn sowing; organized mass-scale thefts in kolkhozes and sovkhozes; terror against the most steadfast and consistent communists and activists in the village;  the deploying of dozens of petlurite emissaries; the distribution of petlurite leaflets” in Ukraine.
 
From this it drew conclusions regarding “the undoubted existence in Ukraine of an organized counter-revolutionary, insurgent underground which has links abroad and with foreign intelligence services, mainly, the Polish military headquarters”.
 
The order ended by setting out the task: “the basic and main task is an urgent breakthrough, uncovering and crushing the counterrevolutionary insurgent underground and inflicting a decisive blow against all counterrevolutionary kulak-petlurite elements which are actively opposing and sabotaging the main measures of the Soviet regime and Party in the villages.”[17]. 
 
In Operational Order No. 2 from 13 February 1933 of the GPU of the Ukrainian SSR, Balytsky was already summing up the implementation of Stalin’s Order: operational activist group No. 2 “has uncovered a counter-revolutionary, insurgent underground in Ukraine which covered up to 200 raions, around 30 railway stations and depots, a number of points on the border zone.
 
In the process of liquidating it, its link was established with foreign Ukrainian nationalist centres (UNR, “UVO”, UNDO) and the Polish Military Headquarters.[18]   This meant that OGPU was provided with a ready strategy for uncovering artificially organized counter-terrorist organizations.
Stalin’s awareness that “the national issue is in essence a peasant issue”[19],prompted him to solve both the national and the peasant problems together. A plan was set in motion for destroying the national political elite, the representatives of which were accused of being in conspiracy with peasant saboteurs (see Stalin’s letter to Kaganovich from 11 August 1932).
 
On 14 and 15 December 1932, the Politburo of the Central Committee of the Soviet Communist Party passed two secret resolutions (Items25, 26, 47, 48), which brought in special national policy with regard to Ukrainians (it did not apply to other ethnic groups). According to these resolutions, responsibility for the food crisis was placed not only on the peasants, but also on the Ukrainian political elite.
On 20 December 1932, at Kaganovich’s suggestion, the Politburo of the CC CPU, passed a decision to seek an increase in supplies of grain for which on 29 December an order was issued to hand over all kolkhoz funds, including the seed fund (Item 27). None of this can be described as anything else but as deliberately depriving the peasants of their last reserves of grain they owned.
On 1 January 1933 a telegram was sent from the “leader, teacher and friend of all peasants” (Item 29). It was made up of two points, the first being that those who voluntarily handed over to the State “previously stolen and hidden grain” would not face repression. The second point stated that those who continued to hide it would face the harshest forms of punishment. 
 
All grain which was not recorded had to be handed over. If they didn’t hand it over there would be a search. If they found grain, the punishment was the death penalty or 10 years imprisonment. If they didn’t find it, they would take away, as a fine, other foodstuffs.
 
Stalin’s telegram resulted in the merging of searches and fines in kind. Furthermore, Stalin had been informed about the results of previous searches (Item 27) and knew that there was no grain in the villages, and that the requisition quota could not be met. This was his “devastating blow”[20], which demonstrates the intention to remove food from the peasants in order to organize famine.
A Directive from Sovnarkom and the Central Committee of the Soviet Communist Party from 22 January 1933 prohibited the exodus of starving peasants to other regions in search of food. This must also be viewed as deliberate acts aimed at depriving the starving of their last options for finding food for their families.
The political repressions of 1933 (Items 39, 40 and 41) in their turn demonstrate the intention to destroy the political and intellectual elite of the republic.
The intention to destroy the peasants through starvation was reflected in the words of the Second Secretary of the CC CPU Mendel Khatayevych from 1933: “A fierce struggle is waging between the peasants and our regime. This is a fight to the death. This year has become the test of our strength and their resilience. The famine has proved to them who is boss. It cost millions of lives however the kolkhoz system will last forever. We’ve won the war!”[21]

THE PERPETRATOR OF THE CRIME 

The main organizer and ideologue of the genocide was Joseph Stalin himself. Three of his hendhmen – Lazar Kaganovich, Viacheslav Molotov and Pavlo Postyshev – were the direct organizers of Holodomor in Ukraine and in Kuban. It was carried out also by the Party – State apparatus of the All-Soviet Communist Party (Bolshevik) Party, the Communist Party (Bolshevik) of Ukraine and the North Caucuses Territory Committee of the All-Soviet Communist Party (Bolshevik) Party (Stanislav Kosior, Vlas Chubar, Mendel Khatayevych, Boris Sheboldaev, Anastas Mikoyan)  and the repressive-punitive bodies of the OGPU and GPU of the UkrSSR (Vsevolod Balytsky, Henrikh Yagoda, Stanislav Pedens) and the courts.

Thousands of local activists, members of committees of poorly-off peasants directly implemented Party-State decisions regarding searches and confiscation of grain and other food.
As follows from the conclusion of the International Criminal Tribunal for Rwanda of 1998 – “the offender is considered guilty since he knew or should have known that the acts he committed would destroy in part or totally the group”.[22] –  Stalin and his henchmen should be considered guilty of genocide.
 
They knew of the size of the harvest, knew and understood the consequences of confiscating food and preventing peasants from leaving regions gripped by famine.

THE CONSEQUENCES OF HOLODOMOR 1932-1933

The consequences of Holodomor 1932-1933 were terrible. They concern “the dead, the living and those unborn” {Taras Shevchenko). Besides millions who died of starvation or who were not born, which in itself had considerable impact on the genofund and development of the Ukrainian people, Holodomor had a devastating effect on those who survived it.

 
It adversely affected their level of social and political activeness and instilled fear of the authorities. The historical memory and the psychology of those who survived 1932-1933 were ravaged by memories of cannibalism, denunciations of neighbours etc. The tragic events are to this day reflected in the psychological makeup of their descendants.
Holodomor and the destruction of the Ukrainian intelligentsia, the elite, which were taboo subjects right up to the end of the1980s, disrupted the intellectual and cultural development of the Ukrainian nation, led to a loss of identity and common values. The tragedy of Holodomor also resulted in an unrecognized inferiority complex for a large number of Ukrainians.
Ukraine’s post-genocide society badly needs conscience at rest, liberation from psychological complexes, freedom from fear. This is impossible without public recognition that Holodomor was a crime, and this should be at a legal level. 
 
This is the moral duty of the nation before those who perished. It is vital for the restoration of historical justice, and for the strengthening of the Ukrainian people’s immune system against political repression, violence and unwarranted State coercion.
We would note also that the European community insists upon the investigation and condemnation of the crimes of totalitarian regimes. The Resolution of the Parliamentary Assembly of the Council of Europe 1481 (2006) “The need for international condemnation of Holodomor in Ukraine in 1932-1933” states:
“The fall of totalitarian communist regimes in central and eastern Europe has not been followed in all cases by an international investigation of the crimes committed by them. Moreover, the authors of these crimes have not been brought to trial by the international community, as was the case with the horrible crimes committed by National Socialism (Nazism).
Consequently, public awareness of crimes committed by totalitarian communist regimes is very poor. Communist parties are legal and active in some countries, even if in some cases they have not distanced themselves from the crimes committed by totalitarian communist regimes in the past.
The Assembly is convinced that the awareness of history is one of the preconditions for avoiding similar crimes in the future. Furthermore, moral assessment and condemnation of crimes committed play an important role in the education of young generations. The clear position of the international community on the past may be a reference for their future actions.
Moreover, the Assembly believes that those victims of crimes committed by totalitarian communist regimes who are still alive or their families, deserve sympathy, understanding and recognition for their sufferings.”

THE OPTIONS FOR LEGAL CLASSIFICATION OF

HOLODOMOR 1932-1933 AS GENOCIDE 

We have endeavoured to demonstrate that the famine in Ukraine of 1932-1933 has all the necessary elements of a crime against humanity in accordance with the Rome Statute of the International Criminal Court of 1998  and of genocide according to the Convention on the Prevention and Punishment of the Crime of Genocide of 1948.  The object, subject, event and makeup of the crime of genocide have been established, as well as its motive and the direct intent to commit this crime. 

 
Can one however apply the provisions of these international agreements with regard to events in Ukraine 1932-1933, and in keeping with them classify Holodomor 1932-1933 as a crime against humanity and act of genocide? Do these international agreements have retroactive force in the given case?
 
The following questions arise:
 
1) whether there are punishable acts which were not at the formal juridical level previously recognized as offences or crimes;
 
2) whether there is no time limit for criminal prosecution over crimes committed in 1932-1933.
Pursuant to Article 7 – 1 of the European Convention on the Protection of Human Rights and Fundamental Freedoms (1950), “No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed”.
 
This fundamental principle is enshrined in the first paragraph of Article 15 of the International Covenant on Civil and Political Rights. The second paragraphs of these same articles of both the Convention and the Covenant states that offences shall be punishable if at the time they were committed, they were considered crimes “according to the general principles of law”.
 
For example,  Article 7 – 2 of the 1950 Convention reads that: “This article shall not prejudice the trial and punishment of any person for any act or omission which, at the time when it was committed, was criminal according the general principles of law recognized by civilized nations.”
 
On the basis of this provision, some researchers have concluded that the Convention on Genocide can have retroactive force. Certainly mass extermination of people, later called genocide, like other crimes against humanity, was classified as a crime by civilized nations earlier as well. 
 
Moreover, according to the UN Convention on the Non-Applicability of Statutory Limitations to War Crimes and Crimes against Humanity of 1968, no statutory limitations apply to the crime of genocide. This means that any statutory limitation set down in law, does not apply to judicial prosecution and punishment for war crimes and crimes against humanity
Other lawyers reject the possibility of applying the Convention on Genocide with respect to events which took place before it came into effect. They consider that the commitments taken on through the UN Convention of 1968 to not apply statutory limitations in the case of crimes against humanity, including genocide, do not indicate retroactive force at the time of the 1948 Convention, and that application of Article 7 – 2 of the European Convention and Article 15 – 2 of the Covenant on Civil and Political Rights is not possible since the international community had still not recognized such acts as a crime at that time.
 
Furthermore, according to Article 58 of Ukraine’s Constitution “No one shall bear responsibility for acts that, at the time they were committed, were not deemed by law to be an offence”.  The Criminal Code of the Ukrainian SSR of 1927 did not include genocide among criminally liable acts. The word “genocide” did not then exist, it being suggested for use by the author of the Convention on Genocide Raphael Lemkin in 1944..
These lawyers also point out that pursuant to Article 3 – 3 of the Ukrainian Criminal Code of 2001, “the criminality of actions, as well as whether they are subject to punishment and other criminal-legal consequences, are determined by this Code”.  According to Article 4 – 2 of the Criminal Code which regulates issues regarding the force of the law on criminal liability in time, the criminality and liability of an action are determined by the law on criminal liability which was in force at the time the act was committed.

The principle prohibiting retroactive force of a law which establishes criminal liability is one of the fundamental principles of law. This principle is enshrined in Article 28 of the UN Conference on the Law of Treaties (Vienna 1969), according to which “Unless a different intention appears from the treaty or is otherwise established, its provisions do not bind a party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the treaty with respect to that party”.

The Convention on Genocide of 1948 does not contain provisions regarding its own retroactive force, which does not make it possible to apply it for recognizing as genocide actions committed before it came into effect.  The 1948 Convention can thus not be applied for classification of Holodomor 1932-1933 as genocide.

One can conclude that the issue around whether there can be retrospective application of the Convention on Genocide of 1948 remains in dispute. However the Convention can always be used to provide a historical assessment of certain events.
 
Such an assessment was given by the Verkhovna Rada which “recognizing Holodomor 1932-1933 in Ukraine in accordance with the UN Convention from 9 December 1948 on the Prevention and Punishment of the Crime of Genocide as a deliberate act of mass destruction of people; passed the Law “On Holodomor 1932-1933 in Ukraine “. Article 1 of this Law recognizes Holodomor to have been genocide of the Ukrainian people.
Holodomor 1932-1933 was condemned by 64 member-states of the UN in a joint declaration from 7 November 2003, by member – states of OSCE in a joint declaration from 3 November 2007 and by UNESCO on 1 November 2007 in its Resolution “On Remembrance of victims of Holodomor 1932-1933 in Ukraine”.
Holodomor 1932-1933 has been recognized as an act of genocide by the parliaments of Australia, Canada,  the Czech Republic, Columbia, Ecuador, Estonia, Hungary,
On 3 July 2008 the OSCE Parliamentary Assembly passed a  Resolution “Holodomor 1932-1933 in Ukraine” which states that “Recalling that the rule of the totalitarian Stalinist regime in the former USSR had led to tremendous human rights violations depriving millions of people of their right to live, … The OSCE Parliamentary Assembly: pays tribute to the innocent lives of millions of Ukrainians who perished during the Holodomor of 1932 and 1933 as a result of the mass starvation brought about by the cruel deliberate actions and policies of the totalitarian Stalinist regime … Strongly encourages all parliaments to adopt acts regarding recognition of the Holodomor”. .
On 21 November 2007 the President of the European Parliament Hans-Gert Poettering made a statement about Holodomor 1932-1933 in Ukraine. He called for remembrance of Holodomor and stated  that the famine, which had taken the lives of 4-6 million Ukrainians during the winter of 1932-1933 had been cynically and cruelly planned by Stalin’s regime in order to force through collectivization against the will of rural people in Ukraine. “Today we know that the famine, known as Holodomor, was in reality a terrible crime against humanity,” Mr Poettering said.
The Parliamentary Assembly of the Council of Europe has included on its agenda consideration of a report on the issue of condemning Holodomor as a crime of the totalitarian regime in Ukraine and in other regions of the former USSR.
 
The PACE Political Committee on 26 June 2008 appointed a rapporteur on this issue – PACE Vice President Alexander Biberaj (Albania). Two years have been set aside for preparation of the report, however Alexander Biberaj expects to complete it much earlier.
The above-mentioned facts demonstrate the attention of the world community to Holodomor 1932-1933 and the understanding of the need for a legal qualification of Holodomor as a crime against humanity and the crime of genocide. 
 
For this it would be possible to amend the Convention on Genocide of 1948, by adding a provision about the retrospective force of the Convention with respect of events which took place from the beginning of the twentieth century. Crimes of the totalitarian regimes in the twentieth century, in the first instance of the communist regime in the USSR, require legal assessment, condemnation and punishment.
 
There are also other reasons for introducing amendments to the Convention. Its scope is too narrow to respond adequately to the tempestuous events of the second half of the twentieth century. We would point out that the signing of the Convention in its present form was a compromise between Western governments and the USSR whose representative insisted on removing victims of “political groups” from the list of victims. It was criticized by scholars for this almost immediately after its signing, as well as for its concentration of the purely physical side of violence.
The domestic legislation of some countries has gone further in defining genocide. For example, the 1991 French Criminal Code adds to the groups listed in the Convention “a group defined on the basis of any other normative criterion”.[23].
 
With respect to this it is worth recalling the comments from the author of the Convention Raphael Lemkin, who a short time before its adoption, noted that “Generally speaking, genocide does not necessarily mean the immediate destruction of a nation, It is intended rather to signify a coordinated plan of different actions aiming at the destruction of essential foundations of the life of national groups, with the aim of annihilating the groups themselves.”[24].
Another approach to achieving a legal classification of Holodomor 1932-1933 would be in the founding of a special International Tribunal for the legal classification of the famine of 1931-1933 as a crime of the totalitarian regime of the USSR (analogous to the International Nuremberg Tribunal set up in 1945, the International Criminal Tribunal for the Former Yugoslavia, established in 1993 and the International Criminal Tribunal for Rwanda from 1994).
 
This approach seems more realistic than making amendments to the 1948 Convention. The creation of an International Tribunal for the legal classification of the famine of 1931-1933 as a crime of the communist regime of the USSR could be approved by inter-state organizations – the UN, the Council of Europe, OSCE.
An international tribunal, if created, should use the results of the US Congress Commission on the Ukrainian Famine 1932-1933 led by James Mace, the International Commission on the Crimes of the Famine 1932-1933 in Ukraine, headed by Jacob Sandberg, archival documents and testimony of victims and witnesses of Holodomor gathered since Ukraine gained independence.
It should be especially stressed that although the Russian Federation is the successor to the USSR, the modern Russian State is not responsible for the crimes of the totalitarian regime of the USSR. The Russian people were victims of these crimes together with the Ukrainian, Kazakh and other peoples, as well as social and political groups.

GENERAL CONCLUSIONS 

1. The deaths of tens of thousands of people from starvation in Ukraine from January – October 1932 were as a result of a crime against humanity organized by the Party-Soviet leadership of the USSR.

2. The death of millions of people in Ukraine from starvation and political repression during the period from November 1932 to August 1933 corresponds to the definition of genocide in the UN Convention on the Prevention and Punishment of the Crime of Genocide, adopted on 9 December 1948, in particular Article II (c) “Deliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part”.
3. The deaths of hundreds of thousands of people from starvation and political repression in Kuban during the period from November 1932 to August 1933 corresponds to the definition of genocide in the UN Convention from 9 December with respect to Article II (c) “Deliberately inflicting on the group conditions of life calculated to bring about its physical destruction in whole or in part” and (e) “forcibly transferring children of the group to another group”. .
4. Holodomor was the result of deliberate and systematic action by the totalitarian Soviet regime for which there is documentary evidence which was aimed at “the destruction of the Ukrainian  people as a political factor and as a social organism” (James Mace).
5. The terrible consequences of Holodomor 1932-1933 require legal classification of Holodomor as a crime of the totalitarian regime of the USSR.
6.  Some researchers believe it possible to apply the UN Convention on the Prevention and Punishment of the Crime of Genocide, adopted on 9 December 1948, to make a legal classification of Holodomor 1932-1933 as the crime of genocide, while others deny this. The issue has yet to be finally resolved.
7. In order to establish the legal classification of Holodomor as a crime, it is proposed that an International Tribunal be set up to make a legal classification of the famine of 1931-1933 as a crime of the totalitarian regime of the USSR.  The decision to create such a tribunal could be approved by inter-state organizations – the UN, the Council of Europe, OSCE.

APPENDIX

BRIEF DESCRIPTION OF THE HISTORICAL FACTS 1930-1933

THE 1930 HARVEST 

1. The requisition quota for 1930 for Ukraine was set in April 1930 at 440 million poods (this despite the fact that the Ukrainian Grain Centre was expecting a harvest of 425-430 million poods),and in September was increased to 472 million poods. However this quota could also not be met since there were already no grain reserves in the villages.
 
On 27 January 1931 the Politburo of the Central Committee of the All-Soviet Communist Party (Bolshevik) [hereafter Politburo] stated that the villages owed 34 million poods. Stalin reduced the debt to 25 million poods and ordered the Central Committee of the Communist Party of Ukraine (hereafter CC CPU) to declare February a month of accelerated grain requisitions and to fulfil the quota[25].
2. Sowing began, yet the previous year’s quota could still not be met. At the beginning of May V. Molotov reported that the harvest quota for 1930 was returning to the previous figure of 490 million poods (“geeing up”). The leadership of the republic was forced to recommence a requisition campaign for the previous year’s grain.
 
After taking away all grain reserves, Ukraine achieved the previous version of the quota which in February 1931 seemed unattainable. By June 1931, in the agricultural sector (kolkhozes and independent farmers) 393 million poods from the 1930 harvest had been gathered, and in all for the republic – 471 million poods. This was 167 million poods more than the figure for 1929.[26]

THE 1932 HARVEST. THE FIRST WAVE OF FAMINE 

3.  In the requisition quota for 1931 even more demands were imposed on Ukraine. The agricultural sector was set a quota for 434 million poods, i.e. 41 million poods more than the amount of grain actually handed over for 1930.  The overall requisition quota was set at 510 million poods.

 
At the end of 1931 this quota had only been 79% met[27]  Molotov was sent to Kharkiv to intensify the requisition process.  As the reports of the Party leaders indicate, this “intensification”, in accordance with Molotov’s directives and the Resolution of the CC CPU from 19 December 1931 turned into searches by local activists to confiscate “grain squandered or stolen from kolkhozes”.
 
Until the quota was fulfilled, kolkhoz workers could not receive grain for their labour therefore any grain found in a peasant’s home was a priori considered squandered or stolen.[28]  However the grain was confiscated regardless of whether the kolkhoz workers had fulfilled their obligation to the State. The requisition quota could still not be achieved. As of 25 June 1932 the quota was only 86.3% met.[29]
4. The confiscation of grain during the first half of 1932 resulted in hunger which in some regions turned into real famine. A similar situation was seen in other agricultural regions of the USSR, however in Ukraine the famine was on a wider scale since the quota, being more excessive, was achieved to a worse extent and therefore considerably more pressure was brought to bear. 
 
Tens of thousands died in this famine. In 1931-1932 it was only in Kazakhstan that the famine was on a greater scale. There hundreds of thousands of people died.
5. A large number of peasants left their villages in search of food. As of the middle of July 1932, according to OGPU figures in some rural areas of Ukraine up to half of the population had left. 116 thousand peasants had left 21 raions[30]. 
 
If you extend this figure to cover the entire number of raions – 484, then the approximate number of peasants fleeing starvation would be around 2 million, 700 thousand. This migration elicited strong irritation among the Soviet Party leaders, however at that time they did not obstruct wide-scale moves in search of food.
6. We can cite testimony about the situation with starvation in the countryside. In April 1932 the Deputy People’s Commissar of Agriculture in the USSR A. Hrynevych arrived in the Zinovyevsky raion (now the Kirovohrad region) in order to see how the sowing was getting on. 
 
In a reporting note to the People’s Commissar Y. Yakovlev he says that the raion has been 98% collectivized, since 1 January 28.3 thousand peasants have left, including all the qualified tractor drivers (the total population of the raion was about 100 thousand). Those who’ve remained are mostly going hungry with kolkhoz workers’ grain having run out back in March, and there are cases of people bloated from starvation. 
 
Within the raion several dozen food points for the children of kolkhoz workers have been organized. Those working in the field have State assistance of 200 g. of bread a day, with tractor drivers having 400 g.  The supply of food stuffs for providing food aid to the population among raion organizations was exhausted by 5 May.
 
The productive forces of the raion are so undermined that the raion will not be able to cope with harvesting the grain without assistance in the form of forage for the cattle and food for the kolkhoz workers, without purchasing draft animals, without the provision of tractors and loading vehicles.[31].
7. Worrying about the fate of the future harvest of 1932, the State began providing assistance in the form of seeds, forage and food grain o the countryside which was starving as the result of its policy.  On 6 March 1932 the grain requisitions campaign was halted.
 
At the end of April 15 thousand tonnes of maize and 2 thousand tonnes of wheat intended for export were returned from ports.  9.5 million poods of grain were purchased from China, Persia and Canada for the needs of the Requisitions Committee.[32] 
 
At the end of May 1932 those starving began receiving dried fish, sardelle, cereals, and other food products. Stalin, however, considered that “Ukraine has been given more than it should get” (from a letter to Kaganovich from 15 June).[33]  On 23 June the Politburo passed a decision to stop the supply of grain to Ukraine.[34].
8. Stalin’s irritated reaction and the decision of the Politburo of 23 June were in total contradiction to the conclusions in the letters from Petrovsky and Chubar to Molotov and Stalin on their impressions from travelling about raions in the republic. Both letters reached the Kremlin on the same day – 10 June.[35] 
 
Hryhory Petrovsky wrote that the CC CPU was to blame for having unconditionally agreed to a requisition quota of 510 million poods of grain that was unrealistic for the republic. Meeting this quota had caused starvation and many villages were still gripped by famine.
 
Petrovsky warned that there was still a month or 6 weeks to the new harvest and in that time the famine would intensify unless the State provided the villages with more food aid. Vlas Chubar in his letter pointed out that at the beginning of June at least 100 raions were in need of food aid (against 61 at the beginning of May).
 
Due to the severe situation of these raions the sowing campaign was not being carried out satisfactorily. Chubar asked for the republic to be provided with at least 1 million poods of food cultures as aid. He suggested rejecting a quantitative extension of the tasks and basing themselves on qualitative indicators.
9. Stalin reacted to Chubar and Petrovsky’s letters in a letter to Kaganovich from 15 June in the following way: “The first is trying on “self-criticism” so as to get new millions of poods of grain from Moscow, the other is playing self-righteous, and sacrificing himself to the “directive” of the Central Committee of the Communist Party” so as to get a reduction in the grain requisition quota. Both the first and the second are unacceptable.””[36]. The Ukrainian village in 1932 once again faced an unrealistic quota and new waves of famine.

THE HARVEST OF 1932: THE SECOND WAVE OF FAMINE 

10. The new grain requisition quota from the harvest of 1932 for Ukraine was approved on 6 July at the III All-Ukrainian Party Conference at 356 million poods, 40 million poods less than from the 1931 harvest. Yet this quota was also beyond the capacity of the republic’s weakened agricultural economy. On the eve of the conference, the Politburo of the CC CPU demanded that Molotov and Kaganovich who had been sent by Stalin to Kharkiv reduce the quota.
 
The Ukrainian communists also tried in vain to influence Molotov and Kaganovich during the conference. For example, Mykola Skrypnyk directly said that in the villages of Ukraine everything that could be taken had already been taken away.
 
Yet Molotov and Kaganovich declared that “there will be no concessions, no vacillation in implementing the tasks imposed on Ukraine by the Party and Soviet government”[37]  and that the party forces must mobilize to fight losses and squandering of grain”[38].  The Ukrainian Party leadership gave in and the quota was passed.
11. In July 1932 2 million poods of grain from the new harvest was requisitioned (against 16.4 million poods in July 1931). The leadership of the Soviet Communist Party was convinced that the peasants were stealing grain.
 
In response and on Stalin’s initiative, on 7 August 1932 the Central Executive Committee and the Council of People’s Commissars of the USSR [Sovnarkom] passed the Resolution  “On the protection of property of State enterprises, kolkhozes and cooperatives, and the consolidation of socialist property” which was known among the population as the “5 ears of corn law”.
 
This imposed the death penalty for theft of kolkhoz and cooperative property – execution (by shooting) and confiscation of all property. For “mitigating circumstances” execution could be commuted to a sentence of no less than 10 years.
12. After the publication of this resolution the “Pravda” editorial office, together with the Communist Party local machine organized a mass-scale two week raid aimed at fighting thefts of grain in which 100 thousand “press udarniki” [udarnik was the term for ultra-productive and enthusiastic workers – translator].  They searched for an “underground wheat city”, but in vain, since they found nothing.[39].
 
At the same time Stalin understood that he had forced the Ukrainian leadership to take on a clearly unrealistic grain requisition quota. On 24 July, in a letter to Kaganovich and Molotov, he wrote that overall the position of unconditional fulfilment of the quota was correct, but that it would be necessary to make an exception for “particularly affected raions of Ukraine”.
 
However he preferred to announce the reduction of the quota later “so that the sowing of winter crops will be more energetic”[40].  And the peasants didn’t want to work in the sovkhozes, rightly considering that they would again receive nothing for their labour.
13.  In the third quarter of 1932 starvation continued in Ukraine’s villages. This is demonstrated, for example, in the statistics for mortality recorded in registrar offices. For the period from March to June they recorded 195,411 deaths, while from July to October the number was 191,105.[41].  In order to escape starvation, the kolkhoz workers even resorted to such measures as uncovering mouse burrows.
 
Workers from the “Peremoha” [“Victory”] Kolkhoz in the Barvinkovsky raion of the Kharkiv region through superhuman efforts uncovered mouse burrows over an area of 120 hectares. As a result they received 17 centners of good-quality grain. Each burrow had between 2 and 6 kilograms of wheat.[42]. 
14. The August “assault” on Ukraine’s villages gave the State 47 million poods of grave, and in September they squeezed out another 59 million. As of 5 October from 23,270 kolkhozes only 1,403 had met the requisition quota. After staff changes in the Ukrainian local leadership and the plenum of the CC CPU, on 12 October 1932 the entire Party organization was mobilized for the gathering of the harvest. Nevertheless, the year’s requisition quota had been 39% met as of 25 October.[43].
15. Not wishing to admit that his policy of the “first commandment” and “geeing up” had not worked, Stalin laid all the blame for the failure of the grain requisitions on the peasants who had supposedly sabotaged the collection of the grain. He considered that through the use of ever more force the harvest could be gathered. For this he decided to send committees with special powers to the main agricultural regions of the country.
 
On 22 October 1932 the Politburo passed a decision to send the Molotov Commission to the Ukrainian SSR for 20 days, and the Kaganovich Commission to the North Caucasus Territory. The commissions set off at the end of October.

THE ACTIVITIES OF THE MOLOTOV COMMISSION 

16. On 29 October 1932 at a session of the Politburo of the CC CPU, together with the first secretaries of the regional committees of the Party, the Commission reported that the Kremlin had agreed to a reduction of the quota.  On 30 October the final quota task divided up into regions, sectors and grain cultures was passed. The Ukrainian SSR had to provide 282 million poods of grain: the kolkhozes 224.1 million, independent farmers – 36.0 million, and sovkhozes – 21 million poods.
 
At the same time, Molotov managed to get a directive passed by the CC CPU on increasing help from the justice bodies to those carrying out the grain requisitions. The courts were ordered to examine this category of case first during outreach sessions at local level and applying harsh repressive measures.[44].
17.  On 5 November Khataevych and Molotov sent secretaries of the regional committees of the Party a telegram with the following: “In reports from the regional bodies of the OGPU there are a lot of accounts of theft, criminal squandering and concealment of kolkhoz grain with the participation and under the leadership of the kolkhoz management, including some communist members who are in fact kulak agents who are dividing the kolkhozes. Despite this, the Central Committee of the CPU does not know what the regional committees are doing to fight this phenomenon.
 
Noting the unacceptable inaction of the courts and prosecutor’s office and the passivity of the press with regard to the relevant specific facts, the CC CPU categorically demands that regional committees take immediate and decisive measures to fight this phenomenon with mandatory and swift undertaking of judicial repression and merciless punishment of criminal elements in the kolkhoz management on the basis of the well-known decree on the protection of public property, with coverage of these facts in the press and issuing of decisions of kolkhoz meetings which condemn these facts.”[45].
18.  On 18 November 1932 the CC CPU and on 20 November the Council of People’s Commissars of the Ukrainian SSR passed resolutions with the same name “On measures to increase grain requisitions” prepared by the Molotov Commission. These resolutions demand that the grain requisition quotas be met by 1 January 1933 and that seed funds be created by 15 January 1933.
 
It is prohibited to spend the natural funds created in kolkhozes which have not settled with the State.  The district executive committees must immediately check these funds and appoint people in cooperatives responsible for their preservation.
 
The district executive committees were given the right to count all natural funds of the kolkhoz as part of the grain requisition quotas. And those kolkhoz debtors who issued advances for people’s labour or for public food over the established norm (15% of the actual amount threshed) had to immediately organize the return of “unlawfully issued grain” in order to direct it towards meeting the quota. 
 
The district executive committees were instructed to organize the confiscation from kolkhozes, those not part of a collective and workers of sovkhozes grain stolen when cutting, threshing or transporting. In order to crush sabotage in the management ranks, it was required that accountants, bookkeepers, storekeepers, managers etc be held to answer if they concealed grain from the inventory, on the basis of the resolution from 7 August 1932, as thieves of State and public property.[46].
19. In Item 9 of the Resolution of the Council of People’s Commissars of the Ukrainian SSR of 20 November it is stated that “With respect to kolkhozes that have allowed the theft of kolkhoz grain and maliciously sabotage the grain requisition quota, fines in kind are applied in the form of an additional quota from the meat requisitions of the size of the 15-month norm of the meat task for the given kolkhoz, both of the common cattle, and that of the kolkhoz workers.[47]. 
 
The Party resolution duplicated this item, however added to it the following: “In kolkhozes which do not satisfactorily meet the grain requisition quota, with regard to kolkhoz workers who have grain sown on their garden plots, all grain which they get from these garden plots as natural issue for labour with the removal of the excess of grain handed over to fulfil the grain requisition quota”[48]. 
 
The Party resolution included yet another item not in the government’s resolutions: those farming not in a collective who did not meet their grain quotas could be fined by the imposition of extra demands not only from the meat requisitions of the 15 month norm, but also from potatoes (the annual norm).[49].
20.  Furthermore, the resolution further pushed the idea that there was grain and that it was communist saboteurs and former petlurites who were obstructing implementation of the quota.
 
“Since a number of agricultural party organizations, especially during the period of cattle requisitions there has proved to be unity between whole groups of communists and some leaders of party branches with kulaks, petlurites, etc which in fact turns such communists and party organizations into agents of the class enemy and is clear proof of how far removed  these branches and communists are from the poor and middle-level kolkhoz masses, the Central Committee and the Central Controlling Commission decrees that a purge be carried out immediately of a number of village party organizations which are clearly sabotaging the implementation of the grant requisition quotas and are undermining fact in the Party among the workers.”[50].
21. On 21 November Molotov, Chubar, Stroganov and Kalmanovich addressed a request to Stalin to provide the CC CPU, as represented by a special commission (the General Secretary of the Central Committee, the Head of the GPU of the UkrSSR, and a representative of the Central Controlling Committee) for the duration of the grain requisitions with the right of decision with regard to using the death penalty. The Special Committee of the CC CPU needed only to report once every 10 days before the Central Committee of the CPSU on its decisions in these cases.[51].
22. Similar commissions at the regional (oblast) level, made up of the First Secretary of the regional committee, the head of the regional division of the GPU and the regional prosecutor were created in order to accelerate the repressions in accordance with the Resolution of the CC CPU from 5 December 1932. 
 
The courts had to consider cases within 4-5 days under the direct leadership and surveillance of the commission[52]. Analogous “troikas” and Special Commissions were created in regional divisions of the GPU (Order of the GPU UkrSSR from 11 December 1932).

HOLODOMOR 1932-1933 IN UKRAINE 

23. In order to force the peasants to give up their grain, the Party bosses made examples of villages which for a long time could not settle with the State, putting them on the so-called “black board”. This term was first used in Kaganovich’s diary during his visit to Kuban. It entailed closure of all State and cooperative shops with the confiscation of all reserves, total ban on trading, kolkhoz or private, a purge of counter-revolutionary and kulak elements and ban on leaving the village.[53].

 
The idea was supported in Ukraine and already on 6 December 1932 a resolution of the All-Ukrainian Central Executive Committee and the Council of People’s Commissars of the UkrSSR placed six villages on the black board, while local authorities applied this against 400 villages.
24. Despite the exceptional measures, the rate of grain requisitions fell. As S. Kosior wrote to Stalin on 8 December 1932, the hay threshing had ended almost everywhere, and therefore the Ukrainian Party organization should be redirected “towards uncovering concealed, wrongly issued and stolen grain”[54]. 
 
Grain could be taken from kolkhoz workers or independent farmers either through searches or repression. Kosior considered the best means to be repression in the form of “fines in kind” (“a kolkhoz worker and even an independent farmer is now holding tight to a cow or pig”) or depriving them of their garden plots[55].
25. Displeased with the activities of the Ukrainian and Kuban leaders, Stalin subjected them to severe criticism at a meeting of the Politburo on 10 December 1932.  On 14 December a secret resolution of the Central Committee of the Soviet Communist Party and Sovnarkom “On grain requisitions in Ukraine, North Caucuses and in the Western Region” was passed.  This changed the deadline for fulfilling the grain requisition quota for Ukraine to the end of January, and in the North Caucasus Territory to 10-15 January.  
 
The resolution again asserted that as the result of the poor work of the Party leadership, former kulaks, officers, petlurites, etc had penetrated the kolkozes and were trying to organize “a counterrevolutionary movement and the sabotage of the harvest and sowing campaigns”. 
 
The Central Committee of the All-Soviet Communist Party and Sovnarkom issue the order “to resolutely extirpate these counterrevolutionary elements by means of arrests, long-term deportation to concentration camps, without stopping short of capital punishment for the most malicious of these elements”. 
 
The Resolution also stated that “the worst enemies of the party, working class, and collective farm peasantry are saboteurs of grain procurement who have party membership cards in their pockets” and ordered that they apply “severe repressions, five- to ten-year deportation to concentration camps, and, under certain circumstances, execution by shooting”[56].
26. The Central Committee Resolution of 14 December 1932 sharply criticized the policy of Ukrainization. It asserted that it “was carried out mechanically, without taking into consideration the peculiarities of every raion and meticulous selection of the Bolshevik cadre. This made it easier for bourgeois-nationalistic elements, Petliurites and others to create their legal cover-ups and counterrevolutionary cells and organizations”. 
 
The Central Committee and Sovnarkom suggest “paying serious attention to the correct implementation of Ukrainization, eliminating its mechanical implementation, expelling Petliurite and other bourgeois-nationalistic elements from Party and government organizations, meticulously selecting and raising Ukrainian Bolshevik cadre, and ensuring systematic Party management and supervision over Ukrainization”[57]. 
 
The Resolution basically contained the instruction to stop Ukrainization in the North Caucasus Territory (more about this in Items 46, 47, and 48). And on 15 December 1932 a telegram signed by Stalin and Molotov was sent to the Central Committees of the republic communist parties; the territory and regional (oblast) committees, the heads of the councils of people’s commissars of the territory and regional committees. 
 
This contained yet another secret resolution which ordered the immediate cessation of Ukrainization in al places with Ukrainians living together throughout the entire territory of the USSR. As well as the North Caucasus Territory (3,106 million Ukrainians), this included such regions as the Kursk region (1.3 million), Voronezh region  (1 million); the Far East, Siberia and Turkestan (with around 600 thousand Ukrainians each).
27. No longer relying on Ukrainian leaders, on 18 December 1932 Stalin sent Kaganovich and P. Postyshev to Ukraine with special powers to use “all necessary measures of an organizational and administrative nature for fulfilling the grain requisition quota”. The Deputy Head of the OGPU of the USSR V. Balytsky had been sent to Ukraine at the end of November 1932.
 
On 20 December 1932 during a meeting of the Politburo of the CC CPU Balytsky stated that from the beginning of December through blanket searches 7 thousand pits and 100 concealed storing places had been uncovered, holding 700 thousand poods of grain.[58].  It followed from this that it was impossible to meet the quota in this way.
 
Nonetheless Kaganovich considered that it was necessary to uncover “an underground grain city” in Ukraine. On 29 December he forced the CC CPU to adopt a decision on confiscating all kolkhoz funds, including seed funds.  Chubar deemed the lack of fines in kind a failing of the grain requisitions.[59].
28. At the Politburo meeting, Balytsky reported that from the middle of July to the middle of November 11 thousand people had been arrested on “grain cases” and from 15 November to 15 December 1932 – 16 thousand people, including 409 heads of kolkhozes and 107 heads of district executive committees. The “troika” had issued 108 death sentences and a further 100 cases were presently under examination.[60].
29.  On 1 January 1933 the UkrSSR leadership received the following telegram signed by Stalin:
“Be informed of the Central Committee Resolution from 1 January 1933: “Suggest that the CPU and the Council of People’s Commissars of the UkrSSR widely inform, via their village councils, kolkhozes, kolkhoz workers and working individual farms that:
a)  those of them who voluntarily hand over to the State grain previously stolen and hidden from inventory, shall not be repressed;
b)  with regard to kolkhoz workers, kolkhozes and individual farmers who stubbornly persist in hiding grain previously stolen and hidden from inventory, the most severe measures of punishment set out in the Resolution of the Central Executive Committee and Sovnarkom of the USSR from 7 August 1932 “On the protection of property of State enterprises, kolkhozes and cooperatives, and the consolidation of socialist property” will be applied.[61]
30. The telegram notified the peasants that they must hand over all grain and if they don’t do this, they faced blanket searches aimed at rooting out “grain stolen and hidden from inventory”. If grain was found, punishment would be according to the “5 ears of wheat law” (the death penalty or no less than 10 years deprivation of liberty), and if none was found, there would be a fine in kind, that is confiscation of meat, including “in live” weight, and potatoes..
31. At the present time many oral accounts from survivors have been gathered, and a lot published. This testimony coincides with the historical facts. After Stalin’s telegram the searches and confiscation of grain were merged into a single campaign of repression.
 
Brigades of activists were organized who removed from the kolkhoz workers and independent farmers not only grain, meat and potatoes, but all food that they found, even cabbage, pickled beetroot,  a handful of wheat – absolutely everything, and if they found food cooked, they destroyed it.
 
In this way they saved themselves from starvation, since they got to keep a part of what they found. The three volume work Oral History Project on the Ukrainian Famine which fills 1,734 pages and published by the US Congress Commission on the Ukrainian Famine 1932-1933 led by James Mace, is full of such accounts from all regions of the country.
32. As in 1932 the peasants tried to leave for other areas of the USSR in search of food. Yet now the Soviet State organized a real blockade to not let them leave Ukraine. On 22 January 1933 a directive was issued by the Sovnarkom and the Central Committee of the Soviet Communist Party on preventing the wide-scale exodus of starving peasants in Ukraine and Kuban to find food. It was written by Stalin personally.
 
On the very next day an identical letter of instruction was issued by the CC CPU and the Ukrainian Council of People’s Commissars, signed b Khataevych and Chubar. It was to all regional party committees and regional executive committees and spoke of the unacceptability of wide-scale moves by kolkhoz workers and independent farmers beyond Ukraine.
“Following last year’s example a mass exodus has begun from some raions of Ukraine to the Moscow, Western regions, Central Chernozem [Black Earth] Region, Byelorussia “for grain”. There have been cases where almost all individual farmers and some of the kolkhoz workers have left their village.
 
Without a doubt some mass exoduses are being organized by enemies of the Soviet regime, social revolutionaries [esery], and agents of Poland in order to campaign “because of the peasants”  in the northern regions of the USSR against the kolkhozes and against the Soviet regime.
 
Last year the Party, Soviet and chekist bodies in Ukraine failed to pay heed to this counter-revolutionary trick by enemies of the Soviet regime. This year there must be no repeat of this mistake.
 
The CC CPU and the Council of People’s Commissars propose:
1.  that decisive measures are taken with no delay in each raion to prevent the mass exodus of individual farmers and kolkhoz workers, on the basis of the directive from Balytsky sent around through the GPU line.
2.  the work of all recruiters of labour for travel beyond Ukraine is checked, that they are held under strict  control, and that all  suspicious counter-revolutionary elements are dismissed from this work and removed;
3.  that widespread explanatory work is undertaken among individual farmers and kolkhoz workers against wilfully leaving and abandoning their households, and that they are warned that if they leave for other regions they will be arrested there;.
4.  that measures are taken to stop the sale of tickets beyond Ukraine for peasants who do not have permission to travel from the raion executive committee or a document from industrial, construction or State organizations confirming that they have been recruited for a particular job outside Ukraine. The relevant instructions should be sent to the People’s Commissariat of Communications and the transport sections of the GPU;
5.   that brief reports be provided no later than 6 p.m. on 24 January about the actual situation with mass exodus of peasants for your oblast”[62]
33. Special patrols and operations groups, as well as filter points, were created at railway stations. Chekists [secret police], police officers and local activists monitored the roads.
 
According to figures from the OGPU, during 50 days following the issuing of the directive 219.5 thousand peasants were stopped, this including 38 thousand in the UkrSSR, 47 thousand in the North Caucasus Territory , in the Central Chernozem Region – 44 thousand, in the Western Region – 5 thousand and at railway stations – 65 thousand peasants.
 
Of those detailed, 186.5 thousand were sent home under convoy, and almost 3 thousand had been convicted, while the rest were awaiting trial or under investigation in filtration camps.[63].
34. Ukrainian peasants, tormented by the endless searches, confiscation of food productions, and blockade were starving en masse. Those who survived testify that beginning from February 1933 the famine became particularly horrific. Whereas up till January tens of thousands were dying, from February to May the numbers were in the millions.
 
According to a document from the GPU of the UkrSSR, during the entire period from 1 December 1932 to 25 January 1933 14,956 pits, 621 “black cellars” and 1,359 other hiding places were found, with 1,718.5 thousand poods of grain confiscated.[64].
35. On 5 February a resolution of the Central Committee of the Soviet Communist Party concluded the requisitions from the 1932 harvest. The UkrSSR had in total fulfilled 83.5% of a quota which had twice been reduced. A total of 4,171.4 thousand tonnes of grain had been requisitioned against 7,047.1 thousand tonnes of grain from the 1931 harvest. Up to 1 November 136.1 million poods were handed over, and from November through January 1933 – another 87 million poods of grain.
36. At the end of January 1933 Postyshev was again sent to Ukraine to prepare the spring sowing which against a background of mass starvation and the lack of seeds was problematical. Back on 23 September, on Stalin’s initiative, the Central Committee of the Soviet Communist Party and Sovnarkom passed a resolution according to which all proposals to provide seed loans were rejected, and sovkhozes and kolkhozes were warned that there would be no loan either for the winter crops or for the spring sowing[65].
 
Therefore on 4 February Postyshev stated that seeds would be gathered by means of grain requisitions. Since there was no grain among the starving peasants, the party leaders resorted to rewards for denunciations. Each person who informed where a neighbour was hiding grain received between 10 and 15% of the grain discovered. On 17 February 1933 these “measures” were approved by a government resolution.[66].
37. In February the Ukrainian leadership began providing aid to the starving in order to safeguard the sowing. On 19 February 1933 Postyshev received Stalin’s consent to unblock 3 million poods of State grain reserves to provide food aid to the peasants. However the scale of the famine was increasing by the day. Therefore Postyshev decided that it wasn’t worth giving food to those not working.
 
A CC CPU Resolution from 31 March 1933 on the preparations for the spring sowing contained the following: “Suggest that the Kyiv regional committee carry out the following measures for organizing food aid to kolkhoz workers and independent farmers in need:
 
a) stop any food from the food aid for non-able-bodied  kolkhoz workers and independent farmers even if they ask for such assistance;
 
b) divide all those hospitalized into the ill and those recovering, and considerably improve the food supplied to the latter so that they can be discharged and back to work as quickly as possible.”[67].
 
Thus, the peasants were divided into those who could provide labour and those weakened by hunger and unable to work. The first survived, the second died. This was the “charitable” State assistance.
38. Mortality in the first half of 1933 increased each month. And despite the fact that the work of the registrar offices was partly paralyzed, from March to August 1933 they registered hundreds of thousands of deaths.[68]. Overall for 1933 registrar offices registered 1,678 deaths in rural areas, 1,552 of these being Ukrainians. These statistics cannot give an idea of the scale of Holodomor as they are incomplete.[69]
39. Against a background of mass starvation in the villages in 1933 Postyshev began an offensive against the Ukrainian intelligentsia and Ukrainian Communist party. 1933 became a year of unabated political repression.  It was impossible to conceal a disaster on the scale of the famine and the deaths of millions of people, and therefore the regime tried to fend off possible accusations by diverting them against “saboteurs”, in the first instance at agricultural specialists.
 
In 1933 Stalin blamed agrarian professors of deliberately “injecting the cattle in the kolkhozes and sovkhozes with plague or anthrax; of encouraging the spread of meningitis among horses, and others”.
 
In March 1933 a panel board of the OGPU of the USSR examined the cases (“according to a list”) of 75 civil servants of people’s commissariats for agriculture and sovkhozes of Ukraine, Byelorussia and the North Caucasus Territory. Less than a day was spent on example the case of the 75 officials. 35 were shot on the basis of the examination into the case.  A real pogrom was carried out in the Kharkiv agricultural and zootechnical institutes. Scientific research institutes and universities in Ukraine lost up to 270 professors and lecturers.
40. At the beginning of 1933 the fabrication began of a “Ukrainian Military Organization” which they “included” three writers in – Oles Dosvitniy, Serhiy Pylypenko and Ostap Vyshnya. The first extrajudicial “terrorist” trial behind closed doors in Ukraine took place in Kharkiv on 3 March 1934. Dosvitniy, Pylypenko and Vyshnya were accused of planning the murder of Postyshev, Chubar and Balytsky.
 
Only Ostap Vyshnya was “pardoned”, receiving a sentence of 10 years labour camp. The other nine people charged in the “Ukrainian Military Organization” Case (still unfinished, in all 148 people were arrested) were shot. There were also trumped up cases over the “Polish Military Organization” [POV] and the “Bloc of Ukrainian Nationalist Parties”.
41. At the end of February 1933 a campaign was launched against Mykola Skrypnyk and the communists supporting him. Skrypnyk was removed from his post as Minister of Education. Everything that was linked in Ukraine with the literary renaissance, introduction of the literary language standards, creation of new dictionaries, development of Ukrainian theatre, historical research and Ukrainization of schools was all stigmatized as “skrypnykovshchyna” [i.e. connected with Skrypnyk], became the target of political repression which did not abate through 1933 and 1934.
 
People carrying out Ukrainization – from rural teachers to members of the Academy of Sciences – were repressed on a wide scale as bourgeois nationalists. On 13 May 1933 the well-known writer Mykola Khvylyovy committed suicide.
 
In June 1933 at the plenum of the CC CPU Postyshev blamed Skrypnyk and his nationalist “deviation” for all the “difficulties of the previous year”, and accused him of harbouring in the People’s Commissariat of Education “deviationists, saboteurs, counter-revolutionaries”.[70]. On 7 July 1934, unable to withstand the hounding, Skrypnyk killed himself.
 
His death spelled the end to Ukrainization and nationalism as a whole (overall the CPU was halved, while the members of the Ukrainian Politburo were later, during the Great Terror of 1937-1938 all eliminated).
 
Another leader of Ukrainization and People’s Commissar of Education Oleksandr Shumsky was also arrested, together with communists connected with him. On 5 September 1933 Shumsky was sentenced to 10 years imprisonment. In November 1933 the Director of the “Berezil” Theatre Les Kurbas was arrested. 
 
In 1934 first-class writers who were later to become known as “rozstrilyane vidrodzhennya” [“Executed Renaissance”] were repressed, being labelled as “bourgeois nationalists” and “terrorists”. 
 
In total the OGPU arrested 199 thousand people in Ukraine in 1932-1933, against 119 thousand in 1929-1931, and 71 thousand in 1934-1936. Death from starvation coincided with repression of the national Ukrainian cultural, intellectual, creative and political elite.

HOLODOMOR 1932-1933 IN KUBAN 

 
42. Just as Ukraine received the most onerous grain requisition quota among agricultural regions in 1931-1932, so to were the planned figures for grain requisitions in Kuban for 1931-1932 higher than for the other 10 districts of the North Caucasus Territory. It was for this reason that the rural population of Kuban, together with Ukraine, had the worst results for grain requisition quotas and became the target of efforts by the Party-State leadership of the USSR aimed at extracting grain. 
 
As stated in the decision of the Soviet Politburo from 1 November 1932 with regard to the commission headed by Kaganovich: “the main task of the said group of comrades is to devise and carry out measures aimed at breaking down sabotage of the sowing and grain requisition, organized by counter-revolutionary kulak elements in Kuban.”[71].
43. The Kaganovich Commission immediately began punitive measures. A resolution of the politburo of the North Caucasus Territory Communist Party from 4 November 1932 added three stanitsas to the “black board” and the population was warned that if it continued to sabotage the sowing and grain requisitions, they would all be exiled North, and the stanitsas would be taken over by diligent kolkhoz workers who work in conditions where there is little arable land or on uncomfortable land in other areas.
 
The resolution also contained measures analogous to the measures in the Resolution of the Central Committee of the Soviet Communist Party from 18 November 1932: intensifying the struggle against saboteurs, especially those with Party tickets in their pocket, the confiscation of grain previously distributed in payment for labour and the introduction of fines in kind.
44. Kaganovich’s threat was carried out, and from four large stanitsas – Poltavska, Medvedovska, Urupska and Umanska – 51.8 thousand people were exiled to the North of the country. and from other stanitsas – no less than 10 thousand. All of their property and livestock was left for those “diligent kolkhoz workers” who would settle in these stanitsas. In fact, the inhabitants of those stanitsas, already emaciated, were deported to a sure death.
45. Those who refused to rob the peasants and Cossacks themselves ended up within the machine of repression. Even before the arrival of the Kaganovich Commission, the OGPU had arrested 5 thousand communists of Kuban, and overall around the territory – 15 thousand.
 
On 4 November 1932 another decision was adopted by the North Caucasus Territory Committee, this being to carry out a purge of the Party organizations of the Territory, and first and foremost, Kuban. Throughout November and December 1932 and in 1933, approximately 40 thousand people were expelled from the Party, while up to 30 thousand other members of the Party fled beyond the Territory.[72].
46. The people of Kuban faced the same fate as the Ukrainian peasants – blanket searches, confiscation of food, and after 22 January 1933 – a blockade with it being impossible to leave in search of food. Earlier, however, discrimination had been added on ethnic grounds.
 
Item 7 of the Resolution of the Central Committee of the Soviet Communist Party “On grain requisitions in Ukraine, North Caucuses and in the Western Region” from 14 December 1932 stated that “the irresponsible, non-Bolshevik “Ukrainization,” which was at variance with the cultural interests of the population and which affected nearly half of the raions in the Northern Caucasus, as well as the complete lack of supervision on the part of territorial agencies over the Ukrainization of schools and the press, had provided the enemies of the Soviet power with a legal form for organizing resistance to the oviet authorities’ measures and tasks on the part of kulaks, officers, Cossack resettlers, members of the Kuban Rada, etc.”[73].
47. “For the purpose of crushing the resistance to grain requisitions mounted by kulak elements and their party and non-party menials”, the Central Committee and Sovnarkom among other things, issued orders to: “immediately switch Soviet bodies, cooperative societies, and all newspapers and magazines in the Ukrainized raions of the Northern Caucasus from Ukrainian to Russian, as being more understandable to Kuban residents, and to prepare and change the language of instruction in schools to Russian by the autumn.
 
The Central Committee and Sovnarkom oblige the Territory Party and Executive Committees to urgently examine and improve the composition of school teachers in the Ukrainized raions”[74].
48. This resulted in the destruction of all ethno-cultural forms of life led by Ukrainians in the Northern Caucuses, the closing of Ukrainian schools, newspapers, journals, other Ukrainian cultural structures. Added to the physical suffering from starvation in Kuban, was the psychological suffering caused by the denigration of the honour and dignify of the inhabitants of Kuban – ethnic Ukrainians who made up more than two thirds of the population of Kuban.
 
FOOTNOTES:
[1]  Here and later references are to the numbers of the items in Appendix “Brief description of the historical facts 1930-1933”
[2] S. Kulchytsky: Holodomor 1932-1933 as genocide, p. 183.
[3]  Commander of the great famine – p..209.
[4]  Ibid . – p. 214.
[5] William A. Schabas, Genocide in International Law. The Crime of Crimes (Cambridge: Cambridge University Press, 2000), “Chapter 3. Groups protected by the Convention”.  (Quoted in Serbin, The Ukrainian Famine of 1932-1933 and the UN Convention on Genocide, p.5).
[6] Id. at 10 (emphasis added).
[7] Prosecutor v.Goran Jelisic, ICTY (Trial Chamber I), Case No. IT-95-10 “Breko”,  Judgement of 14 December 1999.
[8] S.V. Kulchytsky. Holodomor 1932-1933 as genocide… – pp. 396-415.
[9] Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v. Serbia and Montenegro); Summary of the Judgment of 26 February 2007, p.9.
[10] http://ukrsvit.kiev.ua/us/gazeta/statii.html.vatra2
[11] S.V. Kulchytsky. Holodomor 1932-1933 as genocide… – pp. 287-288.
[12] James Mace.  Political causes of Holodomor in Ukraine (1932-1933). Ukrainian Historical Journal, No. 1, 1995: Posted in Ukrainian at: http://maidan.org.ua/n/lib/1044901106
[13] S.V. Kulchytsky. Holodomor 1932-1933 as genocide… – p. 264-265.
[14] S.V. Kulchytsky. Destruction for rescue // Krytyka, No. 3, 2008 – pp. 15-17
[15] Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v. Serbia and Montenegro); Summary of the Judgment of 26 February 2007, p. 9.
[16] Andrea Graziosi: Soviet famine and Ukrainian Holodomor. Available in Russian at: http://www.strana-oz.ru/?numid=34&article=1406
[17] Y. Shapoval and V. Zolotahyov: Vsevolod Balytsky: the person, his time and surroundings – K. 2002, p. 189.
[18]  Famine-genocide 1932-1933 in Ukraine – p. 297.
[19]  “Proletarian Pravda” from 22 January 2008 (quoted from the publication: “Mass-scale famine as social genocide”.
 
[20] “It would be unwise if the communists, working on the premise that the kolkozes are a socialist form of management, did not respond to the blow inflicted by these particular kolkhoz workers or kolkhozes with a devastating blow” (Stalin, 27 December 1932).)
[21] Serhiy Makhun. War on the “literary front”. // Dzerkalo tyzhnya [“Weekly Mirror”] No. 45, 24-30 November 2007
[22] Cited in the work by Andriy Portnov. The concepts of genocide and ethnic cleansing: western scholarly discussions // Ukraina moderna, part 2 (13), 2008 – p. 99
[23] Cited in the work by Andriy Portnov. The theory of genocide before the challenge of Holodomor” // Krytyka, No. 5, 2008 – pp. 11-13.
[24] Raphael Lemkin’s Axis Rule in Occupied Europe: Laws of Occupation – Analysis of Government – Proposals for Redress, (Washington, D.C.:  Carnegie Endowment for International Peace, 1944), p. 79 – 95. http://www.preventgenocide.org/lemkin/AxisRule1944-1.htm
[25]  The Famine of 1932-1933 in Ukraine: causes and consequences – p. 394.
[26]  S.V. Kulchytsky. Holodomor 1932-1933 as genocide: difficulties in understanding – Kyiv: Nash chas 2008 – p. 186.
[27]  The Tragedy of the Soviet Village – v. 3, p. 227.
[28]  The Tragedy of the Soviet Village – v. 3, pp. 239-240.
[29]  S.V. Kulchytsky. Holodomor 1932-1933 as genocide… – p. 195.
[30] The Tragedy of the Soviet Village… – v. 3 – p. 420.
[31] S.V. Kulchytsky. Holodomor 1932-1933 as genocide.. – p. 200.
[32] The Tragedy of the Soviet Village… – v. 3 – pp. 362-363, 365.
[33] Stalin and Kaganovich. Correspondence, 1931-1936. – p. 169.
[34] The Famine of 1932-1933 in Ukraine: through the eyes of historians, in the language of the documents – p. 190.
[35] The Commander of the Great Famine. – pp..227-228.
[36] Stalin and Kaganovich. Correspondence, 1931-1936. – p. 169.
[37] “Pravda” 14 July 1932
[38] Stalin and Kaganovich. Correspondence, 1931-1936. – p. 205.
[39]  S.V. Kulchytsky. The Price of the “Great Turn”. – p. 212.
[40] Stalin and Kaganovich. Correspondence, 1931-1936. – pp.. 241-242.
[41] S.V. Kulchytsky. Holodomor 1932-1933 as genocide.. – p.. 399..
[42] S.V. Kulchytsky. 1933: The Tragedy of the Famine  – K.: 1989. – p. 32.
[43] S.V. Kulchytsky. Holodomor 1932-1933 as genocide.. – pp. 256-257.
[44] The Tragedy of the Soviet Village… – v. 3 – pp.528-529.
[45] The Commander of the Great Famine. – p..236.
[46]  Collectivization and famine in Ukraine. 1929-1933. – pp..548-549.
[47]  Ibid . – p.549.
[48] The Famine of 1932-1933 in Ukraine: through the eyes of historians, in the language of the documents – p.254.
[49] Ibid.
[50] The Famine of 1932-1933 in Ukraine: through the eyes of historians, in the language of the documents – p. 256.
[51] The Tragedy of the Soviet Village… – v. 3 – p.548.
[52] The Famine of 1932-1933 in Ukraine. Documents and Materials. – p. 443.
[53] The Commander of the Great Famine. – p.315.
[54] The Famine of 1932-1933 in Ukraine: through the eyes of historians, in the language of the documents – p. 282.
[55] Ibid. – pp. 284, 286.
[56] The Famine of 1932-1933 in Ukraine: through the eyes of historians, in the language of the documents – p..291.
[57] The Famine of 1932-1933 in Ukraine: through the eyes of historians, in the language of the documents – pp..291-292.
[58] The Commander of the Great Famine. – p.315.
[59] Ibid. – p.317.
[60] Ibid. – p.316.
[61] The Famine of 1932-1933 in Ukraine: through the eyes of historians, in the language of the documents – p..308
[62] The Famine of 1932-1933 in Ukraine: through the eyes of historians, in the language of the documents – p…354. Our translation.
[63] S.V. Kulchytsky. Holodomor 1932-1933 as genocide.. – p. 310.
[64] Ibid. – p. 299.
[65] S.V. Kulchytsky. 1933: the tragedy of the Famine, p. 41.
[66]  Ibid.
[67] The Famine of 1932-1933 in Ukraine: through the eyes of historians, in the language of the documents – p….473.
[68] S.V. Kulchytsky. Holodomor 1932-1933 as genocide.. – p. 340.
[69] S.V. Kulchytsky. Why did he destroy us? – p. 154.
[70] James Mace.  Political causes of Holodomor in Ukraine (1932-1933). Ukrainian Historical Journal, No. 1, 1995 Posted in Ukrainian at:
http://maidan.org.ua/n/lib/1044901106
[71] The Commander of the Great Famine. – p. 250.
[72] [language used would not reprint, see link below for exact text] 
[73] The Famine of 1932-1933 in Ukraine: through the eyes of historians, in the language of the documents – pp…292-293.
[74] Ibid – pp. 293-294.
 
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