Europe Ambassador: We Have Started A Dialog To Ease Visa Regime For Ukraine

SIMFEROPOL, Ukraine -- Head of the Delegation of the European Commission to Ukraine Jose Manuel Pinto Teixeira hopes that the Ukrainian government will manage to meet with the conditions, which will enable relaxation of visa regime between Ukraine and the European Union.

Jose Manuel Pinto Teixeira
"We have started a dialog on the liberalization of visa regime, but there exists a number of conditions the Ukrainian government should fulfill. For example, those concerning the documentation and the issuance of passports as well as a number of other requirements, which are a subject to discussion in such a dialog," head of the European Commission delegation to Ukraine said at a press conference in Simferopol on Friday.

At the same time, he noted that they agree that the final results will be the freedom of movement throughout the EU for Ukrainian citizens as well.

German Ambassador to Ukraine Hans-Jürgen Heimsoeth, in turn, has said that the visa dialog, which has been launched between Ukraine and the EU, will ultimately lead to visa-free travel for Ukrainians.

Source: Kyiv Post

IMF Eases Ukraine Loan Conditions

KIEV, Ukraine -- The International Monetary Fund signaled Friday that Ukraine was making progress toward receiving a second crucial installment of a $16.4 billion emergency loan after the aid program was frozen earlier this month.


The IMF said it was ready to reconsider its loan requirements and allow Ukraine to run a bigger budget deficit after the financial crisis grew worse.

The IMF had previously insisted that Ukraine trim the 2009 deficit from 3 percent to 1 percent of the GDP. But Ceyla Pazarbasioglu, the head of the IMF mission to Ukraine, said Friday that a balanced budget was impossible given the economy would contract by 6 percent or more this year and said the country could run a deficit as long it secures external funding.

"A balanced budget given a sharp decline in revenues does not seem feasible at this point in time," Pazarbasioglu told reporters in a conference call. "We are fully supportive of the authorities' efforts to raise additional funding from multilateral and bilateral creditors."

Prime Minister Yulia Tymoshenko, who is reluctant to cut social spending and upset voters ahead of elections this year, has turned to G-7 countries and Russia to help close the budget gap.

The IMF aid is critical to Ukraine, exposed as one of the most vulnerable to the global financial crisis.

Industrial output has slumped by over one-third and Ukraine's currency has lost nearly half of its value against the dollar. The hryvna continued falling Friday, closing at 8.7 to the dollar Friday, down 46 percent from 4.9 in September.

The crisis has been exacerbated by constant feuds among Ukraine's political leaders.

On Friday, however, Tymoshenko, President Viktor Yushchenko, and parliament speaker Volodymyr Lytvyn pledged they would work together to come up with anti-crisis measures and policy changes in the coming days and present them to the IMF.

Pazarbasioglu praised the effort. "The authorities are putting together their own anti-crisis package and measures and that is very encouraging," she told reporters.

Source: AP

American Chamber Of Commerce: Investors Want To See Ukraine's Successful Eurointegration

KIEV, Ukraine -- Foreign and domestic investors want to see Ukraine gaining membership of the European Union, President of the American Chamber of Commerce in Ukraine Jorge Zukoski has said.

AmCham's President Jorge Zukoski
"Both foreign and domestic investors are interested in seeing the successful integration of Ukraine with the European Union. This will significantly increase the competitiveness of Ukraine and help it find its proper place in the global community," he said at a briefing in Kyiv on Friday.

Zukoski said that one of the determining factors in the country's Eurointegration would be "successful talks on its associated membership and joining an agreement on a free trade area."

"The whole business community should have a sufficiently clear intention to provide all of its support to Ukraine to ensure the successful outcome of these talks," he said.

Source: Kyiv Post

Ukraine's Long-Term Prospects Depend On Germany's Relations With Russia, Says Merkel

BERLIN, Germany -- German Chancellor Angela Merkel has said that Ukraine's long-term prospects depend on the development of Germany's partnership and strategic relations with Russia.

German Chancellor Angela Merkel with Russian Prime Minister Vladimir Putin (file photo).
She was speaking with foreign journalists in Berlin, Deutsche Welle reported.

Merkel said that owing to its geographical position, Ukraine is obliged to stay between the European Union and Russia in all senses of the phrase.

"Finally, Ukraine's long-term prospects depend much on how we manage to build our partnership and strategic relations with Russia. This is fully in Ukraine's interests," she said.

Speaking about Ukrainian-Russian relations, she pointed to the domestic crisis in the country and added that Ukraine's political situation is very difficult, and that it is very hard for the country's leadership to take any decisions.

"Of course, we would like to assist Ukraine in becoming more politically stable," she said.

Merkel said that Ukraine is unambiguously in the sphere of Germany's interests, and that it also belongs to countries of the Eastern Partnership initiative.

She said that a special EU summit on eastern policies is scheduled for May 7, 2009. She said that relations with Ukraine and the provision of assistance to the country to tackle the economic crisis would be discussed at the summit.

As reported, EU officials will participate in a conference in Brussels on March 23 dedicated to the modernization of the Ukrainian gas transportation system.

Source: Interfax

Michelle Kwan To Visit Ukraine

WASHINGTON, DC -- American Public Diplomacy Envoy Michelle Kwan will travel to Ukraine on February 28th where she will visit Kiev, Yalta, Sevastopol, Bakhchisarai and Odessa.

Figure skater Michelle Kwan
This eight-day trip marks the figure skating champion’s fourth tour as an American Public Diplomacy Envoy for the U.S. Department of State’s Bureau of Educational and Cultural Affairs.

As a Public Diplomacy Envoy, Ms. Kwan promotes cross-cultural dialogue with international youth and increases understanding of America by sharing her story and life experiences.

Kwan’s activities during her trip will include participating in a roundtable discussion with university students, visiting high schools, conducting skating clinics and meeting with alumni of other Department of State exchange programs.

Source: US State Department

No Hope To Reconcile Yushchenko And Tymoshenko, Speaker Lytvyn Says

KIEV, Ukraine -- “Unfortunately, I have to admit that there is no hope to reconcile President Yushchenko and Premier Tymoshenko,” Speaker Lytvyn told his voters in the Ternopil oblast. As soon as any decision is taken by the cabinet, a counter decision follows at once. The situation in Ukraine is worsening at a catastrophic speed, Lytvyn admitted.


He stressed that the bitter stand-off [between Yushchenko and Tymoshenko] is explained by their inability to make up and shake hands.

Lytvyn also commented on Pres Kravchuk’s appeal to Yushchenko to step down and call a pre-term presidential election. Kravchuk’s statement “definitely, mirrors the feelings of Ukrainians,” Lytvyn opined.

“I realize that, given the circumstances, it seems impossible to reconcile Yushchenko and Tymoshenko. However, they must be forced to keep working, Lytvyn said, adding that he has always acted on the following principle: if you’re at a loss what to do, go by the law.

The speaker stressed the importance to comply with the constitution. “It is not without faults, but we have to comply with it. One cannot violate it right, left and center.”

The president, premier, Verkhovna Rada and the opposition must be forced to a roundtable to draw up a roadmap for Ukraine, Lytvyn added.

“It is a long way to the presidential election. Calls for Yushchenko’s resignation and snap presidential election will be futile, unless the situation worsens dramatically and [Ukrainians] hit the streets,” Lytvyn warned.

Lytvyn said he has to lean over backwards to keep the legislature going and thus ensure a dialog among the branches of power.

“There is a plan to rock the boat in Ukraine,” he warned.

Source: ZIK

Ukraine's Naftogaz Seeking Changes To Russia Gas Deal

KIEV, Ukraine -- Ukraine's debt-burdened company Naftogaz wants changes in a hard-won natural gas deal with Russia that ended Europe's gas cutoff, officials said Thursday, amid concerns of a renewed dispute between the two neighbours.


Naftogaz has asked Russia's gas giant Gazprom to allow Ukraine to buy less natural gas this year than previously agreed, according to Gazprom and President Viktor Yushchenko's office.

The contract signed in January locks Naftogaz into buying 40 billion cubic metres of gas this year, but the company is asking to buy only 33 billion.

Naftogaz representatives were not immediately available for comment.

The move raises fears of a repeat gas war between Moscow and Kiev as Gazprom is unlikely to yield to Kiev's request. The January dispute left over a dozen European countries cut off in winter after Gazprom halted gas supplies through Ukraine, accusing its neighbour of stealing the fuel.

A spokesman for Gazprom confirmed receiving Naftogaz's request, but declined any further comment.

Naftogaz said last week it may run into arrears with Gazprom because of deep financial problems.

Fresh arrears by Naftogaz could lead to a new conflict with Russia. The deal that ended January's rift stipulates that Naftogaz will have to make advance payments for gas shipments if it runs up arrears — a commitment the debt-laden company may be unable to fulfill.

Naftogaz has long been plagued by financial problems. It is struggling to stay afloat with more than $4-billion (U.S.) in debt. It has twice narrowly averted technical default on its Eurobond obligations.

Source: AP

Four Russian TV Channels Allowed To Broadcast In Ukraine

KIEV, Ukraine -- Ukraine's National Council on Television and Radio Broadcasting has granted four Russian TV channels permission to broadcast in the country, the council said Wednesday.


The channels allowed to broadcast are Zoopark, Ocean-TV, Feniks + Cinema and Topshop TV.

Broadcasting by foreign channels whose programs had not been adapted to Ukrainian laws, including Russia's Channel One, RTR-Planeta, Ren-TV and TVts International, was suspended on November 1, 2008.

Channel One and Ren-TV have since been granted temporary permission to broadcast. More than 10 other Russian TV channels were also granted permission to begin work last December.

It was also reported that Ukraine's objections related mainly to advertising aired by the channels. The Ukrainian distributors of certain channels were ordered to bring the broadcasts in line with Ukrainian laws.

Language has been a contentious issue in relations between Russia and Ukraine, where some political groups have opposed the "Russification" of the country.

Russian is still widely spoken in Ukraine, especially in the east, the Crimea and the capital. Many people in the former Soviet republic people have never learnt to speak Ukrainian.

Source: RIA Novosti

UKRAINE: Between The Kremlin And A Hard Place

WASHINGTON, DC -- Ukraine's internal political problems and tensions with Russia threaten its path to stability and its candidacy for NATO and the EU, warns a new Council on Foreign Relations (CFR) report.

Former U.S. Ambassador to Ukraine, Steven Pifer
The report, "Averting Crisis in Ukraine," analyses the country’s difficulties related to both domestic conditions, including its often disorderly politics, and foreign policy, such as issues related to Ukrainian and European dependence on Russia’s natural gas.

The examination concludes that the U.S. needs to improve its dialogue with Ukraine to avert a bigger crisis.

"A more divided Ukraine would be less able to formulate a coherent foreign policy course with which the U.S. government could engage," said report author and former U.S. ambassador to Ukraine, Steven Pifer, a visiting fellow at the Brookings Institution's Centre on the United States and Europe. "It could even be driven to reorient itself on a more Moscow-focused course."

Domestically, Ukraine faces a presidential election, expected in late 2009 or early 2010, and perhaps preterm parliamentary elections in 2009 that will play out against a backdrop of economic recession and financial crisis.

According to the Bloomberg News Agency, inflation in Ukraine soared to 22.3 percent last month, the highest level in Europe. Ukraine’s currency, the hyrvnia, has lost more than 50 percent against the dollar in the past six months, signaling Ukraine’s first economic contraction in a decade.

President Victor Yushchenko and Prime Minister Yulia Timoshenko, who stood side by side during the 2004 Orange Revolution, have since engaged in fierce infighting, delaying decisions needed to revive the economy.

Due to Ukraine’s failure to meet loan obligations, the International Monetary Fund (IMF) withheld a key second part of a 16.4-billion-dollar loan.

The IMF isn’t the only one putting external pressure on Ukraine. In the aftermath of the August 2008 Russia-Georgia conflict, Kiev must cope with an increasingly assertive Russian foreign policy. Ukraine is regarded by the Kremlin as part of its sphere of privileged interests.

Moscow has made clear its unhappiness with Kiev’s desire to integrate into the European and Euro-Atlantic communities, and will attempt to disrupt that course. Moscow, driven by its geopolitical aims, could fan Ukraine’s internal frictions by escalating its rhetoric against the NATO-Ukraine relationship.

"The Kremlin sees a messy Ukraine as a good thing," Pifer told IPS. Moscow portrays the former Soviet state as an inadequate partner for NATO and the EU.

The Kremlin also capitalizes on Kiev’s political chaos in its domestic politics. The criticisms of Russians who, inspired by Ukraine’s struggle for democratic transformation, want to draw closer to the West are deflected by Moscow’s portrayal of Ukraine as an unattractive alternative political model.

By pointing to Ukraine’s political problems and instability, the Russian government is saying, "Look at the turmoil - that’s what democracy is," adds Pifer.

The CFR report speculates that a new gas dispute between Ukraine and Russia, similar to the most recent incident in January, could again transform into a broader European energy crisis.

A Russian decision to more actively oppose Kiev’s effort to integrate into NATO could spark such a dispute, causing Moscow to cut off its gas supply, impose other economic sanctions, or make a demonstrative military move, such as redeploying army units closer to the Ukrainian border.

But Yushchenko is unlikely to back down in the face of Russian threats, which may, anyhow, be in vain.

According to Walter Zaryckyj, executive director of the Centre for U.S.-Ukrainian Relations, there is little Russia can do to prevent Ukraine’s entrance into NATO. "Russia is bluffing," he said. "I think Russia is willing to do a lot, but they are not in a position to."

Zaryckyj contends that Russia, too, is in economic crisis, having spent much of its money on the Georgia conflict and on the recent agreement with Kyrgyzstan to close a U.S. air base in return for more than 2 billion dollars in loans and aid. The West, therefore, has an opportunity to take a hard stance against Russia.

"The West must say hands off (Eastern Europe) - stop playing games with gas and oil," adds Zaryckyj.

Despite Russia’s opposition, NATO has signalled that it will continue to keep the door open to Ukrainian membership. According to the International Herald Tribune, before a closed-door meeting with Ukrainian Defence Minister Yury Yekhanurov and NATO defence ministers, Secretary-General Jaap de Hoop Scheffer said NATO officials were considering "ways in which the alliance can continue to support its preparations for NATO membership" for Ukraine.

Also, EU Commissioner for External Relations and European Neighbourhood Policy Benita Ferrero-Waldner laid fears of the possibility of a new pro-Russian Ukrainian government to rest, telling journalist in Brussels on Tuesday that, "Whoever comes to power [in Ukraine] in the future, they will certainly want to continue the process of Ukraine's integration into the EU."

According to the CFR report, since the early 1990s, the U.S. government has attached special importance to Ukraine. It has applied billions of assistance dollars to facilitate the country’s development.

"What happens to Ukraine will matter to Washington," says the report, recommending that the U.S. administration "should maintain the goal of Ukraine’s development as a stable, independent, democratic, and market-oriented country, increasingly integrated into European and Euro-Atlantic institutions."

The report encourages the Obama administration to adopt certain strategies, including restoring regular high-level dialogue, counselling Ukrainian leadership and increasing technical assistance to promote energy security. It urges the U.S. to support continued Ukrainian integration with NATO, though it recommends waiting to back concrete steps toward membership until Kiev achieves consensus on this point.

Ukraine, however, "falls fairly low on a list of priorities (for the Obama administration)," said Pifer. "The problem I think that Ukraine has as a foreign policy issue is it’s competing with lot."

The report, however, points to a reawakening of the West to a potential problem in Eastern Europe. According to Zaryckyj, "the report’s title mischaracterises it. The debate is just beginning; I don’t think its ending."

Source: Inter Press Service

Standard And Poor's Slashes Ukraine Credit Ratings

KIEV, Ukraine -- Standard and Poor's said on Wednesday it had cut Ukraine's credit ratings to a level indicating vulnerability to default, amid worries over whether Kiev will receive the next slice of a vital IMF loan.


The ratings agency said it had cut the long and short-term foreign currency sovereign credit ratings on Ukraine to CCC+/C from B/B and local currency ratings to B-/C from B+/B.

It said the outlook was negative, which means the ratings could be cut again.

Ukraine risks missing out on the second installment of 1.9 billion dollars (1.47 billion euros) from a 16.4-billion-dollar International Monetary Fund (IMF) loan due to concerns over its ballooning budget deficit.

Standard and Poor's analyst Frank Gill said in a statement the downgrade represented an "intensifying" risk as regards whether the IMF would pay the loan installment.

A downgrading of sovereign debt is a signal that the underlying economic performance of a country, and its capacity to honour payments due on its sovereign debt bonds, are weakening.

According to the Standard and Poor's website, an obligation rated CCC is "vulnerable to non-payment and dependent upon favorable conditions for the obligor to meet its... commitment on the obligation."

Gill complained that there was an "absence of broad political backing for necessary budgetary revisions and banking system reform" ahead of presidential elections scheduled for January 2010.

"We believe the precariousness of Ukraine's fiscal and economic situation is heightened by the absence of readily available external budgetary funding," he added.

The IMF is still considering whether to grant Ukraine the next tranche of the loan and Ukrainian officials have said a team from the fund could hold discussions in Kiev this week.

Ukrainian politics remains paralyzed by a venomous political row between one-time allies Prime Minister Yulia Tymoshenko and President Viktor Yushchenko which has brought decision making to a halt.

Ukraine is one of the countries worst hit by the global economic crisis.

The former Soviet republic's crucial steel sector has suffered from a sharp slowdown in global demand for the metal, its banks have been struck by the credit crunch and its currency has halved in value against the dollar.

Source: AFP

First Ukrainian President Kravchuk Urges Yushchenko To Resign

KIEV, Ukraine -- Leonid Kravchuk, the first president of an independent Ukraine, has called on incumbent President Viktor Yushchenko to resign and call early presidential elections.

First president of independent Ukraine, Leonid Kravchuk.
"I see clearly that you are not focusing your attention on Ukraine's problems but thinking how to stay in power and are ready even to take advantage of the global financial crisis to this end," Kravchuk said in an address shown by most Ukrainian television channels on Tuesday evening.

"You apparently see the solution for yourself and your retinue in deliberately bringing the economic situation to the boiling point based on the 'the-worse-is-the-better' principle. Do you really see the imposition of the state of emergency as the best way to stay in power?" Kravchuk said.

He denounced what he sees as Yushchenko's tactic of shifting the blame for all problems to the government.

"As a matter of fact, this is exactly why you, Viktor Andriyovych, are trying to bring the situation to a critical point. However, publicly distancing yourself from the government and from responsibility for the situation in the country, you have refused to perform your constitutional duties," Kravchuk said.

"I see early presidential elections as the only solution. Most people are demanding this. Let me remind you that I agreed to early elections in my time. Did I want to do so? Certainly not," he said.

However, Kravchuk suggested that Yushchenko will act as a true patriot if he thoroughly analyzes the situation and his own position and resigns.

"This step could stop the tide of problems, calm society down, and give the hope for overcoming the crisis," he said.

Kravchuk, who was elected president in 1992, called early elections in 1994 and lost them to Leonid Kuchma, who then served as president for the next 10 years.

Source: Interfax

Lavrynovych: Yushchenko's Impeachment Before Next Presidential Elections Depends On The Parliament

KIEV, Ukraine -- The current parliament may initiate impeachment procedures before the presidential elections, according to the first vice speaker of the parliament of Ukraine, Oleksandr Lavrynovych.

Oleksandr Lavrynovych
"Ukraine needs to hold parliamentary and presidential elections as soon as possible. Does anyone still believe nowadays that the current president can take any decisions that can help Ukraine get out of crisis?" he said on Tuesday in an exclusive interview with the Interfax-Ukraine news agency.

The first vice speaker also said that the impeachment procedure might not last a long time.

"This depends on the political responsibility and qualifications of the people working in the special commission and those who wear the judges' robes in the Constitutional and Higher Courts. It could be really fast," he said.

Lavrynovych said that the law on special, temporary parliamentary commissions, which provides the mechanism for conducting an impeachment of the president, might be enacted in the nearest future.

According to the first vice speaker, after that, this law may be amended to improve its quality.

On January 15, parliament passed a law on temporary investigation commissions and ad hoc temporary investigation commissions.

The law foresees that proceedings to impeach the president for alleged high treason be based on an appeal to be signed by a minimum parliamentary majority of 300 deputies, who would be prohibited from withdrawing their signatures from the document.

The president returned the law to the Verkhovna Rada with his proposals.

Yushchenko believes that the law grants overly broad powers to the parliamentary commissions, including those that pertain only to bodies of pre-trial inquiry.

The head of state noted that the law endows these commissions with powers similar to those of independent law-enforcement bodies, with virtually non-restricted powers.

The president said that according to the Constitution, the goal of investigation commissions is not bringing people to account, but preparing and make a preliminary examination of the issues, and the commission's conclusions don't play the key role in court decisions.

Source: Kyiv Post

EU Urges Members To Provide More Aid To Ex-Soviet Nations

BRUSSELS, Belgium -- The EU Commission has called on EU nations to provide more aid for Ukraine and four other ex-Soviet states as part of a proposed "Eastern Partnership" program aimed at making the bloc's Eastern doorstep more stable.

EU External Relations Commissioner Benita Ferrero-Waldner.
EU External Relations Commissioner Benita Ferrero-Waldner said on Monday, Feb. 23, that the European Union has a "crucial strategic interest" in Armenia, Azerbaijan, Georgia, Moldova and Ukraine.

Unveiled by the European Commission last December, the "Eastern Partnership" foresees granting some 350 million euros ($448 million) in extra help between now and 2013 to the EU's ex-Soviet neighbors.

Speaking on the sidelines of a meeting of EU foreign ministers in Brussels on Monday, Ferrero-Waldner said the bloc's so-called "Eastern Partnership" had gained urgency in the wake of the August conflict between Georgia and Russia and January's gas standoff between Russia and Ukraine.

"The 'Eastern Partnership' is a very timely initiative that needs to be implemented," Ferrero-Waldner said, adding that problems in Eastern Europe "affect us directly."

Eastern Europe has been hard hit by the global slowdown with many countries facing rising popular anger as cash-strapped governments cut spending.

Ukraine, which received billions in aid from the International Monetary Fund last year, has seen widespread demonstrations as its economy crumbles and savers rush to pull out money from banks.

Democratic progress

The plan aims to promote economic and political stability in the countries and reduce Russia's influence in the region. It includes free trade agreements, visa waivers, financial aid and economic integration with the EU.

In return, the eastern neighbors are expected to step up progress toward economic modernization, democracy, the rule of law and human rights.

The "Eastern partnership" scheme is to be approved at an EU summit next month and launched in May.

But some EU member states have expressed reservations about the proposal.

France, which pushed the EU's Mediterranean Union project last year, is reported to fear that increasing funding to the bloc's eastern neighbors would shift the EU's strategic focus away from North Africa and the Middle East.

Source: Deutsche Welle

IMF Warns Ukraine On Possible Credit Halt If Loan Terms Not Obeyed

KIEV, Ukraine -- The International Monetary Fund (IMF) warned Ukraine to keep to previously-agreed loan terms or risk a loss of badly-needed credits, a senior government spokesman said Monday. "The fund is insisting all the money loaned us go to our banking system," said Oleskander Shapak, a top economic advisor for President Viktor Yushchenko.

IMF's Ceyla Pazarbasioglu
"They have told us there can be no (Ukrainian domestic) political games with the loan terms," Shapak said, citing a formal message sent from IMF Ukraine mission head Ceyla Pazarbasioglu to Yushchenko over the weekend.

An IMF team, after a visit to Ukraine earlier this month, failed to approve the issuance of the second tranche of a $16.5 billion dollar loan to the former republic, which had been scheduled for February 15.

Ukraine's parliament had recently refused to pass a balanced budget, and money from the initial $4.5 billion dollar tranche sent Ukraine in November was not being focused on the former Soviet republic's banking sector, IMF officials charged at the time.

The IMF warning sent to Kiev by Pazarbasioglu criticised line items in Ukraine's national budget bill for not specifying IMF loan money be used only to support Ukraine's banking sector, a violation of IMF loan terms agreed to by Kiev, Shapak said.

A long-running feud between President Yushchenko and Prime Minister Yulia Tymoshenko has stymied most Ukrainian efforts to respond to a dramatic economic slowdown, with Yushchenko supporting hands-off monetary policy and reductions in state spending; and Tymoshenko calling for massive government intervention in industry, and state support to the national currency the hryvna.

The pair are deeply divided on Kiev's relations with the IMF, with Yushchenko calling for close Ukrainian adherence to IMF loan conditions; and Tymoshenko supporting redirection of already-received IMF money to social service programmes, and flirting with Russia as a possible creditor in case of an IMF loan halt.

Ukraine has been heavily hit by the world financial crisis, with GDP expected to contract in 2009, along with spikes to inflation and unemployment. Anti-government demonstrations have accelerated as the country's economy has worsened, with 2,000 Communists gathering in the capital Kiev on Monday to demand Yushchenko quit office immediately.

Independent analysts in Ukraine generally agree the government is close to default - a situation that might well go critical were the IMF to refuse further cash infusions.

Ukraine's current account budget deficit is some $5.5 billion dollars. High fuel prices and delayed foreign debt now coming due is likely to worsen the situation, observers said.

Ukraine Finance Minister Viktor Pinzenyk handed in his portfolio on February 12 over the government's programme to control the ballooning budget deficit, saying he "could not continue while abandoning principles of a balanced budget, deficit control, and avoiding living on credit."

Source: DPA

EBRD Ready To Help Ukraine

KIEV, Ukraine -- The European Bank for Reconstruction and Development is in talks to help recapitalize Ukraine’s banks and is ready to invest a total of 500 million euros in the country, EBRD’s president said on Feb. 17.

EBRD President Thomas Mirow. Chornobyl gets 135 million euro grant, banks will get 500 million euros.
Ukraine’s banks have been hit by the global credit crunch as its hryvnia currency plummeted, with three banks put in receivership last week, including the country’s seventh largest, Nadra Bank.

"We are in negotiations with a number of banks. The names I wouldn’t like to mention before the agreements have been found,"EBRD President Thomas Mirow told a news briefing.

“The sum that is available in principle is high, meaning something like 500 million euros ($639.7 million), which we would be ready to invest in Ukraine.”

There are over 180 banks operating in Ukraine, many of the larger ones foreign owned. The EBRD has said previously it is likely to focus on banks with which it already has relations.

These include a unit of Hungary’s OTP Bank, Raiffeisen Bank Aval, a unit of Raiffeisen, UkrSibbank, majority owned by BNP Paribas and Ukrsotsbank, owned by UniCredit.

Other banks it works with include Kreditprombank, Forum, Ukreximbank, Prosto Finance Ukraine — a consumer finance arm of Societe Generale, Megabank, Procreditbank, International Mortgage Bank, Kredo Bank and SEB Bank’s unit .

Ukraine’s largest bank is privately owned Privatbank, but is then followed by Raiffeisen, UkrSibbank and Ukrsotsbank.

The country’s No.5 bank, Prominvestbank, was bought by Russian state-controlled VEB bank after spending several months in receivership. Officials said a run on its deposits in October was unconnected to the financial crisis.

Three other banks were placed in receivership last week — Nadra, Bank Kyiv — the country’s 39th largest bank, and Zakhidinkombank, No.72 in the country. Analysts have said that the financial crisis should spark consolidation in the sector.

Chornobyl grant signed

While visiting Kyiv on Feb. 17, Mirow signed an agreement with Yulia Tymoshenko, Ukraine’s Prime Minister, allocating 135 million euros as a grant from the EBRD’s 2008 dividends to fund construction of a new shelter over the decommissioned Chornobyl Nuclear Power Plant, site of the world’s worst nuclear disaster in 1986.

The international community has been involved in the transformation of Chornobyl since the 1990s and appointed the EBRD as administrator of its funds. The EBRD is overseeing the Nuclear Safety Account, through which the nuclear decommissioning of Chornobyl reactors 1-3 is being financed, and the Chornobyl Shelter Fund which deals with the damaged reactor 4.

A major milestone was achieved in September 2007 with the signing of two key contracts, one for the construction of the confinement structure that will be built over reactor 4, the second for the completion of a spent fuels storage facility.

The EBRD grant will be used to support the completion of these two key projects which are currently in preparatory stages with design work nearing completion. Upon completion, the confinement will be the largest such project in the history of engineering.

Final designs for both projects are scheduled in 2009 and completion of the construction works is currently planned for 2012. Further contributions, however, remain essential, according to the EBRD, which said preliminary estimates put the total cost for the new shelter alone in excess of 600 million euros.

“The EBRD grant is therefore seen as a catalyst that will give additional momentum to the efforts of the international donor community,” the EBRD said in a statement.

The Chornobyl Shelter Fund has so far received contributions and donations of almost $800 million from Austria, Belgium, Canada, Denmark, European Community, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Korea, Kuwait, Luxemburg, the Netherlands, Norway, Poland, Portugal, Russia, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Ukraine, the United Kingdom, and the United States.

The Nuclear Safety Account has received contributions close to 300 million euros from Belgium, Canada, Denmark, European community, Finland, France, Germany, Italy, Japan, the Netherlands, Norway, Russia, Sweden, Switzerland, the United Kingdom and the United States.

The EBRD, owned by 61 countries and two intergovernmental institutions, is supporting the development of market economies and democracies in countries from central Europe to central Asia.

Source: Kyiv Post

Can Arseniy Yatsenyuk Save Ukraine From Itself

DENVER, USA -- In many ways the locus of Yatsenyuk’s path to victory that stresses ending the political rancor between the Regions Party and the Tymoshenko Bloc, and building a new sense of national unity and purpose mirrors Barak Obama’s road to the White House in the 2008 elections.

Arseniy Yatsenyuk
Unless a transformational figure emerges to capture the imagination and majority of Ukrainian voters in the January 2010 national elections, Kiev’s drift back to Russia will accelerate and the Orange Revolution will tragically perish in its infancy.

Five years after millions of Ukrainians defiantly overturned a fraudulent election orchestrated in Moscow to usher in Victor Yushchenko’s reform movement, corruption is rampant, chaos reigns in government and nostalgia to re-establish bonds of affection with Russia is metastasizing across Ukraine.

While Ukraine has been a strategic battleground between Europe and Russia, it is Kiev’s dysfunctional leadership that has furnished the means of its own nation’s destruction.

Today, the one leader who is uniquely positioned to save Ukraine from itself may be Arseniy Yatsenyuk, whose meteoric rise is altering the political calculus of Ukraine’s upcoming elections.

If Yatsenyuk enters the race, his road to the presidency will be as difficult as it is unlikely. Ukraine’s next president will inherit a nation in the throes of a spiraling economic crisis still searching for the bottom out point.

With the 4th highest debt level on the planet, industrial output plummeting 30 percent last year, inflation at 24 percent and its national currency (the hryvna) in free fall; economic circumstances in Ukraine couldn’t be worse.

The December gas crisis with Moscow that shut off natural gas flows to twenty European countries has exacerbated Ukraine’s problems, and made it an unreliable provider of energy transiting that is so vital to Europe.

While Prime Minister Yulia Tymoshenko tried valiantly to reassure the European community at the recent Munich security conference that Ukraine has the capacity to fulfill its energy transiting responsibilities to the west, plans are moving forward on three natural gas pipelines from Russia and Central Asia that would all bypass Ukraine.

Further, when the IMF conditioned the release of the second tranche of Ukraine’s $16.4 billion package to re-capitalize the banking sector and service its external debt, Ukraine was obligated to submit a plan for a balanced budget.

Prime Minister Tymoshenko’s government presented a plan riddled with account deficits; prompting the resignation of Ukraine’s Finance Minister.

The gas crisis and Ukraine’s embarrassing proposal to the IMF are just two revealing examples of just how deeply Ukraine’s political leaders have been living in a fantasy world since the Orange Revolution.

The Yushchenko-Tymoshenko Orange coalition, disagreed on virtually everything once they took power in 2004. Since Tymoshenko was tossed out after the first eight months in office the two leaders and factions haven’t stopped fighting since.

Worse than the Ukrainian government’s incompetence is the atmospherics of adolescent carnival its leaders exhibit in conducting the nation’s affairs. Their governmental decorum has the dignity of a primary school dining hall food fight.

In short, Ukraine is not ready for rapid ascension into the European Union or NATO. Even Russia has its doubts about its dealings with Kiev. On February 16, Ukrainian leaders threatened to expel Russian Ambassador Chernomyrdin for his recent criticism of the nation’s leadership as totally disorganized.

President Yushchenko’s fight for the supremacy of the Ukrainian language, uniting Ukraine’s Orthodox Church and building international recognition of the 1932-33 Holodomor as Soviet genocide will not do anything to solve Ukraine’s crisis.

That is precisely why his popularity in the polls is down to less than three percent. Prime Minister Yulia Tymoshenko is a far superior administrator of state affairs than Yushchenko or former Prime Minister Yanukovych.

She managed to unite with Yanukovych’s Regions Party in 2007 to form a governing coalition and then defeated the Regions Party’s recent attempt to topple her from the Prime Minister’s post with a “no confidence vote.”

Tymoshenko also deserves credit for negotiating a deal with Russia to end the gas crisis, eliminating energy transit middlemen who were gouging profits and attempting to restore credibility to the nation’s wages and pension system.

But Tymoshenko is not trusted by vast numbers of Ukrainians who view her as part of the problem and are fatigued by her constant fighting with President Yushchenko and with Yanukovych. Thus, she does not have enough parliamentary seats nor the nationwide support to forge an effective coalition government and lead a genuine reform movement.

Yanukovych’s Region’s Party has a slim parliamentary majority but not enough seats to form a governing coalition. He is currently running behind Tymoshenko in the polls by a few points, and is facing a backlash in his party for fumbling the last attempt to depose Tymoshenko from office.

As for President Yushchenko, his spectacular fall from grace has virtually sunk his “Our Ukraine” coalition.

Against the backdrop of Ukraine’s crumbling economy and gross malfeasance in leadership, Arseniy Yatsenyuk has a tremendous opening to break out as a uniting force to save Ukraine’s flagging ship of state.

While Yushchenko, Yanukovych and Tymoshenko fight, Ukraine is sinking and Yatsenyuk’s poll numbers and popularity are rising. As a former banker, Ukraine’s Minister of Foreign Affairs and Speaker of the Parliament, the 34 year-old Yatsenyuk is experienced and conversant in Ukraine’s byzantine politics.

He is young, relatively scandal free and has the best chance to represent the next generation of a new post-partisan Ukrainian leadership.

But can Yatsenyuk be the sober visionary leader who can impart a new sense of realism that implores Ukraine to clean up its own financial house?

Does he have the charisma to inspire Ukrainians to take their destiny in their own hands and not look to Europe or Russia for salvation or blame them when things go wrong?

Can he reign in Ukraine’s oligarchs who have ravaged the country in the same way that Russia’s oligarchs did during the transition from state ownership to free enterprise without Putinizing the system?

Will Yatsenyuk finally craft a sensible forward-leaning Ukrainian energy policy that modernizes its infrastructure and restores its credibility in Europe?

Can he convince Ukraine to diversify its economic platform and start weaning the nation off of costly subsidies?

Will Yatsenyuk try to articulate a vision that bridges the cultural and religious divide between Ukraine and Russian nationals?

And can he lead a parliament to get things done with significant numbers of members from the Tymoshenko Bloc and the Regions Party?

Although Yatsenyuk lacks money, party organization and a program for Ukraine’s resurrection, he has two things working in his favor; the Ukrainian peoples’ desperate thirst for new leadership and his political rival’s incessant infighting that makes him a more attractive alternative.

What Yatsenyuk needs now is a clear and compelling vision of a new Ukraine, and a new theory of nation-building that departs with the failed attempts of the past.

He cannot simply split the political difference between the major parties. He can be a radical pragmatist proposing solutions that benefit all Ukrainians struggling under severe economic conditions, but he cannot be a soft centrist who tries to be all things to all Ukrainians.

The fact that Yanukovych, and most recently Tymoshenko, have started attacking Yatsenyuk instead of ignoring him is an excellent development that provides him greater opportunities to highlight policy differences and new reforms, rather than engaging in personal smears. Yatsenyuk can and will have to be tough in taking on his detractors; he cannot be equally as dirty.

Yatsenyuk has formed a new organization called the Change Front Citizens Initiative. Unlike the Orange Coalition that was powerful enough to overturn a corrupt government in 2004, but too weak and too divisive to govern effectively, Yatsenyuk must build his own independent base of disaffected citizens and Ukraine’s youth early in the process that are anchored to his core vision.

By doing so he can position his campaign to break off sections of Ukraine’s other major and minor parties on principle and policy to forge a winning coalition as the January 17 elections draw near.

In many ways the locus of Yatsenyuk’s path to victory that stresses ending the political rancor between the Region’s Party and the Tymoshenko Bloc, and building a new sense of national unity and purpose mirrors Barak Obama’s road to the White House in the 2008 elections.

Can Arseniy Yatsenyuk be the change that the new Ukraine believes in?

Source: Brooks Foreign Policy Review

How The Financial Crisis Is Affecting Eastern Europe

KIEV, Ukraine -- Russian President Dmitry Medvedev said on Friday officials were working too slowly to ease the economic crisis. Russia's $1.7 trillion economy is set to contract this year for the first time in a decade and unemployment is soaring.


Following are some details of how the financial crisis is affecting Russia and some other countries in eastern Europe:

BULGARIA

Bulgaria's farming industry, once a main stay of the economy, has shrunk to 5 percent of GDP from 25 percent in the past decade. Cash-strapped producers suffered again in 2008 after the EU froze millions in farm aid over graft. The crisis may erase Bulgaria's gains over the past decade because its main export market, the EU has fallen into recession. Trade unions say some 50,000 people are likely to lose their jobs in 2009.

CZECH REPUBLIC

The economy is highly open and dependent on exports, which in gross terms account for about 70 percent of GDP. The financial system has been relatively unaffected by the initial phase of the global financial crisis, but was hit from a collapse in demand. Over 45,000 people lost their jobs in January, bringing the unemployment rate up 0.8 percentage points to 6.8 percent, the highest level since April 2007.

HUNGARY

Hungary, which escaped the crisis by way of a $25.1 billion IMF-led loan in October, planned to cut its budget deficit below 3 percent of GDP and decided on new spending cuts worth 200 billion forints ($835 million) in 2009 to prevent an overshoot. The economy is under pressure from a collapse in demand in the euro zone, its key export market, and the economy is expected to sink into a recession of up to 3.5 percent.

POLAND

Economic growth slowed to 4.8 percent in 2008 from 6.7 percent in 2007 and analysts expect it to slump to 1.4 percent in 2009.

ROMANIA

Decides this month whether it needs to help from the EU or the IMF. The unemployment rate rose to 4.9 percent in January from 4.4 percent the previous month. Several major industrial companies announced job cuts after demand was hit.

RUSSIA

Russia's economy is set to contract this year for the first time in a decade. About 300,000 Russians lost their jobs in January as collapsing commodities prices and months of market crisis hammered the real economy. The number of jobless jumped to 6.1 million or 8.1 percent of the workforce versus 7.7 percent the previous month. The government forecast on Tuesday the economy would contract by 2.2 percent in 2009. Growth in retail sales slowed in January to 2.4 percent year on year and a 16.3 percent increase in Jan. 2008.

SERBIA

Serbia expects to conclude a 2 billion euro ($2.52 billion) loan with the IMF by April as growth is seen falling far short of earlier official estimates, Prime Minister Mirko Cvetkovic said on Friday. He said it will most probably grow between 0.5 and 1 percent after the fall in fiscal revenues since the beginning of the year. By contrast, last week Serbia's central bank said the economy was most probably heading into recession. Serbia's economy grew 5.5 percent in 2008.

SLOVAKIA

Slovak industrial output fell by 16.8 percent year-on-year in December, the sharpest fall at least in 10 years. Slovakia expects its export-oriented economy to be hurt by the crisis as demand for its products slows in the West.

UKRAINE

Industrial output has shrunk by over a third -- the worst drop in over a decade. Machine building and mineral production both contracted by over half year-on-year. Thousands of workers have been put on unpaid leave as a consequence of the drop. Ukraine's banks have also been hit as its hryvnia currency plummeted, with three banks put in receivership last week, including the seventh largest, the Nadra Bank.

Political turmoil has delayed policy making to combat the crisis and has threatened a $16.4 billion loan from the International Monetary Fund, which failed to agree last week on disbursing a second, much-needed tranche.

Source: Kyiv Post

Ukraine Urged To Overhaul Military

KRAKOW, Poland -- NATO members have urged Ukraine's government to persevere with changes to its military that are needed in order for Kiev to join the alliance.

Yuri Yekhanurov, Ukraine's defence minister, attended the NATO talks in Poland.
The appeal by the military alliance on Friday is in spite of the former Soviet nation being severely hit by the economic crisis.

"Allies are aware that the financial and economic crisis that has also hit Ukraine very hard is having an effect on Ukrainian reforms," Jaap de Hoop Scheffer, NATO's secretary general, said after talks with defence ministers in Krakow, Poland.

"Ministers encouraged Ukraine to keep up the effort including with the necessary resources, difficult as that may be, because an inefficient and antiquated defence and security sector will cost Ukraine much more in the long run," he said.

The global economic downturn has seen Ukraine's industrial output sink by a third and its currency plummet in value, while political turmoil has jeopardised part of a $16.4bn loan from the International Monetary Fund (IMF).

The alliance has said that Ukraine and Georgia can one day join the 26-member bloc, amid opposition from Russia over NATO's expansion into former Soviet nations.

Russian opposition

Scheffer said NATO officials were looking at "ways in which the alliance can continue to support its preparations for NATO membership" for Ukraine.

Robert Gates, the US defence secretary, said Ukraine still had a long way to go before it could join the alliance, but that the Obama administration had no "significant quarrel" with its attempt to become a member.

"There is a long path in front, and frankly there has to be greater unanimity of views within the Ukrainian government itself about the next steps," he said.

Bogdan Klich, Poland's defence minister and host of the two-day meeting, said his country would continue to lobby hard for the two countries to join NATO.

But Ulrich Schlie, the German defence ministry's director of planning, expressed his concerns over NATO's continued expansion.

"The larger the alliance gets the more difficult it is to maintain cohesion," he said.

Moscow, which already has strained ties with NATO, has been angered by the alliance's open-door policy in regard to Georgia and Ukraine, which both lie on Russia's southern border.

Source: Al Jazeera

Ukraine's Prime Minister Says She Is Ready To Change Budget Amid Pressure From IMF

KIEV, Ukraine -- Ukraine's Prime Minister Yulia Tymoshenko said Friday she was ready to amend this year's budget to satisfy requests by the International Monetary Fund, which has said spending must be reduced before the country can receive an emergency loan.

Ukraine's Prime Minister Yulia Tymoshenko.
The IMF froze a hard-won $16.4 billion loan earlier this month after the government refused to trim the budget deficit to 1 percent of GDP from the current 3 percent.

Tymoshenko, expected to run for president in an election in January 2010, is reluctant to upset voters by cutting social spending.

Addressing the mayors of Ukrainian cities Friday, Tymoshenko said she was ready to amend the budget, but sounded vague about whether the changes would mean a reduction in the deficit. Her office declined to elaborate.

Tymoshenko asked the mayors to come ahead with proposals to "expand" regional budgets and said the government should continue subsidizing utilities for the public. But she also told the regional leaders to cut corners and "count every last copeck."

Meanwhile, her fierce political rival President Viktor Yushchenko warned that the economy was in a free fall. Yushchenko again urged Tymoshenko to trim the budget in order to continue receiving the IMF aid.

Ukraine is among the countries worst hit by the global financial crisis. The economy is expected to contract by 6 percent this year, according to analysts, after years of impressive growth.

Industrial output slumped by 34.1 percent in January, year-over-year, the biggest fall in the country's history.

The national currency, the hryvna, lost 40 percent since the financial crisis hit in September. It continued sliding Friday, closing at 8.52 to the dollar at the foreign currency exchange Friday. The Ukrainian stock market has hit the lowest point in four years.

Source: AP

The Orange Emperor Has No Clothes

MOSCOW, Russia -- Despite living separately for the last 17 years, Russia and Ukraine are still inextricably intertwined. Events in one country inevitably have an impact on the other. In fact, two of Vladimir Putin's greatest foreign policy failures were linked to Ukraine.

Putin (L) and Yushchenko smile at a photo op.
The first was in 2004, when then-President Putin personally meddled with Ukraine's presidential election process and his preferred candidate, Viktor Yanukovych, lost under shameful circumstances.

The second flop occurred early last month when Prime Minister Putin temporarily halted gas supplies to Europe in the heat of the gas war with Ukraine, a move that will have negative long-term consequences for Russian-European political and economic relations.

At the same time, Moscow's defeat does not signify a victory for Kiev. As President Viktor Yushchenko's term in office approaches its end, Ukraine is poised on the brink of a severe economic and political crisis that will most likely be worse than Russia's.

Ukraine's deep recession stems as much from the global crisis as from the state's inept management of the economy. What's more, Kiev's leadership is constantly mired in political struggles that go deeper than the most visible battle between Yushchenko and Prime Minister Yulia Tymoshenko.

The main political factions have lost credibility with voters and lost respect from the international community. Moreover, the rule of law and independence of the court system has been severely eroded under Yushchenko's presidency.

In addition, few of the foreign policy goals set by champions of the Orange Revolution have been achieved. The hope of joining NATO has amounted to nothing, and the prospects for integration with Europe have all but disappeared.

To make matters worse, Russian-Ukrainian relations have never been as bad as they have been during the past four years.

What are the reasons for these dismal results? Is it because the country's political elite are too inexperienced or inept? Paradoxically, the roots of today's problems can be traced to the 2004 Orange Revolution itself.

The initial euphoria over the "democratic revolution" drew attention away from the election violations surrounding Yushchenko's victory. After the first vote, which was held in November 2004, the Central Election Commission declared Yanukovych the winner.

Then thousands of Yushchenko supporters protested in the streets, alleging that the vote was rigged. In response, the Ukrainian Supreme Court annulled the results and ordered a repeat of the second election, which was held a month later.

Logically speaking, if the first election results were annulled, there should have been a completely new election open to all candidates; under these conditions, perhaps there would be have been people running in the race.

Instead, there was simply a rerun of the old election between Yushchenko and Yanukovych, which Yushchenko won. This is a vivid example of Ukrainian legal nihilism, and to this day Yushchenko is fond of manipulating the Constitution and court system to strengthen his own political position.

In addition, outside forces played an important role in shaping Ukraine's internal political process. It is true that Russia intervened by supporting Yanukovych, but the West's intervention was more powerful, including the support of nongovernmental organizations within Ukraine and developing a global PR campaign in support of Yushchenko.

After Yushchenko became president, the Orange coalition declared their new strategy of aligning with the West. This strong, pro-Western orientation, unprecedented in Ukrainian politics, complicated its relations with Moscow.

With practically no chance of joining the European Union, Ukraine has been left without a well-defined goal. It is now difficult to take seriously the popular slogan of Ukraine's "European integration."

One of Yushchenko's most important political goals was gaining Ukraine's membership in NATO, and this immediately became a source of heated contention with Russia. Moreover, Yushchenko tried to play the Ukrainian nationalism card, but this was clearly a flawed approach in a country with so many different ethnicities and cultures.

According to a recent Public Opinion Foundation-Ukraine Internet rating, if the presidential election were held today, only 1.9 percent of the poll participants would vote for Yushchenko.

In any event, the 2009 presidential election campaign promises to be heated, and this could ultimately complicate relations with the country's neighbors, particularly Russia. The recent gas war with Russia has shown that the Ukrainian president is willing to take risks and that he can skillfully provoke Moscow to make the Kremlin look bad.

The biggest risk would be for Yushchenko to provoke Moscow on the issue of Russia's Black Sea Fleet, based in Sevastopol, but this could lead to a conflict much more serious than the gas war.

Considering Ukraine's important geopolitical position, events in the country have direct repercussions for Russia and Europe. Kiev's politicians, however, do not fully appreciate this fact as they are more caught up in internal battles and the struggle for their own political survival. This shortsightedness will not change until a new, more pragmatic generation of politicians come to power.

For their part, Ukraine's neighbors have yet to figure out how best to deal with Kiev. Moreover, they continue to believe in myths: Europeans like to believe the fairy tale that Ukraine is building a European democracy, and Russians like the myth that Ukraine — or at the very least its Russian-dominated eastern half — will one day return to the Russian empire.

Source: The Moscow Times

Ukraine To Ease Restrictions On Guns

KIEV, Ukraine -- Ukraine's Interior Affairs Ministry has announced a plan to ease restrictions on the purchase of guns that fire rubber bullets, RFE/RL's Ukrainian Service reports.

Makarych gas pistol with rubber bullet cartridges.
The draft law allows any Ukrainian citizen 18 or older, who has no criminal record, and is psychologically stable, to buy such guns.

Experts fear that such guns can be easily turned into regular guns.

The head of the License Board at the Interior Affairs Ministry's Civil Security Department, Valentin Vedmid, told RFE/RL that criminals mainly use unregistered guns, adding that of last year's 311 gun-related crimes, only 34 were committed with registered guns.

Source: Radio Free Europe/Radio Liberty

Gongadze Murder Still Casts A Shadow Over Yushchenko's Presidency

WASHINGTON, DC -- On January 27 the Parliamentary Assembly of the Council of Europe (PACE) issued another damning report about the poor state of Ukraine's investigation into the murder of opposition journalist Georgi Gongadze in the fall of 2000.

Murdered opposition journalist Georgi Gongadze.
The involvement of senior Ukrainian leaders in the murder was made public using tape recordings made in President Leonid Kuchma's office by presidential guard Mykola Melnychenko, who sought asylum in the United States in April 2001.

Four years after the Orange Revolution and Viktor Yushchenko's promise to investigate the Gongadze murder, there has been little progress in the inquiry.

Three lower-ranking policemen have been sentenced for their involvement in the murder, but the organizers have managed to escape justice thus far: Leonid Kuchma remains in Kyiv, then-Interior Minister Yuriy Kravchenko allegedly "committed suicide" under suspicious circumstances in March 2005, and General Olexiy Pukach, who is alleged to have actually murdered Gongadze, supposedly fled Ukraine in 2004.

Gongadze's wife, Myroslava, accused senior Interior Ministry officers of hiding Pukach in a similar manner to that of Ratko Mladic, a Serbian war criminal.

Melnychenko's recordings, which are crucial to any investigation, were ignored by the prosecutor until December 2008, when the tapes and tape recorder were handed over to the Prosecutor's Office, which agreed to organize the first analysis of the tapes by an impartial European organization.

It is no coincidence that after four years of inactivity the Prosecutor's Office, which is constitutionally under the control of the president, has only now become interested in the Melnychenko tapes.

Ukraine will hold presidential elections in December, and progress in the Gongadze murder case could help Yushchenko improve his current dismal 2.4 percent popularity rating.

Three key individuals in the investigation have refused to give voice samples for comparison to those on the tapes: Kuchma, Volodymyr Lytvyn (head of the presidential administration during the Gongadze scandal), and the chairman of the Security Service at the time, Leonid Derkach.

Lytvyn, as speaker of parliament, is the only one of the three who is still a public figure.

Melnychenko suggested that Yushchenko should set an example by voluntarily giving a voice sample: "If Yushchenko states that this affair is a matter of his honor, then he is obliged as a Ukrainian citizen to come forth and set an example and give evidence". The PACE report demanded that the identity of the voices on the tapes be ascertained.

In a visit to Ukraine last month, Melnychenko said that the European analysis of his tapes not only would reveal information about the organizers of the Gongadze murder but would allegedly include details about high-level abuse of office by Ukraine's elites and interaction with their Russian counterparts.

Melnychenko directs much of his criticism at Lytvyn as the agitator who persuaded Kuchma to order the Interior Ministry to "deal" with Gongadze. Any undermining of Lytvyn could potentially unravel the Orange coalition that was reestablished in December only after the Lytvyn bloc had agreed to join.

Without the Lytvyn bloc's 20 deputies, there could not be an Orange coalition, and Prime Minister Yulia Tymoshenko's government could collapse.

A full analysis of the tapes could be problematical for more people than Lytvyn; after all, the majority of Orange leaders (including Yushchenko and Tymoshenko) were either in government or in business, or both, in the 1990s.

Melnychenko's recordings were made in 1999 and 2000 after Tymoshenko had entered parliament in the opposition Hromada but before Yushchenko joined in 2001.

Melnychenko has accused Lytvyn of being protected by Russia in a deal struck in the last days of the Kuchma regime. On January 12 the Russian Prosecutor's Office declined to assist in the investigation because it would infringe on Russia's "national interests."

Melnychenko asserts that "the organizers met and required certain assistance from senior levels of the Russian authorities." Whether this indicates that the Gongadze affair was a "Russian conspiracy," as Yushchenko and his national democratic allies have always believed, or (more likely) that the organizers sought Russian support after the crisis began unfolding remains unclear.

Kuchma re-orientated Ukraine to Russia from 2001 to 2003 after becoming isolated and shunned by the West.

Melnychenko claims that Russia's knowledge of the real details of the Gongadze murder enables it to "blackmail Lytvyn and Kuchma's entourage," something that is more in Russia's national interests than assisting the investigation.

In a BBC Ukrainian service interview, Melnychenko said that as a presidential candidate, "Lytvyn is supported by Russia in the form of Dmitry Medvedev, Vladimir Putin, and FSB Director Oleksandr Bortnikov."

It is very likely that blackmail materials on Kuchma and Lytvyn are in Russian hands (as are similar materials about Russian leaders in Kyiv). Ukrainian and Russian elites, particularly in the energy sector, are said to have operated as a criminal joint venture during the "Wild West capitalism" of the 1990s.

With such blackmail materials, Russia may indeed hope that it would be in a position to manipulate a future "President Lytvyn."

Opinion polls show, however, that this scheme would be farfetched: the two top presidential candidates have long been Tymoshenko and Party of Regions leader Viktor Yanukovych (on whom the Russian leadership might also have blackmail material, as Yanukovych was Donetsk Governor during the "Wild West" of the 1990s). Lytvyn is both trailing and is being out-flanked by the rising star of former speaker Arseniy Yatsenyuk.

The PACE report and Melnychenko's accusations continue to shed light on an episode that is one of the most important in recent Ukrainian history and remains a black spot on Yushchenko's presidency.

As Melnychenko rightly states, "The result we received [from the Kuchmagate crisis] in 2004 was in the form of the Orange Revolution". Other young democracies have managed to investigate similar conspiracies — Peru under Alberto Fujimori and contemporary Turkey — but the Gongadze affair continues to elude a thorough investigation by Orange Ukraine.

Source: Georgian Daily

One-Way Ticket To US For Yushchenko

KIEV, Ukraine -- Ukraine's Communist party is collecting funds to buy President Yushchenko a ticket to the US. The people behind the move say the mock campaign symbolises the "people's impeachment" of their current leader.


Party members announced the plan during parliament's daily session, bringing turmoil to the meeting. Supporters started throwing paper airplanes and waving posters with the US flag.

After that they brought in a suitcase which they used to collect the money for the president's departure.

“We’ve bought him a ticket with an open date and asked the US president to give employment to George W. Bush’s puppet,” Evgeny Tsarkov, Communist party member, explained.

He said the party is going to award Yushchenko with an order “for giving up the interests of Ukraine to Romanians.”

The communists are also ready to give Yushchenko the suitcase itself so he can pack his things into it.

The event, labelled ‘Yushchenko – suitcase – USA’, started on February 10 in the resort city of Odessa and will continue on February 23 in Kiev.

According to Tsarkov, the communists will pass documents on "the people's impeachment" of Yushchenko to the secretariat on that day.

Ukraine is stuck both in political and economic crises – President Yuschenko is at war with his prime minister, Yulia Timoshenko, and the country’s economy is on the brink of default.

Source: Russia Today

Cracking At Chernomyrdin, Ukraine FM Acted On Stupid Orders From Yushchenko - Taras Chornovil

KIEV, Ukraine -- Parliament foreign relations committee deputy head Taras Chornovil told ZIK that the recent scandal involving the Russian ambassador was a frame-up orchestrated on the instructions from President Yushchenko.

Taras Chornovil
“The foreign ministry has launched a stupid and primitive publicity stunt to boost Yushchenko’s meager rating. The past conflict involving the Tuzla island had the same scenario,” Chornovil stressed.

The lawmaker reminded how President Leonid Kuchma’s rating ballooned in the aftermath of the Tuzla stand-off with Russia.

“Believing he stands a chance for a second term in office, President Yushchenko is eager to beef up his support by jumpstarting risky situations involving the inevitable external enemy and a blue-eyed boy in Ukraine bravely defending his country,” T. Chornovil says.

Yushchenko kicks sand in Russia’s face in the hope of unleashing Moscow on Yulia Tymoshenko, his Enemy #1.

Russia will react to Ukraine FM statement threatening to declare Viktor Chernomyrdin a persona non grata.

“Russia is like a fighter-bulldog. No matter how you coax it or share you bed with it, it remains a fighter-dog. If you give it a kick, it will go for your throat,” Chornovil says.

Source: ZIK

Can He lead?

KIEV, Ukraine -- Since getting fired as parliament speaker, Arseniy Yatsenyuk’s standing has risen in polls. But is this 34-year old ready to be Ukraine’s next president?

Arseniy Yatsenyuk
His could be the easiest presidential campaign imaginable: just sit tight and let his rivals fight.

While President Victor Yushchenko and Prime Minister Yulia Tymoshenko continue to savage each other, as opposition leader Victor Yanukovych timidly barks from the sidelines, former Speaker Arseniy Yatsenyuk is quietly watching his approval ratings rise.

Asked by the Kyiv Post whether he was planning to run for president in 2010, Yatsenyuk said he would make the final announcement in May when he turns 35, the minimum age the Constitution allows for presidential candidates.

Even if he postpones the decision, he can still easily make it to the pool of presidential candidates. In Ukraine the campaign officially lasts 90 days, while the probable election date is Jan. 17. But the Constitutional Court is yet to make the final ruling on the date.

However, some observers are already predicting that the final standoff next year will be between Yatsenyuk and Yanukovych, leader of the Party of Regions, who is expected to run for the second time.

Vicious mudslinging with Yushchenko and the pinch of economic recession are eating away Tymoshenko’s approval ratings. Meanwhile, Yanukovych is holding on to a steady base of support.

“People disappointed with Yushchenko previously tended to support Tymoshenko as they saw no other alternative, but now they have Yatsenyuk,” said Victor Chumak, a political analyst at Kyiv’s International Centre for Policy Studies, a non-government organization.

Yatsenyuk has been gaining an impressive two to three percent of support per month, starting from just three percent in autumn. Two polls this month suggested 10-11 percent of Ukrainians were ready to elect him president. Yanukovych currently leads with 21-23 percent, and 13-17 percent of those polled were ready to vote for Tymoshenko – down from mid-twenties in autumn.

“If the trend [continues], Tymoshenko's presidential prospects will be under threat,” said Volodymyr Fesenko, head of Penta political consulting company.

There are several reasons for Yatsenyuk’s growing popularity.

Apart from a desire by voters to see a fresh face, many Ukrainians do not feel that he is responsible for the economic mess the country ended up in under the current leadership.

Also, many Ukrainians feel his removal from the parliamentary speaker’s seat last November was unjust.

“We sympathize with victims,” Fesenko added.

But it seems it’s not just the voters who are taking on a liking to Yatsenyuk. He has also been spotted by at least some of the former financial and political backers of the current leaders.

Tariel Vasadze, a deputy from Tymoshenko’s parliamentary faction and honorary president of Ukraine’s largest automaker UkrAvto, showed up at a February press conference of Yatsenyuk’s charity foundation Open Ukraine. Yushchenko’s former chief of staff and personal friend Oleh Rybachuk also attended.

If financial backers of his foundation are of any indication, Yatsenyuk will have no problem with the collection box for his presidential campaign. Topping the list of Open Ukraine financiers in 2008 is Victor Pinchuk, Ukraine’s second richest man and son-in-law to ex-president Leonid Kuchma. He donated Hr 4.28 million. Serhiy Taruta, an industrialist who donated Hr 2.95 million.

Yatsenyuk is a frequent visitor and speaker at high-key international events organized by Pinchuk, including annual round table discussions at the World Economic Forum in Davos and Yalta European Strategy. Pinchuk did not explicitly say he would support Yatsenyuk for president, but told the Kyiv Post “it will be transparent” if he does.

Other indicators showed that Yatsenyuk may be the oligarchs' choice, too. Although he is today only a lawmaker holding no high-level posts, he continues to get impressive media coverage, including that of Inter, the most popular television channel allegedly controlled by billionaires Valeriy Khoroshkovksy and Dmytro Firtash.

Firtash co-owns RosUkrEnergo, a Russian-Ukrainian natural gas intermediary that was kicked out of the market by the recent direct deal struck by Tymoshenko and Russian Prime Minister Vladimir Putin. Tymoshenko recently said that Firtash controls Inter and has used his influence over the channel to prop up Yatsenyuk. Both deny the allegations.

Oleksiy Haran, founding director of political analysis school at Kyiv-Mohyla University, says there is no surprise that the nation’s rich are disappointed with unpredictable and petty current leaders, and are betting on Yatsenyuk.

“Business is interested in establishing transparent ‘rules of the game’ and an economy working to market principles, without administrative interference and government manipulations,” he said.

Yatsenyuk is perceived mainly as an economic liberal.

Despite being one of the youngest Ukrainian politicians, he has managed to hold many top positions: central bank chief, economy minister, foreign minister, deputy presidential administration chief and most recently, parliament speaker. He is also a lawyer by training and education.

“Yatsenyuk strikes many chords: he is young, smart, is good at economics and has a good sense of humor,” said Chumak of ICPS.

Should Yatsenyuk claim the presidency, he could use the position as a bully pulpit for his slick oratory skills, winning over more than the support of Ukrainian voters. Unlike the nation's three presidents, Yatsenyuk speaks perfect English. This skill could make him Ukraine's first leader capable of clearly communicating his agenda for the country globally.

But despite these virtues, he still has much work to do to capitalize on his achievements and advance. His weak points include a lack of a political team to back him up, an unclear agenda and few public achievements that demonstrate his ability to manage anything bigger than a ministry.

Referring to the prospects of a Yatsenyuk presidency, one western diplomat questioned if he had ever achieved anything in his previous short-lived posts, adding: “What will his team, or inner circle, be? Can he manage the balancing act … to keep his team together with all the vested interests at play?”

“He is untested. We don’t know what to expect,” the diplomat said referring to Yushchenko’s inability in four years of presidency to keep together a constructive base and avoid infighting.

To answer these big questions, Haran said: “It’s important to know what political force will back Yatsenyuk, what program he will propose and what his relations with leading business groups will be.”

“If we get an answer to these questions, we can talk about his future,” Haran added.

Source: Kyiv Post

EU Mulls Action As Ukraine Crumble Triggers Contagion Fears For Europe

BRUSSELS, Belgium -- Europe's institutions are scrambling for ways to prevent financial contagion from Ukraine and the rest of Eastern Europe from setting off a full-blown banking crisis in Austria, with risks of systemic contagion across the eurozone.

Joaquin Almunia, EU's Economic Commissioner.
Joaquin Almunia, EU's economic commissioner, said Brussels is ready to co-ordinate a pan-EU response to contain the crisis before matters get out of hand.

"I share with the Austrian authorities their concern about the situation of these economies. Everybody shares their concern about the risks involved. We are extremely concerned about the difficulties with the Ukrainian government," he said.

West European banks have lent roughly $1.6 trillion (£1.13 trillion) to the region, led by Austrian, Swedish, Italian, Greek, Belgian, and Swiss banks. Almost $400bn must be rolled over this year in hostile markets.

Lithuania's president Andrius Kubilius echoed the warnings on Wednesday. "We are worried about what can happen in Ukraine and Russia. The collapse of one of these markets would have a very negative impact. It would be good to see a more co-ordinated approach," he told the Financial Times.

Ukraine's travails appear to be snowballing out of control after the central bank said the economy contracted 20pc in January year-on-year, with a dramatic 34pc slide in industrial production. Valery Lytvytsky, the bank's top adviser, said the collapse is the worst in recorded Ukrainian history, exceeding the darkest days after the Bolshevik revolution.

The currency has fallen 40pc since the crisis began, a crippling blow to companies with large debts in dollars or euros. Three banks have failed.

Credit default swaps measuring risk on Ukraine's state debt rose to panic levels of 3,500 on rumours of imminent default following the refusal of the International Monetary Fund to disburse the second tranche of its $16.4bn rescue package. The IMF said the government had failed to rein in public spending as agreed.

Premier Yulia Tymoshenko insisted there was no danger of default. "I would like to tell the whole country that the state is paying all its credits," she said.

She appeared unrepentant over the loss of her finance minister, Viktor Pynzenyk, who resigned this week saying he was no longer willing to serve as a political pawn. "Not all government officials are capable of working in difficult circumstances. The weakest ones abandon the battlefield," she said, in comments bordering on political farce.

Neil Shearing from Capital Economics said Eastern Europe as a whole is likely to contract by 5pc to 10pc this year. "It's pretty grim and it creates the risk of a retreat into populism," he said.

The political risks in Ukraine are huge. The country has a large Russian minority, much of it living in oblasts near Russia's frontier, creating an open door for the Kremlin to intervene if the crisis leads to civil disorder.

Lars Christensen from Danske Bank said ex-Soviet bloc had been a casualty of the blanket extension of guarantees to banks across Western Europe. "East Europe's governments are not strong enough to offer such guarantees for their own banks. This has increased relative risk." he said.

The European Bank for Reconstruction and Development said it is mulling $500m in aid to boost Ukraine's banks, but first the country has to restore credibility.

"We see an urgent need for conducive, comprehensive actions by the Ukrainian authorities," EBRD chief Thomas Mirow said.

Source: Telegraph UK

Ukraine's Leaders Bicker As Economy Burns

KIEV, Ukraine -- Rearranging the deck chairs on the Titanic. That's how many Ukrainian observers describe the very public, escalating power struggle between liberal president Viktor Yushchenko and his erstwhile ally in the Orange Revolution, the fiery populist prime minister, Yulia Tymoshenko.

Tymoshenko's political battles with Yushchenko have caused irreparable damage to the Ukrainian economy.
To many observers, Ms. Tymoshenko and Mr. Yushchenko are already fighting presidential elections that are nearly a year away and are using their official positions mainly to undermine any decisions taken by the other.

In recent weeks, both have issued statements blaming the other for the country's galloping financial crisis, which has seen the hryvna plunge in value by nearly 60 percent, Kiev's main stock market fall by 75 percent, and most banks cease lending or even returning depositors' cash.

Dirty political laundry on national TV

In an internal memo leaked to the Ukrainian media late last month, Ukraine's finance minister, Viktor Pynzenyk, warned that the economy is on the verge of collapse: "We have entered an extremely serious and deep crisis. Ukraine's [economic] situation is the worst in the world."

Following the memo's publication, Yushchenko took to the airwaves to blame it all on the "populism" of Tymoshenko, whose 2009 budget incurs a huge deficit to pay public sector wages, pensions, and other social obligations. As a result of her "irresponsibility," Yushchenko charged, "salaries, pensions, and stipends will no longer be paid.... all this can bring about a social catastrophe."

Tymoshenko appeared on TV the next day to accuse the president of spreading "falsehood, panic, and hysteria. Everyone can see that the president is not the kind of leader they need when Ukraine is reeling under the blows of the global economic crisis."

Surveys show that nearly 85 percent of Ukrainians believe there is no government order in the country.

"It's a good thing when they compete in elections, but when they continue competing afterwards, it's disastrous," explains Vira Nanivska, president of the National Academy of Public Administration in Kiev. "It becomes impossible for needed decisions to be taken."

A revolution's bitter aftertaste

In 2004's Orange Revolution, Tymoshenko and Yushchenko worked together to defeat pro-Moscow leader Viktor Yanukovych. During weeks of protests in Kiev's freezing main square it was usually Tymoshenko, a passionate orator, who would warm up the crowds before turning the stage over to the more measured and cerebral Yushchenko.

Following Yushchenko's election as president, the two quickly had a falling out. Within a year, Yushchenko dismissed her from the prime minister's job. Tymoshenko has since clawed her way back to power in parliamentary elections and now leads a fragile majority parliamentary coalition.

"There was a binary charisma between them that won the Orange Revolution, but which has now acquired an equally compelling explosive force," says Dmytro Vydrin, a member of Yushchenko's National Constitutional Council.

Political rumbles remain from gas dispute

Last month, Tymoshenko traveled to Moscow to sign a deal with Russian Prime Minister Vladimir Putin ending a two week pipeline dispute that had cut energy supplies to 18 European countries.

But she was forced to agree to a near doubling of the price for gas. Yushchenko subsequently denounced the accord as a betrayal of Ukraine's national interests, and vowed to overturn it – a threat he later retracted under pressure from nervous Europeans.

Last week, Tymoshenko's parliamentary coalition voted to dismiss the governor of Ukraine's National Bank, a Yushchenko appointee whose job is to save the country's teetering banking system, even though there is no potential replacement on the horizon.

Tymoshenko, who earned a fortune peddling Russian gas to the Ukrainian market in the 1990s, is accused by Yushchenko's backers of selling out to Moscow in exchange for the Kremlin's political support in winning the presidency.

Such heated rhetoric is not unusual in Kiev's current atmosphere, say experts, including Viktor Nebozhenko, director of Ukrainian Barometer, an independent think tank, and a former adviser to the prime minister. "Yushchenko is pursuing a scorched earth campaign to stop Tymoshenko, and even seems willing to take her down with him."

The prime minister has hurled similar invective, describing Yushchenko as a "state criminal," Mr. Nebozhenko says. "The competition between the two of them is highly personal, and deeply dangerous for the country."

A divided Ukraine heads to the polls

Few experts believe allegations that Tymoshenko is in Mr. Putin's pocket, but some say she may be angling for the Kremlin's support in the electoral battle to come. The logic lies in Ukraine's deep cultural split, in which the country's heavily Russified and pro-Moscow east and is pitted against its nationalistic and Europe-leaning west.

The majority of eastern voters back the Russia-friendly Party of Regions, which led the pack with 22 percent support in a mid-December survey conducted by the independent Democratic Initiatives Foundation in Kiev. Tymoshenko follows with 14 percent, while Yushchenko has fallen into the realm of statistical error, with just 2.2 percent, according to the poll.

The trick for Tymoshenko, who has rolled up most of Yushchenko's "Orange" support, is to win votes in pro-Moscow eastern Ukraine, and for that she needs a nod from the Kremlin, says Vadim Karasyov, director of the independent Global Strategies Institute in Kiev.

"The Kremlin wants to remove Yushchenko because he embodies the pro-Western and pro-NATO membership course for Ukraine," he says. "Tymoshenko has shown flexibility on the big geopolitical issues and, unlike Yanukovych, she can win votes all across Ukraine."

Sign of democracy or seeds of dictatorship?

Some observers worry that things might come to a head long before the presidential polls at the end of the year. "The Ukrainian state is in danger of losing control over the situation," says Andrei Yermolayev, director of the independent Sofia Center for Social and Political Studies in Kiev. "The gloves have come off, and each side is fighting for a monopoly of power. One possible outcome of this struggle is the emergence of an authoritarian regime in Kiev."

Other experts believe that after nearly two decades of independence from the USSR, democracy has become firmly entrenched as a means for Ukrainians to settle differences.

"If the economic situation gets really bad, the authorities will let steam out through new parliamentary elections," says Mr. Vydrin. "Because we are a democracy, we have this option to let the population channel their anger in peaceful and creative ways."

Source: Christian Science Monitor

Ukraine Warns Russian Ambassador That He May Be Declared Persona Nongrata

KIEV, Ukraine -- The Ukrainian Foreign Ministry has warned Russian Ambassador Viktor Chernomyrdin of the possibility that he could be declared persona non grata because of his undiplomatic remarks in relation to Ukraine and its leadership.


Russian Ambassador Viktor Chernomyrdin.
Chernomyrdin was summoned to the Foreign Ministry on Tuesday, where Foreign Minister Volodymyr Ohryzko expressed protest regarding what Ukraine sees as Chernomyrdin's unfriendly and openly undiplomatic judgments, comments, and remarks in relation to Ukraine and its leadership, of which the ministry press service reported later in the day.

"Such actions by the ambassador go against the provisions of the Vienna Convention on Diplomatic Relations, grossly violate the standards of diplomatic ethics and international law, and are incompatible with status as chief of a diplomatic representation in a host country," Ohryzko was quoted as saying.

Chernomyrdin was also told that the Russian consuls general in Kharkiv and Odesa and some other diplomats from the Russian Embassy to Ukraine have also violated the Vienna Convention on Diplomatic Relations of April 18, 1961, which could prompt Kyiv to apply Article 9 of the convention.

Paragraph 1 of Article 9 of the Vienna Convention says, "The receiving State may at any time and without having to explain its decision, notify the sending State that the head of the mission or any member of the diplomatic staff of the mission is persona non grata or that any other member of the staff of the mission is not acceptable.

In any such case, the sending State shall, as appropriate, either recall the person concerned or terminate his functions with the mission. A person may be declared non grata or not acceptable before arriving in the territory of the receiving State".

Paragraph 2 of the said Article says, "If the sending State refuses or fails within a reasonable period to carry out its obligations under paragraph 1 of this article, the receiving State may refuse to recognize the person concerned as a member of the mission."

Kyiv recently expressed its displeasure with Chernomyrdin's remarks in Ukraine's address.

A Ukrainian diplomatic source told Interfax on February 13 that this issue was touched upon in a telephone conversation between Ukrainian Foreign Minister Volodymyr Ohryzko and Russian Foreign Minister Sergei Lavrov the day before.

Ohryzko had pointed out to Lavrov that some of Chernomyrdin's comments regarding Ukraine were critical and incorrect, which, in Ukraine's view, had become systematic of late, the source said.

"Such actions cannot be qualified other than as a provocation," the source said.

Source: Interfax

Ukraine Heading For Default?

KIEV, Ukraine -- In the light of the resignation of Ukraine’s finance minister and recent reports about the poor state of Ukraine’s economy, forecasts of Ukraine’s imminent national default seem to be more and more probable.


On Tuesday the country’s parliament approved the resignation of Finance Ministry head Viktor Pinzenik who announced his decision on February 12. He then stated he disagrees with the government’s budget policy and that he has no possibility of influencing the situation.

Also, without prior notification, the country’s Statistics Committee has decided to make public only quarterly reports on Ukraine’s GDP. Ukrainian authorities say such data will be more accurate and trustworthy.

The Statistics Committee will only publish monthly reports concerning a limited number of industries. Critics say the government is not able to cope with the crisis and is trying to save face by concealing economic data from the population.

Hitting the bottom

Independent economists forecast Ukraine’s GDP will fall by 8-15 per cent in 2009 while the government plans 0.4 per cent growth.

But there seems to be no grounds for optimism. The Statistics Committee has revealed Ukrainian industrial production has plunged 16.1 per cent compared to December 2008 and 34.1 per cent compared to last January.

In January 2009 the decline in construction was 57.6 per cent, 35.1 per cent in transport and 7.8 per cent in the retail trade.

The national currency has fallen by 40 per cent against the dollar this year. Foreign investment flow in 2008 dropped by 22.1 per cent compared to the previous year.

Handmade default

Experts say Ukraine may face a default similar to that seen by Russia in 1998 when billions in foreign debt were written off.

"The market is pricing in a probability of sovereign default of almost 90 percent," Commerzbank analyst Ulrich Leuchtmann told EUobserver.com on Monday. "It could happen in the next couple of quarters."

Earlier, Austria's finance minister warned of the risk of an economic "catastrophe" in the country triggering a "domino effect" of problems further west.

The ongoing political battle between President Viktor Yushchenko and Prime Minister Timoshenko ahead of presidential elections is only making thing worse. The date has not been set yet and will be announced at the end of March.

Some analysts even believe Yushchenko may provoke sovereign default to gain political points. If so, Timoshenko would not be able to fulfill her promises concerning payments of salaries and pensions.

Source: Russia Today

Poll: Yushchenko, Tymoshenko Are Main Culprits Of Crisis In Ukraine

KIEV, Ukraine -- The majority of Ukrainians think that Ukrainian President Viktor Yushchenko and Ukrainian Prime Minister Yulia Tymoshenko are the main culprits of the crisis in the country, a poll conducted amongst 800 respondents by IFAK Ukraine on February 5 - 15 showed.

Yushchenko (L) and Tymoshenko in file photo.
Some 54 percent of respondents think that Yushchenko is to be blamed for the crisis, while 44 percent think that it was Tymoshenko's fault.

A total of 20 percent view the Verkhovna Rada as the one responsible for the situation. Just 11 percent accuse the National Bank, while 8 percent prefer to blame large business.

Some 64 percent of respondents are ready to take part in peaceful protests actions, including rallies, pickets, and strikes.

Some 37 percent rely on themselves in overcoming the crisis.

Source: Kyiv Post

Eastern Europe Gripped By Political Instability

BRUSSELS, Belgium -- Growing political instability in Latvia, Ukraine and Georgia are mainly triggered by the global economic crisis and deep internal problems, such as corruption. But problems with Moscow could be adding an extra "irritant" to an already bad situation, according to leading analysts questioned by EurActiv.

Ukraine Prime Minister Yulia Tymoshenko.
Ukraine, Georgia and Latvia are moving into a period of political instability as they sink deeper into economic recession.

On 13 February, the government of Ukrainian Prime Minister Yulia Tymoshenko survived a no-confidence vote in parliament. Her situation has been further complicated by a power struggle with President Viktor Yushchenko, once a close ally.

A mission by the International Monetary Fund reviewing Ukraine's arrangement with the fund left Kiev last week without making it clear whether or not more funding will be released to keep the economy afloat. Ukrainian Finance Minister Viktor Pynzenyk quit his post on Thursday over budget and policy disagreements with Tymoshenko, the Associated Press reported.

In addition, Ukraine's foreign minister, Vladimir Ohryzko, was reported as having instructed the country's embassies abroad to report at the "highest possible level" the "unscrupulous and inadequate actions" of his prime minister.

In Georgia, many opposition figures blame the president, Mikhail Saakashvili, for the country's troubles and are calling on him to resign. Many foreign investors have fled, leaving Georgia with the highest unemployment rate in the Caucasus.

In Latvia, recent riots illustrated just how badly the Baltic country has been hit by the global economic crisis. But now experts say that the Latvian economy is in terrible shape, even by the standards of the global financial crisis. "The Latvian economy is staring into the abyss," said Neil Shearing of London-based Capital Economics, quoted by Deutsche Welle.

As political instability grows in Ukraine, Georgia and Latvia, EurActiv asked analysts to comment on the background of these developments and the Kremlin's possible role in the region's current instability.

The analysts largely agreed that the main cause of instability is the difficult political and economic contexts in these countries, which include high level corruption and bad governance. Hostile meddling by Russia is only seen as a secondary factor.

Moreover, the worsening economic situation in Russia itself and instability throughout society there were singled out as handicaps for Moscow. Recently, Thierry de Montbrial, president of IFRI, the French Institute of International Relations, warned of a doom-like scenario in which falling oil prices would cripple Russia's economy.

Positions:

Fraser Cameron, director of the EU-Russia Centre in Brussels, said that in his view, the world economic crisis and "massive corruption" in Ukraine and Georgia are for the most part to blame for the worsening situation in these countries.

"There is no question that Russia wants to have these countries under its influence. But its means to do that are limited essentially to the energy weapon. And that's not something they can use with 100% impunity, because there are international rules," Cameron said.

The director of the EU-Russia Centre admitted that Russia is using its Soviet time network to influence on its neighbours, but also warned that this was not the main underlying factor.

"They [Moscow] have been using bribery to influence politics in some countries, that's also quite clear. But it's difficult to assess how effective they have been," said Cameron. He added that the counties in Russia's surroundings are weak, but so is Russia.

"Russia is severely hit by the economic crisis. Russia is not a very stable society either. So I think the opportunities are rather limited here. Gazprom is running around, trying to find money in London, Paris, New York and Frankfurt for capital investment," Cameron observed.

Tomas Valasek, director of foreign policy and defence at the Centre for European Reform in London, also told EurActiv that before analysing the state of Russia's neighbours, one should first examine the situation in Russia itself.

"I don't see very much Russian cloak-and-dagger manoeuvring in Latvia. The political scene has been producing basically the same government for the past six or seven years, there have been elections every other year, people are frustrated, and when you couple it with the economic crisis, the real drop in living standards, that explains the instability. You don't need to look for Russia," he said.

For Ukraine, he stressed that "bad governance and corruption" is "very much behind the picture".

"Again, you don't need to look for Russia. Russia has been a factor, Yushchenko accusing Timoshenko of being a Russian agent, and Yanukovich accusing both Timoshenko and Yushchenko of being irresponsible in Russia policy. Russia has been used more as the object that the political class has been throwing at each other, rather than somebody who has been doing the acting".

Georgia is a completely different case, Valasek admitted, adding that Moscow had chosen to turn the Caucasian country into an example of what happens to a country when it openly provokes Russia.

"The war scared investors, the war destroyed a lot of value, the war has made it impossible for Georgia to raise funds in other ways than through a donor's conference. How can we separate Russian hands from the economic trouble Georgia is in?," asked Valasek as a rhetorical question.

The analyst also singled out the problems facing Russia in the context "of the current global economic recession, if not depression". He added that some countries had been hit more than others, if measuring the impact in terms of the falling value of the stock markets and the devaluation of the national currency, which in his words is exactly what happened in Russia.

Amanda Akcakoca, a policy analyst at the European Policy Centre, told EurActiv she did not consider it fair to blame Russia for all things that are going wrong in Ukraine and Georgia.

"Clearly, in the case of Ukraine, a lot is to do with its internal political situation," Akcakoca explained, adding that the internal political in-fighting between Yushchenko, Tymoshenko and Yanukovich plays for the interest of Russia.

"In this way, Ukraine offers Russia the role of a player in its political scene on a silver plate," she stated.

In the case of Georgia, she observed that in spite of confusing media reports, Saakashvili stays more popular than the opposition, because the opposition is fragmented.

"I would agree that Russia does irritate the situation in these countries, but it’s the domestic situations which at the origin of this," Akcakoca said.

Source: EurActiv

Ukraine’s Hryvnia May Fall 19% In Six Months As Economy Worsens

KIEV, Ukraine -- Ukraine’s hryvnia may tumble 19 percent against the dollar in the next six months as a deteriorating economy and dearth of foreign investment forces the country to abandon its management of the currency, according to five analysts surveyed by Bloomberg.

Ukrainian hryvnia
The hryvnia may slide to 10 per dollar by the end of August, according to the median estimate of the economists and currency strategists surveyed by Bloomberg yesterday.

The hryvnia plunged 43 percent since August to 8.15 per dollar as the economy spiraled toward recession and the International Monetary Fund pledged $16.4 billion in emergency loans.

“Ukraine is really facing an uphill battle,” said Lars Rasmussen, an emerging-markets strategist at Danske Bank A/S in Copenhagen, who forecasts the hryvnia will be at 10 per dollar in six months. “They need to be less focused on holding their currency and concentrate their money on other problems in their economy.”

Ukraine’s economy may shrink 9 percent this year, as the worst global financial crisis since the Great Depression damps demand for its exports and leaves the former Soviet republic struggling to fund deficits in its current account and budget, according to HSBC Holdings Plc, Europe’s biggest bank.

The nation’s reserves slid almost 9 percent to $29 billion in January, as the central bank “regularly” bought and sold foreign currency to control the hryvnia, according to its head of external relations, Serhiy Kruhlik.

Deficits

The analyst forecasts ranged between 8.5 and 11 per dollar. The hryvnia lost 1.2 percent against the U.S. currency this year. It was unchanged against the dollar yesterday and held at 10.4074 per euro, as UniCredit SpA said the Natsionalnyi Bank Ukrainy was intervening.

Ukraine is struggling to fund a $12.3 billion current-account deficit amid the worldwide seizure in credit markets and a slump in the price of steel, its biggest export. The country’s banks face losses and writedowns worth $964.6 billion.

The country passed its 2009 budget in December with a planned budget deficit of 2.97 percent of gross domestic product. Finance Minister Viktor Pynzenyk submitted his resignation last week in a dispute over the deficit, which violated IMF requirements. The IMF offered the loan on the condition Ukraine run a balanced budget.

“The market is really nervous about them losing their IMF support,” Rasmussen said. “The IMF may use them as an example to say, look, we want to help but if you’re not fulfilling your side of the bargain, goodbye.”

Fitch Ratings reduced Ukraine’s credit rating to five levels below investment grade at B last week, amid concern the economy will shrink 4.5 percent this year. Standard & Poor’s said today it may also cut the country’s rating because of concern the IMF loan arrangement may be at risk.

Source: Bloomberg

Lawyer: Russia Not Trying Real Politkovskaya Killers

MOSCOW, Russia -- Three men on trial for helping murder Kremlin critic Anna Politkovskaya were just pawns and the real killers are at large, a lawyer for Politkovskaya's family told the trial on Monday.

Murdered Russian journalist Anna Politkovskaya.
The murder of Politkovskaya, an investigative reporter who reported on human rights abuses, provoked an outcry in the West and raised concerns about the dangers to reporters and rights campaigners in Russia.

Two Chechen brothers, Dzhabrail and Ibragim Makhmudov, are charged with helping guide the killer to Politkovskaya and former police officer Sergei Khadzhikurbanov is accused of providing technical help. All three say they are innocent.

Rustam Makhmudov, suspected of shooting Politkovskaya outsider her apartment in 2006, is on the run. Prosecutors have never identified who ordered the killing.

"The whole thing has been organised at a high level, not at the level of the defendants," lawyer Karina Moskalenko told the jury in a Moscow courtroom as legal teams in the lengthy trial began their closing arguments.

"I will never believe the Chechen boys had their own reasons (to kill Politkovskaya)," she said. "I have drawn my own conclusion that the boys have been used by someone. The question is whether they knew or not."

Politkovskaya, a mother of two who was 48 when she was killed, had won prominence for attacking what she saw as Russia surrendering its democratic freedoms under Vladimir Putin, who was president until last year.

Human rights abuses and corruption in the North Caucasus region, which includes Chechnya, were a target of her criticism, infuriating officials in the region as well as in Moscow.

Putin, now serving as prime minister, has rejected suggestions in the West that the Kremlin could have been behind Politkovskaya's killing. Russian officials say the murder was an attempt to discredit the Kremlin.

But addressing jury members, Moskalenko appeared to direct the blame for the murder at the authorities.

"Who could hate Anya (Politkovskaya) for her articles? Those who are responsible for what was happening in Chechnya," she said, without identifying any individuals.

Source: Kyiv Post

European Commission's Vice President To Visit Ukraine On February 16

KIEV, Ukraine -- Vice President of the European Commission Gunter Verheugen, who is responsible for enterprise and industry, will make an official visit to Ukraine on February 16, the Delegation of the European Commission to Ukraine told UKRINFORM.

Vice President of the European Commission Gunter Verheugen.
Verheugen is scheduled to meet with President Viktor Yushchenko, Prime Minister Yulia Tymoshenko and Verkhovna Rada Chairman Volodymyr Lytvyn in Kyiv to discuss the state and prospects for EU-Ukraine economic relations, including responses to the current economic crisis.

Verheugen is also expected to hold talks with Vice Prime Minister Hryhoriy Nemyria and Economy Minister Bohdan Danylyshyn, as well as with representatives from the country's business community.

Source: BSANNA News

The Never Ending Ukraine Story

KIEV, Ukraine -- The one positive thing to come out of the Russian-Ukraine gas crisis, which caused shortages in 20 European countries for more than two weeks amid freezing temperatures, was the direct contract signed between Gazprom and Naftogaz and the removal of shadowy Swiss-based intermediary RosUkrEnergo AG. Goodbye and good riddance!

Ukrainian President Viktor Yushchenko (L) shakes hands with Prime Minister Yulia Tymoshenko during Security Council meeting in Kiev, Ukraine, January 10, 2009. There’s little love lost between the two Ukrainian leaders.
Asked if the mysterious RosUkrEnergo, which was the sole importer of gas to Ukraine from 2006, has now been completely and irreversibly excluded from that role, Ron Smith, chief strategist at Alfa Bank, said, “Yeap, probably so. It does clarify substantially by removing a middleman that by all indications really added nothing to the process except another layer of potential problems. By having direct contract between the actual company purchasing and distributing and the actual company selling that’s much improved,” he told New Europe, telephonically from Moscow.

As the war between Ukrainian President Viktor Yushchenko and former Orange Coalition ally-turned-foe Prime Minister Yulia Tymoshenko is gaining momentum, the latter was more than happy to cut RosUkrEnergo out of the deal and trim a rumored cash source for Yushchenko.

“Well, I think there’s a lot going on there than we have any idea about,” Smith said, adding that the Russia-Ukraine contract brokered by Russian Prime Minister Vladimir Putin and Tymoshenko established a direct relationship between the two countries’ companies “instead of going through the shadowy Swiss-made intermediary.”

Yushchenko on February 10 called Tymoshenko a “traitor” for signing what he called a disadvantageous gas import deal with Russia and secretly agreeing to emergency credits from the Kremlin. “This is nothing less than a betrayal of the national interest,” Yushchenko said at a televised Ukrainian National Security Council meeting.

Tymoshenko flatly denied Yushchenko’s claims, calling them “groundless” and “invented.” Russia, which canceled an arrest warrant for Tymoshenko in 2005, now enjoys a pragmatic relationship with the Ukrainian premier.

Staying away from politics, Viacheslav Kniazhnytskyi, energy officer at Ukraine’s Mission to the EU, told New Europe that the January contract between Naftogaz and Gazprom setting terms for the fuel’s import into Ukraine, and on-shipment into Europe is ruled by Swedish law and will provide better transparency.

“This is not an agreement; this is a contract. That is why this is a substantially different thing of what it used to be in the past. This is a contract, absolutely precise,” the Brussels-based official said, adding that any disagreements would have to be resolved in an international court. “There’re two companies and politicians should refrain from efforts to have any impact on the contracts,” Kniazhnytskyi said, adding that his primary concern is that the gas crisis would not be repeated in the future. “As far as this contract goes, it’s not a political agreement between two governments or between the Russian Federation and Ukraine so I’m cautiously optimistic that we will not have any other crises from now on,” the Ukrainian energy officer said.

Meanwhile, Gazprom and RosUkrEnergo are at odds over the transit of 11 billion cubic metres of gas stored at the Ukrainian underground gas storage facilities. “I think these two guys should fix relations among themselves,” Kniazhnytskyi said. “I’m not sure relations between Gazprom and RosUkrEnergo are very clean.”

Alexander Medvedev, deputy chief executive officer of Gazprom, was quoted by the press as saying that Gazprom has no plans to sell its 50 percent stake in RosUkrEnergo. RosUkrEnergo owes Gazprom about USD 500 million, he said. Ukrainian billionaire Dmitry Firtash owns 45 percent of RosUkrEnergo and his business partner Ivan Fursin the remaining five percent.

Kniazhnytskyi said the problems in the past were the result of these murky deals. “We don’t need at any given time any intermediary. I’m talking with you as a humble Ukrainian customer. I don’t need any intermediary,” he said. “Any intermediary will mean higher tariffs for my family in Kiev.”

Source: New Europe

Kyiv Post Editor's Opinion

KIEV, Ukraine -- Looking for good signs in 2009, amid all the gloomy economic news? Here’s one: There are no more outdoor cigarette billboards to poison the beauty of Kyiv and to promote deadly products that send 100,000 Ukrainians to their graves prematurely every year. That’s right, they’re finally gone and they won’t be missed.

Cigarette billboards are a thing of the past in Ukraine.
Parliament banned outdoor (as well as TV and print) ads promoting tobacco, effective on New Year’s Day, to comply with the global anti-tobacco treaty that Kyiv joined years ago.

A total ban on cigarette advertising will hopefully follow soon, so that Boryspil International Airport will stop being Winston Airport.

Before the ban, Ukraine’s outdoor advertising space was overrun with visual contradictions: Pictures of healthy, pretty and slim young people promoting cancer sticks wrapped in pretty boxes. Only libertarian extremists, the kind who sell cigarettes and booze to your children, could object to such a sensible ban.

As a journalist, I believe in free speech. I also don’t believe tobacco should be outlawed. Millions of smokers over thousands of years have shown that such a ban would not be accepted.

But society has every right to restrict the in-your-face marketing of an addictive product that kills millions of people each year and drives up health care costs by billions of dollars. Smoking also damages workers’ productivity and saps their health.

Now Ukraine needs to hike cigarette taxes — and continuously keep hiking them — to end its disreputable status as source of Europe’s cheapest smokes.

Not only will the cash-starved government generate much-needed revenue with tax hikes, but higher cigarette prices will encourage smokers — most of whom wish they didn’t smoke — to drop the habit. Only higher prices will cut the smoking rate, now among the world’s highest, with 40 percent of adults lighting up.

Ukraine should also end the practice of selling cigarettes from street kiosks, where they are easily purchased by children. Sales should take place indoors, in stores that are licensed, regulated and restricted in number.

Smoking should also be banned in all public places, including restaurants and bars.

If all these steps are taken, Ukrainians will find that — just as with the now-gone cigarette billboards — nothing will be missed.

Source: Kyiv Post

The Wall Street Journal Advises Obama Not To Nurture Russia’s Illusions

TBILISI, Georgia -- Barack Obama wants to make friends with Russia, ‘press the reset button’ as his Veep proposed the other day.

President Barack Obama
Sounds familiar. Bill Clinton bear hugged Boris Yeltsin and George W. Bush peered into successor Vladimir Putin's soul. Yet relations haven't been this bad since Konstantin Chernenko's days at the Kremlin – The Wall Street Journal reports.

Imagine a world with a friendly Russia, able to help us, say, stop Iran's atomic bomb program. So let's not push so hard to deploy anti-Iran missile defense sites in Poland and the Czech Republic that Russia hates -- use, if necessary, the excuse that costs and feasibility require further study.

Back off on closer NATO ties for Ukraine and Georgia. Make Russia feel important and consulted. Joe Biden sketched out this sort of bargain at last weekend's Munich security conference.

The conceit is we can win the Kremlin over by modifying our behavior. Before Mr. Obama tries, he should be aware of recent history. On missile defense, American diplomats spent as much time negotiating with Russia as with the Central Europeans, offering Moscow the chance to join in. Nothing came of it. On Kosovo independence and Iran sanctions, Russia blocked the West at the U.N.

Last spring, NATO snubbed Georgia and Ukraine in a signal of good will to Mr. Putin. The day after, Mr. Putin privately told Mr. Bush that Ukraine wasn't ‘a real country’ and belonged in the Russian fold. Five months later, Russia invaded Georgia and de facto annexed its breakaway provinces of Abkhazia and South Ossetia.

Mr. Obama may be tempted to think Russia can be won over. After all, they would seem to need America (short for the West) far more than America needs Russia. We're not the enemy.

Russia's real strategic challenges are in the East: China looks ravenously at the vast, mineral-rich, lightly populated Siberian steppe cut off from Moscow (to this day, you can't drive across Russia). And to the South: The arc of Islamic extremism, starting with a possibly nuclear Iran, a competitor for Caspian energy and influence.

The Obama magic dust doesn't seem to work on a regime defined and legitimized by its deep dislike for America. Dmitry Medvedev, the Putin underling in the president's office, moved the state of the nation address to the day after the American election to spin the outcome for the domestic audience.

The Kremlin then welcomed Mr. Obama into the White House with the administration's first serious foreign policy headache. Taking $2 billion from its fast-depleting reserves, Russia bullied and bribed Kyrgyzstan to close a U.S. military airfield, the main transport hub for supplies going into Afghanistan. Russia's desire for a "sphere of influence" trumps the threat of resurgent extreme Islamism in its southern underbelly.

The thinking here is Cold War porridge. But the Russians were never offered a new narrative. Mikhail Gorbachev's idea of a ‘European family’ and Yeltsin's reforms foundered. Mr. Putin went back to a familiar recipe: Russia, empire-builder and scourge of the West.

A Cold War mentality lingers in America, too. A foreign policy caste rich in Sovietologists by habit overstates Russia's importance. The embassy in Moscow is huge; bilateral meetings inevitably become ‘summits,’ like in the old days.

Mr. Obama's fresh start is a good time for a reality check. The U.S. can work with Russia, seen in its proper place. To even suggest that the Russians have a special say over the fate of a Ukraine or our alliance with the Czechs lets Mr. Putin nurture the illusion of supposed greatness, and helps him hang on to power’.

Source: The Georgian Times

Ex-President Kravchuk: Snap Elections Will Not Help Ukraine Find Way Out Of Crisis

KIEV, Ukraine -- First Ukrainian President Leonid Kravchuk has said that it is necessary to amend Ukraine's electoral law before holding snap parliamentary and presidential elections, as a means of bringing the country out of the crisis.

First Ukrainian President Leonid Kravchuk.
"Snap elections are unnecessary. The recent [snap parliamentary] elections [of 2007] were unfruitful. It is necessary to amend electoral law to hold the elections," the Korrespondent magazine quoted him as answering questions from visitors to the Korrespondent web site.

Kravchuk criticized the current system of closed lists of candidates participating in elections and called for the introduction of open lists.

"If the elections are held under the current law, I will not participate in them, and I will call on other people to boycott them, because this will be another political trick, which might bring Ukraine into another, more serious political confrontation," he said.

He said that Ukraine would sooner or later settle the crisis and added this crisis had been created artificially.

Source: Kyiv Post

Ukrainian Crew Returns Home After Piracy Ordeal

KIEV, Ukraine -- Crew members of a Ukrainian ship held captive for months by Somali pirates have returned home.

Ukraine's President Viktor Yushchenko (L) meets seamen of the Ukrainian ship MV Faina upon their arrival in Kiev February 13, 2009. The Ukrainian ship laden with tanks and freed by Somali pirates after a five-month hijack approached port in Kenya on Thursday with debate still ranging over ownership of the sensitive military cargo.
Twenty sailors from the MV Faina arrived Friday at Kiev's international airport, where they were met by family members and Ukrainian President Viktor Yushchenko.

The crew included 17 Ukrainians, two Russians and a Latvian.

Mr. Yushchenko told the gathering Ukraine has decided to join an international initiative to fight piracy. He said talks on Ukraine's participation are ongoing.

In one of the highest-profile seizures of recent times, Somali pirates captured the Faina in September with its crew and a cargo of weapons, including 33 Soviet-era T-72 tanks.

The pirates released the ship last week after receiving a ransom payment of $3.2 million.

The ship docked in Kenya on Thursday with its crew and cargo.

The Kenyan government says the weapons were destined for Kenyan military bases. They insist the shipment was a transparent military transaction between their government and Ukraine.

But since the ship was seized, international officials have reported the weapons were destined for the government of Sudan. Kenyan maritime official Andrew Mwangura was jailed briefly for reporting the information.

Source: Voice of America

Ukraine May Be Next To Default

KIEV, Ukraine -- In December, Ecuador became the first country to buckle under the current financial crisis and default on its loans. Now with its outlook deteriorating rapidly, there's a good chance that Ukraine will become the second.


Ukraine took three significant blows within the space of the week. The International Monetary Fund said on Feb. 7 it was delaying the second $1.9 billion tranche of a $16.4 billion loan, which led to Thursday's resignation of Ukraine's finance minister Viktor Pynzenyk.

Pynzenyk said he was stepping down because of the government's refusal to cut its budget deficit according to the terms of the loan left him in an untenable position.

On top of that, ratings agency Fitch cut the country's long-term foreign and local currency credit rating to below investment grade -- to "B" from "B+" with a negative outlook -- meaning that a further downgrade is likely.

Together this spells big new troubles for Ukraine, according to Paul Biszko senior emerging market strategist at RBC Capital in Toronto. "Debts particularly on the private sector side and extreme liquidity stress could push Ukraine into default," Biszko told Forbes. "The odds are rising."

Ukraine had pledged to cut its budget deficit by $4.9%, to $10.0 billion -- 1.1% of gross domestic product -- but infighting between arch-rivals Prime Minister Yulia Timoshenko and President Viktor Yushchenko has meant that it has not followed through so far.

With elections coming up next year, and an economy suffering as a result of a plummeting currency and falling commodity prices, it is very unlikely to do so in the future.

Timoshenko has been appealing to Russia and the Group of Seven nations to step in with support with a $5.0 billion loan, but RBC's Biszko says there is "little chance of bilateral cash" coming through.

According to Tom Fallon, head of emerging markets at fund manager La Francaise des Placements, Ukraine may be able to struggle through the current year, because its external debt that must be repaid this year represent less than a project 10.0% of fiscal revenues.

Ukraine's final hope of a rescue may lie with the European Central Bank. A major exporter of steel to the rest of Europe, a transit route for Russian gas, and with many local banks belonging to major European ones such as Unicredit, ING and Raiffeisen, a default by Ukraine is a risk the central bank may be unwilling to take.

Defaulting on loans can be devastating to an economy: Argentina's default in 2001 wiped out a quarter of that year's gross domestic product, and has taken a long and painful restructuring process to get it back on track.

Source: Forbes

The Bloom Is Off Europe's Rose And Orange Revolutions

TBILISI, Georgia -- Some four years ago, as he stood before a cheering crowd of tens of thousands, former President George W. Bush declared that Georgia's pro-western government was "inspiring democratic reformers . . . across the world."

Mikheil Saakashvili (L) and Viktor Yushchenko.
Georgia's ouster of its Russian-linked leadership in the 2003 Rose Revolution and the following year's U.S.-backed Orange Revolution in Ukraine had sent a message that "freedom will be the future of every nation," Bush said.

Today, though, the governments of Georgia and Ukraine are unraveling — symbols not of freedom but, to a large extent, of U.S. foreign policy errors, tarnished American allies and an emboldened Russia that's capitalized on its rivals' weaknesses.

The diplomatic complications for President Barack Obama over Russia and its neighbors go beyond these two countries in Moscow's backyard. Earlier this month, Russia flexed its muscle in another "rainbow revolution" country, Kyrgyzstan, where democratic reform had never fully taken root.

Russia offered the central Asian country more than $2 billion in loans and aid. Almost immediately, the Kyrgyz president announced, in Moscow, that he plans to close a major U.S. air base in his country that's critical to the U.S. mission in Afghanistan.

Ukraine and Georgia have significant differences — for starters, Ukraine has a population of about 46 million, and Georgia only about a tenth of that — but like Kyrgyzstan, they've been part of the Kremlin's campaign to reduce U.S. influence in what Russian officials call their "near abroad."

Many officials and analysts in the two countries say the Bush administration made the crucial mistake of continuing to fully, and very publicly, back their presidents — Mikheil Saakashvili in Georgia and Viktor Yushchenko in Ukraine — long after it was apparent that they'd lost their way.

By not establishing stronger relationships with rival politicians in Kiev and Tbilisi, those observers said, Bush committed the U.S. to the two men, and their shortcomings, rather than to broad-based democratic reform.

In Georgia, a growing front of opposition officials, which includes former leaders of Saakashvili's government, say that misstep empowered an increasingly authoritarian regime and in the end helped Russia.

"We tried to explain to our American and Western partners that what Saakashvili is doing here, ruling with autocratic tools, it will soon cause mass protests," Kakha Kukava, an opposition leader in Tbilisi, said in a recent interview. No one in the Bush White House, he said, was interested.

In Ukraine, some opposition and former officials say the Bush administration's support for the country's application to join NATO, a key Yushchenko initiative that, like Bush, was widely unpopular in the south and east, only further unraveled the government.

"In Ukraine it backfired," said Oleg Rybachuk, a former chief of staff to Yushchenko. "All critics of Bush, they positioned Yushchenko as a clear puppet of Bush — (as having an) aggressive, pro-NATO policy."

Kukava and Rybachuk emphasized that, like many critics of their presidents, they want democracy and agree on the importance of checking Russian power.

Russian Prime Minister Vladimir Putin has made it clear that he dislikes Saakashvili and Yushchenko and considers them U.S.-backed interlopers in Russia's "privileged" sphere of influence.

Putin didn't deny reports that he threatened to string Saakashvili up by the testicles. Asked on national TV recently if he said he wanted to hang the Georgian president by a certain part, Putin replied, "Why by one?"

Under Putin's leadership, the Kremlin has taken advantage of Saakashvili's and Yushchenko's mistakes at every turn.

Once in office, Saakashvili made progress fighting corruption and jump-starting the nation's economy, but he also cracked down on civil liberties and began consolidating power. During November 2007, Saakashvili declared a state of emergency after sending Georgian troops to violently disburse protests in Tbilisi, which government officials say were sparked by Russia.

After Saakashvili launched an offensive last August against the breakaway Georgian republic of South Ossetia, lured in part by Russian provocations, Russia invaded Georgia and established de facto control of both South Ossetia and another rebel province. Amid the upheaval, Saakashvili's government recently nominated its fifth prime minister in five years.

In a report last month, Freedom House, an independent U.S. organization that promotes democracy, said it had removed Georgia from its list of electoral democracies. The country that once "represented one of the few bright spots in the former Soviet Union" has taken an "erratic course," that "ranks among the more disturbing developments of the past two years," the report said.

The news also is bad from Ukraine. President Yushchenko's approval rating is in the single digits, and he lost almost all voter support during a series of feuds with his prime minister and one-time ally, Prime Minister Yulia Tymoshenko.

Before a crippling economic crisis hit, the government was headed for its third parliamentary election in as many years in late 2008.

Soon after, Russia shut off gas supplies to Ukraine in January. The contract later signed requires Ukraine to pay market prices after decades of subsidies — a move almost certain to weaken the economy further.

Last week, Tymoshenko said that her country was shopping for loans to shore up its budget. Russian and Ukrainian media reported that Moscow has offered some $5 billion, with conditions not yet made public. One Russian state TV station headlined the story: "Ukraine gets out the begging bowl."

Yushchenko's political ineptness has paved the way for Russia's candidate in 2004, Viktor Yanukovich, to be a leading contender for the presidency again. Still, many Ukrainians don't blame Russia and its propaganda campaign against Yushchenko for his undoing.

"Of course, the Russians were doing their best to discredit the president as the personification of the Orange Revolution, as the personification of democratic values," said Boris Tarasiuk, a senior member of Yushchenko's coalition and former foreign minister.

Having said so, Tarasiuk conceded that most of Yushchenko's problems emanate from his confrontations with the prime minister. "He happened to be the victim of his own mistakes," Tarasiuk said.

Added one Western diplomat in Kiev: The Kremlin "probably enjoyed watching."

Source: McClatchy Newspapers

Our New Russian Opportunity

WASHINGTON, DC -- True to his word, President Obama has launched a new era in American foreign policy. Signals from the U.S. have been positive and encouraging. Henry Kissinger quietly visited Moscow in December.

US President Barack Obama
Vice President Joseph Biden spoke optimistically about cooperating with Russia at the international security conference in Munich. In his first press conference, the President mentioned non-proliferation negotiations and Russia's role in preventing other regimes in acquiring nuclear capability.

Secretary of State Hillary Clinton plans to visit Moscow in March to lay the groundwork for reestablishing the U.S.-Russia partnership. And finally, President Obama and President Medvedev will meet at the G-20 summit in April. There is a veritable thaw in the air and spring looks promising.

Moscow has welcomed this change, but has taken a wait-and-see attitude. Moscow responded by canceling plans to deploy missiles in Kaliningrad in exchange for slowdown of the missile defense shield deployment in Eastern Europe.

However, foreign minister Sergei Lavrov snubbed Hilary Clinton's phone call a few weeks ago; he was busy traveling with President Medvedev in Central Asia. The Russians are expanding their influence in this region by offering Kyrgyzstan financial support. Meanwhile, Moscow has opened its airspace for the U.S. to fly non-military supplies to Afghanistan.

Given the emphasis that President Obama has placed on the military operation there, Russia's cooperation will become increasingly important. Where should the State Department start to repair its relationship with its Eurasian ally? It will have to reevaluate its policy towards Russia's neighbors.

Moscow has historically been very sensitive to its borderlands. Over the past millennium, Russia's geopolitical interests have changed at a much slower rate than her governments. The Bush administration targeted its two soft spots: the western borders and the "soft underbelly" in the Caucasus.

Since 2003, the White House placed its bets on Georgian President Mikhail Saakashvili and Ukrainian President Viktor Yushchenko at the expense of its relationship with Moscow. However, last summer's war with Georgia and the recent gas dispute between Moscow and Kiev have demonstrated how much more complicated the situation has become.

It is not the black-and-white picture that the U.S. media paints of Russia's relations with its neighbors. Saakashvili and Yushchenko have proved to be not only embarrassments, but liabilities. The Obama administration now has the chance to choose better partners in the region.

The recent gas dispute has demonstrated the weakness of Ukraine's political system. President Yushchenko has repeatedly threatened to ignore the gas deal that Ukrainian Prime Minister Yulia Timoshenko negotiated with Russian Prime Minister Vladimir Putin in mid-January.

Now it is likely that Moscow will loan Kiev money to weather the financial crisis. The political and international dimensions of the row between Moscow and Kiev provided valuable insight into the Ukrainian presidential campaign that kicks off this year.

Hailed by the Bush administration as a reformer and patriot, President Yushchenko went out of his way to lay all the responsibility for the gas dispute at Russia's doorstep, which was a bit too hasty.

Ukraine's economy has been sliding towards catastrophe and the gas predicament was the latest installment in the standoff between Yushchenko and Timoshenko. The Ukrainian state gas company Naftogaz and the murky intermediary RosUkrEnergo threw their weight behind different parties.

Although some see this as the natural birth-pangs of democracy, it has proven a dangerous handicap during the global financial crisis and an embarrassment to the Bush administration even in its last days. At times, neither Moscow nor the EU knew which of the two leaders spoke for Ukraine.

Unfortunately, Mr. Yushchenko has confused Ukrainian patriotism for an anti-Russian policy, which fit perfectly into the Bush administration's containment policy towards Russia. It is true that Moscow has used its natural energy resources as a political lever.

However, since Russia has subsidized Ukraine's economy by selling it gas below market prices, it was well within its rights to expect cooperation in return. Unfortunately, President Yushchenko has equated "westernization" with NATO membership, which the Bush administration encouraged and Moscow opposed.

But preventing neighbors from joining military alliances hardly constitutes imperialism or bullying. Moreover, Russia has never objected to Ukraine's participation in the EU, the OECD, or any other non-military western institution.

Mr. Saakashvili was also a Washington favorite for NATO membership. But his luck ran out when he recklessly attacked a breakaway region with internationally-approved Russian peacekeepers in it. It suits Moscow well that Georgia has two territories in what promises to be endless purgatory, because NATO will not accept a country without full territorial integrity.

Meanwhile, the gas dispute has played into Ms. Timoshenko's hands. Her shuttle diplomacy with Moscow has given her the appearance of a savior in the eyes of the Ukrainians and the Europeans. As long as Mr. Yushchenko tried to square Ukraine's geopolitical circle by "bringing the country into the West" via NATO--instead of via a functional and solvent economy--the gas problem persisted.

Russia is willing to cooperate with a Ukraine integrated into European political and economic structures, but not with a government disdainful of its benefactor's geopolitical interests. By suspending its unequivocal support for Ukrainian (and Georgian) membership in NATO, the Obama administration will gain a more cooperative Russian ally.

Washington would do better to throw its support behind Ms. Timoshenko. She has used the gas dispute to position herself as a Ukrainian patriot, a European-minded politician, and someone able to negotiate with Moscow.

She has eclipsed President Yushchenko and has come out the winner in Ukrainian politics for 2009. In addition to ensuring gas supplies to her western neighbors, she has, no doubt, also negotiated support for herself in the form of Moscow's non-interference in Ukraine's presidential race, which Russia tried to influence in 2004.

This leaves Moscow's protégé Mr. Yanukovich out in the cold this time around. In exchange, Ms. Timoshenko will most likely soften her stance on Ukraine's bid to join NATO and restore a stable and lucrative relationship with Russia.

Indeed, she has already negotiating the Russian loan. The end of the gas crisis signals the beginning of the Ukrainian presidential campaign in which Ms. Timoshenko has a head start. One only hopes that Georgia will also produce as practical a politician.

This spring offers President Obama and Secretary of State Clinton a chance to restore Washington's relationship with Russia by supporting more reliable politicians in Georgia and Ukraine.

Ms. Timoshenko is a tough negotiator, but she does not equate Ukrainian interests with anti-Russian policies that create more problems than they solve. With plans to increase U.S. involvement in Afghanistan, the White House and the State Department would do well to restore cooperation with Moscow.

Source: Washington Post

Justice Denied

WASHINGTON, D.C. -- Whoever ordered the murder of Georgiy Gongadze in 2000 may have hoped that, by now, people would stop demanding justice. If so, they are mistaken.

Myroslava Gongadze, a journalist with Voice of America in Washington, D.C., received political asylum in the United States a year after her husband's 2000 murder. She now lives in Washington with the couple’s twin daughters, Solomiya (upper) and Nana.
More than eight years later, international and national voices continue to press Ukrainian authorities to find out who silenced the crusading Kyiv journalist who founded Ukrainska Pravda website and used the online news platform to criticize high-level corruption.

Every six months or so, the Parliamentary Assembly of the Council of Europe calls for the investigation to be completed. The United States takes the same position, but hasn’t had much to say recently. Ukrainian Human Rights Ombudsman Nina Karpacheva has denounced the unprofessional investigation into the beheading of the journalist.

“It seems to me that [the Prosecutor General’s Office] lacks the courage, professionalism or independence to name those who ordered this murder,” Karpacheva said at a news conference last fall commemorating the Sept. 16, 2000, disappearance of Gongadze. “Until the head of Georgiy Gongadze is found, Ukraine will remain the ‘headless rider.’”

These voices hope that their quest for justice is not a futile one. However, the official investigation long ago – to the discredit of the nation’s political leaders and law enforcement agencies – degenerated into farce.

The case appears as stalled as the 2004 Orange Revolution, the peaceful uprising triggered by the outrage of millions of Ukrainians who took to the streets to demand justice in the Gongadze murder and other high-profile crimes, including the rigged presidential election that year. But hope, as the saying goes, dies last.

Recent progress has been reported. Nearly a year ago, three former police officers were sentenced to prison terms of 12-13 years. But nobody thinks the convictions of Mykola Protasov, Valeriy Kostenko and Oleksandr Popovych represent justice. If the trio did participate in the actual killing and beheading of Gongadze, they are widely seen as fall guys, lower-level police officers who followed orders.

But whose orders?

The key to answering that question, many still believe, lies with the tapes allegedly recorded by former presidential bodyguard Mykola Melnychenko. The Melnychenko tapes are purportedly 700 hours of recordings that – if authentic – show that former President Leonid Kuchma ran the nation of 46 million people as a criminal enterprise in which murder, massive theft, punitive tax inspections, election fraud and intimidation were routine.

The Melnychenko tapes purportedly show that Gongadze had become such an irritant to Kuchma that the president, who ruled from 1994 to 2005, discussed ways to silence the journalist. The tapes allegedly show Kuchma had conversations about Gongadze with chief of staff Volodymyr Lytvyn, former Interior Minister Yuriy Kravchenko and others.

Kuchma is out of power. Kravchenko died of gunshot wounds the day he was supposed to give testimony in the case. Oleksiy Pukach, former chief of the Interior Ministry’s surveillance department, remains a key suspect. Pukach has fled the nation. Lytvyn is now speaker of the parliament.

Meanwhile, Gongadze’s 36-year-old widow, Myroslava, received political asylum in the United States in 2001 and is now a journalist for Voice of America in Washington, D.C. She is raising the couple’s 11-year-old twin daughters, Solomiya and Nana. Gongadze’s mother, Lesia, also continues her quest for justice.

Myroslava Gongadze blames the “Kuchma regime” for her husband’s murder. She also believes Yushchenko “is not willing to get to the bottom of the case.” Kuchma has always denied any involvement in Gongadze’s murder or any knowledge of the circumstances of the journalist’s death. From time to time, as recently as this month, Yushchenko still expresses interest in having the case solved. But the president’s statements ring hollow to many.

The following is a Kyiv Post interview with Myroslava Gongadze:

Do you still hope that the case will be solved? Or have you given up?

There was not a lot of hope to solve this case at the beginning of the investigation. However, I made a decision that I would do everything possible to reach this result. We have shown that it is possible to fight for justice and for human rights. Our goal is worth fighting for. The Orange Revolution happened. Perpetrators of the murder went on trial and have been convicted. They are being punished. People believed that the fight is realistic. I haven’t given up on pursuing justice. I believe that investigating crimes against Georgiy, other journalists and politicians during the [President Leonid] Kuchma regime is both morally necessary and a practical step in the fight against corruption.

Does the evidence still exist?

I think there is a lot of evidence not investigated in full. The Prosecutor General’s Office has not done its job. I think the reason for this is the lack of political will magnified by the lack of professionalism. Not all participants of the conversation [about how to silence Gongadze] in President Kuchma’s office have been questioned by investigators. The analysis of the recording [of the Mykola Melnychenko tapes] has not been done as Melnychenko is claiming there are hundreds of hours of recording. The conversations between Kuchma and his close circle must be compared with events of that time. The Ukrainian government has not satisfied the decision by the European Court of Human Rights in the Gongadze case. President [Victor] Yushchenko did not fulfill his promise in front of the Parliamentary Assembly of the Council of Europe to get to the bottom of this case. For five years, the authorities were covering up the crime. This is a crime itself that must be investigated.

Do you think that a deal was struck at height of the Orange Revolution and Kuchma was given immunity for Gongadze and other crimes?

There are a lot of talks about this kind of deal and I don’t have the facts to dispute it. I suspect that the new Ukrainian authorities decided to stop the investigation in Georgiy’s murder at the level of the perpetrators. Despite President Yushchenko’s previous and recent statements, I don’t see that he has the real will to investigate this and other crimes of the Kuchma regime.

What has Yushchenko done right and what has he done wrong regarding this matter?

Some promises given on Maidan have been fulfilled. The perpetrators of this crime have been convicted. However, this was the result of a long fight of the family, friends, lawyers and a few brave investigators. The new government just opened the door to allow this to happen. Everything else was done wrong. The investigating team was changed. The few investigators [assigned to] the case [after it was] sent to court were deprived from the investigative process and were sent to different divisions in different regions of Ukraine.

Do you agree that the Gongadze case is a litmus test for Ukraine’s passage into democracy – a test that it has failed so far?

I said this in 2002 and I continue to say the same thing now in 2009. Yes, this is a litmus test which Ukraine has failed so far. But we cannot afford to give up. I think, in many aspects, the future of Ukraine depends on the results of this case.

Have you determined in your mind what happened and who is to blame?

Definitely I have only one to blame: the Kuchma regime, first of all, for allowing this to happen. According to Melnychenko’s tapes, which are, in my opinion, authentic, discussing the matter with the head of his administration [current Verkhovna Rada Speaker Volodymyr] Lytvyn and [the late Interior Minister Yuriy] Kravchenko, Kuchma suggested that “this Georgian” (Gongadze) be “given to Chechens” for ransom or taken somewhere. “I will take care of him, Leonid,” Kravchenko responded. “I will do it. He will be sorry.” Two of the participants of the conversations still can be questioned. Kravchenko is silent forever, just as a lot of other participants of conversations in Kuchma’s office died under strange circumstances. I think it is very important to move this investigation and others forward and faster. One more suspect in this crime, General [Oleksiy] Pukach [who is suspected of strangling Gongadze] is in hiding. The completed investigation against the perpetrators has all the evidence that he personally helped another policeman kill Georgiy and then tried to cover up the case.

What do you think about the fact that Lytvyn and others in power then such as [former Tax Administration Chief] Mykola Azarov are still prominent politicians today?

They were a part of the authoritarian power built and practiced in Ukraine during the Kuchma era. They acted as insurance for the political survival of Kuchma. Their dealings at that time have to be investigated, as should all crimes of the Kuchma regime. Volodymyr Lytvyn particularly has never said: “I am not connected to Gongadze’s murder.” He is using a lot of different words, but he never gives a direct answer.

What do you think about Kuchma?

I see Kuchma as a former government official who should be under trial in the courtroom. He is a source of many problems in Ukraine. He allowed the corruption and abuse of power to blossom in Ukraine. He developed the system that gave full immunity to his close circle. Those who were not supporting such practices or spoke against it were prosecuted, harassed or even killed. However, it was not sufficient for him to be feared. In addition, he wanted to be loved by people. For the sake of this love, he was ready to wipe out his political rivals and journalists. He was never happy with what he had. Kuchma reminds me the old greedy wife from Pushkin’s ‘The Tale of the Fisherman and the Fish.’ At the end of the story, the old wife remained with a broken washboard. The tragedy here is that all 46 million Ukrainians have been left with the broken washboard.

How is your life going?

It is very important for me to be able to make a difference. My work as a human rights activist and journalist in Washington gives me this opportunity. Every day at my news desk I am trying to show Ukrainians new horizons and open new worlds. I live in a place where important political decisions are made that I can influence. At the same time, I am present in Ukraine on a television screen, helping people to understand this world better. In my personal life, my priority is my children. I want them to grow up as decent, smart and strong personalities, with good critical thinking, being able to make their own decisions and find their own destiny. They survived a big tragedy in their life and I want to protect them.

What do you tell your daughters about their father?

They know their father from photos we have at home, videos, my stories and our friends’ stories about him. They are proud of their father and we have a place in Washington we can go and mourn his untimely death. In Newseum [the museum of news], there is a memorial of journalists who died in the line of duty. Georgiy’s name and portrait are there.

Are you as dissatisfied, like most Ukrainians, with the political and economic situation?

I am frustrated and disappointed. For 17 years we have failed to build any basis for healthy governance and statehood. The country's resources are being wasted. It is out of control. Politicians are thinking only about their personal wealth. Now I am afraid that even independence of the country is in danger. The only hope Ukraine has is its people. They have to believe in themselves and have to take greater responsibility for their actions and future. We have to look for the new leaders among ourselves.

What do you miss the most in Ukraine?

I miss the energy of Ukrainian life, music and friends. There is a different nerve of life in Ukraine. Western society gives stability, but the music of life is missing. I still hope that one day I can return to Ukraine to be useful there.

What do you miss the least in Ukraine?

Discord of life. Ubiquitous discord of life. I do not miss rude militia and irresponsible officials.

Have you made contact with other relatives of journalists slain?

Yes, constantly and not only in Ukraine; in Russia, Azerbaijan and other places. People call me and ask for help.

Is there danger for journalists in the United States?

There are many investigative journalists in the United States and it can be dangerous here, too. Of course, not to the extent as it is in Ukraine. The danger for a journalist is also to betray himself or herself. A journalist has to be truthful to him or herself and it can be difficult.

Source: Kyiv Post

Ukraine Finance Minister Quits Over Budget Deficit

KIEV, Ukraine -- Ukrainian Finance Minister Viktor Pynzenyk resigned on Thursday, saying he had become a "hostage to politics" in a dispute with the prime minister over the budget.

Ukrainian Finance Minister Viktor Pynzenyk.
Pynzenyk cited differences over a deficit contained in the budget backed by Prime Minister Yulia Tymoshenko, defying the International Monetary Fund which made a deficit-free budget a condition of its $16.4 billion loan.

Ukraine sought the loan to help it weather the world financial crisis which has slashed the value of its hryvnia currency and battered the commodity exporters that form the core of its economy.

"In current conditions, the professional job of finance minister has become a hostage to politics," Pynzenyk said in a statement to parliament that appeared on his ministry's website. He cited differences in financing the deficit.

"The finance minister cannot change the situation. Nor can he walk away from his professional actions. There is no point in remaining in the job of finance minister in such conditions."

A respected online news service last month published a letter it said was written by Pynzenyk denouncing as unrealistic the budget overseen by Prime Minister Yulia Tymoshenko.

The budget allowed for a deficit equivalent to 3.0 percent of gross domestic product.

Pynzenyk criticised publication of the letter but did not formally deny that he had written it. In addition to his current term as as finance minister from 2007, he had held that and other senior posts in the 1990s.

An International Monetary Fund mission left Kiev last week with no decision on disbursing the second instalment of the loan for Ukraine.

Tymoshenko noted that the minister had been on sick leave and in hospital for some time.

"Not all officials are able to to deal with the world financial crisis. Not all are able to work and react to the challenges in a proper manner," she told a news conference.

"Those who are the weakest give ground on the key positions and end up leaving and dealing with other matters."

She said a new minister would soon be appointed.

Tymoshenko has approached several countries, including Russia, to secure credits to cover a budget deficit.

Tymoshenko's approach to Moscow for a $5 billion credit has sparked new disputes between the premier and her estranged ally from the 2004 "Orange Revolution", President Viktor Yushchenko.

In an earlier statement on his Website, Yushchenko issued a new call for the cabinet to "review its economic strategy and deficit parameters" and come up with a more "realistic" budget.

IMF REQUIREMENTS

Ukraine's central bank, meanwhile, announced it would no longer sell foreign currency to banks who conduct transactions at exchange rates exceeding the average market value of the U.S. dollar.

Dealers said that action was linked to another IMF requirement limiting to two percent the difference between the official rate of the hryvnia currency and market transactions.

The bank expressed its "deep concern" at banks conducting operations at rates "far exceeding the average market rate" and suggested it could take other punitive measures against them.

The central bank intervenes on the interbank market from Monday to Thursday in support of the hryvnia currency and conducts dollar auctions each Friday.

Dealers said the central bank's action would create further dollar shortages, with exporters reluctant to sell at low prices. That, in turn, would prompt new intervention.

Tymoshenko has urged the president to sack the central bank chairman over the steep plunge in the hryvnia's value last year and said its should be no weaker than 6.0-6.5 to the dollar.

The hryvnia's difficulties are reflected in the worsening trade deficit for goods, pegged by officials at a record $18.532 billion for 2008 against $11.322 billion a year earlier.

Source: EARTHtimes

Apples, Oranges And Natural Gas: Ukraine Mystery Deepens

KIEV, Ukraine — When Ukraine and Russia ended their clash over natural gas supplies last month, resuming the flow to more than a dozen European countries, the agreement focused a spotlight on a mysterious firm that suddenly was cut out of the deal.


Over the four-plus years of its existence, Rosukrenergo — short for Russia-Ukraine Energy — had collected billions of dollars, much of it as the sole intermediary for gas pumped to Ukraine from Russia .

The man largely responsible for pushing Rosukrenergo aside was Russia's powerful prime minister, Vladimir Putin . One motive appears to be getting even with his Ukrainian nemesis, President Viktor Yushchenko , who's enraged Putin by applying for NATO membership and supporting Georgia in its war with Russia last year. Yushchenko's government, Putin hinted publicly, was getting money from Rosukrenergo or its management.

Putin's partner in the deal, Ukrainian Prime Minister Yulia Tymoshenko , stood to benefit politically by nipping a rumored cash source for Yushchenko and another leading Ukrainian politician.

That's just the simplest interpretation of a tangled, post-Soviet story of riches and power, however. For the West, the company is a reminder of how unpredictable and opaque business ventures still are in the former Soviet bloc, a big problem especially for Europe , where some 25 percent of natural gas comes from Russia .

It's also a warning post of sorts for U.S. foreign policy, which under President George W. Bush presented Ukraine as a beachfront of democracy despite rampant problems with corruption and political rivalry that make the country look like the Wild West.

Little is known about Rosukrenergo, half-owned by the Russian state gas monopoly Gazprom, which has close ties with the Kremlin. A Ukrainian businessman, Dmitry Firtash, owns 45 percent; his name has been associated with a reputed mafia boss who's wanted by the FBI on fraud charges, but he denies any business dealings between them.

The details are further clouded by Ukraine's political infighting. Russian authorities also consistently refuse to discuss the country's financial dealings, which have included accusations that officials in Moscow also profited from Rosukrenergo.

One thing is certain: The description that Firtash offered can be discounted. "Rosukrenergo is a normal company, just like any other," he recently told Ukrainian television.

Who is Firtash, and where does Rosukrenergo's money really go?

Ukrainian officials who ought to know can't say. "This is a shadow kind of company that we still officially have not got any information on. Who is their shareholder? Who is their beneficiary?" said Ukraine's deputy justice minister, Evhen Kornichuk , who's a member of Tymoshenko's party. "That might be Firtash; who else?"

Still, there's been no proof that the company acted improperly or that politicians were pocketing money.

A clue to Rosukrenergo's central role in the dispute came from Putin, who attacked the firm — without naming it — and Yushchenko's administration about a week after Russia shut off the gas.

"I think what matters most for the Ukrainian government is not the gas price," Putin said during a meeting with reporters, "but rather the opportunity to retain certain intermediaries to use the dividends for private purposes, to accumulate personal wealth and obtain financial resources for further political campaigns."

When the deal was announced Jan. 19 , Putin, with Tymoshenko sitting next to him, said that Rosukrenergo was out of the picture. "All the intermediaries are to be extracted from the payment structure," he said.

Rosukrenergo sold more than $21 billion worth of gas from July 2004 through December 2007 , and made a net income of some $2.3 billion in that period, according to audits posted on its Web site, which didn't include results from 2008.

"There is a lot of corruption in Ukraine , but the magnitude of the cash flows surrounding and associated with Rosukrenergo . . . make it plausible that this could be the largest source of corruption," said a Western diplomat in Kiev , who spoke on the condition of anonymity because of the sensitivity of the issue.

Headquartered in Zug, Switzerland , Rosukrenergo was set up in 2004 and acted as an intermediary between Russia and Ukraine for the delivery of gas, pumped in primarily from central Asia .

The chief of the Ukrainian security services in 2005 told the Financial Times that he was investigating whether Rosukrenergo managers were under the control of Semyon Mogilevich , an alleged mafia leader in Eastern Europe who's on the FBI's wanted list and whom Russian security forces arrested last year. That official, Tymoshenko ally Olexander Turchinov, later was removed from office during a political reshuffle and declined to comment last month.

The FBI alleges that Mogilevich, a heavy-set man with a pockmarked face, previously funded a scheme that defrauded investors of some $150 million with a company incorporated in Canada .

Zeev Gordon , a former attorney for Mogilevich who's based in Tel Aviv, Israel , told McClatchy that his client "denies any links to Firtash. He knows him, but he denies any links." Gordon said that Mogilevich also "denies any links to the company Rosukrenergo."

Gordon acknowledged that he'd once helped Firtash establish a gas-trading company by flying to Budapest, Hungary , and registering the company's shares in a trust. However, Gordon said that the fact that he'd represented both Firtash and Mogilevich suggested nothing about their relationship with each other.

In Ukraine , several officials have alleged that the company or those connected with it were paying off two sides in national politics: President Yushchenko and the rival he'd ousted, Viktor Yanukovych, who's close to Russia .

Yushchenko and Yanukovych deny any wrongdoing. Former oil and gas Minister Yuri Boiko , a Yanukovych loyalist, told McClatchy he suspects that Tymoshenko, a one-time gas executive, might have "decided to bring in her own companies." Boiko, however, has been accused of having ties to Rosukrenergo. While he headed Ukraine's national gas company, he also sat on Rosukrenergo's coordination committee for a year, according to a report by Global Witness, an international organization that researches corrupt exploitation of natural resources.

Yushchenko and his supporters have derided Tymoshenko's deal in Moscow as an attempt to gain Kremlin backing for her presidential bid. Observers in Kiev , however, including those with past official ties to Yushchenko, say there's no question that the president and Firtash are closer than they admit.

Just after her deal with Putin, Tymoshenko fended off attempts by Yushchenko to renegotiate the contract, saying publicly that, "I will not allow the president to bring back a corrupt intermediary."

Russia's motives for ending the deal are less obvious.

Analysts speculate that the Kremlin wanted to tamp down the company's influence, especially after Firtash reportedly bought 75 percent of an oil and gas company and its claims to a gas field in southwest Russia in 2006.

"This infuriated Gazprom, which was eyeing the same field for itself and whose offer was turned down," said Yulia Latynina, a Russian journalist who's widely considered to have good sources in the government and business community. "It also proved that a company set up to oversee gas trade had stolen enough money to buy gas fields."

As one analyst in Kiev put it: "Firtash, who played along with Russia for some time, got out of their reach and starting making the wrong friends." The analyst asked not to be named because of fears about angering powerful men.

Firtash and Rosukrenergo representatives declined to be interviewed by McClatchy . A Gazprom spokesman in Moscow said only that "Relations in the gas sphere should be transparent and businesslike."

According to his holding company's Web site, Firtash got an early start in the gas trade during 1993 with a barter deal in Turkmenistan that included "fresh produce supplies."

He founded an intermediary company in 2002 and obtained exclusive contracts to supply Turkmen gas to Ukraine . Rosukrenergo was founded two years later, but Firtash's stake in the firm wasn't made public until 2006.

Although Firtash has denied working with Mogilevich, the Paris -based Web site Intelligence Online published a schematic diagram last year showing multiple points where the two men's financial interests allegedly intersected. In 2003, for example, Firtash bought Mogilevich's ex-wife's shares in a company he now controls, a move he acknowledged in a 2006 interview with The Wall Street Journal .

"What seems to be pretty clear is that Firtash knew or had dealings with Mogilevich at some time in the past, but that's not necessarily conclusive," the Western diplomat in Kiev said.

When Mogilevich was arrested in Moscow in January 2008 on charges of tax evasion, some analysts speculated that it was a precursor to a new gas deal between Russia and Ukraine .

"In Russian leadership, there were two groups: One backed Rosukrenergo, another opposed it. The fight against it started over a year ago, and the first volley in this fight was the arrest of Semyon Mogilevich , the guy who stood behind Rosukrenergo," said Stanislav Belkovsky , the head of the Council on National Strategy , a government-friendly research center in Moscow .

Mogilevich's lawyer in Moscow , Alexander Pogonchenkov, said he had no information about ties with Ukrainian gas, and that Mogilevich couldn't be interviewed because he was being held by the FSB, the successor agency to the KGB.

"There are forces which want him to remain behind bars, but I do not want to speculate on who these people may be," Pogonchenkov said.

Source: McClatchy Newspapers

United States To Consider Ukraine's Possible Request On Financial Aid

WASHINGTON, DC -- Ukraine is an important partner for the United States and the latter is ready to provide the country with possible financial assistance, the U.S. Department of State has reported.

Prime Minister Yulia Tymoshenko
"Ukraine is an important partner for the United States. We'd have to take a look at a request [on financial aid], should one come in," Acting Spokesman Robert Wood said at a regular briefing on Tuesday evening.

He said that "Prime Minister Yulia Tymoshenko had reached out to a number of countries on this issue."

Wood failed to predict which decision would be taken.

"I can't give you promises from this podium because I'm not aware that they've actually come to us on this [request]," he said.

Wood said that the United States very much supports Ukraine's program with the International Monetary Fund (IMF) and hopes for its implementation.

"We believe that Ukraine should work hard with the IMF to make sure that it implements that economic program," he said.

Source: Kyiv Post

Getting Outswindled By A Swindler

MOSCOW, Russia -- The Russia-Ukraine gas war officially ended in Moscow on Jan. 19, when Prime Minister Yulia Tymoshenko and Prime Minister Vladimir Putin signed a 10-year agreement. But there was a strange epilogue when Ukrainian President Viktor Yushchenko demanded shortly thereafter that the agreement be annulled.

Semyon Mogilevich
Tymoshenko pushed very hard to include a clause eliminating the role of the controversial intermediary RosUkrEnergo. If Yushchenko gets his way, RosUkrEnergo will be the big winner.

As soon as it became known that Yushchenko was considering annulling Tymoshenko's agreement, there were media reports that Russia's prosecutor general had placed the nominal owners of RosUkrEnergo, Dmitry Firtash and Ivan Fursin, on a criminal wanted list. The official reason was their alleged ties to Semyon Mogilevich, who is also wanted by the FBI on charges of fraud and racketeering.

In all fairness, it's hard to believe that there is "secret most-wanted list" from the Prosecutor General's Office; these announcements are always made public. But then again, there have always been lots of secrets coming out of Moscow, such as the secret terms for gas exports. And don't forget the secret Molotov-Ribbentrop Pact.

Yushchenko's political opponents constantly accused him of having close ties to RosUkrEnergo. But Putin controls the Russian gas business with an iron hand, and Mogilevich, who is suspected of being a co-partner in RosUkrEnergo, did not live in Kiev but in the upscale Rublyovka neighborhood of Moscow until he was arrested in January 2008 on tax evasion charges.

Let's suppose that Mogilevich approached the Kremlin in 2002, offering his services as a middleman to ensure that gas deliveries to Europe via Ukraine went smoothly. And let's assume the Kremlin hired him in this capacity.

Let's also assume that in 2006, two years after Yushchenko was elected president, Mogilevich (or his authorized representatives) told the Kremlin that he had Yushchenko in his back pocket.

Now let's assume that Mogilevich spent a lot of money buying up shares in Ukrainian companies and then presented the bill to Moscow, labeling it as "Yushchenko's cut." This made Kremlin officials extremely angry because they believed that Yushchenko was personally profiting from the deals, while they got no cut at all. Naturally, Yushchenko was not aware he was being "paid" all of this time.

Russia's criminal proceedings against Mogilevich began after RosUkrEnergo bought the Astrakhan gas field. That deal was later annulled and Mogilevich was arrested. You can certainly understand why the Kremlin would be upset.

After all, it had apparently recruited RosUkrEnergo's owners to help expand Russia's influence in Ukraine -- mainly, to buy up Ukrainian companies, politicians and political parties on the cheap. But as it turns out, the money was used by RosUkrEnergo to purchase the Astrakhan gas field that Gazprom had its own sights on.

Let's suppose that this classic influence-peddling scam collapsed once it became clear that the intermediary had accumulated a gigantic sum of money with which it was attempting to buy Russian energy assets and conduct its own political games in Ukraine.

It also ground to a halt when Tymoshenko became prime minister, because the middlemen could never have struck a deal with her.

It seems to me that the Kremlin leaders tried to mix foreign policy with a secret plan to buy another country's president, while trying to add money to their foreign bank accounts. It's no surprise that in the end, they got what they deserved, having been duped big time by a world-renowned swindler.

Source: The Moscow Times

Ukraine President Criticizes PM Over Russian Loan

KIEV, Ukraine -- Ukraine's president criticized his rival, Prime Minister Yulia Tymoshenko, for seeking a $5 billion rescue loan from Russia, saying Tuesday that deal would make the country overly dependent on its giant neighbor.

Prime Minister Yulia Tymoshenko.
President Viktor Yushchenko said at a security council meeting that Ukraine may be unable to pay back the loan Tymoshenko is seeking and have to cede control of its strategic gas transit system to Russia in lieu.

Tymoshenko requested financial aid from Russia and a number of other countries after talks on getting a second tranche of a key $16.4 billion emergency loan from the International Monetary Fund stalled last week.

The Washington-based IMF said Ukraine must make more efforts to strengthen the shaken banking system, stabilize the fallen national currency and maintain fiscal discipline.

The gas pipelines, meanwhile, were at the center of a bitter New Year's feud between Russia and Ukraine. Ukraine's status as a transit country for Europe-bound Russian gas irks Moscow because it gives Kiev control over the gas with which Russia is contracted to supply EU countries.

Passing the transit system to Russian hands would deprive Kiev of leverage in such issues as transit prices and prices for its own gas from Russia.

For her part, Tymoshenko said she would not let that happen.

In a sign of the fragility of the relationship between the two former Soviet republics, a dispute over those issues led Russia to cut off natural gas supplies to Europe via Ukraine in January, leaving more than a dozen European countries freezing in winter temperatures.

Yushchenko's comments also highlighted the alarming state of the Ukrainian economy, which is struggling to avoid an all-out collapse in the face of the global economic crisis. The state budget is crippled by higher gas bills from Russia and multibillion dollar debts accumulated by state gas company Naftogaz.

Source: International Herald Tribune

Uncertainty On IMF Loan Sends Ukraine To Moscow

NEW YORK, NY -- The International Monetary Fund is likely to suspend loan payments to Ukraine, a move that would further push the government toward Moscow for aid and exacerbate a feud between top leaders in Kyiv, according to The Wall Street Journal.


Ukraine is failing to meet the terms of its loan deal with the IMF, and likely won`t get the next installment this month, according to a person close to talks between the fund and the government in Kyiv.

Faced with a cash shortage, Kyiv is passing the hat around to global powers. Talks were held in Moscow last week over a $5 billion loan to help plug Ukraine`s budget deficit.

Ukraine Prime Minister Yulia Tymoshenko said her government also sent letters to the U.S., European Union, China and Japan, and that "Russia is ready to help with the credit agreement`s signing."

President Viktor Yushchenko criticized the talks with Moscow. "It`s a dangerous policy and poses a threat to Ukraine`s national interests," he said.

The U.S. State Department said it was looking into reports of Ukraine`s request for aid.

Ukraine has been hit by falling prices of metals and fertilizers, its main exports. Infighting between Mr. Yushchenko and Ms. Tymoshenko has led to a policy deadlock.

The deficit has been a sticking point in talks with the IMF on the release of the second installment of a $16.4 billion loan that it agreed to extend to Ukraine last year.

The IMF released the first $4.5 billion tranche in November and had made further disbursements contingent on Ukraine reducing the budget shortfall and making progress on bank restructuring.

Ms. Tymoshenko`s government`s 2009 budget is forecast to show a deficit of 3% of gross domestic product.

Last week, an IMF mission monitoring Kyiv`s progress left without an agreement with the government that would have paved the way for disbursing the next loan tranche.

Ceyla Pazarbasioglu, assistant director of the European Department of the IMF, said "further actions, including structural fiscal measures, are needed for us to recommend completion of the review."

Source: The Wall Street Journal

Ukraine Pushes For Loans To Meet Shortfall

MUNICH, Germany -- Ukraine has appealed for emergency loans from the world’s richest countries to help support its economy, which has been battered by the global financial crisis.

Yulia Tymoshenko in Munich, Germany.
Yulia Tymoshenko, prime minister of Ukraine, said her government had sent letters to the US, Russia, China, Japan and the European Union asking for loans to fill a shortfall in budget revenues for this year.

“We have already received a positive response from some countries, including Russia,” Ms Tymoshenko said at the Munich Security Conference at the weekend. “Russia is ready to sign such loan agreements.” She did not clarify how much Kiev was seeking to borrow but reports in Ukraine suggested Russia could lend $5bn (€3.9bn, £3.4bn).

Ms Tymoshenko said Ukraine was keen to harmonise relations with Moscow, soured after last month’s gas prices dispute. She insisted Kiev would stick to a western integration agenda that included efforts to join the European Union and Nato.

News that Ukraine was seeking emergency loans amid frozen credit markets comes days after a senior International Monetary Fund delegation warned of “serious problems” brewing in Ukraine’s economy.

The fund delegation ended its one-week visit to Kiev last week but provided no clear signal on whether it would grant further disbursements from a $16.5bn standby facility agreed last year.

Ukraine received a first tranche of $4.5bn last November. Future disbursements depend on the implementation of tough conditions and are needed to keep Ukraine’s currency, the hryvnia, stable. It lost nearly 40 per cent of its value in 2008.

The IMF’s concerns centre on Kiev’s 2009 budget, which has a 3 per cent deficit in spite of a fund stipulation it be deficit-free. It also seeks a freeze on social spending at a time when more than 1m out of a population of 46m have lost their jobs.

Ukraine’s gross domestic product is expected to contract by around 5 per cent this , thus curbing budget revenues, complicating the state’s ability to rescue shaky banks and to provide unemployment benefits.

Ukraine is struggling to tame annual inflation of more than 20 per cent and to adjust to a fourth stiff price rise on natural gas imports from Russia in as many years.

The US and other western nations are keen to stabilise Ukraine for geopolitical as well as economic purposes, given its important position in Eastern Europe as a neighbour of Russia.

Source: Financial Times

Ukrainian Govt. In Secret Talks With Moscow - Presidential Envoy

KIEV, Ukraine -- A Ukrainian governmental delegation went to Russia on Friday for secret talks on a loan, a presidential representative said on Saturday on Ukraine's Inter TV channel.


"Yesterday, a governmental delegation has secretly left for talks on a special loan to prevent the bankruptcy of the country's energy company Naftogaz of Ukraine," said Bohdan Sokolovsky, the president's international energy security envoy.

The government's press service dismissed the claims.

Sokolovsky urged the parliament, the ruling coalition and the opposition to take urgent action.

"Of course, the Ukrainian president... demands that such illegal actions are immediately stopped and the Ukrainian people are clearly informed on the situation with Naftogaz of Ukraine," he said.

He added that Naftogaz of Ukraine could be brought to bankruptcy by the deal on gas prices agreed in Moscow on January 19, Ukraine's UNIAN news agency said.

Russia suspended supplies to Ukraine on January 1 after the former Soviet neighbors failed to reach an agreement on a new gas contract for 2009. A week later, Gazprom cut off gas deliveries to the European Union, saying Ukraine was stealing gas intended for EU consumers.

The two countries' prime ministers, Vladimir Putin and Yulia Tymoshenko, and the chiefs of Gazprom and Naftogaz signed a deal to resume gas supplies on January 19.

Ukrainian President Viktor Yushchenko and officials in his administration have criticized the deal Tymoshenko struck with Putin which allowed the resumption of gas shipments to and through Ukraine.

Source: RIA Novosti

Hryvnia Falls More Than Most Currencies In 2008

KIEV, Ukraine -- The national currencies of Ukraine and Iceland, both recent recipients of emergency lifeline loans from the International Monetary Fund, lost more value in 2008 than any other countries, the respected Russian business daily Vedomosti revealed in a Feb. 2 report citing figures provided by Bloomberg.


The report, entitled “Friends in Devaluation,” goes on to describe Russia’s currency, the ruble, as also being battered heavily last year.

According to Kyiv-based investment bank Dragon Capital, the hryvnia has been under mounting depreciation pressure since September due to rapid deterioration in Ukraine’s balance of payments.

“In addition to a sharp contraction in foreign demand and declining world commodity prices producing a strong negative impact on exports, Ukraine’s external position was undermined by evaporating access to foreign debt capital, on which the domestic private sector and banks had relied strongly in the previous several years having accumulated $83 billion, (48 percent of gross domestic product) of debt by the first half of 2008.

“The hryvnia’s rapid slump made it one of the hardest hit emerging market currencies worldwide. However, the bottom may still be ahead. With foreign demand for Ukrainian export commodities staying weak and the domestic political situation remaining volatile, fueling uncertainty over near-term monetary and fiscal policies, we do not rule out new downswings in the exchange rate in coming months. Our 2009 exchange rate forecast actually accounts for new possible fluctuations, envisaging an end-2009 rate of Hr 8.5 relative to the United States dollar and a rate of Hr 9.5 on average for the year."

Source: Kyiv Post

Who Owns The Gas In Ukraine's Underground Reservoirs?

KIEV, Ukraine -- The gas dispute that left half of Europe without gas in early January was officially settled by accords signed by Gazprom and Naftohaz Ukrainy in Moscow on January 19 and 20.

Dmytro Firtash
The clash, however, is apparently not over. Ukrainian businessman Dmytro Firtash, who owns the RosUkrEnergo gas trading company jointly with Gazprom, has said that he is suing Naftohaz in the Stockholm arbitration court over 11 billion cubic meters of gas stored in Ukraine's underground reservoirs.

Firtash maintains that the gas belongs to RosUkrEnergo, but Ukrainian Prime Minister Yulia Tymoshenko insists that Gazprom passed the ownership rights to Naftohaz. Consumers in the European Union may suffer again.

Tymoshenko and Russian Prime Minister Vladimir Putin agreed to cut RosUkrEnergo out of the gas trade between Russia and Ukraine.

They also agreed to solve the problem of RosUkrEnergo's $1.7 billion debt to Gazprom through a complicated deal in which Gazprom paid Naftohaz in advance for gas transit to Europe in 2009 and Naftohaz paid RosUkrEnergo's debt to Gazprom from that money, so RosUkrEnergo in fact became Naftohaz's debtor. The problem is that RosUkrEnergo and Ukrainian Prime Minister Yulia Tymoshenko interpreted the settlement scheme differently.

The Ukrainian government decided that Naftohaz became the owner of the gas that RosUkrEnergo had accumulated in the huge underground storage facilities in western Ukraine.

By Tymoshenko's interpretation, Naftohaz bought the 11 billion cubic meters of gas stored by RosUkrEnergo for $1.7 billion, which equals $154 per 1,000 cubic meters, much lower than the $360 price that Gazprom is charging Ukraine in the first quarter of 2009.

Ukraine should therefore be using gas from the reservoirs for the time being rather than buying expensive Russian gas.

Tymoshenko forecast that the average cost of gas for Ukraine would be $228, based not only on the expectation that Russian gas would become cheaper due to a drop in the world oil price but also calculating that most of the gas used in the first quarter of 2009 would cost Ukraine $154 rather than $360.

Firtash refused, however, to let Naftohaz take the cheap gas from the reservoirs. Ukrainian Customs Service chief Valery Khoroshkovsky said that he would treat the gas in question as the property of RosUkrEnergo in accordance with the customs declarations.

Khoroshkovsky explained later that the accord between Gazprom and Naftohaz on RosUkrEnergo's debt settlement had been signed only by a representative of Gazprom but not by a representative of Firtash, which is a legal requirement of Switzerland, the country where RosUkrEnergo is registered.

This, according to Khoroshkovsky, meant that Naftohaz's earlier obligation to pump this gas to RosUkrEnergo's customers in Europe remained in force.

Gazprom tried to distance itself from the dispute, leaving it to Naftohaz to persuade RosUkrEnergo to pay the $1.7 billion debt.

Tymoshenko accused Khoroshkovsky of being part of Firtash's team (Khoroshkovsky is indeed a partner of Firtash in several mass-media projects, including Inter TV), and she dismissed him from the Customs Service on January 28.

On the same day Ukrainian President Viktor Yushchenko, confirming his reputation as Tymoshenko's bitter rival, appointed Khoroshkovsky as first deputy chief of the Security Service (SBU).

The SBU immediately instructed the Customs Service to prevent the government from confiscating RosUkrEnergo's gas. Speaking in his new capacity, Khoroshkovsky warned that if the government took the disputed gas, it would violate several laws on property and investment protection.

The new leadership of the Customs Service, appointed by Tymoshenko, apparently ignored the SBU's warning, as Tymoshenko announced that her government had given the go-ahead to start pumping RosUkrEnergo's gas from the reservoirs.

Firtash insists that the gas in question is destined for consumers in the EU. RosUkrEnergo was cut out of the market in Ukraine, but it is still bound by contracts to supply gas to Poland, Hungary, and Romania in 2009.

Firtash warned that those countries would not receive the gas that Tymoshenko ordered to be taken for Ukrainian domestic needs.

RosUkrEnergo already has problems with its clients in the EU. Polish Petroleum and Gas Mining (PGNiG) was considering suing RosUkrEnergo over the company's failure to fulfill its obligations.

RIA-Novosti quoted a PGNiG spokesperson as saying on February 2 that Poland expected to receive 14 million cubic meters of gas a day under its contracts with RosUkrEnergo but was receiving only 7 million.

If Firtash manages to prove that the disputed gas does not belong to Naftohaz and if RosUkrEnergo's disgruntled clients turn to Ukraine for it, Naftohaz may be in serious trouble.

It is unlikely to receive any more international loans to keep it afloat, not only because of the global financial crisis but also because Naftohaz is considered untrustworthy as it even has trouble making payments on earlier loans.

Naftohaz can hardly expect Ukraine's cash-strapped industry or households to pay more for gas, nor will it receive much money from the Ukrainian state budget, which is already running a huge deficit if a recently published report to the cabinet by Finance Minister Viktor Pynzenyk is to be believed.

Source: Eurasia Daily Monitor

MV Faina: Freed At Last … But Whose Arsenal Is It?

NAIROBI, Kenya -- The deadly arsenal — 33 T-72 Russian battle tanks, rocket-propelled grenade launchers and anti-aircraft guns — held by Somali pirates is free at last, and the penultimate question is: Whose cargo is it?

A handout photo provided by the US Navy shows the Belize-flagged Ukrainian cargo MV Faina off Somalia's Indian Ocean coast as seen from a US Navy guided-missile cruiser.
Last night, the Ukrainian ship MV Faina was expected to dock at the port of Mombasa, as queries heightened over who paid the $3.2 million ransom.

When the ship was hijacked five months ago, there was an international storm over who the owner of the deadly arsenal was, with the US insisting the cache was headed to Southern Sudan. Yesterday, the Government — that kept insisting that the cargo was hers — remained uncharacteristically economical with information.

And in a dramatic move, the $3.2 million ransom was flown from Wilson Airport, Nairobi, by a chopper and parachuted down the Somalia coast. The plane, according to sources who spoke to the Associated Press, had originated in South Africa.

Focus turns on the ship’s next destination and who claims the cargo.

By 4pm yesterday, all the pirates, more than 100, had left the ship.

Kenya Army Spokesman Bogita Ongeri declined to comment, while Government Spokesman Alfred Mutua said: "Pirates are still getting off... the ship is not moving. It’s still in hostile waters ... Maybe it will move tomorrow."

Ransom paid

And asked whether the cargo is destined for Nairobi, Dr Mutua said he would issue a comprehensive report later.

A man involved in negotiations to secure the release of the ship told the AP that a chopper carrying the ransom left Nairobi on Wednesday afternoon and dropped on the Faina.

A spokesman for the owners of the MV Faina said ransom was paid to the pirates and the ship freed.

A statement from the office of Ukraine President Viktor Yushchenko did not refer to a ransom, but said the ship was freed as a result of an operation involving intelligence agents from his country.

The US Navy said it appeared the ransom was dropped on Wednesday.

"We have all indications that ransom was paid regarding MV Faina," Lt Nathan Christensen, a spokesman for the Bahrain-based 5th Fleet, told AP.

The ship is loaded with military hardware and there had been fears the arms would fall into the hands of al-Qaeda-backed Somali insurgents.

The pirates seized the MV Faina on September 25, last year, and the cargo consisted of 33 T-72 tanks, rocket launchers and small arms.

It has since been moored off Haradhere, along with a number of other vessels seized by the pirates.

Kenya said the cargo belonged to it but there were claims that the manifest suggested it was destined for South Sudan. Once the ship is underway, focus is likely to shift to the cargo and its final destination.

Presidential spokeswoman Irina Vannikova told Russia’s ITAR-Tass news agency that "the ship is now under the guard of forces of the US Navy and is preparing to head for the Kenyan port of Mombasa".

One of the pirates told AP by satellite telephone that some of the pirates remained on board.

"We are not holding it (the ship) now anymore," said Aden Abdi Omar, one of those who left the ship. "But our men should disembark first for it to move to wherever it wants."

Dozens of pirates

Omar said two boats had been sent to collect more than two dozen other pirates who were on board.

By yesterday 4pm, according to sources, all the more than 100 pirates had left the ship.

Mr Mikhail Voitenko, a spokesman for the ship’s owner, said the pirates had received the ransom on Wednesday. The pirates had originally demanded $20 million.

The MV Faina was seized last September 24 with its 20-man crew.

East African Seafarers Assistance Programme Co-ordinator Andrew Mwangura, who used to give updates to local media, declined to comment yesterday.

Coast PPO King’ori Mwangi declined to comment and referred The Standard to the Kenya Maritime Authority (KMA).

KMA Director-General Nancy Karigithu said she was not in a position to say anything since she had not been informed about the development.

Somali pirates have so far captured three ships in the busy Gulf of Aden and Indian Ocean shipping lanes. The zone is a global piracy hotspot and 111 ships were attacked, with 42 seized last year.

Source: The Standard Online

Ukraine Parliament Fails To Pass Non-Confidence Bill Against Cabinet

KIEV, Ukraine -- Ukraine's parliament on Thursday failed to pass a non-confidence bill against the government led by Prime Minister Yulia Tymoshenko.

Ukraine's Prime Minister Yulia Tymoshenko (Front) reacts after winning a no confidence vote in the parliament in Kiev Feb. 5, 2009. Ukraine's parliament Thursday failed to pass a no confidence bill against government led by Prime Minister Yulia Tymoshenko.
The bill, put forward by the opposition Regions Party of Viktor Yanukovich, gained only 203 supporting votes in the 450-seat assembly. Its passage needs at least 226 votes.

With less than a year to go before a presidential election, the outcome strengthened Tymoshenko's position ahead of what she said would be a cabinet reshuffle next week. Only one confidence vote can be submitted per session under the Constitution, and now she cannot be voted out of office until at least autumn.

Analysts said the vote will allow Tymoshenko to work quietly for a time and protect her against rearguard attacks from the parliament. She still faces some strategic risks, but these are linked not so much to politics as to the social and economic crisis.

Tymoshenko said before the Thursday vote that political will was needed to face down those predicting negative growth. The economy grew 2.1 percent last year.

"The government did not agree with such a forecast. It is simply too easy to become reconciled to a fall. I believe Ukraine is strong, with resources and reserves and if the proper actions are taken at this difficult time, we can achieve this indicator as planned." she added.

The global financial tsunami delivered a hard blow to Ukraine's economy. The inflation rate hit 22 percent in 2008. From a peak of4.50 to the U.S. dollar last spring, the country's currency hryvnia has lost more than 60 percent of value by now.

Falling prices of steel, Ukraine's top export item, have led to the shutdown of most iron and steel plants. Lack of liquidity has also troubled banks.

Tymoshenko, 47, took office on Dec. 18, 2007.

Source: Xinhua

Ukraine Says Ship Held By Pirates Freed

KIEV, Ukraine -- A merchant ship carrying tanks and weapons held by pirates off the coast of Somalia since September has been freed, Ukraine's president announced Thursday.

Somali pirates who hijacked the Ukrainian cargo ship MV Faina, pictured in October 2008.
A spokesman for the owners of the MV Faina said on Wednesday that a ransom was paid on to the pirates. The brief statement from the office of President Viktor Yushchenko did not refer to a ransom, but said the ship was freed as the result of an operation involving special-services agents from Ukraine.

The Faina is loaded with military hardware and there had been fears the arms would fall into the hands of al-Qaida-backed Somali insurgents. Presidential spokeswoman Irina Vannikova was quoted as telling Russia's ITAR-Tass news agency that "the ship is now under the guard of forces of the U.S. navy and is preparing to head for the Kenyan port of Mombasa."

One of the pirates told The Associated Press by satellite telephone that some of the pirates remained on board. "We are not holding it (the ship) now anymore," said Aden Abdi Omar, one of those who left the ship. "But our men should disembark first for it to move to wherever it wants."

The U.S. Navy said it appeared the ransom was dropped Wednesday. "We have all indications that a ransom was paid regarding Faina," Lt. Nathan Christensen, a spokesman for the Bahrain-based 5th Fleet, told the AP on Thursday.

Christensen said U.S. Navy ships, monitoring the Ukrainian arms ship, "saw something that could be a ransom, dropped on the ship on Wednesday." Omar said two boats have been sent to collect more than two dozen other pirates still on board. He said he would give more details later.

Mikhail Voitenko, a spokesman for the ship's owner, said the pirates had received a ransom on Wednesday. He did not say how much was paid, but ITAR-Tass news agency put it at $3.2 million. The pirates originally demanded $20 million.

The MV Faina carrying a cargo of tanks, other weaponry and about 20 mostly Ukrainian crew members was seized by bandits in September off the Somali coast. Ships of the U.S. Navy's 5th Fleet surrounded it to be sure the cargo did not get into the hands of Somali insurgent groups linked to al-Qaida.

"The ransom has been delivered to the Faina. The owners of the ship so far don't want to comment on this, but I'm getting information on this just about every half-hour," Voitenko said in comments on Russian TV Wednesday. "A pile of pirates are counting the haul on the Faina. I hope that nothing will be disrupted and the sailors will soon be able to disembark."

Voitenko did not answer repeated phone calls seeking further comment. The seizure of the Faina was one of the most daring attacks by Somali pirates in recent years. Last year Somalia become the global piracy hotspot. A total of 111 attacks on ships reported, with 42 of them being seized.

Somalia does not have a coast guard or navy because it has not had a functioning government since warlords overthrew dictator Mohamed Siad Barre in 1991. They then turned on each other, reducing Somalia to anarchy and chaos.

Source: Kyiv Post

The Rise And Fall Of Yushchenko

KIEV, Ukraine -- Victor Yushchenko’s growing number of political foes and even some of his remaining friends agree: He is not the leader everyone thought – or hoped -- he would be. What went wrong?

Victor Yushchenko was propelled to power on the wave of the 2004 Orange Revolution, a peaceful uprising of millions of Ukrainians who protested vote-rigging in favor of his opponent, Victor Yanukovych, and forced a new vote.
Some believe that fame and conceit overtook him, that top-level isolation led to paranoia, which in turn fueled political combat with people who could have helped him.

Amid the relentless infighting and slimming record of accomplishments, Ukrainians have overwhelmingly turned on their president.

Polls show the nation is ready to relegate Yushchenko to the political scrap heap, with Ukrainians concluding that their lives and the nation’s fate have not improved during his four years of leadership.

If Yushchenko is to win re-election, he must rebound from near-zero approval ratings in the 10 months or so before the new vote.

Yushchenko’s spectacular fall is all the more dramatic considering that he was propelled to the highest echelon of power by the 2004 Orange Revolution.

The peaceful, pro-democracy uprising was backed by millions of Ukrainians who had hoped he was capable of ending the rampant corruption and low living standards that characterized the gangster-like Leonid Kuchma era before him.

Instead, Yushchenko has made little headway against corruption – raising questions among the most ardent critics about whether he ever intended to punish the lawlessness of the Kuchma era.

As for living standards, despite the strong credit-driven growth for most of the decade, the nation appears headed for a long and nasty recession that is exposing its over-reliance on commodity exports.

The Kyiv Post sought out people who were once close to Yushchenko for an assessment of what went wrong. Some talked openly; others not for attribution.

Many say they are baffled by his ineffective leadership, and what they regard as his delusional hopes of winning re-election whenever it is held, in late 2009 or early 2010.

“We can’t talk to him anymore … he seems to have lost his mind,” said one former ally, a Verkhovna Rada member with Our Ukraine’s parliamentary faction. While he didn’t want his name published, his comment reflected a pervasive sentiment among former allies.

“He thinks he has a chance to get re-elected,” this lawmaker continued. “We don’t understand what is going on in his head and why he sticks with all these self-destructive strategies.”

Oleh Rybachuk, a longtime friend and chief of staff to Yushchenko in 2005, said he saw problems almost from the start. After assuming the presidency, Rybachuk said, Yushchenko put more energy into destroying or containing political enemies than keeping his team together and making good on his promises to clean up Kuchma-era corruption.

“Earlier, the President’s ideas were clear to people and were supported by them,” Rybachuk said. Now, he said, the president’s messages are muddled and contradictory.

Stability needed to adopt an economic agenda to move Ukraine closer to Western integration and further from Soviet-era realities has been largely absent. Personal rivalries have, instead, supplanted policy goals.

Rather than brokering pragmatic compromises with foes such as Victor Yanukovych, head of the largest faction in parliament, and one-time allies such as Prime Minister Yulia Tymoshenko, backstabbing and distrust have frozen the nation’s progress.

Escalating hostility with Russia also had unintended consequences. Yushchenko’s ambitious drive for NATO membership and recognition of Holodomor as Soviet genocide helped fuel personal animosity between the Ukrainian president and Kremlin leaders.

The effect has been to blunt, not to advance, Ukraine’s hopes for joining the NATO military alliance and becoming part of the European Union.

The West has taken notice of the chaos and many leaders don’t seem to take Ukraine as seriously as they did in the wake of the Orange Revolution.

Now, given the option between placating Russia’s desire for a privileged “sphere of influence” on its borders and deepening support for Ukraine’s dysfunctional government, Western powers – by action, if not by words – have opted to antagonize Kremlin autocrats as little as possible. But Moscow alone is not to blame for Yushchenko’s troubles.

Ukrainians are fed up. The last public opinion poll by the Democratic Initiatives and Ukrainian Sociology Service indicated only 2.4 percent would vote for Yushchenko if the elections took place this month.

It’s a stark contrast from the 15 million voters (52 percent) who not only cast their ballots for Yushchenko on Dec. 26, 2004, but who also made the do-over election possible by blunting election fraud with their bodies on Kyiv’s freezing streets.

Rybachuk says the president is not the same man who electrified Orange Revolution crowds on Maidan Nezalezhnosti (Independence Square) and successfully rallied them to overturn election fraud.

“What is happening right now is irrational,” said Rybachuk, who started working with Yushchenko when the president headed the National Bank of Ukraine through much of the 1990s. “It seems to me that Yushchenko has lost touch with reality - like the rest of main political players.”

Yushchenko’s tenure as central bank head catapulted him into a favorable national political spotlight. He is credited with introducing Ukraine’s currency, the hryvnia, in 1996.

By keeping it stable, he injected a rare dose of predictability into Ukraine’s economy. And this helped Ukraine to rebound from the economic despair that accompanied the 1991 collapse of the Soviet Union.

A stable currency also helped fuel economic growth which, in turn, propelled Yushchenko to the prime minister’s post in 1999. His government served through 2001 and is widely viewed as Ukraine’s best so far.

During his era, privatization shifted into high gear and his deputy premier, Tymoshenko, was credited with cleaning up the corrupt electricity sector.

Public coffers filled up, allowing the government to pay off long-overdue wages and boost pensions. Citizens took note and Yushchenko’s popularity surged. But there were notable exceptions to the bandwagon.

Those whose financial interests suffered from the anti-corruption crusade were not amused. And some believe that Kuchma, whom Yushchenko once regarded as his political mentor, was so jealous of his protégé’s rising popularity that the former president engineered Yushchenko’s sacking by parliament.

After becoming president in 2005, Yushchenko surprised many with behavior more reminiscent of Kuchma than of the anti-corruption “clean team” of Yushchenko and sidekick Tymoshenko.

“Yushchenko chose a clear strategy of trying to flunk governments” to enhance his own ratings, said Oleksiy Haran, a political science professor at National University Kyiv Mohyla Academy. But it backfired as a political strategy, partly because of the president’s personality. “His strengths were in finding compromise and achieving results,” Rybachuk said. “He was never any good in dog fights.”

Perhaps to compensate for these weaknesses, Yushchenko replaced Rybachuk as chief of staff in 2006 with hardliner Victor Baloha, a political pit bull and former confidant of Victor Medvedchuk, Kuchma’s chief of staff.

Rybachuk believes Baloha’s appointment was one of the president’s major mistakes. Leonid Kravchuk, the first president of independent Ukraine, who served from 1991-1994, agrees: “Instead of working with foes to achieve results, Yushchenko sunk to the low depths by getting tangled in relentless political wrestling matches.”

If Yushchenko is, indeed, finished politically, the lesson for future political leaders may be this: Unproductive political mayhem annoys voters. The relentless attacks from Yushchenko’s administration have fueled nihilism, disrespect for power and the sense that “nobody is responsible for anything,” Kravchuk said.

One recent example of Yushchenko’s perplexing behavior is his criticism of the Jan. 19 gas agreement that Tymoshenko negotiated with her Russian counterpart, Vladimir Putin. It ended Gazprom’s three-week shutoff of gas to Ukraine, and nearly two-week interruption of supplies to Europe.

Unable or unwilling to negotiate personally with the Kremlin, Yushchenko reacted to the deal by criticizing Tymoshenko for not negotiating a lower price.

Yushchenko threatened to revoke the deal through his pliant National Security Council, only to back down following international pressure.

Rybachuk, among other Yushchenko allies, thought the deal deserved presidential praise instead of criticism.

The ex-presidential chief of staff said that Tymoshenko appeared to have succeeded where others failed. She curbed corruption in the gas trade by introducing direct bilateral sales between Russia and Ukraine, a step that will eliminate cancerous intermediaries that “made more than one generation of Ukrainian politicians and businessmen rich,” Rybachuk said.

Despite his current and persistent unpopularity, Yushchenko will be credited with lasting achievements, even if he leaves office next year.

Ukraine has made tremendous strides in democracy under Yushchenko, including holding two parliamentary elections internationally recognized as democratic.

The news media also became freer to conduct independent journalism and to criticize government authorities. Under Yushchenko, Ukraine also deepened contacts with the West.

“I am sure historians will better gauge Yushchenko’s achievements in 20 years,” said Vadym Karasyov, a political analyst and adviser to the president.

But some think his priorities were misplaced, contributing to his undoing. They say he spent too much time pushing greater use of the Ukrainian language, trying to unite Ukraine’s Orthodox Church and building international recognition of the 1932-33 Holodomor as Soviet genocide.

“He only cares for insignificant things and it looks like he doesn’t notice Ukraine’s larger crises,” said Nina Tymkovych, a Kyiv resident. “The president has no policy to rescue Ukraine. We have a chance to be saved if we change presidents.”

Oles Doniy is equally disappointed. A lawmaker with the once strongly pro-presidential Our Ukraine-People’s Self Defense grouping, he is among 23 lawmakers in the bloc who are distancing themselves from the president.

Doniy also delivered what could prove to be the president’s political epitaph: “Unfortunately, he turned out to be an ineffective president driven by irrelevant agendas and useless political battles.”

Source: Kyiv Post

Putin Undermines Gazprom As Ukraine Pact Freezes Out Yushchenko

MOSCOW, Russia -- As Russia and Ukraine reached a mid- January accord in their long-running natural-gas dispute, Russian Prime Minister Vladimir Putin had at least one thing to cheer him up.

Russian Prime Minister Vladimir Putin.
He had frozen his pro-Western nemesis, Ukrainian President Viktor Yushchenko, out of the negotiations, reaching an agreement instead with Ukrainian Prime Minister Yulia Timoshenko, who had shuttled back and forth to Moscow during the crisis.

At home, this left Yushchenko looking ineffectual: One opinion poll put his approval rating at 3.4 percent even before the settlement. Yushchenko is a Russia basher; Timoshenko isn’t. Her poll numbers are rising, and she has voiced a desire to run for Yushchenko’s job in the next elections, which could take place at year’s end.

During Putin’s eight year presidency, which ended in May 2008, he made it his goal to strengthen Russia’s position as the dominant European gas supplier while becoming a global energy power with sway over energy supplies and policies far and wide.

To that end, the Ukraine gambit is part of Putin’s ongoing strategy to divide Europe and thwart the U.S., which is concerned that Russia intends to exploit its energy dominance to influence European politics.

Rough Test Ahead

Marginalizing Yushchenko was one tactical Putin victory; that the West could do little more than issue statements and grumble at Russian temerity was another. The European Union’s helplessness was reminiscent of its inaction during Russia’s invasion of Georgia in August.

Putin’s gamesmanship is in for a rougher test as oil prices drop and the Russian and global economies slump. He also must deal with a blow to the credibility of OAO Gazprom, Russia’s gas monopoly, which he employed as his proxy in the Ukraine fight.

Still, Putin plows onward. He has used the Ukraine crisis as an opportunity to flog two new pipelines, known as Nord Stream and South Stream, as a way to break what he has characterized as Ukraine’s monopoly on European gas deliveries.

The new pipelines would also increase Russia’s export capacity to Europe by 50 percent from current volumes; Russia now supplies about 25 percent of Europe’s gas.

“You’ve got to give Putin credit, he’s outplayed the West,” says Chuck Wald, former deputy commander of U.S. armed forces in Europe. “It’s not as easy now without $100 oil, but he’s driving the issues.”

Huge Losses

Two developments could yet derail or at least stall Russia’s energy ambitions. One is the 70 percent drop in oil prices, which peaked at $147 a barrel in July 2008 before falling to a low of under $34 a barrel on Dec. 19. The other is that Europe, jarred by the Russian gas cutoff, is now seriously thinking it needs to diversify its energy supplies.

“We must not allow ourselves to be placed in this position in the future,” said European Commission President Jose Barroso as gas started flowing again through Ukraine’s Soviet-era pipelines on Jan. 20.

Putin’s actions also caused Gazprom to bleed. By the company’s own estimates, the Ukrainian dispute cost it more than $2 billion in lost revenue.

“Was this agreement worth such efforts, such costs?” Putin said in a Jan. 25 interview with Bloomberg Television. “I think yes, because at some point you need to move to normal civilized market relations.”

‘Political Tool’

Those losses were piling up at a time when Gazprom was saddled with 1.1 trillion ($31.4 billion) in debt; that and sharply declining revenue could weaken the company’s ability to raise outside capital as global credit markets dry up.

“De facto, Gazprom is being used as a political tool,” says James Beadle, chief investment strategist at Pilgrim Asset Management, an investment fund in Moscow. “It’s not functioning as a corporate enterprise, putting business and reputation first.”

Other casualties could include the Nord Stream project, estimated to cost 7.4 billion euros ($9.6 billion) and scheduled to go online in 2011, and South Stream, projected to cost about $20 billion and slated for completion in 2013. “The question is, where is Gazprom going to get all the financing?” says Keith Smith, an energy analyst at the Center for Strategic and International Studies in Washington.

He contends that the projects are primarily political, as it’s prohibitively expensive to find and develop the Arctic fields that hold the gas with which Russia plans to fill the pipelines.

Gazprom’s position as a natural-gas provider isn’t going to shield it from falling oil prices -- European gas prices are pegged to the oil market, lagging crude prices by six to nine months.

Optimistic Projection

Not everyone is that pessimistic. Nord Stream, a 1,200- kilometer (750 mile) route under the Baltic Sea, would cut out transit countries by linking Russia directly to Germany. “They’re going under the assumption that expanded sales will pay for Nord Stream,” says Ronald Smith, chief strategist at Moscow based Alfa Bank. “It will justify itself, even at $40 oil.”

South Stream, on the other hand, a 900-kilometer pipeline under the Black Sea that would link Russia to Bulgaria, is less realistic, he says -- and not just because of its price tag.

Should Europe get serious about importing more liquefied natural-gas and relying more on nuclear energy, demand for piped gas could stagnate, he says. Russia may find it difficult to keep on track many of the long-planned projects necessary to replace declining production, much less undertake ambitious new ones.

Domestic crude output fell for the first time in a decade last year, declining to 488 million tons from 491 million in 2007.

Many of the fields brought online by the last wave of Soviet investment three decades ago are drying up, forcing producers to explore in ever more remote regions in Russia’s Arctic and eastern Siberia.

Cold Comfort

One example is Gazprom’s Shtokman field -- an Arctic offshore project with enough reserves to meet world gas demand for more than a year. The field is financially feasible at a per barrel oil price of $50-$60, according to project chief Yury Komarov.

Delays to the development, projected to provide 11 percent of Gazprom’s gas output by 2020, could also affect exports to Europe, since part of Shtokman’s gas is expected to fill the proposed Nord Stream pipeline.

Merrill Lynch & Co., which had originally forecast 2009 average prices at $90 a barrel, cut that to $50 a barrel in November. Finam Investment Co. of Moscow estimates that 2009 oil prices will average $52 a barrel, while its “pessimistic” scenario projects $37 a barrel oil.

Extraction taxes and export duties on oil and gas provide almost half of Russia’s revenue. Russia’s Finance Ministry, in one scenario projecting Russia’s Urals export blend to average $32 a barrel this year, is forecasting a 2009 deficit of 4 trillion rubles, or about $111 billion -- Russia’s first shortfall in a decade.

Staying the Course

Gazprom insists that despite a looming recession, dropping oil prices and the global credit squeeze, its energy plans are going forward. “All of our projects in production, distribution and transportation will be realized regardless of any difficulties,” Alexander Medvedev, Gazprom’s deputy chief executive officer, said at a January press conference.

Western energy companies, desperate to get in on Russia’s still considerable untapped oil and gas reserves, may bail Russia out as they have in the past. “Russia is the biggest prize left on the planet for international energy majors,” says Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow. “If they have to secure their position by shouldering a disproportionate share of the financing, history shows they will do it.”

For example, France’s Total SA and Norway’s StatoilHydro ASA are already partners in Shtokman, while Royal Dutch Shell Plc and ConocoPhillips may be roped into developing the isolated Arctic Yamal peninsula.

Gazprom plans to build Nord Stream in partnership with German energy companies E.ON AG and BASF AG; South Stream is proposed as a joint venture with Italy’s Eni SpA.

Putin’s Irritation

On the surface, the latest Ukrainian dispute, which erupted on Jan. 1, was about Gazprom’s attempt to discontinue selling gas to Ukraine at a discount and start charging market prices. The political subtext was Putin’s irritation that Yushchenko is seeking membership in the European Union and the North Atlantic Treaty Organization.

The U.S., at least vicariously, got dragged into the Ukrainian fray. At the height of the dispute, Gazprom’s Medvedev suggested that Washington was behind Ukrainian obstinacy. “It looks like they are dancing to music which is being orchestrated not in Kiev but outside the country,” he said, referring to a U.S. Ukraine strategic partnership charter signed in Washington on Dec. 19.

The agreement, similar to one Washington reached later with Georgia, contained a clause saying the U.S. would help Ukraine refurbish its gas pipeline network.

U.S. Skepticism

The American response to Russian criticism was a mid-January statement from the U.S. Embassy in Moscow that said, “We hope Russia will do its part to end this dispute, resume and maintain gas supplies and avoid similar crises in the future.”

That the U.S. is wary of a Russian stranglehold on European gas supplies is no secret. In May 2006, four months after Russia cut off gas to Ukraine the first time, then U.S. Vice President Dick Cheney, on a visit to Lithuania, scolded Russia by declaring “no legitimate interest is served when oil and gas become tools of intimidation or blackmail.”

Cheney toured former Soviet republics voicing U.S. support for a proposed “southern energy corridor” that would bring Caspian Sea energy to Europe, bypassing Russia.

The key to the corridor is a European project that was backed by the administration of former U.S. President George W. Bush. Nabucco, named by its Vienna-based consortium for the opera by Giuseppe Verdi, is a $10 billion, 3,000-kilometer pipeline stretching from eastern Turkey to Austria that’s designed to bring gas from Central Asia, Egypt or the Middle East.

Russia Strikes Back

“What happened in recent years in Ukraine is the result, to a significant extent, of the activities of the previous U.S. administration and the European Union, which supported it,” says Putin.

Annoyed with perceived U.S. meddling in Russia’s backyard, Putin journeyed to Central Asia in May 2007. He coaxed Kazakhstan and Turkmenistan -- two logical suppliers to Nabucco -- to increase gas exports to Russia instead of throwing in their lot with the Europeans.

A month later, Gazprom announced its South Stream plans, and Putin courted leaders in Hungary and Bulgaria, both partners in Nabucco, to join South Stream instead.

“South Stream is a Trojan horse to stop Nabucco,” says Keith Smith, the Washington based energy analyst.

‘One Goal’

The Russians bristle at accusations that the pipelines are political tools. “Our relations with our partners have only one goal: to develop business from oil and gas extraction to refining and power generation,” Gazprom’s Medvedev says.

U.S. policy may change little with the Obama administration. In June 2008, Joe Biden, just before he became Barack Obama’s running mate, spoke at Senate hearings on Russia’s energy intentions.

“No wonder the president and prime minister of Russia spend more time running Gazprom than they do running the country,” Biden said. “They have shown that they are willing to use their dominance of both ends of most existing pipelines to extract not just economic deals but, increasingly, political influence.” Gazprom has been the engine in driving Putin’s energy goals and creating Russia’s new wealth.

In 2007, Medvedev first laid out Gazprom’s vision to become the world’s largest company, with an eventual market value of $1 trillion. And as oil prices climbed to unprecedented heights in June, CEO Alexei Miller predicted that a barrel of crude would soon hit $250.

Radical Adjustments

The energy landscape has changed radically since then. Gazprom, amid crashing revenues, has to come up with $10.6 billion in debt payments by the end of June. Its share price by mid January had tumbled more than 60 percent since July, knocking the company from its perch as the world’s third largest, with a market cap of $366 billion on May 16, to 51st on Feb. 3, according to data compiled by Bloomberg.

All of this is happening when other segments of the Russian economy are faring no better than the country’s energy industry. The Micex Stock Exchange has also cratered, declining almost 60 percent since its peak in May, when oil was riding above $130 a barrel.

The ruble -- once touted by Putin as a reserve currency of the future -- has gone wobbly. It sank to record lows against the dollar, falling to 36 rubles per dollar and losing more than a third in value from August. That has forced the government to burn through more than $200 billion of reserves since August in an effort to buttress the currency.

Beleaguered Oligarchs

Russia’s claim to be the world’s hottest billionaire factory has also taken a battering. According to Bloomberg data, a clutch of oligarchs, including Roman Abramovich, who is an owner of steelmaker Evraz Group SA, and Oleg Deripaska, who runs Basic Element, an investment concern with holdings in energy, financial services and manufacturing, watched their asset values shrivel by $230 billion in the five months from May to October 2008.

Some wonder if Putin has overplayed his hand. “Putin’s energy doctrine is in danger,” says Mikhail Korchemkin, director of East European Gas Analysis, a consulting firm in Malvern, Pennsylvania. “It doesn’t work in bad times.”

Putin, a former KGB agent, is acutely aware of the correlation between cheap oil and economic decline. Sub-$19-a- barrel oil undermined Mikhail Gorbachev’s efforts to remake socialism and Boris Yeltsin’s early economic reforms.

A Gas OPEC?

Putin is counting on increased political clout and diversification to spare the new Russia. The country already belongs to a once ineffectual organization called the Gas Exporting Countries Forum, which includes the likes of Iran and Venezuela.

Putin has said he wants to energize the group to coordinate investment and output -- similar, critics worry, to the Organization of Petroleum Exporting Countries.

And he is already looking far beyond sales to European gas markets. Later this year, Russia will deliver its first shipments of liquefied natural-gas -- exportable anywhere by tankers -- to Japan and Korea.

Source: Bloomberg

Mystery Moscow Posters Mock Ukraine's Pro-US Leader

MOSCOW, Russia -- Mysterious posters advertising a traditional Ukrainian delicacy have appeared on the walls of the Moscow undergound in an apparent smear campaign against Ukraine's pro-Western leader.

Ukrainian salo
Styled after Andy Warhol's iconic Campbell's Soup canvasses, the posters depict six cans displaying a U.S. flag and the words "American Salo" written on them.

Salo is a traditional Ukrainian dish of pure pig fat, highly prized across the former Soviet Union.

Each poster shows six cans offering different varieties of the product: " Classic", "Chocolate", "Spicy" and "To go with the borsch" (a traditional Ukrainian beet soup).

The posters do not give any other information except a Web site address of the movement that has designed them.

The movement, "Creative Warriors" said on its Web site that the aim of the campaign is to "foment mistrust against (Ukrainian President Viktor) Yushchenko."

"Salo is an unofficial symbol of Ukraine all over the world," the movement said. "Just as the American Salo is impossible, so the American Ukraine is impossible too."

Up to nine million people use the Moscow underground on a busy weekday.

Yushchenko was swept to power in the 2004 Orange revolution on pledges to align his country with the West, to the chagrin of the Kremlin.

Mikhail Kovalyov, coordinator of the movement, insisted, however, it was mostly a commercial project aimed at advertising the canned salo that would soon hit stores in Ukraine.

Kovalyov told AFP his movement had been asked to develop a "creative concept" by a "certain third party" and it did it for free.

But Natalia Orekhova, a spokeswoman for Olymp, an agency which has a contract to place advertising on the Moscow metro, said the posters didn't advertise any specific product.

A spokesman for the Moscow underground declined to comment on the posters, saying it was up to authorities to establish whether they were ethical.

Veteran Russian ambassador to Kiev Viktor Chernomyrdin pledged on Monday that Moscow wouldn't meddle in Ukraine's domestic affairs and take sides during the presidential vote due in late 2009 or early 2010.

Source: AFP

UEFA Delegation In Ukraine To Inspect Euro 2012 Preparations

KIEV, Ukraine -- A high-powered delegation from UEFA arrived in Ukraine on Monday to inspect the former Soviet republic's preparations to co-host the Euro 2012 football championship.

UEFA General Secretary David Taylor.
The team led by UEFA General Secretary David Taylor was scheduled to tour three of the four Ukrainian cities set to be game sites, and two alternate game venues as well, during the four-day visit.

Euro 2012 director Martin Kallen and the tournament's commercial director Phillipe Margraff also were members of the traveling panel.

Hryhory Surkis chairman of the Football Federation of Ukraine (FFU) would accompany the UEFA group, according to an FFU statement.

The inspectors were planning to visit stadiums, airports, train stations, hotels, and planned fan zone sites in the primary game host cities Kiev, Dnipropetrovsk, and Lviv, and the alternate game host cities Kharkhiv and Odessa.

Meetings between the European inspectors and local politicians also were scheduled, the Interfax news agency reported.

Ukraine and Poland in April 2007 were named co-hosts for the upcoming European footballing championship.

Ukraine has struggled to ramp up for its share of the high-profile sports event, with delays in overhauling an existing stadium in Kiev, and beginning construction of new stadium in Lviv, among the highest-profile of Ukraine's difficulties.

Other Ukrainian shortfalls identified by UEFA and FFU officials alike include a transportation infrastructure well below international standards, and insufficient hotels for the up to one million fans expected to attend the Euro 2012 tournament.

Source: DPA

Billionaire Firtash Proposes Gas Group For Russia, Ukraine, EU

KIEV, Ukraine -- Ukraine should set up a joint venture with Russia’s OAO Gazprom and European companies including E.ON AG and GDF Suez SA to guarantee gas supplies after last month’s dispute, according to Ukrainian billionaire Dmitry Firtash.

Ukrainian billionaire Dmitry Firtash.
Russian, Ukrainian and European investors would each own one third of the company, Firtash said in a Bloomberg Television interview on Jan. 31 in Kiev. He controls 45 percent of Swiss- registered RosUkrEnergo AG, the sole importer of gas to Ukraine since 2006, while his business partner has 5 percent and Gazprom 50 percent.

Gas supplies from Russia via Ukraine to Europe halted for almost two weeks last month amid a spat over prices and transit fees. Russian Prime Minister Vladimir Putin said under an accord signed by the two governments on Jan. 19, that middlemen in the trade will be eliminated.

“I am convinced that such a consortium should be set up,” Firtash said. “Taking into account that Russian gas goes to Europe, companies such as Germany’s E.ON, Gaz de France and Wingas should be interested.”

Under Firtash’s proposal, Ukraine’s contribution to the venture would be its pipelines, which transport one quarter of the European Union’s annual gas consumption, and which he said may be worth about $20 billion. He said Gazprom should pledge gas fields producing 50 billion cubic meters a year over 25 years, while European companies should invest cash.

Gas Assets

Sergei Kupriyanov, a spokesman for Gazprom, could not be reached for immediate comment when called on his mobile phone outside office hours yesterday. E.ON spokesman Jens Schreiber said he couldn’t comment on its Ruhrgas unit, while Ruhrgas spokesman Helmut Roloff didn’t respond to a message left on his cell phone. GDF Suez spokeswoman Armelle Dillar declined to comment.

Firtash, 43, has a net worth estimated at $3.8 billion, according to Polish magazine Wprost, and has businesses mainly in energy, chemicals and pipeline construction. He consolidated his assets in holding company Group Dmitry Firtash, or GDF, in June 2007.

He made his fortune over the past 15 years, moving to Moscow in the early 1990s and securing his first gas deal with Turkmenistan in 1993 in exchange for food supplies. RosUkrEnergo was set up in 2004 by “top Russian and Ukrainian politicians” to import Central Asian gas into Ukraine, according to its Web site, and has been Ukraine’s monopoly gas supplier since 2006.

Gas Flows

Normal gas flows to parts of Eastern Europe still have not been restored in full since early January, following the disruption which caused shortages in 20 EU countries.

Timoshenko said Ukraine purchased 11 billion cubic meters of gas, which belonged to RosUkrEnergo and is in Ukrainian storage facilities, for $153.90 per 1,000 cubic meters following the accord with Russia. Firtash is challenging that, saying RosUkrEnergo made no sale to the government and the gas is contracted for delivery to Poland, Romania and Hungary.

Polskie Gornictwo Naftowe i Gazownictwo SA, Poland’s gas monopoly, has reported receiving only 76 percent of volumes ordered from Russia and other former Soviet countries because of the dispute.

Second Dispute

RosUkrEnergo has filed lawsuits in courts in Switzerland and Sweden claiming the gas back, according to Firtash, and is seeking several hundred million dollars in compensation. In the meantime, it expects to restore full supplies to its consumers in Eastern Europe “within the next two to three weeks,” and is in talks to borrow gas from Gazprom, he said.

“Our gas would allow Timoshenko’s government to reduce prices for Ukraine’s domestic consumption by about $40 per 1,000 cubic meters, to average between $240 and $250 per 1,000 cubic meters this year,” Firtash said. “Ukraine is unable to pay that high price.”

Naftogaz spokesmen Valentyn Zemlyanskyi and Ilya Savvin could not immediately be reached on their mobile phones outside business hours yesterday.

The third investor in RosUkrEnergo, alongside Gazprom and Firtash, is Ivan Fursin, a long-time business partner of Firtash, who controls 5 percent of the trading company.

Gas Partnership

Ukraine depends on imported fuel for 70 percent of its needs, and last month’s dispute with Russia was the second in three years. In January 2006 Gazprom’s gas shipments to Ukraine were cut for three days, leading to shortages in EU countries, including Hungary and Austria.

Firtash’s proposal for a joint venture involving European companies echoes an idea which was under discussion during the last month’s dispute.

Putin met representatives of GDF Suez, E.ON Ruhrgas AG and Eni SpA in Berlin on Jan. 16 to persuade them to form a group that would buy gas needed to permit Ukraine’s pipeline system to operate.

Eni at that time backed Putin’s initiative, which was designed to meet short-term conditions demanded by Naftogaz and Gazprom to complete bilateral accords. Russian Deputy Prime Minister Igor Sechin said E.ON Ruhrgas, BASF SE’s Wingas and GDF Suez were also backing the idea of a gas partnership, while E.ON Ruhrgas, Germany’s biggest gas provider, said more talks were needed.

Chemical Companies

The conclusion of an accord signed between Russia and Ukraine three days later made an interim solution unnecessary.

Firtash, whose comments this weekend revive the idea in a longer-term form, also owns companies including Hungarian gas trader Emfesz Kft, Vienna-registered Zangas Hoch-und Tiefbau GmbH, which repairs and builds pipelines, and OSTCHEM Holding AG, which controls chemical companies, according to GDF’s Web site. He additionally has real estate assets.

Firtash said Nov. 7 he plans also to acquire a majority stake in VAT Bank Nadra, Ukraine’s seventh-biggest bank by assets, to diversify and expand his business.

Firtash was born in the village of Bohdanivka, in western Ukraine, the only child of a driving instructor and an accountant at a local sugar beet processing plant. He graduated from Donetsk technical school in 1984, served in the army and then worked as a fireman in Chernivtsi before moving to Moscow and sealing his first gas deal.

Source: Bloomberg

Russia President: Urges Quick Work Making Pipelines To Bypass Ukraine

SOFIA, Bulgaria -- Russian President Dmitry Medvedev called for the speedy completion of two new gas pipelines that bypass Ukraine, in an interview with Bulgarian national television Friday.

Russian President Dmitry Medvedev.
"The new energy routes such as the South Stream and the Nord Stream pipelines have to be speeded up," Medvedev said during an interview from his Meiendorf Castle official residence.

"If we can diversify supplies, Europe will depend less on the whims of the political regime in one country or another," he said according to the BNT channel.

Medvedev reiterated Russia's position that it wasn't responsible for the two- week halt in deliveries of natural gas to Europe in January amid a pricing row with Ukraine.

"Judicial responsibility has to be brought against the party that is really to blame for not respecting its contract," he said, adding that he wanted to see the creation of an "international legal control mechanism."

On Wednesday, Russian Prime Minister Vladimir Putin urged the World Economic Forum in Davos to set up an international legal framework for energy security, saying it could prove as important as the 1951 European Coal and Steel Community accord, which led to the European Union.

Medvedev also said Friday Russia didn't need to sign its delivery gas contracts via intermediary companies.

"We do not need any intermediaries if they...hike up the price of gas. We want transparent and direct contracts," he added.

Medvedev is expected to discuss energy issues with his Bulgarian counterpart Georgy Parvanov during the latter's visit to Moscow on Wednesday.

The two men will discuss progress on the South Stream pipeline project to channel Russian gas to Europe under the Black Sea and the Burgas-Alexandrupolis oil pipeline project to bring Russian oil from the Black Sea to the Greek port of Alexandrupolis on the Aegean.

Nord Stream is a gas pipeline to link Russia and the European Union via the Baltic Sea.

Source: AFP

Priest Uncovers Ukraine's 'Holocaust By Bullets'

NEW York, NY -- The Holocaust has a landscape engraved in the mind's eye: barbed-wire fences, gas chambers, furnaces. Less known is the "Holocaust by Bullets," in which over 2 million Jews were gunned down in towns and villages across Ukraine, Belarus and Russia.

French Catholic priest, Patrick Desbois.
Their part in the Nazis' Final Solution has been under-researched, their bodies left unidentified in unmarked mass graves.

"Shoah," French filmmaker Claude Lanzmann's documentary, stands as the 20th century's epic visual record of the Holocaust.

Now another Frenchman, a Catholic priest named Patrick Desbois, is filling in a different part of the picture.

Desbois says he has interviewed more than 800 eyewitnesses and pinpointed hundreds of mass graves strewn around dusty fields in the former Soviet Union. The result is a book, "The Holocaust by Bullets," and an exhibition through March 15 at New York's Museum of Jewish Heritage.

Brought to Ukraine by a twist of fate, Desbois has spent seven years trying to document the truth, honor the dead, relieve witnesses of their pain and guilt and prevent future acts of genocide.

Some 1.4 million of Soviet Ukraine's 2.4 million Jews were executed, starved to death or died of disease during the war. Another 550,000-650,000 Soviet Jews were killed in Belarus and up to 140,000 in Russia, according to the U.S. Holocaust Memorial Museum. Most of the victims were women, children and the elderly.

Begun after Germany invaded the Soviet Union in June 1941, the slaughter by bullets was the opening phase of what became the Nazis' Final Solution with its factories of death operating in Auschwitz and other camps, all in Nazi-occupied Poland.

Desbois devotes his 233-page book, published by Palgrave Macmillan in August, to his work in Ukraine, where he says he has uncovered over 800 mass extermination sites, more than two-thirds of them previously unknown.

Since the book was written, he has expanded his search for mass graves into Belarus and plans to look early this year in areas of Russia that were occupied by the Germans.

Sometimes bursting into tears, old men and women from poor Ukrainian villages recount to Desbois how women, children and elders were marched or carted in from neighboring towns to be shot, burned to death or buried alive by German troops, Romanian forces, squads of local Ukrainian collaborators and local ethnic German volunteers.

Even then, it was methodical, Desbois' research shows. First, Germans would arrive in a town or village and gather intelligence on how best to transport the victims to extermination sites, where to execute them and how to dispose of their bodies.

"It was done as systematically as it was done elsewhere," said John Paul Himka, an expert on the Holocaust and Ukraine at the University of Alberta in Canada, who is not connected to Desbois' work. "You can read as they're figuring out best way to do this, the best way to shoot ... it's absolutely systematic, no accident here."

Desbois' interviews and grave-hunting tie in to millions of pages of Soviet archives, heightening their credibility, says Paul Shapiro, of the U.S. Holocaust Memorial Museum who wrote the foreword to Desbois' book.

Father Desbois' work is also having an impact on efforts to preserve Holocaust sites. In December, the 26-nation International Task Force on the Holocaust called on European governments to ensure the protection of locations such as the mass graves Desbois is uncovering, according to Shapiro, who helped draft the resolution.

Among Desbois' key findings is the widespread use of local children to help bury the dead, wait on the German soldiers during meals and remove gold teeth and other valuables from the bodies. His work has also yielded evidence that the killings were most frequently carried out in the open, in daylight and in a variety of ways — shooting victims, throwing them alive into bonfires, walling up a group of Jews in a cellar that wasn't opened until 12 years later.

Desbois' witnesses are mostly Orthodox Christian, and he comes to them as a priest, dressed in black and wearing a clerical collar, taking in their pain and trying to ease their suffering. Many have never before talked about their experiences.

In the village of Ternivka, some 200 miles south of Kiev where 2,300 Jews were killed, a frail, elderly woman, who identified herself only as Petrivna, revealed the unbearable task the Nazis imposed on her.

The young schoolgirl saw her Jewish neighbors thrown into a large pit, many still alive and convulsing in agony. Her task was to trample on them barefoot to make space for more. One of those she had to tread on was a classmate.

"You know, we were very poor, we didn't have shoes," Petrivna told Desbois in a single breath, her body twitching in pain, Desbois writes in his book. "You see, it is not easy to walk on bodies."

Desbois, 53, a short, soft-spoken man with dark, thinning hair, says the stories give him nightmares. The most difficult is "to bear the horrors that the witnesses tell me, because often the people are simple, very kind and want to tell me everything," Desbois said in a phone interview while on a trip to western Ukraine.

"You have to be able to listen, to accept, to bear this horror," said Desbois. "I am not here to judge the people's guilt, we are here to know what happened."

Desbois' small team includes a translator, a researcher, a mapping expert, a ballistics specialist and a video and photo crew. He often joins his witnesses in their homes, leaving his shoes outside. He tends to a peasant's cow while the man tells his story.

Desbois has deep personal roots in his project, dating to 2002, when he first visited Ukraine to see the place where his grandfather was interned as a French prisoner in World War II.

When he arrived, the locals told him of a stream of blood that had run from the site where the Jews were executed and of a dismembered woman hanging from a tree after the Nazis threw a grenade in a pit full of people. When he was offered a visit to more villages, he did not hesitate.

"I am in a hurry to find all the bones, to establish the truth and justice so that the world can know what happened and that the Germans never left a tiny village in Ukraine, Belarus and Russia without killing Jews there."

The Holocaust is a divisive topic here because some Ukrainians collaborated with the Nazis. Jewish groups are grateful for Desbois' efforts and lament the lack of government support for his and other Holocaust research and education programs.

"As a Ukrainian citizen and a Ukrainian historian it pains me ... that there is no policy of national remembrance," said Anatoly Podolsky, head of the Ukrainian Center for Holocaust Studies. "We are not responsible for the past but we are responsible for remembering."

Desbois leads a French association, Yahad-In Unum (the Hebrew and Latin words for "together"), which was founded by Catholics and Jews to heal the wounds between the two faiths. He believes that as a Catholic priest talking to Orthodox believers about the killing of their Jewish neighbors his work advances that healing mission.

"The book is meant so that people know ... that a genocide is simply people killing people," Desbois said. "My book is also an act of prevention of future acts of genocide."

Source: Kyiv Post