Ukraine Asks Japan For $5 Billion Dollar Loan

KIEV, Ukraine -- Japan is considering the possibility of granting 5-billion-dollar loan to Ukraine. According to Bogdan Danilishin, the Minister of Economics of Ukraine, this issue was discussed during the talks between Ukraine’s Prime Minister, Japan’s Finance Minister Kaoru Yosano and Japan's Prime Minister Taro Aso.

Ukraine's Prime Minister Yulia Tymoshenko, center left, is welcomed by Japanese officials on her arrival at Tokyo's Haneda Airport, for a two-day visit.
He also said Tymoshenko told Kaoru Yosano that Kiev hopes to deepen economic ties with Japan, which has a competitive edge over high-tech industries and energy conservation areas.

This week Japan is likely to send its experts to Ukraine to define the terms of the loan.

"We have an agreement that this credit can be given on even more favorable conditions than IMF’s conditions," Bogdan Danilishin said.

At the same time Yulia Tymoshenko dismissed reports that the country had taken on a begging role in negotiations with other countries and international organizations amid the current financial crisis.

"I would like to refute statements that Ukraine has taken on the role of a beggar," the premier told journalists on return from a visit to Japan, adding "Ukraine and Japan are building cooperation. There is no begging here."

Ukraine has been hit hard by the global economic crisis with its currency, the hryvnia, depreciating 50% since September.

Kiev received the first installment of $4.5 billion as part of a $16.43 billion IMF loan in November 2008, however, further payments have been delayed over the country's inability to prove to the IMF that Kiev is capable of reducing its budget deficit.

Earlier it was reported that Ukraine had applied to Russia for a $5 billion loan to pay for natural gas deliveries.

Source: Pravda

Russian Diplomat Found Dead In Southern Ukraine

ODESSA, Ukraine -- Russia's vice-consul in Odessa, southern Ukraine, was discovered dead early on Monday, local media said.


"It is true, the man passed away," a diplomatic source told RIA Novosti. "I can't tell you what happened, it is being investigated."

Misto.Odessa.ua, the city's news portal, reported that Igor Tsvetkov, born in 1965, apparently hanged himself in the Russian consulate building in Odessa.

The diplomat's wife and child are reported to have been in an adjoining room when the alleged suicide occurred.

The local police department and the Russian consulate have yet to make an official statement.

Tsvetkov, the vice consul in charge of bilateral cultural cooperation, was also rumored to be responsible for providing support to pro-Russian political parties in Odessa.

This January media in the southern city reported that a briefcase containing official documents was stolen from the official's car.

Source: RIA Novosti

Ukraine Cafe Glorifies Anti-Soviet Fighters

LVIV, Ukraine -- The popular Kryivka (secret place) cafe in the western Ukrainian city of Lviv celebrates the deeds of a wartime anti-Soviet guerrilla group.

A waiter holds a gun as he serves clients in the restaurant "Kryïvka" in Lviv, which celebrates the Ukrainian Insurgents Army.
"Are there Russians or Communists amongst you?" barked the grey bearded man at the entrance, clutching an old sub-machine gun.

The man, dressed as a soldier, offers visitors a glass of honey vodka -- "poison for the Moskals", he cackles -- before leading them to the cafe which seeks to imitate a Ukrainian nationalist hideout.

The controversial Ukrainian Insurgent Army (UPA) are still revered as heroes in western Ukraine for fighting Soviet forces up to the early 1950s in the hope of creating an independent Ukrainian state.

But their detractors accuse them of collaborating with the Nazis and taking part in deadly ethnic cleansing operations against local Polish citizens.

Almost everything in the cafe is a reference to the UPA: the waiters are dressed in khaki, the crockery is metal and wartime weapons and photos adorn the walls.

You can even fire a plastic bullet into the portrait of Soviet wartime leader Joseph Stalin, something Ukraine's First Lady Kateryna Yushchenko lost no time in doing when she visited.

"Before, we had a plaster head of Lenin to fire at. But it was completely destroyed in about two weeks of shooting and we still haven't purchased a new one," said senior waitress Anna Garbar.

The existence of such a restaurant would be unimaginable in the east of Ukraine, where daily life is conducted mostly in Russian rather than Ukrainian and memories of the Soviet Union are fonder.

For centuries part of the Polish Kingdom and then an important town of the Austro-Hungarian Empire, the beauty of Lviv's UNESCO-listed mediaeval centre is in stark contrast to the urban landscapes of most ex-Soviet cities.

The city of Lviv and its region were only annexed into the Soviet Union during World War II and the city has grown into a Ukrainian nationalist stronghold since the country won independence.

After the hopes of the 2004 Orange Revolution that ousted a corrupt old regime from power, political unity remains elusive in Ukraine partly because of the country's linguistic and cultural division.

The divisions show no sign of becoming smaller. This month, the Freedom movement of Oleh Tyahnybok, known for his populist Ukrainian nationalist rhetoric, won a shock victory in local elections in a region neighbouring Lviv.

"Some Russian speakers are scared of coming in, while others try and speak as little as possible," laughs Garbar, who has worked as a waitress at the Kryivka since its opening in August 2007. "But once they see that no-one means them harm they relax," she said.

For the cafe's founder and co-owner Yurko Nazaruk the aim is to "tell the true history about the UPA, which fought for the independence of western Ukraine."

But he emphasises that this is done with a sense of humour and a light touch. "We wanted to stick the myth about our city -- that we kill Russians, that it's illegal to speak Russian in a street -- on its head."

The UPA remains deeply controversial today and not just amongst historians.

Moves by Ukraine's pro-Western President Viktor Yushchenko to rehabilitate its leaders have caused consternation in Moscow, which sees such groups as enemies in the fight against Fascism.

In 2007, Yushchenko bestowed the title of Hero of Ukraine on the group's overall leader Roman Shukhevych, who was killed in 1950 in a shoot-out with Soviet security forces.

Western Ukraine had again been part of Poland in the inter-war period, until Soviet troops ousted Polish forces in 1939. Nazi forces then took over the region two years later.

Formed in 1942, the UPA initially welcomed the arrival of German troops as liberators from Communist oppression although Ukrainian historians insist the group then declared war on the Nazis.

The group fought Soviet forces from its foundation up to the 1950s and is also blamed for killing thousands of Polish civilians in its conflict with the Armia Krajowa (Home Army, AK) non-Communist Polish resistance.

The UPA's hatred of Communism is reflected in the cafe's menu, which includes delicacies like a "grilled KGB agent" or a fish speciality called "drunken Russian".

"We are trying to show history as it is, and in no way do propaganda for Nazism," said the co-owner Nazaruk.

And for most of the satisfied clientele, the cafe's references are more of a joke than anything else. For Vitali Tolstoy, one of the few native Russian speakers in Lviv, it is precisely the place where old enemies should meet.

"We need to sit down at table so that this war finally finishes after so long," said the retired doctor over dinner.

Source: AFP

Extreme Right Gains Ground As Ukraine Falls Into Crisis

MOSCOW, Russia -- Europe's economic crisis has allowed the extreme right in Ukraine to capitalise on the turmoil engulfing the former Soviet republic.

A poisonous feud between President Viktor Yuschenko and Yulia Tymoshenko, the prime minister, has compounded the problems facing Ukraine.
An unexpected regional election victory by a previously marginal ultra-nationalist party is among a string of developments in Ukraine that threaten to fulfil the worst fears of G20 leaders as they gather for their summit in London.

Lacking the protection of European Union membership, Ukraine has few of the safeguards that prevent its Western neighbours from falling into ruin.

A sharply weaker currency, a collapse in exports and an economy expected to contract by at least six per cent this year has forced the country to seek £11 billion from the International Monetary Fund. Even this lifeline is endangered by a poisonous feud between President Viktor Yuschenko and Yulia Tymoshenko, the prime minister.

The two rivals led the Orange Revolution in 2004, before falling out in spectacular style. As Mrs Tymoshenko plots to take Mr Yuschenko's job, ordinary Ukrainians are showing signs of rejecting them both.

On March 15, voters in the Ternopil region of western Ukraine elected a new regional assembly. This was an Orange Revolution bastion, a region that has long sought to embrace the West and shun Russia.

But it is also has Ukraine's highest unemployment. In a crowded field, the previously little-known Freedom Party won 50 of the regional assembly's 120 seats as voters embraced its hard Right leader, Oleg Tyagnibok, who has urged the expulsion of all Jews and Russians from Ukraine.

"The problem is less the popularity of the nationalists than the universal disappointment with mainstream parties," said Viktor Chumak, a political scientist in Ukraine's capital, Kiev. "Voters are sympathising with radicals more and more as a result of the crisis."

So concerned are the authorities with the Ternopil result, which they claim was rigged, that commentators are predicting the presidential election could be postponed. Some commentators even say that the constitution may be changed so that the president is chosen by parliament rather than by the people.

Critics argue that mainstream politicians - both the squabbling Orange Revolution ruling alliance and the equally discredited pro-Russian opposition - only have themselves to blame because of their failure to give a lead in a time of crisis.

As the danger of political radicalism grows, Ukraine is in danger of formal bankruptcy. Oleksandr Suhonyako, the president of the Association of Ukrainian Banks, gave warning that the country could default on its sovereign debt because of political division and ineptitude.

"In a way, the crisis in Ukraine is less an economic one than a political one," he told the Daily Telegraph. "The key political leaders do not understand how to lead the country out of crisis. If the political crisis continues, we could see the worst case scenario. The threat of sovereign default is there."

The country's government debt, at only 20 per cent of GDP, is well below the recognised danger threshold. The main concern is over corporate debt, with fears that banks could collapse, triggering crises in the financial sectors of western European countries like Austria, which is significantly exposed to Ukraine.

Earlier this month, Western diplomats and politicians forced Mr Yuschenko and Mrs Tymoshenko to pledge to work together to fulfill the IMF's conditions for the rescue package.

The prime minister, however, quickly reneged. On the day she pledged to use her parliamentary majority to pass the laws recommended by the IMF, Mrs Tymoshenko instead marshalled her forces to sack the foreign minister, one of the president's most important allies.

The IMF's money is still being withheld.

Source: Telegraph UK

Andrei Shevchenko's International Career With Ukraine Drawing To A Close

LONDON, England -- Old players never die: they just go to Milanello. But while signing for AC Milan seems to have rejuvenated the 33-year-old David Beckham, the 32-year-old Andrei Shevchenko continues to moulder.

Andrei Shevchenko
The Ukraine forward has started just two league games this season, and there are, for the first time, suggestions that his international career may be coming to an end.

Shevchenko was left out of Ukraine's starting line-up for the qualifier against Belarus last September, but that could be explained by the need to have him fresh for the trip to Kazakhstan four days later. For the coach Oleksiy Mykhailychenko to omit him against England would be another matter entirely.

The suspicion is that a place will be found for him, but his snappish response to questioning about his lack of pitch-time suggests he is beginning to feel the pressure.

"Once again these questions!" he said. "As for me, such things have never influenced my play for the national team and I hope that it will be the same this time."

There is justification to his words. He may have managed only nine league goals over the past three seasons, but Shevchenko's form for Ukraine held up remarkably well. When he was finally introduced against Belarus with quarter of an hour remaining, he converted the injury-time penalty that decided the game. He scored again in Almaty the following Wednesday.

"He will score a point against the sceptics who have covered him in dirt," the former national coach Josef Szabo insists, but a lacklustre performance in the 0-0 draw against Croatia in November raised serious doubts.

The issue has been brought into sharper focus by Andriy Voronin's comments after being left on the bench throughout that game that he would have been better off spending the time with his new-born son.

His case has been strengthened by his recent form for the Bundesliga leaders Hertha Berlin, for whom he has scored seven goals in his last seven games.

Liverpool are believed to be willing to accept an offer of €4million to make his loan move permanent. It is unclear, though, whether Hertha could match his present salary of €4m.

Leaving out Shevchenko would not only signal the end of the frontline career of the greatest player of an independent Ukraine, but it would also sever the final tie with the era of Valeriy Lobanovskyi.

Shevchenko is the last survivor of the great final generation of the state-funded academies that also included Sergei Rebrov and Oleh Luzhny.

Mykhailychenko, meanwhile, played for Lobanovskyi with Dynamo Kyiv and the USSR, served as his assistant as Dynamo and succeeded him on his death in 2002.

The two league championships he subsequently won were seen almost as posthumous titles for Lobanovskyi, and as soon as things went wrong, of course, it was seen as his fault for steering away from the Lobanovskyian path.

Ukraine is beginning to move on, and the fruits of the new club academies are starting to emerge. Six of the squad that arrived in St Albans on Wednesday were part of the Ukraine squad that reached the final of the European Under-21 Championship in 2006.

Shakhtar Donetsk's Dmytro Chyhrynsky is established at centre-back, and only injury denies the Dynamo Kyiv forward Artem Kravets his place in the squad. For now, though, Mykhailychenko will probably maintain the link with the past.

Given the position of the Dynamo Kyiv playmaker Oleksandr Aliev seems secure, that means Mykhailychenko either making a direct choice between Shevchenko and Voronin, or abandoning the lone striker system he would surely prefer.

"Shevchenko has great experience, a great desire to play," he said. "It will be much easier for the young players we are bringing in to develop if he is alongside them."

Shevchenko certainly seems to expect to be playing, and is relishing the prospect of a first outing at Wembley, having missed Chelsea's victory over Manchester United in the 2007 FA Cup final.

"A player who dreams of his best match should dream of doing it at Wembley," he said.

"The atmosphere is really impressive and England are one of the best teams in the world. They have very strong players, real stars, and therefore we must meet them with collective play and commitment. Everybody has to play not at 100 per cent but at 150 per cent of their ability."

The question, though, is really what percentage of his past ability Shevchenko can muster these days.

Source: Telegraph UK

Grim Ending To Ukraine's 'Orange' Fairy Tale

KIEV, Ukraine -- For thousands of jubilant Ukrainians crammed into Kiev's main square on Jan. 23, 2005, a duo of pro-Western politicians were a prince and princess ready to whisk them to a magic land of EU membership and prosperity.

Protesters rally around a Vladimir Lenin monument, seen in the background, in central Donetsk, Ukraine, on Friday. About 30,000 activists from the opposition Party of Regions waved blue flags and chanted 'Crisis Stop!' and 'Down with the Authorities!'' Opposition activists around the country are holding anti-government protests, demanding early elections amid a worsening financial crisis.
Now with the so-called Orange Revolution that swept the old order from power a distant memory, the tale of Viktor Yushchenko and Yulia Tymoshenko is, like many folk tales, heading for a somewhat macabre end.

A victorious Yushchenko took the acclaim of the crowds that day after finally being inaugurated president after a disputed election. Tymoshenko would a few days later become his prime minister.

But now Ukraine is among the countries worldwide worst hit by the economic crisis and the two leaders have been engaged in a poisonous feud that has made them a laughing stock in the media.

With next presidential elections expected in January, Yushchenko's poll ratings are languishing at less than three percent, possibly making him the most unpopular elected head of state in the world.

"The economic crisis is more serious than in other countries. But there is another factor: the political instability and constant crisis situation," said the director of the Penta political research center Volodymyr Fesenko.

"There is a great disappointment with the existing political leadership."

The vast independence square in central Kiev that was the main arena for 2004's peaceful uprising is now inhabited by the grubby tents of protesters who have been staging a sit-in against the ruling elite over the past four weeks.

"Get Usikh!" reads the Ukrainian-language slogan of one movement daubed on its tents along with a broom. "Clear Out!"

The country's economy is paying for its continued reliance on exports from Soviet-era heavy industry, whose production has slumped by more than 30 percent as global demand slumped for metal and mining products.

Only now have Yushchenko and Tymoshenko agreed to a formal ceasefire in their public battle, a condition set by the International Monetary Fund to give out a US$1.9 billion tranche of a standby loan vital for staving off the risk of default.

The weekly Fokus put the pair on its cover as Obi-Wan Kenobi and Princess Leia from the "Star Wars" films, under the headline "With Whom Will the Force Be?." The Korrespondent meanwhile portrayed the pair as child vagabonds in rags with the headline "The Children of Default."

A twist in the tale?

With the current story ending so badly, the question is what the next chapter will hold for the 46 million inhabitants of Europe's largest country.

Yushchenko seems out of the frame, and the latest poll by the Razumkov center think tank shows his vanquished opponent from 2004, Viktor Yanukovich, leading with 19.5 percent and Tymoshenko second with 17.9 percent.

The charismatic Tymoshenko, who still styles her hair with traditional Ukrainian braids, is conventionally seen as a pro-Western figure while Yanukovich draws his support from pro-Moscow Russian speaking regions.

"For the moment, Tymoshenko is the favorite and she has a very good and strong team. But the crisis is working against her. With every week of the crisis, her chances of victory become worse," commented Fesenko.

But labels are a tricky business in Ukraine's shifting political world and it was Tymoshenko who signed the deal with Russian Prime Minister Vladimir Putin ending the New Year gas crisis.

Oleksandr Lytvynenko, senior political analyst at Razumkov center, said it would be wrong to see Yanukovich's Party of the Regions as an unambiguously pro-Russian force.

"They can come up with pro-Russian slogans but Yanukovich accused Tymoshenko of acting in Moscow's interests when she signed the deal to end the gas conflict."

"It is a party that is not interested in the integration of Ukraine into Russia but with obtaining power in Ukraine itself. The party was always like this."

Adding further intrigue is speculation that Tymoshenko could form an alliance with Yanukovich which could see her staying as prime minister and the latter working as a more ceremonial president.

And as if that was not enough, the Kiev political world has been abuzz with talk that an outside figure could spring to prominence in the elections.

Areseniy Yatseniuk, 34, a pro-Western protege of Yushchenko and an ex-parliament speaker, is winning around 12 percent of the vote in presidential opinion polls although he is only just forming a political faction.

Meanwhile, the establishment was rocked by the surprise victory of the Freedom movement of Oleh Tyahnybok, known for his populist Ukrainian nationalist rhetoric, in elections in the western Ternopil region this month.

"Many people are saying that those in power are yesterday's people and new faces are needed. There is a demand for something new," said Lytvynenko.

But for all the bitter disappointments, there have been dramatic changes within society since the Orange Revolution removed a corrupt regime that often seemed stuck in a Soviet time warp.

"The relationship between people and politics has changed. It has become more rational, critical. There is no sign of the extent of stagnation in public consciousness that there was before 2004," said Lytvynenko.

Source: AFP

The Lost City Of Chernobyl

CHERNOBYL, Ukraine — It looks like a baby monitor, but the beeping device that tour guide Dennis Zaburin clutches in his hand monitors radiation. The digits on the dosimeter's display change rapidly, indicating rising and falling danger. Other than the beeps, our footsteps are the only sounds we hear, multiplied as they echo off the abandoned buildings that surround us.

A park that never opened in Pripyat.
Zaburin knows where it's "safe" and the spots to avoid. But I have my doubts. I am, after all, at the site of the world's worst nuclear accident: Chernobyl, Ukraine.

More than 20 years after the atomic genie was released from the bottle, the invisible danger in this modern ghost town remains. Zaburin tells me not to worry, but I can see the readout on his dosimeter. It says 1,800. Only a few hours earlier he told me that 50 is normal. What am I doing here?

Hallowed ground

On April 26, 1986, Reactor No. 4 at Chernobyl, in what was then the Soviet Union, blew up. I've been fascinated since then by how man's quest to control nature backfired and how nature is slowly reclaiming a city where thousands once worked, raised families and made a community. I've read the books about Chernobyl, seen the movies and played the game (yes, there is actually a video game set here).

At the time of the accident, four reactors were in operation and two more were under construction. It was during a systems test in the early morning hours of that spring day that things went terribly wrong. Technicians tried to stop the test and rein in the reactor, but it overheated, resulting in a massive blast. While it wasn't a nuclear explosion, the reactor blew apart, shooting radioactive debris more than a mile into the sky.

In the days after the explosion, winds carried radioactive fallout across most of Europe. Eventually more than 300,000 people were forced to relocate.

It may seem a macabre place to visit, but is Chernobyl any different from the sites of tragedies like Auschwitz or New York's ground zero? It too has become hallowed ground where people come to witness history and to remember.

Welcome to Pripyat

Chernobyl lies about 80 miles northwest of Kiev, Ukraine's capital. It is an atomic bull's-eye in the middle of the menacingly named Zone of Alienation, a 20-mile exclusion area that surrounds the power plant.

Just after 9 on a sunny Wednesday morning I board a tour bus in central Kiev, along with five Swedes and a Norwegian — curious tourists from countries close to the accident. We pass through a series of military checkpoints before arriving at the town of Chernobyl.

While the power station is referred to as Chernobyl, it is actually located in Pripyat, a model Soviet town founded in 1970 to support the nuclear complex. We stop at a bland government building and head inside.

This is where I first meet Zaburin, our young but serious government tour guide. The 27-year-old is dressed in bluejeans, camo jacket and a Formula 1 ball cap. He doesn't smile. Inside a large room lined with maps and photographs of the disaster, Zaburin gives us a short lecture about what happened and what to expect.

Machines and men

The tour begins at what he calls the vehicle museum. It's really nothing more than a few military vehicles scattered about a grass field in desperate need of a mow. Zaburin waves his dosimeter a few inches from a tank — the numbers skyrocket.

Even though I know how dangerous radiation is, it's easy to forget about the risk because it's invisible. But the signs and the beeping of the dosimeter keep reminding me.

Most of the time our group is quite boisterous — making comments, asking questions, taking pictures. But at the Monument to the Firefighters we become subdued. Until this point we've seen only objects that were affected by the disaster. The large blue sculpture reminds us of the human toll.

Officially, fewer than 100 people died in the initial disaster. But poor record-keeping, combined with the long-term nature of radiation poisoning, make it impossible to determine exactly how many have died in the past 23 years — or to predict how many more will.

A city's skeletons

Pripyat, the power plant's support city, once had a population of about 50,000. Today it's zero.

Back in 1986, officials told residents that the evacuation was temporary and they need only bring a few days' worth of clothes. As a result, most people left everything behind, unaware that they would never return.

Pripyat was a modern city before the disaster. Today, it is a crumbling shell, a surreal place where empty roads are lined with street lamps that never light. The only traffic is the occasional bright yellow dump truck emblazoned with radioactive symbols. Zaburin warns us not to breathe when they pass by. The dust could be hazardous to our health.

It's at the main square where I really feel Pripyat's emptiness. Zaburin tells us we're free to explore the city's skeletons: a grocery store filled with overturned carts and moldy signs. A hotel waiting for guests that will never come. Disconnected phone booths, empty swimming pools and overgrown paths that snake past faded signs highlighting the achievements of a country that has ceased to exist.

Books, chairs and even radiators are scattered about, the flotsam and jetsam of 1980s Soviet life. A child's ballet shoe here, a trumpet case there. A strip of old film, perhaps touting the bright future of this atomic city?

The heart of the disaster

A few miles away, down a deserted road, partially completed cooling towers and idle construction cranes welcome us to the reactor complex. We drive past stagnant cooling ponds and a decaying network of electrical transmission infrastructure before reaching the heart of the disaster: Reactor No. 4, an enormous and enormously frightening building.

Nearby is another poignant tribute: the Monument to the Liquidators. In the weeks, months and years that followed the explosion, 100,000 troops and 400,000 experts and civilians worked to stabilize the complex and clean up the radioactive mess.

They became known as the liquidators, and their work may have saved countless millions. But they paid a high price: Many became very sick, and many died.

The Sarcophagus, a hastily constructed containment structure, covers the wreckage of Reactor No. 4. Built as a temporary measure, it is the only thing standing between tons of loose radioactive material and the outside world.

As I stand before the giant tomb, Zaburin explains that it is in dire need of replacement, and there are plans to build a new structure to completely contain the Sarcophagus. If it were to collapse before then, clouds of radioactive dust would be released into the air, creating another nuclear disaster.

A park that never opened

The children of Pripyat must have been bursting with excitement in the days before the disaster. A new amusement park was scheduled to open on May 1, 1986, in honor of May Day. It never did.

Instead of children's laughter, this amusement park is silent, a sad reminder of shattered dreams and the lives ripped apart. The large decaying Ferris wheel has become a tragic symbol of the disaster. A few steps away, I spot a rotting stuffed toy hanging in the smashed window of a ticket booth, as if caught in mid-escape.

It feels like the set of a zombie movie, but Pripyat is not dead. It's renewing itself. Just as nature is slowly returning, evident in the grass that now grows between the cracks in the plaza or the shrubs and trees that have found root in the contaminated soil, so too are people slowly returning to the area, albeit in the form of visitors like me.

It may be thousands of years before this area is safe enough for human habitation. Until then, the site of humanity's worst nuclear disaster may become one of the world's most chilling tourist attractions.

Source: Mercury News

Opening Salvos Of A New Gas War: Russia Versus The EU And Ukraine

WASHINGTON, DC -- The Ukrainian - EU agreement on renovating the main Ukrainian gas trunk pipeline signed in Brussels on March 23 was greeted with a virulent reaction from Moscow. Russian Prime Minister Vladimir Putin, who runs his countries gas sector with an iron fist, threatened to "review" existing gas supply contracts and prices with EU states and Ukraine as well as relations with the EU and Ukraine. The ostensible reason for Putin's reaction was that Russia was not included in the deal.

Russian Prime Minister Vladimir Putin, runs his countries gas sector with an iron fist.
According to the EU-Ukrainian agreement, the EU would allocate $2.57 billion towards the renovation of the pipeline. Ukrainian Prime Minister Yulia Tymoshenko asked that the renovation include expanding the present through-put capacity of 145 billion cubic meters of gas annually by 58.6 billion. The deal includes a basic demand put forth by Ukraine that EU gas companies would now buy Russian gas at the Ukrainian-Russian border and pay Ukraine the transit fee.

This would de-facto integrate the Ukrainian pipeline into the EU gas transportation system, a major defeat for Putin's conception of creating a gas pipeline consortium with Russian participation which would manage the Ukrainian system, but allow Ukraine to maintain ownership of the pipeline. However, the Putin plan called for Russia to insure the transit of its gas to Europe through Ukraine with Russia paying Ukraine the transit fee.

The vice chairman of the European Regulators' Group for electricity and gas (ERGEG), Walter Boltz, told the newspaper Kommersant on March 25, "In reality there are no reasons why Russia should insure transit (of gas) and why we shouldn't pay for transit. We buy gas at the Ukrainian-Russian border and worry about its delivery ourselves. I believe there is no alternative."

At the heart of the matter are a number of issues vital for Russian interests; maintaining its gas hold over Europe and its geopolitical goal of bringing Ukraine into Russia's sphere of influence. If the through-put capacity of the Ukrainian pipeline is expanded by almost 60 billion cubic meters there would be no commercial justification for building either the Nord Stream or South Stream pipelines. The cost of upgrading the Ukrainian pipeline is estimated at about $5-7 billion, far less than the estimated $12 billion needed to build Nord Stream and the $13 billion needed for South Stream.

In his reaction to the EU-Ukraine agreement to expand the Ukraine pipeline, Putin lashed out by asking the far from rhetorical question: "Nobody asked us if we are ready to transport such quantities (of gas)". Was this a threat or a bluff by Putin, the hidden CEO of Gazprom? More likely than not, it was an emotional outburst based on rational fear. If Nord Stream and South Stream are doomed by an expansion of the Ukrainian pipeline, then the Nabucco pipeline might become far more acceptable for those EU member states who had already signed up for South Stream.

With European demand for Russian gas down by 40 percent in February 2009 from a year ago, Gazprom is now caught in a dangerous cash flow situation and has already warned that it would reduce its vitally needed investment program into exploring for new fields -yet the company continues to pour money into building its new skyscraper in St. Petersburg and announced that it would take its option on buying from Italy's ENI the remaining 20 percent of Gazpromneft at the current price of $2.1 billion in April 2009.

Putin's threat to unilaterally "review" the price of gas for the EU and Ukraine is a more direct form of intimidation. This can be done only if Russia decides to abandon the existing price based on oil products and devises a new pricing formula, one based on political and financial considerations convenient to Gazprom.

By March 25, the pressure mounted on the Ukrainian government. Russian President Dmitri Medvedev told the Russian National Security and Defense Council that he was cancelling "indefinitely" a meeting between Russian and Ukrainian negotiators to discuss, among other matters, a loan request for $5 billion from the Ukrainian side. Part of the $5 billion was to be used by Ukraine to pay Russia for gas purchases in 2009.

In the meantime, Yulia Tymoshenko headed to Japan for a meeting with Japanese corporations and banks to discuss possible loans and greater Japanese investments into Ukraine Tymoshenko can well be looking to Japan to extricate her from a potentially embarrassing refusal by Russia to lend her government $5 billion for which has personally lobbied.

Within Ukraine, the agreement with the EU was instantly criticized by the largely pro-Russian Party of Regions. The shadow cabinet's energy minister, Yuriy Boyko, went on the air where he supported Putin's views and argued that "Without the full inclusion of Russia, the main supplier (of gas) it is impossible to guarantee that the Ukrainian gas transportation system will receive any gas. Ignoring Russia's concerns is contrary to Ukraine's interests".

Despite Boyko's reservations, most energy analysts see the agreement as a major breakthrough in cleaning up the murky, corruption ridden gas transport schemes which some attribute to Boyko and his constant lobbying of shady middleman schemes. What is certain is that Gazprom and Vladimir Putin will fight this new arrangement tooth and nail in order to keep the Ukrainian pipeline system linked as close as possible to the Kremlin in order to prolong the millions of dollars of hidden rents which benefit both Russian and Ukrainian elites.

Source: Eurasia Daily Monitor

Opposition Protests In Crisis-Hit Ukraine

KIEV, Ukraine - Opposition activists held anti-government protests across Ukraine on Friday, demanding the president and prime minister step down amid a worsening financial crisis.

Activists shout during a rally in central Kiev, Ukraine, demanding early elections amid a worsening financial crisis.
About 3,000 activists from the opposition Party of Regions waved blue flags on Kyiv's main square and chanted: "Crisis Stop!" and "Down with the Authorities!" Similar protests were held in a dozen other Ukrainian cities, the party said.

Although the rally in Kyiv was relatively small, it reflected growing discontent with the government's handling of the financial crisis. Analysts warn dissatisfaction could grow into mass protests and civil unrest later this year.

The leader of the Russian-leaning opposition party, Viktor Yanukovych, accused pro-western President Viktor Yushchenko and his 2004 Orange Revolution ally-turned-foe, Prime Minister Yulia Tymoshenko, of mishandling the crisis.

Analysts expect the Ukrainian economy to contract by at least six per cent this year. Industrial output has dropped nearly one-third as global demand has fallen and the national currency, the hryvna, has lost nearly half of its value.

"Everything they promised - they did just the opposite," Yanukovych told a cheering crowd.

"These authorities must resign - both the president and the government."

Ukraine is scheduled to hold presidential elections late this year or early next year but both Yanukovych and Tymoshenko have recently said they want an early vote. The two are expected to be the top contenders in the race with about 17 and 15 per cent support respectively, recent polls indicate. Yushchenko's ratings have sunk to below five per cent.

Source: AP

Kiev Residents Protest Eccentric Mayor

KIEV, Ukraine -- Hundreds of angry Kiev residents on Thursday picketed the office of the city's increasingly unpopular mayor, an eccentric millionaire who sings at rallies, poses in Speedos to show off his good health and goes by the nickname Cosmos.

Kiev Mayor Leonid Chernovetsky
Angered by major price hikes for public transport, utilities and medical care, the protesters demanded that mayor Leonid Chernovetsky resign.

But so far the 57-year-old has proved highly resilient, despite widespread accusations of corruption and erratic behavior often bordering on the absurd.

He survived an early vote last year that was initiated by Ukraine's parliament in an attempt to unseat him. He is now fending off an investigation over controversial sales of city land and even a parliamentary inquiry into whether he is mentally fit to hold office.

Eager to demonstrate he is of sound body and mind, he invited journalists to watch him earlier this month jogging, doing chin-ups and diving into a swimming pool in his tight Speedo suit.

''They are judging me today,'' Chernovetsky said, after he emerged from the water and flexed his muscles in front of the cameras. ''They want me to spend my whole life behind bars in a psychiatric ward. I want to demonstrate to the whole world that I am completely healthy, both physically and psychologically.''

Chernovetsky says his nickname is derived from his policies, which are ''cosmic'' and ''completely unusual for Ukraine.''

''I am proud that they don't resemble anything that went on in Ukraine before,'' he said on a talk show last year.

Chernovetsky was elected Kiev mayor in 2006 in a surprise win over the capital's incumbent mayor and boxing heavyweight champion Vitaly Klitschko.

His critics charge he won the race through questionable tactics such as donating pasta, sugar and other food to Kiev's impoverished pensioners. He was re-elected last May, largely due to his opponents' failure to unite behind a single candidate.

Chernovetsky has acknowledged on national television that he had given bribes worth $21 million when he was a businessman in the early 1990s. But he denies bribing his voters, calling himself ''the humble mayor who loves babushkas.''

In an effort to increase city revenues, he has proposed charging foreigners to live here, selling his kisses in a lottery and introducing entry fees for visits to city cemeteries. He has also started holding $100,000 dinners for entrepreneurs interested in discussing their affairs with city authorities.

Chernovetsky's opponents have acccused his administration of giving away or selling through non-transparent auctions about 300 plots of land worth several billion dollars in late 2007. Klitschko filed a lawsuit to invalidate those deals, but it was turned down by a Kiev court. Parliament is now investigating those transactions.

Ukraine's competitive elections for president, parliament and Kiev mayor are a testament to the level of democracy in this former Soviet state of 46 million, a sharp contrast to the carefully managed elections in neighboring Russia and Belarus.

But many Kiev residents have had enough, saying Chernovetsky's bizarre policies were bad before but have become unbearable during an economic crisis that is one of the worst in Europe.

About 2,000 elderly women, students and bus drivers from all political groups waived flags in front of Chernovetsky's office Thursday and chanted ''Down with the mayor!'' The drivers parked dozens of buses on Kiev's main streets, blocking traffic to protest job layoffs.

''It's not that he doesn't respect us, it's that he is mocking us!'' said Dmytro Antonenko, a 50-year-old teacher. ''We like him as a singer, but as a singer only.''

Chernovetsky brushed off the protests, saying he was open to dialogue with residents and had set up a complaint line that receives some 9,000 calls a day.

''He believes this demonstration was a political provocation by his opponents,'' said spokeswoman Oksana Makarchenko.

Chernovetsky vowed he would not be intimidated and said he still planned to run for president in an election expected in early January.

Source: Kyiv Post

Economic Havoc Heats Up Political Strife In Ukraine

KIEV, Ukraine -- Ukraine’s political crisis today is a powder keg, and it is the ongoing economic havoc that has contributed most of the powder. The Opposition is planning massive protest actions, hoping half of the country’s population will take to the streets.

A metalworker at the Iron and Steel Factory in the Ukrainian industry city of Mariupol. Already rocked by the collapse of the Soviet Union's command economy, the global economic crisis means Ukraine's metals factories have been struck by a plunge in export orders that count for 80 percent of their production.
In the meantime, President Viktor Yushchenko’s strength is at a critical low, and politicians and experts speculate early parliamentary elections may be expected as early as this summer.

The people have long lost the last bits of illusion about the political forces they once wholeheartedly voted for. Ukrainian society feels an urgent need for the emergence of a new political force. In this connection analysts have pointed to the fast popularity climb of the former parliamentary speaker, Arseny Yatsenyuk, who, some suspect, may contest the presidency, and with success.

The oppositional Party of Regions has begun a national action in the Crimea in support of the demand for the resignation of the president and government. In Simferopol, the peninsula’s main city, Yanukovich on Thursday was holding a meeting of the shadow Cabinet.

A large crowd gathered in the central square of Simferopol. “Stop the Crisis, Bring the Authorities to Justice” was the watchword. The Crimean rally is seen as a prelude to much stronger actions of protest, due to be staged in Kiev as of March 27. On the same day Odessa and sixteen other Ukrainian cities, including those in the country’s West, will see protest demonstrations.

Nearly half of the Ukrainians (42.2 percent) are prepared to participate in authorized protest actions, and nearly one-fourth (23.8 percent) will dare demonstrate without permission, as follows from a March opinion poll by the Razumkov Center.

The Marketing and Consulting agency quotes the pollster’s experts as saying the Ukrainian people’s anger has grown considerably since December 2008.

Yanukovich believes that the surest way of leading Ukraine out of the political and economic crisis will be re-electing all bodies of power.

“Our main task is to find a means of how to oust the current authorities in the near future. We cannot tolerate this for another year. In one year’s time the country may be lying in ruins,” Yanukovich warned.

The leader of the Party of Regions declared the need for calling early presidential and parliamentary elections.

“Only after that there will emerge the possibility of political and economic stabilization in Ukraine,” he said. “I am certain that the Ukrainian people will manage to cope with this, and the Party of Regions will actively help them in this.”

Yanukovich recalled that the Party of Regions had waged a struggle against this ‘orange power’ in 2004 and in all the subsequent years.

“We did our utmost to ensure it should leave for good and vacate this country once and for all,” Yanukovich said.

The rally, which brought together some 5,000-6,000 residents of Simferopol, voted for a resolution demanding the resignation of the president and Cabinet of Ministers, for disbanding parliament and for initiating early elections. Street demonstrations, say the organizers, will be the first phase of a plan that may eventually lead to the declaration of early parliamentary elections.

Early elections may be called as soon as June 2009, deputy parliamentary speaker Nikolai Tomenko, of the Yulia Timoshenko Bloc, said.

The leader of the pan-Ukrainian association Liberty, Oleg Tyagnybok, made a similar statement to the daily Kommersant.

“There are three scenarios. Number one is early parliamentary elections are called first, and then the presidential one. That’s what Viktor Yushchenko wants. Number two is parliamentary and presidential elections are to be held simultaneously. That’s the Viktor Yanukovich-backed option. And number three is a freeze on any elections till 2015. That’s Prime Minister Yulia Timoshenko’s wish,” Tyagnybok said.

The chief of the Democratic Initiatives research center, Ilko Kocheriv, doubts early parliamentary elections are likely, though.

“The authorities are perfectly aware that calling early elections amid the political and economic crisis would be tantamount to planting a mine under one’s own seat,” he told the daily Nezavisimaya Gazeta. He acknowledged that the positions of the incumbent president are at a critical low.

The pressure on the Ukrainian political elite is so strong that several months before the official beginning of the election campaign Viktor Yushchenko’s opponents decided to initiate impeachment procedures. However, the sole political force that has backed this idea is the Party of Regions, on the condition, though, Timoshenko Cabinet steps down, which makes the whole affair as rather problematic.

Ukraine is to elect a new president at the end of 2009 or the beginning of 2010.

In the meantime, none of Ukraine’s political forces enjoys a preferential position.

”What makes Ukraine’s recent history after 1991 so special is that we have not a single political force that would enjoy credibility with a majority of the population. The existing political system has discredited all of the current political forces,” the director of the Sociology Institute under the Ukrainian Academy of Sciences, Nikolai Shulga, said.

The Party of Regions, he said, has its own stable electorate at a level of about 29-33 percent. Viktor Yanukovich largely owes the support he enjoys to his confrontation with the ‘orange forces.’ Those who back him are unable to support other politicians by virtue of their cultural, linguistic and geo-political preferences. True, Yanukovich’s supporters have had their own reasons to be disappointed somewhat, but his opponents have created far more problems for themselves.

“Humiliation and distortion of history, speculations over the theme of famine of the 1930s, the surge of pro-Nazi sentiment and glorification of Nazi collaborators and henchmen, as well as attempts to set the Ukrainians and the Russian against each other, (this strife allegedly constitutes the backbone of history Russian-Ukrainian history), and the restoration of some tiny localities Russians had allegedly destroyed – all this has caused the people’s revulsion and disillusionment about Yushchenko.”

The electorate of Our Ukraine is in dismay, says the political scientist. It has turned its back on Yushchenko (and no new people are coming to join him). Also, a great share of voters feel disappointed over Timoshenko and the smaller parties – the Christian Democratic Party, the fragments of People’s Rukh, and the Yuri Kostenko Popular Party.

If parliamentary elections were to be held next Sunday, the Party of Regions would gain the upper hand, as follows from the results of an opinion poll the Agency of Social Studies conducted in March. The Party of Regions would get 19.2 percent of the votes, the Yulia Timoshenko Bloc, 15.4 percent, the Arseny Yatsenyuk Bloc, 6.9 percent, the Litvin Bloc, 5.2 percent, and the Communist Party of Ukraine, 3.4 percent. The movement For Ukraine under the former leader of the Our Ukraine-People’s Self-Defense faction, Vyacheslav Kirilenko, would have certain chances of getting into parliament, too. It would receive 3.2 percent of the votes of the polled. In the meantime, Viktor Yushchenko’s bloc Our Ukraine can count on a tiny 2.9 percent of the votes, and Oleg Tyagnybok’s Liberty, 2.3 percent.

As they consider the chances of likely contenders for the presidency, experts point to the quick rise of the former parliamentary speaker, leader of the Front of Change, Arseny Yatsenyuk. If one assumes he will manage to persuade the hesitant ones, and also those who have so far voted against all, the young politician’s emergence in the forefront of the election campaign will look quite probable.

According to a FOM-Ukraine opinion poll the Marketing and Consulting company is referring to, if the presidential election were to be held in the middle of February, the leader of the Party of Regions, Viktor Yanukovich, would have 20.4 percent of the votes, Prime Minister Yulia Timoshenko, 17.5 percent, former parliamentary speaker Areseny Yatsenyuk, 10.1 percent, Communist Party leader Pyotr Simonenko, 4.7 percent, parliamentary speaker Vladimir Litvin, 3.7 percent, and President Viktor Yushchenko, 1.9 percent.

The farther down the road, the more interesting the picture gets. Should Yanukovich and Yatsenyuk qualify for the run-off, the former would get 30.2 percent of the votes, and the latter, 32.1 percent. In case of the Timoshenko-Yatsenyuk option the ration would be 20.4 percent to 31.5 respectively.

Source: ITAR-TASS

Russian Ambassador Calls Ukraine-EU Gas Declaration Senseless

KIEV, Ukraine -- The recent Ukraine-EU natural gas pipeline declaration does not make any sense and looks like a deal signed by "a deaf man and a blind man," the Russian ambassador in Ukraine said Thursday.

Russian ambassador to Ukraine, Viktor Chernomyrdin.
Ukraine and the European Union signed a declaration on Monday to modernize the ex-Soviet state's natural gas pipeline network. Russia, which transits about 80% of its Europe-bound gas via Ukraine, said it was excluded from the talks in Brussels, and Prime Minister Vladimir Putin threatened to review ties with the EU.

"If you want my opinion, it looks as if a deaf man and a blind man sat at a table and signed the paper without even understanding what they had signed," the UNIAN news agency quoted Viktor Chernomyrdin as saying.

The EU endorsed Ukraine's plan to modernize its Soviet-era pipelines and underground storages and build new gas metering stations, for which Europe pledged 2.5 billion euros ($3.4 billion) and promised to encourage more investment on the condition Kiev reform the sector to make it more open and transparent.

Ukraine also asked the EU to help build two more pipelines to increase the network's capacity by about 60 billion cubic meters to 200 billion cu m, a project it earlier estimated at $5.5 billion.

Kiev says this would be cheaper than building long-distance gas pipelines, such as Nabucco promoted by Europe and the Nord Stream and South Stream projects Russia has been pushing.

President Viktor Yushchenko said on Monday Ukraine would soon join the treaty on the common European energy system, raising fears in Moscow that Ukraine would be legally closer to the EU in the energy sphere.

Some EU countries experienced disruptions in gas supplies in January as Russia briefly cut off shipments via Ukraine amid a debt and pricing row with its neighbor. The crisis fueled EU concerns on reliance on Russian energy.

The Ukrainian prime minister said on Tuesday that Russia was welcome to invest in Ukraine's pipelines and modernize them.

"Russia can invest in and modernize the gas pipeline system," Yulia Tymoshenko told a news conference, adding that Moscow might not like some aspects of the cooperation agreement with EU, but the document did not run counter to Russia's interests.

Russia's energy giant Gazprom said, though, that the increase in gas pipeline capacity envisioned in the document would affect future export contracts and production of natural gas in Russia and Central Asia.

Source: RIA Novosti

Ukrainian Oligarchs Lose Wealth, Keep Power In Crisis

DONETSK, Ukraine -- What's the difference between a Ukrainian and a Russian oligarch? They both lead lavish lifestyles, adore football, and have lost billions in the financial crisis.

A multi-billionaire and top leader of the Regions Party, Rinat Akhmetov.
But unlike their now politically timid Russian counterparts, Ukraine's super rich are unafraid of meddling in politics and are seen playing a key role ahead of January presidential elections.

Russian billionaires have steered clear of politics since several fell foul of the law under strongman ruler Vladimir Putin, including the now jailed head of the Yukos oil giant Mikhail Khodorkovsky.

Their Ukrainian counterparts may be less well known outside the country but an elaborate courtship dance with its highly polarised political elite is being followed avidly by the nation.

"Our situation is different to Russia. The state does not put this pressure on big business. It prefers a process of negotiations and compromise," said Oleksandr Lytvynenko, senior political analyst at the Razumkov Centre.

In the southeastern industrial city of Donetsk, whose region is home to the country's biggest concentration of mining, metal and chemical industry, it's hard to escape the presence of one man -- Rinat Akhmetov.

Akhmetov is the multi-billionaire owner of System Capital Management, a conglomerate whose interests range from mining and metals, to banking and the media.

The coal miner's son owns regional and national newspapers, the top Donetsk hotel and above all the city's pride and joy -- its football side FC Shakhtar Donetsk.

Thanks to Akhmetov's support, Shakhtar are now a regular in top European competitions and will move this year to a new 50,000-seat stadium which is being built for the club on the city outskirts.

The ethnic Tartar had always been seen as the financial muscle behind the Party of the Regions of Viktor Yanukovich, the pro-Moscow faction which reaches out to the Russian speaking population of areas like Donetsk.

But over four years after the Orange Revolution that brought pro-Western leaders to power, Akhmetov is now playing a more cautious game and political analysts are intrigued by his increasing closeness to Prime Minister Yulia Tymoshenko.

"The current political strategy of Rinat Akhmetov is to balance creating a positive image for himself while improving relations with decision makers who until recently were implacable foes -- like the Tymoshenkoites," the weekly Kommentarii wrote.

According to Volodymyr Fesenko, the director of the Penta centre for political research, "businessmen do not want there to be a single winner in the Ukrainian political fight in whom all the power is to be concentrated."

"The situation is changing, some oligarchs are distancing themselves from politics while others are diversifying their political activities.

"They are spreading their risk."

According to the latest rich list of US magazine Forbes published this month, Akhmetov is now the 397th richest man in the world with a fortune of 1.8 billion dollars compared with 7.3 billion last year.

Like almost every oligarch across the former Soviet Union, his fortune has been hit by the slump in commodities prices amid the economic crisis and also the plunge in equity markets.

Forbes' figures show he has now been overtaken as Ukraine's richest man by Viktor Pinchuk, the founder of the Interpipe piping company and a son-in-law of former president Leonid Kuchma.

Pinchuk, whose fortune was estimated at 2.6 billion dollars compared with five billion before the crisis, himself served as a member of parliament between 1998-2006.

But according to his website, he has now "retired from politics" and channels his finances into charity work and cultural events.

He was behind ex-Beatle's Paul McCartney's open air concert in Kiev last year and his Pinchuk Art Centre will in April show a major retrospective of British modern artist Damien Hirst.

Akhmetov and Pinchuk lost out in the aftermath of the Orange Revolution when their joint purchase of the country's largest steel producer Kryvorizhstal for a bargain price in 2004 was denounced by Yushchenko and then annulled by a court.

It was then sold to Indian giant Mittal Steel for almost five billion dollars, almost seven times more than what the two oligarchs had paid. But now both businessmen are members of a charity fund headed by Yushchenko's daughter.

Ukraine's third richest man according to Forbes, Ihor Kolomoysky, is a more reclusive figure, but who is still seen playing a prominent role in politics after switching allegiances between Tymoshenko and her foe, President Viktor Yushchenko.

The Dnepropetrovsk-based billionaire's Privat group is one of the biggest holdings in Ukraine with interests in steel, food and banking.

Another prominent figure is Dmitry Firtash, who has long been seen as an ally of Yushchenko and foe of Tymoshenko and is the co-owner of energy trader RosUkrEnergo.

Source: AFP

Ukraine Opposes Deployment Of Extra Submarines With Russia's Black Sea Fleet

KIEV, Ukraine -- Ukraine is opposed to deploying more submarines with Russia's Black Sea Fleet, which is based in Crimea, spokesman for Ukraine's Foreign Ministry Vasily Kyrylych said on Wednesday.

Lada class Russian submarine.
Commenting Russia's plans to deploy some new submarines with the Black Sea Fleet, Kyrylych stressed Russia could conduct modernization of the fleet only with Ukraine's consent, according to the Interfax-Ukraine news agency.

"Modernization of the Black Sea Fleet is possible only after the signing of appropriate agreements with Ukraine," he said.

"This is not a new issue. It was repeatedly discussed during the bilateral consultations, and the position of Ukraine on this issue is well known to the Russian side. We are opposed to increasing the number of military units of the Black Sea Fleet, which is based in the territory of Ukraine," Kyrylych added.

A senior Russian Navy official said on Tuesday that the Black Sea Fleet must have eight to 10 submarines in active service and the Navy plans to commission new Lada class vessels to meet the requirement.

"We are planning to deploy additional submarines with the Black Sea Fleet, including new Lada class vessels, but our plans are being hampered by Ukraine, which sees this as the deployment of new weaponry rather than an upgrade of the existing fleet," said Vice Admiral Oleg Burtsev, deputy head of the Navy General Staff.

The Black Sea Fleet currently deploys one Project 877 Kilo class diesel-electric submarine, while an outdated Project 641 Foxtrot class sub is undergoing a long-term overhaul.

Russia's Black Sea Fleet uses a range of naval facilities in Ukraine's Crimea as part of a 1997 agreement, under which Ukraine agreed to lease the bases to Russia until 2017.

The Ukrainian authorities repeatedly emphasized that Ukraine would not extend the lease of the base for Russia's Black Sea Fleet beyond 2017, and urged Russia to start preparations for a withdrawal.

Source: Xinhua

Pro-Russia Protest Against US Frigate In Sevastopol

SEVASTOPOL, Ukraine -- Pro-Russia protesters cried "NATO out" Wednesday as a US naval frigate arrived in the Ukrainian naval port of Sevastopol, where Russia's Black Sea fleet is also based.

Activists from the Ukrainian Communist Party and Russian Bloc protest as the USS Klakring sails into Sevastopol. The pro-Russia protesters cried "NATO out" as the US warship arrived in the Ukrainian port -- where Russia's Black Sea fleet is based.
The USS Klakring docked at 0630 GMT, as about 250 largely communist and far-left demonstrators also shouted "Yankee go home!"

The frigate is in port for a five-day "friendly visit" and will not take part in any exercises, a Ukrainian navy statement said.

It is feared that Sevastopol in the Crimea, where the Russian fleet has maintained a presence for over 200 years, could become a flashpoint in strained relations between Russia and the West.

Russia signed a 20-year contract with Ukraine in 1997 to station its fleet in the Black Sea and makes an annual payment of 12 million dollars (nine million euros) to Kiev for the privilege.

Ukrainian officials have repeatedly called for the fleet to leave Sevastopol when the lease expires in 2017.

Source: AFP

Platini To Visit Poland And Ukraine 2012 Chiefs

COPENHAGEN, Denmark -- UEFA president Michel Platini will visit Poland and the Ukraine on April 15 and 16 to meet officials organising the troubled 2012 European Championships.

UEFA president French Michel Platini, seen here during the 33rd ordinary congress of the European football federation in Copenhagen, will visit Poland and the Ukraine on April 15 and 16 to meet officials organising the troubled 2012 European Championships.
"This visit is important because I will bring with me the top UEFA directors so that we can get a precise idea of what's happening in Poland and the Ukraine," explained Platini during a press conference here on Wednesday at the end of UEFA's 33rd Ordinary Congress.

"We'll spend one day in each country to listen to the presentations of the local organising committees on stadia, cities and infrastructures," he added.

"We're doing this because there's a steering committee that will discuss everything at the beginning of May and I'd prefer to have seen the host cities in order to see the progress that is being made on the stadia and the cities."

Regarding the preparation work, the former France international said that "the situation at the organisational level is not easy for Poland and the Ukraine, and it's not easy for UEFA either".

"But these two countries are working thoroughly and UEFA is also doing everything it can to take things forward," he insisted.

Poland and the Ukraine were a surprise choice to host the tournament and have since been dogged by concerns about their ability to meet their commitments regarding the construction of stadia and the creation of transport and hotel infrastructures.

Source: AFP

Vaccine Scare Threatens Health In Ukraine

KIEV, Ukraine -- A widespread scare about vaccine side effects in Ukraine has led to a sharp drop in immunizations that could result in disease outbreaks spreading beyond the former Soviet republic, international and local health officials say.


Hundreds of thousands of fearful Ukrainians have refused vaccines for diseases such as diphtheria, mumps, polio, hepatitis B, tuberculosis, whooping cough and others this year, according to official estimates.

Authorities have canceled a U.N.-backed measles and rubella vaccination campaign funded by U.S. philanthropist Ted Turner, and will have to collect and incinerate nearly 9 million unused doses in coming months.

"I never thought I'd see the day where perfectly good vaccines are being destroyed," said Michael Bociurkiw, a spokesman for UNICEF.

Around the world, health officials say they are struggling with the repercussions of vaccine fears they call unwarranted and dangerous.

In 2003, imams in northern Nigeria fomented a boycott of polio vaccinations claiming they were a Western plot to make Muslims infertile or infect them with HIV. Authorities in Indonesia are discussing a plan to end childhood immunizations against a number of diseases out of fears that foreign drug companies are using the country as a testing ground.

A budding movement of parents getting exemptions from pre-school vaccination laws is seen as partly responsible for a spike in U.S. measles cases.

Experts blame the Ukrainian scare on government mismanagement and irresponsible media coverage of an anti-vaccination campaign launched after the May death of a 17-year-old boy who had received a combined shot for measles and rubella.

Activists including members of the homeopathic and alternative healing industries blamed his death on the vaccination. Ukrainian authorities said they needed to investigate and halted the campaign to revaccinate 9 million Ukrainians aged 16-29 for measles — a leading cause of childhood death — and rubella, which can cause serious birth defects.

The Ukrainian Health Ministry and World Health Organization concluded that the boy died of septic shock from a bacterial infection unrelated to the vaccine. But the ministry decided last month to terminate the revaccination campaign, saying there was no longer enough time to administer the vaccines before they expire this summer and that people would refuse the shots.

Over 4.5 million Ukrainians, mostly children, are vaccinated for a wide variety of diseases each year in the country of 46 million. Health authorities say spreading fears of immunization were largely responsible for an estimated 10 percent drop in the vaccination rate since May.

"This threatens to lead to a spike in the number of infectious diseases," said Lyudmyla Mukharskaya, the country's deputy chief public health official. "There will be outbreaks, especially among children."

Ukraine has had two major outbreaks of measles since 200. Ukrainians aged 16-29 have proven to be highly susceptible, apparently because of an ineffective vaccination campaign carried out in the 1990s, when the country was in economic crisis following the collapse of the Soviet Union.

If Ukraine cannot revaccinate at least 95 percent of the estimated 9 million people who got deficient vaccines in the '90s, UNICEF says, the next outbreak could be even bigger.

"There are concerns that the measles disease could be exported to other European countries where Ukrainians travel," Bociurkiw said.

Independent health experts say government mistakes were a major factor in the vaccine scare. Prosecutors briefly detained the country's chief public health official after the teen's death and claimed that the vaccine, which was certified by WHO, was imported into the country without proper authorization.

Dr. Fedir Lapiy, an expert in infectious diseases based in Kiev, said prosecutors appeared to have used the case to promote themselves and discredit political opponents.

"It looked more like a PR campaign than a thorough probe," Lapiy said.

Ukraine has an educated population but rumors and misperceptions spread easily. Constant political turmoil and a devastating financial crisis — one of the worst in Europe — has fueled mistrust of Ukraine's crumbling health care system, and authorities in general.

"It is sad to see the population of a country in the middle of Europe refusing to get immunized," said Andrei Tulisov, an infectious disease and immunization specialist at WHO.

Ukrainian media outlets are numerous and uncensored but do not widely follow Western standards of fairness and accuracy. Some print and online reports alleged after the boy's death that the Indian-made measles and rubella vaccine would sterilize men as part of a plot by Ted Turner, whose Washington-based United Nations Foundation charity paid for the vaccines.

"This kind of scare tactic coupled with the death of the boy struck the fear of God into a lot of young people and parents," Bociurkiw said.

Nina Zaichenko, a 25-year-old interior designer in Kiev, says she has decided not to immunize her 1-year-old daughter, Dasha, against any diseases until at least the age of 3. She fears the infant's body is still to weak to handle vaccinations and she does not trust the local health system to acquire and properly store high-quality vaccines.

"The chances of a child getting sick from a vaccine and from the disease itself are equal," Zaichenko said, an assertion experts say has no basis in the truth. "It's a hard choice for parents to make."

UNICEF says it believes only up to 30 percent of Ukrainians who need revaccination for measles and rubella would turn up if the campaign were restarted today. Only 400,000 people received vaccines before the campaign was stopped.

The Health Ministry says it will work to promote the need for immunizations among the population, and look for ways to launch a new measles and rubella vaccination campaign.

Source: AP

The Prognosis For Ukraine

KIEV, Ukraine -- Following events in Ukraine is like listening to the tale of the boy who cried "wolf": people have been shouting "crisis" for so long that it is hard to tell whether or not a terminal crisis has finally arrived.


The situation does look pretty bad. Ukraine's chronic political stalemate has run into the buzz saw of a global economic recession. Then add to the mix an obstreperous Russia, eager to flex its muscles – as shown by its willingness to cut gas supplies for an unprecedented two weeks this January.

First, the grim economic numbers. The hryvnya has lost 60 percent of its value against the dollar over the past year – despite the government spending $11 billion of its reserves in an effort to shore up the currency.

The global slump saw demand collapse for Ukraine's export commodities like steel and chemicals. By January, industrial production had fallen by 34 percent year on year. Inflation is running at 22 percent, while real wages have fallen 12 percent.

This is by far the worst performance of any of the Commonwealth of Independent States economies. The International Monetary Fund is predicting that GDP will fall 6 percent in 2009.

Sixty percent of Ukraine's loans and mortgages are held in dollars, and in October fears of a bank run and currency collapse led the Ukrainian government to negotiate a $16.4 billion loan from the IMF.

The first $4.5 billion tranche was paid out, but the IMF suspended the second payment, due in February, because the government failed to make politically unpopular spending cuts (including cuts in utility subsidies) and the parliament passed a budget based on over-optimistic assumptions about revenue and hence spending for 2009.

The mounting economic crisis was exacerbated by the feuding between President Viktor Yushchenko and his archrival, Prime Minister Yulia Tymoshenko, whose backers maintain an unsteady majority in the parliament, the Verkhovna Rada.

In October, Yushchenko tried to disband the Rada and hold fresh elections but backed off after complaints from Western allies. In November, he suspended talks on the 2009 gas contract with Moscow, helping to trigger the January gas crisis.

More recently, on 4 March he sent the National Security Service to raid the headquarters of the gas company Naftogaz Ukrainy, seen as loyal to Tymoshenko.

The Rada in turn succeeded in ousting Foreign Minister Volodymyr Ohryzko, who was accused of mounting an anti-Tymoshenko publicity campaign, although legislators called a cease-fire in February in their attempts to fire the head of the central bank.

The finance minister, Viktor Pynzenyk, resigned on 12 February; six weeks later the post remains unfilled. This is not the most auspicious time for the state treasury to be without a head.

The politicians are maneuvering in preparation for the presidential elections scheduled for January 2010. Yushchenko himself has no chance of prevailing (polls put him at 3 percent support). It will likely be a three-way race among Tymoshenko, Party of Regions leader Viktor Yanukovych, and a new contender, the 34-year-old former parliamentary speaker, Arseniy Yatsenyuk.

Some observers insist that the fundamentals of the Ukrainian economy are sound. Anders Aslund of the Peterson Institute in Washington, D.C., the best-informed specialist on the Ukrainian economy, insists that a default is unlikely and argues that Ukraine has met the IMF's key conditions.

On one condition, balancing the budget, the fund has lightened up and now appears willing to accept a modest deficit. By March Ukraine still had $26 billion in reserves, enough to cover eight months of imports.

In 2008 the government's fiscal deficit was a modest 1.5 percent of GDP, and the external trade deficit was about 7 percent of GDP. The state's foreign debts amount to about $24 billion, or some 20 percent of GDP, well below the levels usually seen in pre-default economies.

Corporate debts are higher, estimated at $40 billion or more, but the fall in world oil and gas prices will ease pressure on an economy that is highly dependent on imported energy.

WHAT'S THE WEST TO DO?

The European Union itself has a great deal at stake, given its dependence on Russian gas pumped across Ukraine, and given the exposure of Austrian banks in Ukraine. But the EU lacks a common approach and has delegated the job of handling Ukraine's financial problems to the IMF.

Meanwhile, back in Washington think tanks have been issuing reports urging the Obama administration to act – to encourage the feuding Ukrainian leaders to cooperate in implementing the IMF program.

They argue that Ukraine is too big – and too strategically located – to be allowed to fail. While they no longer call for an immediate pre-membership plan for NATO entry, recognizing that this step is opposed by many NATO partners, they still advocate helping prepare Ukraine to join the alliance.

In the Brookings Institution report "Engaging Ukraine in 2009," authors Steven Pifer, Aslund, and Jonathan Elkind baldly state that "the primary reasons for engaging Ukraine remain geopolitical," that is, to "encourage Moscow to pursue a more cooperative, integrative foreign policy and give up any thought of seeking to restore the Russian empire."

Such policies would probably serve to redouble Moscow's determination to push back against the American presence in the region. So it is not at all clear that Ukraine would benefit from efforts to talk up and politicize the economic crisis.

Ukraine's dilemma is that pressure to speed up external integration with Western institutions is opening up rifts within Ukrainian society that threaten internal disintegration, given the ideological distance between western Ukraine and the east and south of the country.

These divisions are of course being exploited by a rogue's gallery of Russian political actors. But Western pressure, diplomatic or economic, is only likely to exacerbate the problem.

Source: Business Week

Moscow Delays Talks With Kiev Over Ukraine-EU Pipeline Deal

MOSCOW, Russia -- Russia is putting off government consultations with Ukraine, which were due next week, until its natural gas pipeline declaration with the EU is clarified, President Dmitry Medvedev said on Tuesday.


Ukraine and the European Union signed a cooperation declaration on Monday to modernize the ex-Soviet state's gas pipeline network. Russia, which transits about 80% of its Europe-bound gas via Ukraine, said it was excluded from the talks in Brussels.

"The consultations will take place after Russia has received answers to its questions," Medvedev told a Security Council meeting. "This declaration raises questions."

Speaking at the meeting, Prime Minister Vladimir Putin said: "For our inter-government consultations to be effective, we need to clarify the situation."

On Monday, Putin threatened to review ties with the EU if it continued to ignore Russia's interests.

The EU endorsed Ukraine's plan to modernize its Soviet-era pipelines and underground storages and build new gas metering stations, for which Europe pledged 2.5 billion euros ($3.4 billion) and to encourage more investment on the condition Kiev reform the sector to make it more open and transparent.

Ukraine also asked the EU to help build two more pipelines to increase the network's capacity by about 60 billion cubic meters to 200 billion cu m, a project it earlier estimated at $5.5 billion. Kiev says it is cheaper than building long-distance gas pipelines, such as Nabucco promoted by Europe and the Nord Stream and South Stream projects Russia has been pushing for.

President Viktor Yushchenko said on Monday Ukraine would soon join the treaty on the common European energy system, raising fears in Moscow that Ukraine would be legally closer to the EU in the energy sphere.

Some EU countries experienced disruptions in gas supplies in January as Russia briefly cut off shipments via Ukraine amid a debt and pricing row with its neighbor. The crisis fueled EU concerns on reliance on Russian energy.

The Ukrainian prime minister said on Tuesday that Russia was welcome to invest in Ukraine's pipelines and modernize them.

"Russia can invest in and modernize the gas pipeline system," Yulia Tymoshenko told a news conference, adding that Moscow might not like some aspects of the cooperation agreement with EU, but the document did not run counter to Russia's interests.

Tymoshenko said Monday's deal had ensured Ukraine's energy interests for decades.

Source: RIA Novosti

Ukraine-EU Gas Deal Angers Russia

BRUSSELS, Belgium -- Ukraine agreed to clean up corruption in its gas export industry in return for Western investment in a deal with the EU on Monday that sparked a sharp warning from its powerful neighbour, Russia.

Ukraine agreed to clean up corruption in its gas export industry in return for Western investment in a deal with the EU on Monday which sparked a sharp warning from its powerful neighbour, Russia.
Moscow warned it would "review" its relations with the European Union if Russia was left sidelined by the discussions here, which followed a winter dispute between Kiev and Moscow that disrupted gas supplies to Europe.

Ukraine's President Viktor Yushchenko told government and industry officials in Brussels that he would "restore order" and "reject all corruption" in Ukraine, which needs billions of euros to upgrade its aging gas infrastructure.

At a conference here on modernising Ukraine's gas infrastructure, it signed an agreement with the European Commission, the World Bank, the European Investment Bank and the Bank for European Reconstruction and Development.

Under the deal, the Ukrainian gas transport company must prove its legal independence from outside influence, offering access to its pipeline at transparent prices that respect European norms.

However, Ukraine has no intention of giving up ownership of the major strategic asset, through which passes 80 percent of the gas sent by Russia to the European Union.

Putin slammed the agreement as "unprofessional," in comments reported by Russian news agencies after the Brussels meeting, and warned Moscow could review its ties with the bloc.

"If the interests of Russia are going to be ignored then we will be compelled to begin to review the principles of our relationship," Putin was quoted as saying in the southern city of Sochi.

European confidence in Ukraine as a gas-transit partner country suffered a blow in January when Moscow cut off deliveries to Ukrainian consumers and transit supplies amid a row with Kiev about new prices and debts.

Several EU states were left without Russian gas for two weeks.

"We cannot allow our citizens to face fuel shortages in the depth of winter again," EU External Relations Commissioner Benita Ferrero-Waldner told the conference in Brussels.

"All of us... have an interest in ensuring Ukraine provides a reliable and secure transit route for gas in decades to come."

The agreement lays out the commitments that Kiev is to make to pave the way for much-needed foreign investment in its gas pipeline network.

Yushchenko said he intends to have metering stations set up along transit pipelines in Ukraine and open up access to the country's substantial underground gas storage facilities.

Putin scorned the new agreement. "It seems to me that this document ... is at the very least not thought-out and unprofessional," he said. "To discuss questions of supplies without the main supplier is simply not serious."

Moscow is currently involved in several gas pipeline projects with European companies, such as the Nord Stream project which aims to bypass Ukraine with a pipeline beneath the Baltic Sea to Germany.

The EU wants to tread carefully with Kiev and Moscow as it seeks to diversify its sources of gas shipments by backing the Nabucco pipeline that will bring gas from the Caspian through Turkey.

Ukrainian Prime Minister Yulia Tymoshenko said building new pipelines bypassing Ukraine would be much more expensive than updating Ukraine's network.

Ukraine is seeking more than 5.5 billion dollars (4.1 billion euros) to expand its gas pipelines, but refuses to give up ownership of the infrastructure.

The Russian foreign ministry had already warned in a statement that the agreement could push up gas prices for Ukrainian and European consumers and disrupt supplies.

"If this is just a little technical hitch in the already quite complicated trilateral relations between Russia, Ukraine and the European Union then no matter," Putin said on Monday.

"But if this is the start of an attempt to systematically ignore the interests of the Russian Federation then that is very bad."

Source: AFP

Chernobyl Taking A Toll On Invertebrates Too

CHERNOBYL, Ukraine -- Most of the talk about the ecological aftermath of the Chernobyl nuclear accident in Ukraine has been about the impact of the 1986 disaster on animals.

Population declines suggest invertebrates are very sensitive to radiation.
Recent research has refuted the idea that the region around the power plant, contaminated by radiation and off limits to most humans, has become a sort of post-apocalyptic Eden for deer, foxes and other mammals and birds.

A new study by the same researchers shows that it’s not much of a paradise for invertebrates, either. Anders Pape Moller of the University of Paris-South and Timothy A. Mousseau of the University of South Carolina report in Biology Letters that the abundance of insects and spiders has been reduced in the area.

The researchers conducted standard surveys in forests around Chernobyl over three springs from 2006 to 2008, noting the numbers of bumblebees, butterflies, grasshoppers, dragonflies and spider webs at points with radiation levels that varied over four orders of magnitude.

After controlling for factors like height of vegetation and type of soil, they found that abundance declined with increasing radiation intensity.

The decline was noticeable even in areas with relatively low levels (about 100 times normal background), which suggests that invertebrates are highly sensitive to radiation.

The researchers note that most of the radiation in the area is in the top layer of soil, and given that many invertebrates spend much time in or near soil — as eggs, larvae or adults — that could explain the decline.

Source: The New York Times

EU To Upgrade Ukraine's Outdated Gas Pipelines

BRUSSELS, Belgium -- The EU vowed Monday to help upgrade Ukraine's network of gas pipelines in exchange for reforms in the country's energy management to avoid a repeat of the January dispute which resulted in the cutoff of Russian gas deliveries to Europe.


The two sides signed an agreement to improve both the management and capacity of Ukraine's 40-year-old grid of gas pipelines. In return for embracing market economy practices, Kiev can expect billions of euros (dollars) in funding and western expertise on how to run a profitable -- and reliable -- energy sector.

The EU did not say how much it would commit for the work. Ukrainian Prime Minister Yulia Tymoshenko said the project would need euro 5.5 billion, while the EU has costed it at euro 2.5 billion, without setting a figure on the final bill.

Ukrainian gas pipelines carry domestic supplies but also Russian gas to Western Europe. A fifth of gas consumed in the EU comes from Russia through the Ukraine.

Ukrainian President Viktor Yushchenko said "we are determined to improve the functioning of the gas market and root out all kinds of corruption and make sure that the system works to the benefit of all."

A key priority, he said, was building gas metering stations to improve the monitoring of gas passing through Ukrainian pipelines.

Yushchenko signed the gas agreement with European Commission President Jose Manuel Barroso.

It aims to improve both the safety and capacity of Ukraine's pipeline network and revamp its management so western investors can put up money without fear of losing any of it to endless red tape or corruption.

This year, Ukraine plans to join the European Energy Community, which sets common trade rules for producer and consumer nations. It means that by 2012, Ukraine's energy laws must comply with market economy standards.

That -- plus cuts in excessive domestic consumption -- will boost exports, especially from the Black Sea region, and make "Ukraine a predictable market" for Western Europe, said Ukrainian Energy Minister Yuriy Prodan.

Energy supply is a sensitive political issue in the region, and the EU-Ukraine deal quickly triggered Russian misgivings about being sidelined in its own backyard.

Ukraine's gas pipeline network "has an organic link with Russia," Russian Energy Minister Sergei Shmatko told a conference at which the EU-Ukrainian gas declaration was signed.

The EU-Ukraine agreement is part of a web of cooperative deals the EU is seeking with Russia's immediate neighbors for fear that Moscow's enduring sway in ex-Soviet republics hampers across-the-board reforms.

"We are working for safe and attractive conditions for the transit of Russian gas," said EU Energy Commissioner Andris Piebalgs. "There is no intention to exclude Russia."

EU officials were pleased both Yushchenko and Ukrainian Prime Minister Yulia Tymoshenko -- his political rival -- showed up for Monday's signing ceremony.

Yushchenko has accused Tymoshenko of delaying repayment of debt to Russia worth $2.4 billion ($3.3 billion) for gas imports, saying that leaving it unpaid makes Ukraine a colony of Moscow. The state gas company Naftogaz, which answers to Tymoshenko, disputes the size of the debt.

"Today's participation of the prime minister and the president shows that in some issues they are united," said Piebalgs.

Tymoshenko told the EU that modernizing her country's outdated gas pipelines -- which span 37,600 kilometers and comprise 73 compressor stations and 13 underground storage facilities -- will cost euro 5.5 billion ($7.5 billion). She said that was cheap compared to building alternative pipelines, as the EU is contemplating.

The European Commission has provisionally costed Ukraine's modernization program at euro 2.5 billion ($3.4 billion).

Source: AP

Ukraine's President And Prime Minister Feud As Their Country's Economy Sinks

KIEV, Ukraine -- In Ukraine, it’s truly noteworthy only when the president and prime minister stop fighting.

Ukraine's President Viktor Yushchenko (left) shakes hands with Prime Minister Yulia Tymoshenko during a session of the National Security and Defence Council in Kiev Feb. 10, 2009.
President Viktor Yushchenko and Prime Minister Yulia Tymoshenko — who stood shoulder-to-shoulder just four years ago as Orange Revolution allies — have spent the better part of the last year at each others' throats, in a vituperative, take-no-prisoners struggle that has split the government down the middle and paralyzed the country’s political process.

The situation would be humorous if it were not so critical: Hardly a week seems to go by without some sort of outburst from the president (or his minions) against the prime minister (and her backers). The two camps regularly hurl back and forth phrases like “criminal,” “traitor,” “con artist” and “idiot."

Meanwhile, Ukraine is facing its biggest economic challenge since the economic drought that immediately followed the Soviet Union’s breakup.

Industrial output declined by 30 percent year on year this January. The national currency, the hryvnia, has lost half of its value since highs last year. Banks have stopped lending, and many are permitting only miniscule withdrawals, to head off a run on banks. Factories, shops and businesses throughout this eastern European country of 46 million are closing their doors, while unemployment and public dissatisfaction are spiking.

“Re-arranging the deck chairs on the Titanic,” “Fiddling while Rome burns,” — so the local and international press describe the Ukrainian morass.

The Ukraine-Russia gas dispute was interpreted by many partially as a product of the two leaders’ struggle. In February, the second tranche of a critical $16.5 billion International Monetary Fund bailout program fell through because of infighting in the government. Finance Minister Viktor Pynzenyk, a Yushchenko ally, resigned in protest. Tymoshenko accused the president of spreading “falsehood, panic and hysteria.”

Earlier this month, agents from the Ukrainian Security Service (SBU), some wearing baklavas and brandishing automatics, stormed the offices of state energy company Naftogaz.

At issue was the ownership of a large amount of natural gas — between 6.3 and 11 billion cubic meters, depending on which report you read — valued at about $1 billion. The SBU said the gas belonged to RosUkrEnergo, a shadowy Swiss-based company with reputed ties to Yushchenko and other top politicians, while Naftogaz said it was the rightful owner.

But since the SBU answers to the president — and just a few weeks earlier Yushchenko named a close ally, media magnate Valery Khoroshkovsky, as the SBU’s deputy head — and Naftogaz comes under the prime minister’s aegis, this was viewed as just another clash in the two leaders’ battle royale, albeit with the new, extremely disturbing development of involving the country’s law enforcement bodies.

“This is not new,” said Yuri Yakymenko, director of political and legal programs at the Razumkov think tank, adding that the struggle originally reached fever pitch and stayed there when the president tried to dissolve parliament last autumn and called for new elections. “Unfortunately the fight among the political groups has witnessed a drop in legitimacy for the whole political system.”

The current sparring is believed to be a preview of the presidential elections, scheduled for January next year. Tymoshenko is the front-runner, though her position takes a beating with every new piece of jaw-droppingly horrible economic news. Yushchenko for his part incredibly appears still to be considering re-election — or at least he has not said that he will not run – although his approval ratings are at 2.5 percent. (That could mean zero or lower, when you factor in the margin of error.)

For this reason — and maybe because they at times actually are concerned for the future of their country (though this is not a given) — the two leaders have occasionally set aside their differences. Most recently this happened in the wake of the IMF bailout delay. Yushchenko and Tymoshenko issued a joint statement laying out a unified economic reform program. Both leaders now say they are confident that the country will receive the second $1.8 billion payment.

The damage to both leaders’ reputations — in fact to the whole ruling class — has been irrevocable. Ukrainians will say in one breath that they want to be part of Europe and the West, but at the same time that they are disillusioned with the Orange Revolution, capitalism, as it is now practiced in their country, and even democracy.

On Kiev’s central Independence Square, where hundreds of thousands gathered in 2004 to protest a stolen election and sweep Yushchenko and Tymoshenko to power, a few tents have stood since January. They are part of a movement called “All of them — Out!,” which seems mostly to be made up of groups from the nationalist fringe.

“All of our leaders must go and be replaced by new forces,” said Nadezhda Batolkina, a movement member. As the weather warms, and with demonstrations expected throughout the country, we will soon know to what extent others agree with her.

Source: GlobalPost

How The West Turned From Kiev

KIEV, Ukraine -- Just five years ago Ukraine was the toast of pro-democracy politicians the world over. The Orange Revolution seemed to be the next strand of the thread going back to the 1989 Velvet and other peaceful European transitions. Despite the bullying of Moscow, the Ukrainians stood their ground and said they wanted to become another Euro-Atlantic nation.

Independence Square - Kiev, Ukraine.
But now, like parents with a sulky, wayward child who just won't grow up, the world's democracies are turning their back on Ukraine. U.S. President Barack Obama will clink glasses with Russian and European leaders in London, Strasbourg and Prague and drop in to say hello to Turkey.

But Ukraine, Turkey's Black Sea neighbor, is off his radar. Silvio Berlusconi openly supports Russia every time there is a dispute over gas. Angela Merkel used to visit Ukraine regularly and hold annual Berlin-Kiev summits, but now she ignores the country.

Russia's ambassador to NATO, the ultranationalist Dmitry Rogozin, boasted to France's Nouvel Observateur that French President Nicolas Sarkozy "opposed America's desire to see Ukraine join the Atlantic alliance," adding that the French president was "Moscow's ally in Europe." That may be just Russian bombast, but increasingly Kiev looks west and sees no alternative.

Yes, Ukraine faces many internal domestic problems that the EU and the United States are largely powerless to influence. Its economy is a shambles. With 40 percent of GDP linked to steel and aluminum, it is seeing a nose dive into negative growth as exports slump.

Ukraine's politicians squabble openly and try to tear each other down. Yet everyone in Kiev agrees that democracy has sunk deep roots. Ukraine has its oligarchs who wheel and deal and buy influence, but they live in their own country and not (as has happened to some of their Russian counterparts) in exile in London waiting for a dose of plutonium to arrive with the coffee or banged up in a Russian prison.

There is no state police, journalists at last are free, and Kiev sparkles and looks more energetic and full of well-dressed people, bustling stores, offices and public spaces and new cars—despite the recession. Unlike neighboring Georgia, which remains a favorite of the West, Kiev avoids provocation.

It has abolished nuclear weapons.

It has sent troops to all NATO missions. Ukrainians have remained calm about Russia's Black Sea fleet, and they are fed up with being linked to Georgia as if they were a double act, when Ukraine has a stand-alone claim to be taken seriously as a European nation that wants to fit in with the Euro-Atlantic community.

There was once real hope that Europe meant it when a procession of visitors from Brussels and other EU capitals said Ukraine was en route to a European future. But the West got frightened last August, after the Russian invasion of Georgia, and bought into the Russian line that plans to admit Ukraine to NATO meant trouble and strife—though this had also been the Russian line on NATO membership for Poland, the Baltic states and Black Sea nations like Bulgaria and Romania.

Now this kind of nyetpolitik is getting the upper hand. Earlier this month U.S. Secretary of State Hillary Clinton staged a photo op with her opposite number from Moscow pressing a "reset" button. But reset for Moscow means a free hand to dictate Ukraine's internal affairs.

Clearly, the Kremlin has never adjusted to the idea that Ukraine is its own nation—"whole and free," to use the first President Bush's phrase about the nations that emerged after the end of Sovietism. Russian leaders still think of Kiev as Russia's "mother," compared to its heart in St. Petersburg and brains in Moscow.

And, obviously, Russia matters more than Ukraine to both Obama and Europe. On Iran, on nuclear-weapons treaties, on transit access to Afghanistan, Russian cooperation is the goal of post-Bush foreign policy. But help for Ukraine can come in the form of soft power. EU leaders can visit more and encourage trade and investment.

Brussels might end a repressive EU visa regime that means a Ukrainian university professor who used to need only a multiple-entry visa to go repeatedly to universities in Western Europe must now apply for each single trip. The Ukrainian military needs help to modernize, and it should get that help as a thank-you for taking part in NATO missions.

Indeed, with Russia breathing down its neck, the last thing Kiev needs is for Paris and Berlin and Washington to create a new axis of complacency that uses the incoherence of Ukrainian politics to justify accepting the Moscow world view that places Ukraine firmly in Russia's sphere of influence.

What's needed now is a new policy that treats Ukraine, warts and all, as a European nation. Instead of listening to the nyet from Moscow, the United States and the EU need to start saying da to Kiev's moderate and modernizing politicians.

Certainly this will be hard for Moscow to accept, but bringing Ukraine into Europe—in the full sense of a path toward EU and NATO membership—might even help encourage Russia to see itself as a future partner of the EU and the United States, in place of the scratchy rivalry Moscow now creates in the Euro-Atlantic community.

Source: Newsweek

Cold Comfort For Ukraine

LONDON, England -- Ukraine's hopes of successfully co-hosting the European Championships in 2012 could be about to hit the buffers after a Sunday Herald investigation revealed that the company responsible for transport infrastructure projects has yet to raise the $7 billion it promised the Ukrainian government.


Sun Land Group, owned by Daniel Mejia, a Miami-based Dominican businessman, last year promised to raise $7bn to invest in 2000km of new roads and bridges needed for 2012. As he signed the contract, Mejia said: "We believe our experience and knowledge of credit resources positions Sun Land to successfully complete these projects on time." Asked last week, 13 months later, if this is still the case, he said it was now "dependent on the Ukrainian government".

After the signing ceremony, Mejia issued a press release trumpeting the presence of "Mr Motoo Kusakabe from the European Bank of Reconstruction and Development".

This was encouraging. If the contract was backed by such a prestigious institution, surely it was bound to succeed. But last week the EBRD denied "any formal or informal relationship with the Sun Land Group Corporation" and said Kusakabe was not from their bank. He worked for a Japanese bank official and attended in his private capacity. Mejia explained last week that "Mr Kusakabe is our distinguished friend".

Has the $7bn been raised? Mejia replied: "The Ukraine government must complete all approvals." Then the money will flow, he insists, through a "private placing structure, directly handled by our company". However, Mejia declined to identify banks likely to provide the money.

Mejia's Sun Land business took off in the Dominican Republic with a $76 million deal in 2000 to supply military equipment. His good relationship with president Hipolito Mejia there secured a $115m public works contract the following year.

Worries about Sun Land soon surfaced in local newspapers and there was uproar when it was revealed how the money was being raised for its projects. Critics claimed officials were creating financial notes - a kind of IOU - that Daniel Mejia could sell abroad, pocketing commissions, according to the contract, of nearly 14%.

This caused upset when the country allegedly broke public spending promises to the IMF. The Miami Herald termed it one of the Dominican president's "major scandals".

Sun Land's dealings were soon being described as "controversial" and "questionable" and even "jeopardising the state". It was then uncovered that Sun Land was charging $130m to re-equip the country's police and other services.

Two companies Mejia said were supplying equipment couldn't be traced. Critics said cars and motorbikes were overpriced and alleged Daniel Mejia was charging $10,000 for $1000 computers.

Jorge Pineda, Editor of Dominican Today said: "We had never heard of the Sun Land company. There was no public tendering and we couldn't understand how they got the contracts. Because of robust reporting by our media and the public outcry that followed, the government had to cancel Sun Land's last contract."

Daniel Mejia rejects all criticisms, denies his prices were inflated and insists: "The contract is not dead. That would require an act of Congress."

Mark Blinder, confirmed by Daniel Mejia's Miami office as the company's agent in Ukraine, claims that 40% of Sun Land is owned by the State of Florida.

But there's no evidence of that in the company's filings. They admit to just four employees and annual sales of only $260,000. Blinder also claims that former Florida Governor Jeb Bush, brother of the American president, will be a "consultant" to the project.

"I am one of the people who came up with this project," says Blinder. "Sun Land's participation is the result of selection work on the world financial markets."

Blinder's relationship with Daniel Mejia was unearthed by Kiev reporter Vlad Lavrov who tracked him to an apartment in one of the city's most prestigious developments. "He was surrounded by fine art and paintings," says Lavrov, "and souvenirs from Odessa, his home town. Blinder was very confident about Daniel Mejia and his Sun Land company. Then I showed him the company's Florida records. He went red and started mumbling. He seemed lost for words."

When Lavrov raised the criticisms of Sun Land in the Dominican Republic, Blinder replied: "They hate Sun Land. Daniel Mejia has a good relationship with the president. Those who are against Sun Land oppose the president.

"Sun Land has been recommended to Ukraine by the US government," Blinder insisted.

Lavrov adds: "When I asked him about allegations in Germany and Spain that he was Russian Mafia and involved in money laundering - and more - he stood up and went out to his balcony. It was December and very cold. He smoked a cigarette then came back in and spoke in a self-pitying way."

He explained to Lavrov: "I lived in Spain for quite a long time. This story caused me a lot of headaches. It was in the summer when journalists usually have nothing to write about.

At that time any Russian who had more than one million dollars on his account, a private house and guards, especially in Basque country where they don't like foreigners, would automatically be considered connected to mafia."

Blinder says a new business, Sun Land Ukraine, will be set up "with 100% foreign capital and my direct participation".

Companies who want a share of the business will have to play "by local rules".

Recently Daniel Mejia has teamed with a two-man business, the Las Vegas based Bioolio Group which promotes a "$10 million Biodiesel Project". When the company registered two years ago annual earnings were estimated at less than $10,000. Nevada officials closed them down because they failed to file adequate information, but now they claim "sustainable and consistent growth" and an "enhanced place in the marketplace".

Meanwhile the clock is ticking to Euro 2012. Uefa president Michel Platini is due to visit Ukraine next month for a final decision on whether the country is making sufficient progress and while stadium construction may be running on schedule, the need for roads could yet prove enough to scupper Ukraine's hopes.

Source: Sunday Herald

Klitschko Retains WBC Belt, Stops Gomez In Ninth

STUTTGART, Germany -- Vitali Klitschko stopped Juan Carlos Gomez in the ninth round Saturday night, easily retaining his WBC heavyweight title.

Ukraine's boxer Vitali Klitschko, left, punches Cuba's boxer Juan Carlos Gomez, right, during the WBC heavyweight Championship fight in Stuttgart, Germany, on Saturday, March 21, 2009. Klitschko retained his WBC heavyweight title by beating Juan Carlos Gomez on a technical knockout in the ninth round on Saturday.
The 37-year-old champion twice put down the Germany-based Cuban defector, in the seventh and ninth rounds, before the referee Daniel Van de Wiele stopped the fight with 1 minute, 11 seconds remaining in the round.

Klitschko (37-2, 36 KOs) was making the first defense of the title he reclaimed by stopping Samuel Peter in dominating fashion last October. The Ukrainian, whose brother Wladimir holds two other versions of the title, hasn't lost since getting knocked out by Lennox Lewis in 2003.

"I knew that he was a world-class boxer," Klitschko said. "I said before that the fight would not be easy."

At 6-foot-7, Klitschko had a size advantage of more than 3 inches and 19 pounds against his southpaw opponent, who tired in the middle rounds and eventually couldn't move fast enough to get inside of Klitschko's long reach.

Gomez (44-2) joked afterward that he had not expected to last so long.

"I thought I gave Vitali a very hard fight but I realized it wasn't enough," Gomez said. "He was so tall and so heavy."

Trainer Orlando Cuellar said it was his decision to send Gomez out for the ninth.

"I asked him, 'Can you try for one more round?' He was a very valiant fighter," Cuellar said.

The 35-year-old Gomez was the mandatory challenger and Klitschko's former sparring partner, and was trying to become the first heavyweight champion from Cuba.

Gomez managed to frustrate the champion early, keeping his hands high to fend off jabs and peppering Klitschko with right hands.

Klitschko landed his first big right midway through the second round, drawing a smile from Gomez, who showed he could push the bigger man back when he landed a few combinations.

The champion found success leading with his right in the fourth as he began to take control, and opened a small cut on Gomez's right eyebrow in the fifth.

A cut opened high on Klitchsko's forehead in the sixth, and he was forced to backpedal to the ropes in the seventh. But that effort seemed to tire the Cuban, who lowered his hands and provided a better target for Klitchsko, who dropped Gomez to a knee for a count of eight.

Gomez was trapped in the corner and took another big right, and the challenger pulled both fighters to the ground before ending the round defending himself in his own corner.

Gomez got some breathing space in the ninth when Klitschko was reprimanded for gouging, but Klitschko just launched into another assault, downing Gomez by the ropes with another right and finishing the fight a minute later.

"I was a little hectic," Klitschko said. "I wanted to end the fight earlier but I didn't get to hit him enough."

Klitschko said he wants to meet Russian giant Nikolai Valuev, who holds the WBA title, but his next battle might well be in the court room.

Klitschko has appealed to the Court of Arbitration for Sport in Switzerland, which will decided whether the WBC can force him into another mandatory defense against Russian former champion Oleg Maskaev.

Wladimir, who was in his brother's corner, holds the IBF and WBO versions of the heavyweight title and the Klitschkos have long talked about rounding up all the belts between them.

Wladimir Klitschko is in negotiations to face Britain's David Haye, the charismatic former cruiserweight champion, on June 20.

A three-time champion, Vitali retired because of injuries and vacated the WBC belt in 2005, only to return last October and reclaim when Peter decided not to come back for the ninth round.

Gomez previously held the WBC cruiserweight title for four years before vacating in 2002 to move up to heavyweight. He earned the right to face Klitschko by winning a unanimous decision over Vladimir Virchis last September.

On the undercard, two veteran American southpaws who sparred with Klitschko to prepare him for Gomez won against German opponents.

Tony Thompson (32-2, 20 KOs) stopped Adnan Serin in the sixth round, and Chris Byrd -- who defeated Vitali to win the WBO belt in 2000 and lost it to Wladimir six months later -- stopped Mathias Sandow in the fourth round.

The 38-year-old Byrd (41-5-1) now fights in the cruiserweight division.

Source: ESPN

Heavyweight Champion Vitali Klitschko Aims To Impress US Fight Fans

STUTTGART, Germany -- Heavyweight champion Vitali Klitschko hopes to impress the lucrative American market when he defends his WBC title against Cuban defector Juan Carlos Gomez on Saturday.

Ukrainian Vitali Klitschko (L) and Cuban defector Juan Carlos Gomez.
The 37-year-old Ukrainian's bout is being shown live at 5 p.m. ET in the United States, the traditional home of boxing's signature division where interest has waned since Lennox Lewis retired five years ago.

Klitschko, whose younger brother Wladimir holds the WBO and IBF versions of the heavyweight title, is making a mandatory defence against the 35-year-old Gomez, who is based in Germany.

"I like Juan a lot. He's a real nice guy and a good buddy of mine," Klitschko said. "It's a real pity that I now have to beat him up."

With an eye on future fights that could be marketed in the U.S., Klitschko hopes to record an impressive win and then take on the WBC in a courtroom battle for the right to choose his next opponent.

The sanctioning body wants to force Klitschko to fight Russian Oleg Maskaev within four months because of a past deal it struck when the 40-year-old former soldier was champion.

Klitschko (36-2, with 35 KOs) has appealed to the Court of Arbitration for Sport in Switzerland to avoid that prospect.

He prefers a challenger more attractive to broadcasters such as Chris Arreola, an unbeaten 28-year-old from Los Angeles.

However, the six-foot-seven Klitschko must first get past Gomez, a former cruiserweight world champion. The 6-3 1/2 Cuban will to use his southpaw style and technical skills in an attempt to overcome his size disadvantage. Klitschko weighed in at 249 pounds on Friday and Gomez was 230 pounds.

Klitschko has promised to teach Gomez "a heavyweight lesson," and give him the "hardest fight of his life."

Gomez used to spar with both brothers and help them prepare to face left-handed fighters at a time when all shared the same promoter in Germany.

Gomez (44-1, with 35 KOs), previously held the WBC cruiserweight title for four years before vacating it in 2002 to move up to the heavyweight ranks.

The Cuban, who calls himself "The Black Panther," predicted he will "destroy" Klitschko, taking a swipe at his nickname, "Dr. Iron Fist."

"I'll toy with 'Dr. Wimp' in such a way and I'll outbox him that there won't be two opinions about the outcome: 'The Black Panther' will be world champion again," Gomez said.

The Cuban earned the right to challenge Klitschko when he won an unanimous decision over Vladimir Virchis last September.

Rankings by The Ring magazine have Gomez at No. 9, while Klitschko is No. 2 behind his brother.

Klitschko is a three-time heavyweight champion with a post-graduate degree in sports science.

He won and lost the WBO belt within 10 months in 1999-2000, then impressed when losing to Lewis in six rounds in 2003. Doctors would not let Klitschko continue with a cut over his left eye.

He captured the vacant WBC title a year later by stopping Corrie Sanders of South Africa in the eighth, but injuries forced him into retirement after one defence.

After twice failing in bids to be elected mayor of the Ukraine capital Kyiv, Klitschko returned to the ring last October and stopped Samuel Peter when the Nigerian decided not to come out for the ninth round.

Source: The Canadian Press

EU, Ukraine To Agree On Gas Network Repairs And Reforms

BRUSSELS, Belgium -- The European Union and Ukraine on Monday are set to agree on a programme of political reforms and physical repairs to the former-Soviet state's giant gas network, EU officials said. One fifth of all the natural gas consumed in the EU flows through Ukraine's 13,500-kilometre network of gas pipelines, but experts say that that network will need some 2.5 billion euros (3.4 billion dollars) in investment over the next six years just to keep pipes and pumping stations in running order.

Ukrainian Naftogaz pipelines.
Analysts say that Ukrainian monopoly Naftogaz, which runs the pipeline system, finds it hard to attract the necessary investment because of a perceived lack of transparency and accountability both in its management and in Ukraine's top political leadership.

On Monday, Ukraine's President Viktor Yushchenko and Prime Minister Yulia Tymoshenko - currently feuding ahead of presidential elections - are set to meet the head of the EU's executive, Jose Manuel Barroso, and officials from the World Bank, European Investment Bank and energy companies in Brussels.

At the meeting, they are expected to sign a joint declaration committing Ukraine to reforming the rules by which it operates its gas network.

That should pave the way for Western and Russian donors to invest in the renovation of the network, EU diplomats told Deutsche Presse-Agentur dpa.

The question of Ukraine's gas transit system has been a highly-charged one ever since a row with Russia in 2005-06 provoked Russian gas monopoly Gazprom to shut supplies off to Ukraine, causing severe shortfalls in Europe.

The drama was repeated in January in an ill-tempered spat that crippled gas supplies to the EU for two weeks.

The EU is now keen to reduce its dependency on both Russia and Ukraine as energy suppliers.

On Thursday, EU leaders agreed to give 200 million euros to the "Nabucco" pipeline project, which is meant to bypass both countries and bring gas direct from the Caspian Sea to Europe.

Source: DPA

Ukraine, Ex-Soviet Currencies May Drop More, Deutsche Bank Says

KIEV, Ukraine -- The currencies of Ukraine, Kazakhstan and other former Soviet republics may still have to be devalued by as much as 20 percent as their economies readjust amid the global financial crisis, Deutsche Bank AG said.

Ukrainian currency
Ukraine’s hryvnia has lost 38 percent versus the dollar over the past six months as the central bank drained a third of the country’s foreign-currency reserves striving to arrest the drop.

Nearby Kazakhstan, Belarus and Armenia all allowed their currencies to weaken around 20 percent since January, as credit markets seize up in the worst financial crisis since the Great Depression and demand for their exports slump in first global recession since World War II.

“In some cases an additional round of depreciation of as much as 20 percent may be warranted,” Yaroslav Lissovolik, chief economist in Moscow at Deutsche Bank, the world’s largest currency trader, said in an interview in the Russian capital late yesterday. “We expect another round of weakness on the external outlook, including Ukraine.”

Nations throughout emerging Europe are having to ease their fixed currency regimes as the global recession saps growth and leaves countries like Ukraine struggling to fund current-account deficits in the absence of foreign investment.

Belarus, Ukraine and Armenia are all receiving bailouts from the International Monetary Fund, while Kazakhstan has bought stakes in some of its largest banks as the 58 percent drop in oil prices over the past six months threatens to end a decade of economic growth.

As Ukraine’s economy contracts 6.2 percent, the hryvnia will probably slide 13 percent to 9.2 per dollar by the end of this year before weakening further in 2010, Lissovolik said. The hryvnia was unchanged at 7.9999 per dollar by 2:57 p.m. in Kiev today, according to Bloomberg data.

Hryvnia Defense

The Natsionalnyi Bank Ukrainy has already raised the country’s refinancing rate to 18 percent, restricted withdrawals from banks and warned lenders against buying and selling the currency at a weaker level than an average daily rate set by the central bank as a way of stopping the hryvnia’s hemorrhage.

Still, as the nation heads toward elections expected by early next year, “there will be more populism and more pressure to inject liquidity” which banks may convert to foreign currency, depressing the hryvnia, Lissovolik said.

Kazakhstan’s tenge has held steady around 150 per dollar since Feb. 4, when the country’s central bank allowed the managed currency to weaken 21 percent. Nearby Russia, meanwhile, let the ruble drop 44 percent against the dollar from a July record as Urals crude, the nation’s chief export blend, slumped 67 percent and the economy heads for its first recession since its 1998 debt default.

Kazakh Profile

Kazakhstan, which holds 3.2 percent of the world’s oil reserves according to BP Plc, has a similar economic profile to Russia and so is under pressure to let the tenge fall at least as much as the ruble, Lissovolik said.

Kazakhstan is also not receiving an IMF loan “like most of the other problem countries in the region” he added. A decline of as much as 20 percent from current levels would leave the tenge at about 190 per dollar, based on Bloomberg calculations.

The Belarusian ruble was devalued 21 percent to 2,656 per dollar on Jan. 6, six days before the IMF, which advocates flexible exchange rates, approved a $2.46 billion credit line.

Armenia allowed the dram to float freely on March 3, spurring a 20 percent drop against the dollar, as the IMF said it would provide the country with a $540 million loan. A 20 percent drop would leave Belarus’ ruble at 3,300 per dollar and the dram at about 470, from today’s 374.25 per dollar.

Source: Bloomberg

Tymoshenko Seeking $5 Billion Loan From Russia Amid Worsening Crisis

KIEV, Ukraine -- Prime Minister Yulia Tymoshenko will travel to Russia early next month to seek a $5 billion (€3.66 billion) loan for Ukraine's collapsing economy, her office said Thursday, defying the pro-Western president who is her bitter political rival.

Prime Minister Yulia Tymoshenko
President Viktor Yushchenko has assailed Tymoshenko over her efforts to secure a loan from Russia, saying it would make Ukraine overly reliant on a huge neighbor determined to bolster its influence over the country and keep it out of NATO.

Tymoshenko and Russian Prime Minister Vladimir Putin are also expected to discuss adjustments to a long-term gas agreement they brokered in January, ending a price dispute that prompted a two-week cutoff of Russian natural gas supplies to Europe via Ukraine.

The agreement, which stipulates how much gas is purchased and delivered to European consumers through pipelines crossing Ukraine, must be changed because Ukraine and European countries have slashed consumption due to the global financial crisis, Tymoshenko's top aide Oleksandr Hudyma said.

Tymoshenko is due in Moscow on April 7-8, Hudyma said. She will seek the loan in order to help cover a huge budget deficit and pay off the debts of the embattled energy giant Naftogaz, he said.

In Moscow, Russian Foreign Ministry spokesman Andrei Nesterenko said Russia had received a request for a $5 billion loan to Ukraine and was considering it.

Tymoshenko's planned trip is likely to deepen her long-standing political confrontaiion with Yushchenko, a former ally she has vowed to succeed in a presidential election expected late this year.

The two teamed up against a Russian-backed presidential candidate in the 2004 Orange Revolution protests that ushered Yushchenko to power, and both favor closer integration with the U.S. and Europe.

But Tymoshenko has proved more willing to negotiate with Russia, and held lengthy talks with Putin in Moscow in January to come up with the deal that ended the embarrassing European gas supply cutoff.

Hudyma insisted that loan she is seeking, with payment over five to 10 years at an annual interest rate of 10-12 percent, will have no political conditions or implications attached.

Ukraine is reeling from the global financial meltdown, which has depressed demand for the steel and chemicals that are crucial sources of its export income.

Industrial output fell by nearly one-third in February, year-on-year, the national currency has shed nearly half its value against the U.S. dollar since September and the economy is expected to shrink by 6 percent this year.

Ukraine is struggling to stay afloat without the crucial second installment of a $16.4 billion (€12 billion) emergency loan from the International Monetary Fund.

The IMF withheld the payment last month because of the Tymoshenko's reluctance to trim government spending, and it has yet to come through despite signs of progress toward reviving the deal.

Source: International Herald Tribune

Kiev's Mayor Just Gets Weirder And Weirder

KIEV, Ukraine -- He has recorded a disc of 1980s cover versions, proposed auctioning off his kisses and given a news conference in a pair of swimming trunks. Meet Leonid Chernovetsky, mayor of Kiev, whose increasingly erratic behaviour is shocking the city of three million.

This 2006 photo shows Kiev's Mayor Leonid Chernovetsky preparing for a lie detector testing during his mayor election campaign in Kiev. He has recorded a disc of 1980s cover versions, proposed auctioning off his kisses and given a news conference in a pair of swimming trunks.
Even by the colourful standards of Europe's mayors, such as the mop-haired mayor of London Boris Johnson, Chernovetsky is one of a kind.

Earlier this month the mayor -- known as "Kosmos" for his increasingly other-worldy behaviour -- took himself off on leave for health reasons but then returned to his desk early.

And to show he was still on top form, on Wednesday he performed a full fitness circuit in front of astonished local media. Followed by a news conference, dressed only in a pair of speedoes.

"I want to demonstrate to the whole world that I am absolutely fit physically and mentally," Chernovetsky said in comments broadcast on Ukrainian television.

The Interfax Ukraine news agency counted that Chernovetsky ran once round the capital's Dynamo stadium, performed 15 chin-ups and swam 15 metres (49 feet) in the swimming pool.

This demonstration came after a parliamentary commission investigating his work as mayor advised him last week to undergo a psychiatric examination.

Sitting on a poolside wooden bench wearing a pair of swimming trunks, he loudly denounced his parliamentary enemies in front of a sea of microphones.

"Look at these people," he said of parliament. "They pass judgment on me and want to lock me up for the rest of my life behind bars in a mental clinic."

He retained control of the town hall in elections in May 2008 on the back of support from elderly voters, beating off a challenge from former world heavyweight boxing champion Vitaly Klitschko.

Chernovetsky won the post of mayor in 2006 following a career as a businessman in which he built a multi-million dollar fortune but was also known for his generous handouts to Kiev's poor.

He has adopted a string of novel and sometimes bizarre measures to balance the municipal books amid the economic crisis, saying he was prepared to sell everything that can be sold "including the air you breathe."

Over the course of the last months, he has sought to quintuple charges for municipal services and charge for the entry of cars to cemeteries.

"Everything can be put up for lottery: you can have a trip in my armoured Mercedes... a kiss from me or receive a book from me in front of all the Ukrainian press corps," Ukrainian media have quoted him as saying.

Perhaps his most ambitious scheme was to produce a record of covers of 1980s songs. "I will earn a million dollars a day because who sings better than me? Nobody, only God," he has said.

Ukrainian news agencies even reported that he had sacked the head of Kiev zoo for failing to find a female mate for the "very handsome" elephant he sponsors at the zoo.

The increasing doubts about the mayor's behaviour come as Ukraine fights a dire economic crisis that has hit its industrial sector and national politics remains mired in instability.

His behaviour has already become enmeshed with the national political chaos and President Viktor Yushchenko used his powers to sack five of Chernovetsky's deputies and block the bid to raise municipal charges.

By contrast, his budget was passed at the municipal council with the surprise support of the political faction of Yushchenko's sworn political enemy, Prime Minister Yulia Tymoshenko.

Although the mayor can readily count on the support of his core constituency of "dear babushkas (grandmothers)," polls have already shown Chernovetsky's support is waning.

The mayor himself complains of being unloved.

"I have a small amount of land. I live like most people in Kiev. I don't know my neighbours. They avoid me and they detest my cat Yasha," he said last week.

At the end of February, thousands of inhabitants of the Ukrainian capital protested outside the town hall in a bid to secure his removal.

Source: AFP

Tymoshenko Hopes Ukraine's Cooperation With International Monetary Fund Will Resume In Coming Weeks

BRUSSELS, Belgium -- Prime Minister Yulia Tymoshenko has said she hopes that Ukraine will resume its cooperation with the International Monetary Fund (IMF) and that the country will get a second tranche from the fund in the coming weeks.

European Union foreign policy chief Javier Solana (R) shakes hands with Ukraine's Prime Minister Yulia Tymoshenko during a meeting in the EU Council building in Brussels March 19, 2009.
"I hope and believe that Ukraine-IMF cooperation will continue in the coming weeks, and that Ukraine will get the second tranche," she told journalists in Brussels on Thursday, following a summit of the European People's Party.

Tymoshenko said that "much attention is being paid" to cooperation between Ukraine and the IMF. She expressed hope that the Ukrainian parliament would soon pass the laws needed to resume cooperation with the IMF.

She said that the question of Ukraine-IMF relations had been discussed during her meeting with the EU's High Representative for Common Foreign and Security Policy Javier Solana.

Tymoshenko also said that the economic and financial situation in Ukraine is similar to the situation in most countries around the world, and that Ukraine uses "the same range of measures being used by most countries."

She said that Ukraine had made the right choice after planning the deficit of its state budget for 2009 at 3%.

"We were absolutely right not to foresee a zero deficit of the budget," she said, adding that she had drawn this conclusion after a discussion of measures being taken by European countries to tackle the economic crisis.

Tymoshenko said that most officials predicted during the summit that 2012-2013 would be the turning point in countering the crisis, and after then economic growth would resume.

"However, everybody wants to believe that late in 2009 the anti-crisis measures of foreign countries will be effective and that stabilization will start," she said.

She said that the participants in the summit had paid a great deal of attention to the social element of the crisis.

"Market mechanisms should be socially-oriented amid the crisis," she said.

Tymoshenko said that the summit had also focused on the transparency of the banking system and the need to take measures to stabilize it.

Source: Interfax-Ukraine

Will Yushchenko Be Impeached?

KIEV, Ukraine -- The Party of Regions may support BYuT's initiative regarding the impeachment of President Yushchenko, PR member Anna Herman told journalists.

MP Anna Herman
"I think if relevant laws are adopted, the impeachment procedure may be started soon," she said in response to the question whether the Party of Regions would support the impeachment initiative of BYuT and the Communist party.

At the same time Herman underlined that the Party of Regions would not "make friends with someone against someone." "Our parnership is with the people of Ukraine," she added.

The MP pointed out once again that their political party supports the idea of impeachment. "But at the same time we also support the resignation of the government. We don't care who leaves first - the Premier with her Cabinet or the President with his Secretariat," she summed up.

Meanwhile, panic is setting in the President's Secretariat. Its officials are concerned about an "anti-constitutional coup."

Source: Forum

A Major Ukrainian Bank Sued in New York

NEW YORK, NY -- A major Ukrainian bank has been sued in Federal Court in New York, under the Racketeer Influenced and Corrupt Organization Act of 1970 ("RICO"), for allegedly operating a gigantic Ponzi scheme in Ukraine and allegedly transferring the money to two New York banks, Citibank, N.A. and The Bank of New York Mellon.

Petr Baron, CEO VAB Bank
Both Citibank and The Bank of New York Mellon are also named as defendants in the action.

The lawsuit which was commenced in the United States District Court, Southern District of New York, accuses All-Ukrainian Joint Stock Bank a/k/a/ Vseukrainsky Aksionerny Bank ("VAB") of using fraud and deception to induce the plaintiff and others, to deposit money with the bank pursuant to a so-called deposit agreement in which VAB promised depositors a high rate of interest on money deposited with the bank and the right to terminate the agreement early and to receive their money back on short notice.

The complaint alleges that the representations by VAB contained in the deposit agreement were allegedly false and fraudulent in that the promised high interest rate and the right of early termination of the agreement were merely devices to induce the plaintiff, and others, to in the aggregate, deposit millions, if not billions of dollars, with VAB and that various portions of the money which were deposited with VAB have allegedly been transferred to accounts maintained by VAB at Citibank and The Bank of New York Mellon; were allegedly used to pay earlier depositors, as part of the Ponzi scheme, and were otherwise allegedly misappropriated.

Citibank and The Bank of New York Mellon are alleged to have aided and abetted VAB's fraudulent scheme and to have violated, as correspondent banks to VAB, their obligations under the Patriot Act.

The lawsuit seeks to recover, among other things, compensatory and punitive damages from VAB, Citibank and The Bank of New York Mellon. The plaintiff in the action is being represented by New York attorney Anna Val.

Source: Press Release 365

EU's Barroso Urges Ukraine Leaders To Cooperate On IMF Loans

BRUSSELS, Belgium -- European Commission chief Jose Manuel Barroso urged Ukraine's feuding leaders on Wednesday to overcome their differences in order to secure vital IMF loans.

European Commission chief Jose Manuel Barroso.
"The duty of all responsible politicians is to work together for the common good of (their) country," Barroso told journalists after meeting with Ukrainian President Viktor Yushchenko in Brussels.

"This is the message I conveyed to President Yushchenko and I hope to convey to Prime Minister (Yulia) Tymoshenko," he said at a news conference with the Ukrainian president.

The IMF is considering whether to grant a second instalment of $1.9 billion from a $16.4 billion loan package to help the country cope with a severe economic crisis.

But Ukraine risks missing out on the money over concerns on its ballooning budget deficit and political tensions between Tymoshenko and Yushchenko, which have paralyzed decision-making in the country.

"As president of the country, I believe the cooperation with the IMF mission and generally with all international financial institutions is compulsory...for Ukraine to get out of this crisis," Yushchenko said.

"I'm sure in the nearest future the government and parliament will take all the necessary steps" towards securing the IMF's agreement for the loans, he said, adding he expected lawmakers to pass crucial bills in the coming days.

Source: AFP

Study: Chernobyl Animals Worse Affected Than Thought

LONDON, England -- Radiation has affected animals living near the site of Ukraine's Chernobyl nuclear disaster far more than was previously thought, a study showed on Wednesday, challenging beliefs that local wildlife was on the rebound.

Anders Moller in Chernobyl
The study showed that numbers of bumble-bees, butterflies, spiders, grasshoppers and other invertebrates were lower in contaminated sites than other areas because of high levels of radiation left over from the blast more than 20 years ago.

The findings challenge earlier research that suggested animal populations were rebounding around the site of the Chernobyl explosion in Ukraine, which forced thousands to abandon their homes and evacuate the area.

Estimates of the number of deaths directly related to the accident vary. The World Health Organisation estimates the figure at 9,000 while the environmental group Greenpeace predicts an eventual death toll of 93,000.

"We were amazed to see that there had been no studies on this subject," Anders Moller, a researcher at the National Centre for Scientific Research in France, who led the study, said in telephone interview.

"Ours was the first study to focus on the abundance of animal populations."

Researchers said they had compared animal populations in radioactive areas with less contaminated plots and found that some were nearly completed depleted of animal life.

"There are areas with an abundance of 100 animals per square metre," Moller said. "And then there are areas with less than one specimen per square metre on average; the same goes for all groups of species."

The researchers also found that animals living near the Chernobyl reactor -- which was covered in a protective shell after it exploded in April 1986 -- had more deformities, including discoloration and stunted limbs, than normal.

"Usually (deformed) animals get eaten quickly, as it's hard to escape if your wings are not the same length," Moller said. "In this case we found a high incidence of deformed animals."

The findings challenge the view of Chernobyl as ecologically sound, despite the fact that Ukrainian officials have turned it into a nature reserve, with wolves, bison and bears.

Earlier research into the area ignored the fact that animal populations had grown unimpeded in the absence of humans for many years after the blast, Moller said.

"We wanted to ask the question: Are there more or fewer animals in the contaminated areas? Clearly there were fewer," said Moller, who has worked on Chernobyl since 1991.

While researchers focused on the 30 kilometre radius around the Chernobyl reactor, the fallout from the explosion covered a vast swathe of Eastern Europe, including parts of Russia, Ukraine and Belarus.

The findings probably apply to those areas as well, Moller said, adding that any decontamination effort was unlikely due to the extent of the fallout.

Source: Kyiv Post

Ambassadors: Political Instability Prevents Ukraine From Joining NATO

KIEV, Ukraine -- Political instability in Ukraine is a major obstacle of the country on its way to joining NATO, according to the ambassadors of Poland, Hungary and the Czech Republic to Ukraine.


They were speaking during a press club at the Ukrainian Foreign Ministry, entitled "Ten years of NATO membership: in hindsight," in Kyiv on Tuesday.

"I think that in the technical context, you are working quite effectively and successfully. It is difficult to make any criticisms here," Polish Ambassador to Ukraine Jacek Kluczkowski said, adding that the "major problem here is the absence of any stability in the state."

He said that when Poland was joining the alliance, there was domestic understanding and unity between the political parties in this connection.

He said he knew many representatives of the Regions Party who earlier supported Ukraine's integration with the alliance, however, serious changes have now occurred.

"Perhaps it is due to the lack of talk and dialogue between political parties," Kluczkowski said.

Hungarian Ambassador to Ukraine Andras Barsony said that the alliance acts, first and foremost, as a military political organization.

"The issue concerns not only the position and activity of the Foreign Ministry or the Defense Ministry, but also domestic political work in the country. If the domestic political situation remains unstable, there will be no chance [for Ukraine to join NATO]," he said.

He also said that NATO could not interfere in the internal affairs of Ukraine, because it is a sovereign and independent state - it could only help the country on its way to stabilizing the domestic situation.

"We have no moral right to interfere with an independent state. We can only support it," the ambassador said.

"NATO enlargement means the enlargement of the stability zone," Czech Ambassador to Ukraine Jaroslav Basta said.

He said that if a country wants to gain NATO membership, there should be political stability in this country.

Source: Kyiv Post

Russia-Ukraine Gas Watchmen

KIEV, Ukraine -- Although Ukrainian Prime Minister Yulia Tymoshenko brokered a deal with Russian Prime Minister Vladimir Putin in January to end a dragging dispute, which left millions of Europeans without gas in the middle of winter, she may have only delayed the inevitable.

Ukrainian Prime Minister Yulia Tymoshenko
Because of the price increase and terms of the contract, Kiev is likely at some stage to default on its obligations and Ukraine and Europe may be faced with Russia turning the gas off again.

A reprise of the January dispute was averted when Ukraine barely made its payment by March 7, but it is only a matter of when the dispute flares up again.

It appears that Moscow does not want a repeat stand-off. Putin said on March 12 that his country would not punish Ukraine for purchasing less natural gas this year than agreed in January. For now.

Ukrainian President Viktor Yushchenko is accusing Tymoshenko of signing an agreement that was not advantageous to Ukraine and would damage the country by providing the means for Russia to influence what goes on in Ukraine.

Tymoshenko was in effect in no hurry to resolve the January crisis and only at the last minute stepped in, appearing as the country’s saviour.

According to one scenario, Tymoshenko agreed with Putin to create a situation which would in effect create problems in Ukraine and this would allow Russia to come in and either buy up or receive access to the Ukrainian gas transportation system, to gas storage and eventually to some Ukrainian key industrial assets on an advantageous level.

For some time, Russian natural gas monopoly Gazpromhas tried to gain access to Ukraine’s transportation system but to no avail.

As a result of the agreement, Tymoshenko may have resolved a personal debt dispute with the Russians going back to the 1990s.

Tymoshenko will also probably continue to receive Russia’s support during the election campaign for presidency next year.

The internal conflict in Ukraine at the moment is about one thing and one thing only: who becomes president in 2010.

And history has shown Tymoshenko would make friends with whomever she needs to make friends with.

Initially, she made friends with the EU and the US when she felt that friendship would allow her to become president.

When the Bush administration lost power and the EU was shown to be powerless over the Russia-Ukraine gas negotiations, she shifted her allegiance to Moscow.

The Tymoshenko-Putin deal also locked out RosUkrEnergo, a controversial business entity that acted as a gas intermediary between Russia and Ukraine.

A 50-50 venture between Gazprom and Ukrainian business, the Ukrainian face behind RosUkrEnergo is Dmitry Firtash.

For some time Firtash and Tymoshenko have not exactly been close friends.

Working in the 90s as head of one of then largest gas trading companies, Tymoshenko knows the business well.

She has made a lot of money out of this business and she’s likely to continue to make to money out of this joint business.

However, with Firtash and Gazprom having a joint venture, this was impossible, so she wanted to get RosUkrEnergo out of the picture.

This is a process reminiscent of Russia under then-president Putin and Mikhail Khodorkovsky from YUKOS. Only Tymoshenko lacks Putin’s determination (and KGB training) and Firtash has connections in high places.

Firtash, Yushchenko and Valeriy Khoroshkovskyi, a billionaire media magnate, Yushchenko appointed rec en tly as deputy director of the Security Service of Ukraine (SBU) have refused to make it easy for the prime minister.

Tymoshenko has accused Yushchenko of benefiting personally from RosUkrEnergo. I met Khoroshkovskyi in Kiev in 2003 when he was Ukraine’s promising Economics and European Integration Minister.

All three men are connected by their support of a free-market economy and Ukraine’s path to Europe, but their ties may go much deeper than that.

It’s possible that Firtash has business connections with Khoroshkovskyi and is also close to Yushchenko himself, although the president has denied any impropriety about the relationship.

It’s all Ukrainian politics!

Source: New Europe

Political Analyst: Ukraine Teetering Between Chaos, Dictatorship

KIEV, Ukraine -- Ukraine is teetering between chaos and dictatorship, according to the director of the Kyiv Horshenin Institute for Management Problems, Kost Bondarenko.

Kost Bondarenko
"Ukraine is now balancing between chaos and dictatorship. The danger of dictatorship and fascism primarily appears where there is the temptation to seek simple solutions to problems... Other causes for such developments would be an increase in the strain on the country's economic and the growth of populism. As you can see, we have all these tendencies," Bondarenko has said during a round table meeting entitled "Ukraine between chaos and dictatorship. Is there a Christian answer?" on Monday in Kyiv.

According to the political analyst, Ukraine is turning into a "corrupt, speculative state."

"A state that speculates over its transit position, a state where oligarchy dictates its own laws and where power relies generally on the oligarchs… These very facts constitute a threat to Ukraine's present situation, namely balancing between chaos and dictatorship," he said.

Source: Kyiv Post

Fidel Castro's Columns Published In Ukraine

HAVANA, Cuba -- The book entitled "Fidel Castro. Reflections of the Commander of the Revolution", compiled for the first time in the Russian language, was launched in Ukraine on Friday.

Fidel Castro
Attending the presentation of the book were parliamentarians from the Supreme Rada of the Ukraine, belonging to the Party of Regions, the Communist Party, and the bloc of Primer Minister Yulia Timoshenko, as well as members of the board of directors of the Ukraine-Cuba Friendship Association, and business representatives.

During the activity, Cuba’s ambassador to Kiev, Felix Leon Carballo, thanked Dmitri Tabachnik, member of the Ukrainian Parliament, for being the initiator of this project, and described him as a friend of Cuba and a connoisseur of its history.

Tabachnik recalled his meetings with the historical leader of the Cuban Revolution, and said that he has never met a head of state that can speak in such depth on such a wide variety of subjects and be so accurate when citing statistical data.

He pointed out that the most varied themes of world interest, from climate change to the production of bio-fuels, including Washington’s policy toward Cuba, are tackled in the 58 compiled essays, written from March 2007 to November 2008.

The website of the Cuban Foreign Ministry points out that Tabachnik, who is also the vice-president of the Parliamentarian Friendship-with-Cuba Group, highlighted the fact that for almost 19 years, doctors from the archipelago have offered their services free of charge to more than 22,000 Ukrainian children, the victims of the Chernobil nuclear disaster.

Source: The Miami Herald

Ukraine And Latvia Warn Of Financial Disaster In The West If They Are Not Helped

LONDON, England -- Government officials from the two countries, which are at risk of bankruptcy as a result of the global financial crisis, told the Daily Telegraph that the European Union's biggest powers were in danger of repeating the worst mistakes of the 1930s depression by retreating into isolationism and protectionism.


Grigory Nemyria, Ukraine's deputy prime minister, said that the EU had to overcome bitter internal differences over how to deal with the economic crisis in eastern Europe when world leaders met next month at the G20 summit in England.

"The EU should not just be helping Ukraine because Ukraine is helpless," Mr Nemyria said. "It should be doing so because it is in the EU's self-interest.

"There is a high exposure in the [Western European] banking sector to Ukraine, Latvia etc that can only be addressed by acting in concert. The cost of inaction will be far greater than the cost of action."

Strategists have warned that collapsing financial sectors in countries like Ukraine and Latvia could infect the rest of Europe, leading to a series of continent-wide bank failures.

But an Austrian plea for a £140 billion ($196 billion) bail-out funded by the EU was rejected by Germany and a similar Hungarian proposal was given equally short shrift. Instead the West has signalled to some in the East that it will take care of itself first.

Nicolas Sarkozy, the French president, has come under fire after calling on leaders of industry to close factories in eastern Europe to save jobs in France. "An important challenge of the G20 is to send a message that such policies could lead to disaster," said Mr Nemyria.

His message was endorsed by Andris Miglaus, chief advisor at Latvia's finance ministry.

"Populist protectionism is creating internal frontiers that will negatively affect other areas of Europe," he said.

After a decade of impressive growth, Ukraine's export-driven economy is in meltdown. Demand for its steel and agricultural products in Russia and the European Union has collapsed, helping drive down Ukraine's currency, the hryvnia, by over 50 per cent in the past nine months.

Forecasters say that Ukraine's economy - like Latvia's - could shrink 12 percent this year.

Most experts do not think Ukraine will default this year. Instead most concern is being directed at Ukraine's financial sector, which is dominated by the subsidiaries of Western European banks.

Like other countries in the region, Ukraine has been on a credit binge. Since 2006, Ukraine's mortgage bill has increased by over 4,000 per cent. Over 10 million Ukrainians have loans, compared with under 100,000 in 2002.

But many, like Olga Symonchuk and her husband Nikolai, are now struggling to repay the banks.

A year ago, the Symonchuks decided that life in a two-bedroom Kiev flat with their two sons and their fiancées was getting a little too cramped. They decided to take out a £58,000 ($81,000) mortgage with a subsidiary of BNP Paribas to buy a second flat in the capital's suburbs.

They chose a mortgage based in dollars, because interest was half that of a local currency loan. But as the local currency collapsed, their repayments soared. The couple were also put on half-pay. Despite having their mortgage restructured, the Symonchuks have missed two monthly payments.

For the Symonchuks, like millions of Ukrainians, the majority of whom hold their debts in foreign currency.

As personal defaults grow, so do fears of a systemic collapse in the Ukrainian banking sector.

For the moment, the major foreign players in the market - Austria's Raiffeisen and Italy's UniCredit - have promised to support their Ukrainian subsidiaries. Swedish banks have promised to do the same in Latvia. But as the crisis worsens, it is unclear how long such commitments can be honoured.

Western European banks are exposed to over £1 trillion ($1.4 trillion)of eastern European debt, leading to comparisons with the subprime crisis in the United States. Austria is particularly affected, with an outstanding loan portfolio to eastern Europe of £213 billion ($298 billion), 71 per cent of GDP.

Austria's exposure has drawn ugly comparisons with the past. In 1931 Austria's Creditanstalt collapsed because of its exposure to Eastern Europe, triggering a wave of worldwide bank defaults and unleashing the darkest days of the Depression.

Source: Telegraph UK

Ukraine Is Used To Life On The Edge. Is This The Year It Slips Over?

KIEV, Ukraine -- Not long ago, Andriy Lalak was treated like one of BM Bank's most valued customers. But when he shows up there now, employees avoid him like the plague.

A protest outside a branch of the National Bank of Ukraine in Lviv.
For over a month, Lalak has been trying unsuccessfully to withdraw 100,000 hryvnia ($11,700) from his account, money he says he needs to expand the small trading company he runs in the western Ukrainian city of Lviv.

But Ukraine's cash-strapped banks, reeling from declining liquidity and a choked-off credit market, have suspended all cash withdrawals. Lalak and a small group of friends have begun to stage daily protests outside the bank.

"We are defenseless. We have no recourse," Lalak tells RFE/RL's Ukrainian Service. "It is as if there is a conspiracy not to return money to depositors like myself. Money needs to be liquid. It needs to be invested in businesses. I wanted to buy an apartment to expand my business. But as a result of this situation, my business can't develop."

Lalak's situation is hardly unique. Ukraine is struggling through a mushrooming economic crisis that the country's weak and warring political institutions appear increasingly incapable of addressing. Unemployment and inflation are on the rise, the currency is tanking, and GDP growth is shrinking at an alarming pace.

And as if all that isn't enough, the president and prime minister are barely on speaking terms as a debilitating default and crippling energy crisis looms.

Last week, Ukraine narrowly averted a new gas conflict with neighboring Russia when it paid off the final $50-million installment of a $360-million gas bill to Gazprom just hours after Russian Prime Minister Vladimir Putin threatened to cut off supplies for the second time this year. Difficult negotiations loom with the International Monetary Fund over an emergency loan.

Getting through the current crisis, which many economists call the worst global downturn since the Great Depression, presents a daunting challenge for even the most cohesive and focused governments -- and Ukraine's government is neither.

Observers say the endless bickering between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, allies in the pro-Western Orange Revolution just four years ago, is tearing the elite apart and handcuffing anticrisis efforts as the government seeks foreign assistance to ward off economic catastrophe.

"There is a total inability among the Ukrainian elite to deal with the crisis, at the economic and also at the political level," says Eugeniusz Smolar, director of the Warsaw-based Center for International Relations. "This is a time of national crisis and they are acting as if it were one of those standard mini-crises that they have been facing. This is not like that. This is a mega-crisis."

Looking Over The Brink

And it is a mega-crisis that many analysts fear could cause social unrest, opening the door to possible meddling by Russia, and potentially destabilizing a strategically important country. Just a few years ago, Ukraine -- a sprawling country of 46 million people tucked between Russia and the European Union -- was touted as one of the region's most promising young democracies. Now, that legacy is deeply in doubt.

In recent weeks, truckers angry over high taxes briefly blocked the vital Kyiv-Odessa highway. Kiosk owners in Kyiv have demonstrated against the city's plans to force them to buy new stalls. And workers at a combine factory in Kherson, in eastern Ukraine, briefly occupied the city hall to protest wage arrears.Entire towns, unable to pay utility bills, have gone days without heat or water.

Ukrainians have proven remarkably resilient in difficult times, but analysts say the current crisis could push this well-worn tolerance for economic pain to the breaking point.

"Ukrainians really have an ability to muddle through difficult situations. They also have this ability to go to the edge, look over the brink, and then draw back. The problem is that if you go to the brink too many times, you can slip over," says Steven Pifer is a former U.S. ambassador to Ukraine who is now a visiting fellow at the Brookings Institution.

"This is a year where the Ukrainians, if they are not careful, could end up in a very difficult situation, or could end up missing the opportunity to reduce just how difficult this year is going to be."

Ukraine's economy is largely dependent on steel and chemical exports, both of which have plummeted amid declining global demand.

Industrial production has fallen by 34.1 percent in January alone, the sharpest drop since Ukraine won independence in 1991. The country's main stock market, the PFTS index, has tumbled 33 percent this year. Unemployment hit 3.2 percent in January, and workers are bracing for more job losses as key steelmakers cut production.

The sharp downturn is reminding Ukrainians of the hardships they endured in the early 1990s following the breakup of the Soviet Union.

"People remember times when they were not paid for months and they had to rely on some small plot of land outside of town from which they brought back potatoes," Smolar says. "People thought they put these bad times behind them. But it is not impossible that these bad times are returning."

Hostage To Politics

In an effort to avert a default on its sovereign debt and to stabilize its banking system and currency, Ukraine turned to the IMF last year for a $16.4-billion bailout loan -- but those negotiations have been hampered by the ongoing feud between Yushchenko and Tymoshenko.

The IMF released the first $4.5-billion tranche of the loan in November. But after Tymoshenko's government put forward a budget projecting a 5-percent deficit in February, the IMF -- which is demanding a smaller deficit -- refused to release the second $1.9-billion installment.

The IMF is also seeking a gradual increase in Ukraine's retirement age, which is currently 60 for men and 55 for women, and an end to state subsidies for natural gas to households. Both are moves that the prime minister, who is looking ahead to next year's presidential elections, is reluctant to make.

Tymoshenko won votes in the September 2007 parliamentary elections by promising lavish social spending and has been loathe to cut the budget or inflict pain on voters in an election year. Yushchenko, for his part, sought a lower deficit and supported further spending reductions.

Anticipation of the presidential elections, expected in January 2010, is shaping the agenda of both Tymoshenko and Yushchenko, and each has been reluctant to give the other any kind of political advantage as an anticrisis program is debated. The main opposition leader and former prime minister, Viktor Yanukovych, who controls the largest single faction in parliament, is also planning to seek the presidency.

Amid the impasse, the fiscally conservative Finance Minister Viktor Pynzenyk resigned, saying his job had become "hostage to politics."

Observers say the mismanagement and feuding among Ukraine's rulers is exacerbating an already dire situation.

"To a large extent, this crisis simply has to be lived through. It is going to get worse for objective reasons. Unfortunately the corruption and incompetence of the current government is making things worse, there is no question," Ivan Lozowy, a Kyiv-based political analyst, says.

Yushchenko announced a budget review on March 2 after meeting with Tymoshenko, and the two agreed to set aside their differences to reach a compromise that would be acceptable to the IMF. The IMF, in turn, has relaxed its target budget deficit from less than 1 percent of GDP to 3 percent.

No sooner had the president and premier reached an understanding on the budget than a fresh conflict erupted over energy. On March 4, armed agents from the Ukrainian Security Service (SBU) raided the offices of the state-run gas company Naftogaz. The SBU, which is loyal to Yushchenko, says it was investigating corruption in the company, which is seen as loyal to Tymoshenko.

The protracted conflict between the president and prime minister, analysts say, threatens to erode the country's rapidly declining international credibility.

"It feeds into this unhealthy battle that goes back and forth. It runs the risk at some point -- if we haven't passed that point already, in some countries -- that they stop taking Ukraine as a serious entity," Pifer says. "Serious countries don't have this level of conflict."

Source: Radio Free Europe

Ukraine: Ghost That Haunts Rail Crossing Seen By Drivers

CHERNIHOV, Ukraine -- Does a ghost haunt a railway crossing in the Ukraine? A number of rail workers in the Eastern European country seem to think so.


Ukraine has a problem with train crossings.

Every year dozens are killed by trains while crossing tracks, often bad winter weather is responsible for poor visibility leading to these tragedies.

In 2006 on the 13th of October in the region around Chernihov two young lovers crossed a train track in a Lada automobile. The man was 23 and his female companion was only 18.

The couple was planning to wed and they were on their way to inform the would-be bride's parents. Their car was struck by a train and the two were killed instantly.

Drivers on this route now frequently report seeing a ghost of a woman with long flowing hair and a white dress pushing a translucent image of a car of the track at the very spot the couple was killed.

Even more disturbingly the ghost is seen trying to push real cars with people in it onto the track. The cars she chooses are often on their way to a funeral.

'The girl must have so wanted to get married she remains in spot forever trying to hopelessly rewrite history' commented one Ukrainian paranormal researcher.

Source: Gazeta.ua

The Breadbasket Becomes The Basket Case

KIEV, Ukraine -- Ukraine's president was once considered a hero. But his country has spiraled into chaos and despair.

People walk by a currency exchange office in Kiev, Ukraine. The global economy will shrink this year as the world enters 'a Great Recession,' the head of the International Monetary Fund said Tuesday. Speaking in a taped interview with French television channel France 24, Dominique Strauss-Kahn said economic data has worsened since January, when the IMF forecast global growth in gross domestic product of 0.5 percent this year.
On an icy November night in 2004, Viktor Yushchenko and Yulia Tymoshenko stood in front of orange-clad crowds in Kiev's Independence Square and promised their supporters a brave new world.

He spoke of a new Ukraine allied to the European Union, not Moscow, free of Russian-style vote-rigging and crony capitalism, with a free press, free elections and transparent markets.

"My heart breaks when it sees how the government is robbing this country of its riches," Yushchenko said to the half million people who had braved the freezing rain to protest the corrupt old regime. "Europe has shown us what can be achieved with solidarity, tolerance and mutual understanding." The new Ukraine, he added, would be "respected by both East and West."

Five years later, the promises of the Orange Revolution are ringing very hollow. Democracy is certainly flourishing—but instead of bringing stability and prosperity, the Orange revolutionaries and their Western values seem to have brought nothing but chaos and disaster.

The years since Yushchenko's historic speech have been marked by unstable political coalitions and incessant wrangling between Yushchenko (now president) and Tymoshenko (now prime minister). Yushchenko's 2.7 percent approval rating likely makes him the world's most unpopular leader. Ukraine and its leaders are distrusted by their would-be European allies, and their big neighbor to the east continues to view it with the patronizing eye of empire.

Meantime, the promised free market has battered Ukraine half to death. Since 2000 it has averaged 7 percent annual growth, but its economy is expected to shrink by up to 20 percent in 2009, according to Standard & Poor's, making Ukraine the developed world's worst recession victim. Some analysts fear the country's fragile banking system could fail altogether, demolishing savings and making recovery even more difficult.

On one level, the fall of Ukraine has nothing to do with the failings of the government. More than 40 percent of the economy depends on aluminum and steel exports, a legacy of Soviet-era central planning. With the global recession, both demand and price for metals has dropped by 50 percent, decimating Ukraine's exports.

But bad leadership has made things much, much worse. Paulius Kuchinas, a regional analyst for the Oxford Business Group, says Ukraine got the "worst sort of democracy," one that has been hijacked by populism and business interests. Indeed, all of the top political leaders have unsavory ties to Ukraine's oligarchs, and it often seems that the leaders are more concerned with leveling accusations of corruption against one another than in solving the country's problems. "It's all tactics and no strategy," says Kuchinas. "Everyone is looking for short-term gain."

Voters perceive Yushchenko to be the worst of the bunch, judging from his popularity ratings, and even many of his staunchest allies have become disillusioned. Sergei Teriokhin, a former minister of the economy and an old personal friend of the president's, recalls how they used to talk for hours about how to reform and democratize Ukraine, but instead of following through, Yushchenko fell out with Tymoshenko in 2005 and dismissed her government.

Many now believe he is spending his time protecting his cronies' business interests rather than managing the country. "None of our old dreams have come true," Teriokhin says.

Emblematic of the mismanagement has been Yushchenko's handling of the nation's natural-gas imports, which account for 70 percent of Ukraine's energy needs. Ukraine's state gas utility, Naftogaz, sells to consumers at below-market prices, with the state picking up the difference—a massive drain on the state budget. With debts of more than $3.5 billion and an expected loss this year of another $3.5 billion, Naftogaz only barely scraped together enough money last month to pay its main supplier, the state-controlled Russian energy company Gazprom.

Scrapping subsidies and forcing Ukrainian consumers (including oligarch-owned businesses) to pay full price for the gas would allow Ukraine to balance its budget, but both Yushchenko and Tymoshenko have so far balked at such an electorally unpopular move.

Worse still, Yushchenko has refused to allow payments between Ukraine's gas monopoly and Gazprom to be made directly, allowing them to go through shadowy middlemen like RosUkrEnergo, a company partially owned by longtime Yushchenko-backer Dmitry Firtash. "Yushchenko was the father of the RosUkrEnergo scheme, but he lied to everybody and lost himself in lies," says Mikhail Pogrebinsky, a political analyst who has worked for a Yushchenko rival.

With so many signs of dysfunction at the top, it's unsurprising that Europe now has a jaundiced view of Ukraine. Kiev has a long track record of broken financial promises, making Brussels wary of more bailouts—all the more so because the EU has its own wrecked economies to deal with.

Ukraine's reputation as a gas-transit country is also rock bottom after spats between Naftogaz and Gazprom led to gas cutoffs that left Eastern European consumers freezing. Membership in the EU—a long shot in the best of times—now looks more unlikely than ever, and Germany and France, long skeptical about Kiev's NATO application, have hardened their stance.

But the risks of abandoning Ukraine are great. The further collapse of Ukraine's currency—it has already fallen by half against the dollar since October—and the failure of its banking system would be disastrous for small and medium-size business, exactly the kind of enterprises the country needs to shift away from metals.

Rising unemployment is likely to lead to social unrest and a wave of emigration that would destabilize the shaky economies of Ukraine's EU neighbors. It would also aid Russia, which has been trying to use the crisis to regain influence in Ukraine. Last week, Russia's Finance Ministry made positive noises about a $5 billion loan requested by Tymoshenko this year, raising concerns that Europe could be opening a door to Russian influence across the region.

"Allowing an enthusiastically pro-EU, pro-NATO state to fail for want of a few billion presents "a different sort of moral hazard," says one senior Western diplomat in Moscow. "The bottom line is, you have to stand by your friends … or you don't make any more friends."

So far, others are getting the message. Despite the misgivings of some of Europe's biggest countries over bailing out neighbors, the EU is likely to add some money to a $16.4 billion IMF loan if a deal is struck.

The European Bank for Reconstruction and Development has said it will also invest €1 billion this year. "The stability of Ukraine is of crucial importance for the future of all Europe," says EBRD president Thomas Mirow. "We must not allow it to become a no-man's land."

Ukrainians appear committed to ensuring that such a thing never happens. Polls show a deep and increasing commitment to Europe, not Moscow, and it is clear that Ukrainians prefer real democracy, however rough-and-tumble, to the more superficially stable example of authoritarian capitalism next door.

In fact, "everything that Russia has done over the last five years has pushed Ukraine further toward NATO and Europe," says Kremlin-connected political analyst Stanislav Belkovsky. For instance, there are no longer pro-Russian members in Ukraine's Parliament, and even Viktor Yanukovych, the Kremlin-backed candidate in the 2004 elections, no longer takes a pro-Moscow line.

Moreover, despite the precipitous economic decline, protests in Kiev have been largely small and sporadic—certainly nothing on the scale of the waves of pent-up discontent that shook the country in 2004.

Even the near-failure of banks like Rodovid Bank and Nadra Bank—which have frozen deposits, confiscated ATM cards and swallowed transfers—haven't yet produced major popular anger.

Kiev's muted reaction to the protests has made Ukraine look more like strike-plagued France than neighboring Russia, where attempts at protest over recent months have been broken up by riot police, with the secret police filming the demonstrations.

But as the election this fall approaches, it's unlikely the calm will last. The IMF's stringent budget-deficit demands will mean painful cuts in public spending—above all, on gas subsidies. The Central Bank will soon run short of reserves to prop up the currency, making a further fall likely and angering the thousands of Ukrainians who took out foreign-currency loans aggressively marketed by Western banks.

The result is further disenchantment with Yushchenko and the factional politics that followed the Orange Revolution. Already, 80 percent of Ukrainians say they favor a "strong leader," and the front runner in the election, Tymoshenko, looks set to take that role.

Like her countrymen, she has not turned her back on the democratic values of the Orange Revolution. But she has dropped the now-toxic brand, no longer calling herself an Orange politician, describing herself instead as "white-hearted" to emphasize her anti-corruption platform.

How she will cope with the coming waves of anger remains to be seen. But the belt-tightening that will follow can only make Ukraine stronger—and maybe one day deliver the stability and prosperity the Orange revolutionaries promised.

Source: Newsweek

Russian Oil And Gas Swap For Ukraine’s Crimea Peninsula?

KIEV, Ukraine -- According to Ukrainian sources, Russian officials are in informal discussions with their Ukrainian counterparts over the possibility of swapping Russian oil and gas for Russia’s long-term lease of the Crimean Peninsula.

Crimean peninsula
The Crimea Peninsula extends into the Black Sea and has a rich history, which is apparent by its Greek ruins, specifically at Chersonese. Russia’s Black Sea Fleet is stationed at the Crimean city of Sevastopol, while around 52 percent of Crimea’s population is Russian.

After defeating the Tartars in the end of the eighteenth century, the peninsula became part of Russian territory. In 1954, Khrushchev, some say acting beyond his powers, gave the Crimea to Ukraine.

Ukraine’s economic growth is expected to plunge 10 percent this year as the global economic crisis continues to bite, and this is making it exceedingly difficult for the capital of Kiev to pay its gas bill.

In a tedious replay of events exactly three years earlier, Gazprom, the Russian state-controlled gas company cut off supplies to Ukraine on January 1 over unpaid debts. But since Ukraine serves as a major supply corridor for Russia’s nervous European customers, the incident once again infuriated Brussels and beyond.

Ukrainian Prime Minister Yulia Timoshchenko met her counterpart Vladimir Putin in Moscow where they signed a new gas agreement on January 19th. The deal allowed for gas supplies to continue, yet it did not save the famous-mane princess of the Orange Revolution from facing the wrath of her political opponents back home.

Under the new contract, Ukraine pays Russia $450 per 35,314 cubic feet of gas.

“This is obviously unfair. I’m sure that those who signed this agreement and accepted these terms will have to answer for their actions,” the Ukrainian president was quoted as saying, adding that $450 was “an exorbitant price.”

Some Ukrainian officials and media have publicly asked why Yushchenko was not informed about the terms of the contract before ink was put to paper.

At the beginning of March, masked Ukrainian Security Service agents, who serve under President Viktor Yushchenko, raided the headquarters of the country’s gas and oil company Naftogaz, reportedly seizing documents relating to the January deal.

Putin, speaking at a news conference in Moscow on Wednesday, criticized the actions, saying that “all it is doing is discrediting [Ukraine] and prompting thoughts about alternative routes of delivery for our hydrocarbons.”

Russia has in the past floated the idea of using its planned South Stream gas pipeline as one viable route to bypass cash-strapped Ukraine.

Kiev’s Mounting Debt

On top of a $16.43 billion loan from the International Monetary Fund (IMF), Ukraine’s acting finance minister confirmed that the debt-burdened country has asked Russia for a $5 billion loan to pay for natural gas deliveries.

“This loan will be used to buy gas,” Ihor Umanskiy said on Wednesday.

The IMF has already provided Ukraine $4.5 billion, but has refused to release the second tranche of around $2 billion until Kiev proves that it is capable of turning around its ailing economy.

“Ukraine is in dire economic straits,” said a high-profile Ukrainian businessman, who formerly served as a deputy minister in the Verkhovna Rada, the Ukrainian parliament, and who agreed to speak on condition of anonymity. “And there are some members of the opposition who think that Ukraine will have to make some uncomfortable decisions, and this may involve future swap deals with its Russian neighbor.”

The businessman then alluded to informal talks between “politically active individuals” that would grant Russia long-term use Ukraine’s Crimea Peninsula, which includes Russia’s Black Sea Fleet, in return for an undisclosed annual amount of Russian gas and oil supplies to Ukraine.

“I was not present at the alleged talks,” the source said via telephone, “but I was informed that the talks focused on the idea of swapping Russian oil and gas supplies in return for Ukraine granting Russia a 99-year lease of the Crimea Peninsula.”

“This sounds like a bad joke,” commented Dmitry Babich, Acting Editor-in-Chief of Russia Profile, an on-line political website. “There is absolutely nothing in Ukraine’s constitution that would permit such a trade-off.”

Babich then mentioned similar stories that filled the air when Russia and Japan were holding talks over the disputed Kuril Islands [Four small islands that were occupied by Soviet forces at the end of World War II].

“There were rumors that Russia would give Japan the islands, and Japan would pay money to Ukraine, which in turn would use the funds to purchase Russian oil and gas,” Babich said

Equally distrustful of the claims is Fyodor Lyukanov, Editor-in-Chief of Russia in Global Affairs.

“Such deals are impossible in principle,” Lyukanov said. “To exchange territorial integrity for oil and gas – if we imagine this could happen – is an unequal exchange. Ukraine would receive resources that would eventually disappear, while Russia would get land. Impossible.”

Yet there are signs that Moscow is losing its patience with Ukraine, which threatens to disrupt Russia’s longstanding resource partnership with its European clients.

“Clearly, If Kiev cannot find ways to guarantee the viability of its contracts, then alternative forms of doing business will have to be found,” the former deputy minister said.

“I personally do not see why such a swap could not work," he said. “Russia would get its naval rights, while Ukraine would get the oil and gas supplies it so desperately needs. A win-win situation.”

Source: Russia Today

Kiev Mayor Must See Psychiatrist

KIEV, Ukraine -- A parliamentary commission set up in Ukraine to evaluate the mayor of Kiev, Leonid Chernovetskiy, says he should submit to a psychiatric examination.

Protesters try to force their way into Kiev's city council office to denounce Mayor Leonid Chernovetsky at a council meeting, February 12, 2009. Protesters opposed increases in rates for municipal services and other proposals to raise funds for city finances.
Mr Chernovetskiy, a former banker, won re-election as an independent last May.

His populist campaign included handing out food parcels to pensioners, and waxing lyrical to audiences about how great life would be with him in charge.

Opponents have accused Mr Chernovetskiy of becoming increasingly erratic in his behaviour and criticised his policies.

Around 10,000 people attended a protest last month, accusing him of corruption. Some pensioners even returned the food parcels.

Mr Chernovetskiy organised a counter-demonstration by municipal employees the following day, and also went on television to assert that he was sane.

'Cosmos'

Members of the ad hoc parliamentary commission voted unanimously on Friday to order the mayor to undergo a psychiatric evaluation.

The commission was set up to investigate alleged violations of the constitution, laws, and recent decisions taken by Kiev city council.

There have been growing concerns about Mr Chernovetskiy's behaviour.

In particular, residents of Kiev have been worried by recent media reports suggesting that he planned to levy taxes on such items as satellite dishes and air-conditioners, and charge an entry fee to communal graveyards.

The mayor's office has distanced itself from some of these plans.

However, the BBC's Gabriel Gatehouse in Kiev says Mr Chernovetsky has undeniably angered many by raising rates for communal services, such as water, heating and electricity, in a bid to balance the city's budget.

The mayor has even earned himself the nickname, "Cosmos", because of his sometimes other-worldly behaviour.

But Ukraine's parliament cannot force Mr Chernovetsky to undergo any examination, and he has plenty of supporters too, our correspondent says.

His power base is largely among the poorest sections of society, especially pensioners, who are also some of the most likely to vote, he adds.

Source: BBC News

Too Quiet On The Eastern Front

WASHINGTON, DC -- During the brief Russia-Georgian war in August 2008, many Europeans rejoiced that the EU had at last woken up to reality in Eastern Europe. Were it not for French President Nicolas Sarkozy's febrile shuttling in Tbilisi and Moscow, the war could have dragged on longer. The 27-nation bloc acted as the "honest broker" in the event.


Regrettably, the real troubles have returned--and new ones have emerged--ever since that conflict. The EU has not noticeably stepped up its diplomatic and military role in the conflict-ridden areas of the region.

The umpteenth "gas war" between Russia and Ukraine in January exposed once again Europe's impotence before its energy dependence on Moscow and on unstable transit countries. To the peoples in the region, Europe continues to give the impression of being the bystander to Russia's newfound belligerence.

With the credit crunch now hitting violently some Eastern European economies, the EU risks to give the impression of being the bystander--full stop.

Come Spring, Europe will give yet another try at its Ostpolitik. At the initiative of Sweden and Poland, the EU is now set to launch an "Eastern Partnership", a framework embracing all the westernmost former-Soviet republics--Ukraine, Moldova, Georgia, Armenia, Azerbaijan, and prospectively Belarus. The policy will be endowed with funds somewhere in the region of Euro 350m ($450m).

Content-wise, the "Eastern Partnership" makes all the right noises. It promises gradual and yet comprehensive integration of the partner countries into the EU's huge market; it will encourage transparency in the energy sector, and will favor movement of people through visa facilitation agreements.

Like previous European endeavors in this region, however, the taboo relating to the possible membership of these nations into the EU will not be lifted.

On the bright side, it is becoming increasingly difficult to put these countries in the same basket. Belarus persists on its autocratic path, although Russia's aggressiveness is forcing President Lukashenka to consider a number of overtures from the West (not least a surprise emergency loan package by the International Monetary Fund).

Armenia and Azerbaijan continue to oscillate perilously in the undefined zone between democracy and autocracy. Despite their serious domestic shortcomings, Ukraine and Moldova uphold their objective of Euro-Atlantic integration.

The "Atlantic" part of this goal is bound to be tricky. In 2008, the Alliance confirmed to Ukraine and Georgia that they can become members, but key NATO members France and Germany have dug in their heels for the time being.

Popular support for NATO in the region itself remains mixed at best. While NATO has enjoyed peaks of over 75 percent approval in Georgia, support in Ukraine is only around 20 percent. The conflict in the Caucasus, together with a less confrontational US posture on Russia under President Obama, have made the NATO prospect even fainter in the foreseeable future.

When it comes to the EU, there was a time, not too long ago, in which senior European politicians could be heard saying that an EU enlargement to Ukraine was tantamount for the United States to take in Mexico.

If the fading "Color Revolutions" have left any legacy, it is that fewer Europeans today care to object to the European identity of Ukraine or Moldova. For now, however, Europe continues to wrap its broad array of measures into formats that are silent about the membership aspirations of these countries.

As the financial crisis takes its toll within Europe and without, the EU can only be expected to be more introverted on this matter. Yet if this crisis is indeed to provide an opportunity, it will be also to the extent that the EU will be willing to take a leap of faith in this region.

This is ultimately a matter of being clear about the eventual prospects for EU enlargement for some of the Eastern European countries, while being just as unequivocal that membership is not in the cards any time soon.

For a nation such as Ukraine, prospective EU membership would mean a tortuous journey that may first end in fifteen years. But it would also mean that there is at last a destination and, one can hope, a least common denominator around which its querulous politicians can build a semblance of consensus.

For Europe, resolving the enlargement dilemma would not instantly restore its credibility, nor would it suddenly reverse the fortunes of its underperforming policy in Eastern Europe. It would, however, constitute a most explicit way to reawaken from its strategic trance.

Source: The Washington Post

To The Rescue: The Obama Administration Wisely Pledges To Bolster The IMF

WASHINGTON, DC -- Add the plight of Eastern Europe to the many threats facing the world economy. Having boomed in recent years thanks to imported capital, much of it provided by Western European banks, country after country is now going bust because of the contraction of credit.


This not only poses risks to global trade and growth; it also raises concerns about their future survival as democracies within the European Union. In the largest of the Eastern European states, Ukraine, a former Soviet republic that does not enjoy the political benefits of E.U. membership, the stakes are especially high.

There, industrial production has plunged by almost a third since the beginning of the crisis; living standards for 46 million people are starting to collapse. The weaker and more chaotic Ukraine becomes, the likelier it is that Russia will attempt to reassert hegemony over it.

A Putinized Ukraine would be a disaster for that country, Europe and the United States.

The Obama administration has announced an important step toward salvaging emerging markets, including Eastern Europe: Treasury Secretary Timothy F. Geithner's proposal to triple the International Monetary Fund's resources from their current level of about $250 billion.

Of that, $100 billion would come from the United States.

Congress may balk at this number; already feeling bailout fatigue with respect to U.S. banks and auto companies, many lawmakers may wonder why they need to aid other countries.

The answer is that the crisis is global, and so the solution has to be global; Congress must provide funding lest economic rot spread through not only Eastern Europe but also Asia, Latin America and Africa. The IMF is the only institution capable of doing the job.

Other countries must do their share.

Some already have: Mr. Geithner was following the example set by Japan, which is suffering a steeper downturn than the United States but still found $100 billion to spare.

The Obama administration correctly seeks greater contributions from cash-rich China and Saudi Arabia. If modifications to IMF governance are necessary to secure their participation, that should be considered.

The disappointment so far is the European Union, whose Western European members are not eager to bail out the East. But it will be harder for them to delay now that the Obama administration has stepped up.

Indeed, Western Europe is likely to come around eventually, if only to prevent the collapse of the European Union's Eastern half from turning into a collapse of the alliance itself.

For Ukraine, however, the United States will have to lead. That includes encouraging Ukraine's leaders to control the political squabbling between Prime Minister Yulia Tymoshenko and President Viktor Yushchenko that so far has thwarted the formulation of a new economic program necessary to secure international aid.

Consequently, the IMF recently withheld the second installment of a planned $16.4 billion loan. Washington needs not only to supply money but also to push for political cohesion and responsibility among the politicians in Kiev.

All the IMF money in the world can't save them unless they can agree on how to help themselves.

Source: The Washington Post

Putin Eases Off 'Broke' Ukraine

MOSCOW, Russia -- Russia's prime minister says it has waived fines owed by Ukraine for breaking gas contracts because it does not want to "finish off" its neighbour.

Russian PM Vladimir Putin
Vladimir Putin said he realised Ukraine was "on the verge of bankruptcy" and that "they have nothing to pay with".

Mr Putin said Kiev was not taking the volume of gas agreed in contracts with the Russian state gas company, Gazprom.

But Ukrainian officials say Gazprom has already agreed to sell less than the contracted amount of gas this year.

Gas has become a source of major tension between Russia and Ukraine. Gazprom shut down gas supplies to Ukraine for two weeks in January during a commercial dispute, leading to severe gas shortages across Europe.

Supplies were only restored when Ukraine's government and state gas firm, Naftogaz, agreed prices at which they would buy Russian gas, and ship it to Europe. The issue of Ukraine's non-payment of fines imposed by Gazprom for late payment in 2008 remained unresolved by the deal.

IMF Loan

In stinging comments on Thursday to miners at Novokuznetsk in south-western Siberia, Mr Putin said Moscow would refrain from levying fines on Ukraine for violating the contracts because they could contribute to an economic crisis in the country.

"Ukraine is not taking from us the contracted volumes [of gas] and should pay fines," he said, according to Russian news agencies.

"We will forgive these fines because we recognise the reality - they have nothing to pay with. They are on the verge of bankruptcy, and as you well know you should not finish off your partners," he added.

Ukraine's economy has been hit by falling demand for its main exports, notably steel. In November, it received $4.5bn of a $16.4bn loan from the International Monetary Fund (IMF) to help weather the downturn.

The IMF and Kiev said on Wednesday that they were making progress on overcoming differences in implementing reforms that have delayed the release of a second part of the loan, worth $1.9bn.

Earlier this week, Mr Putin cast doubt on Ukraine's reliability as a gas-transit country after the national security service raided the headquarters of Naftogaz.

"Only God knows what parts of their bodies the people who give these orders are thinking with," he said.

The raid was linked to an investigation into the diversion of 6.3bn cubic metres of natural gas worth $880m (£620m), whose ownership is in dispute.

Source: BBC News

Lviv Judge Jailed And Disrobed

KIEV, Ukraine -- Ihor Zvarych, former Lviv Appeals Court judge, was arrested on March 9 and transferred to Kyiv, where a court ordered him jailed.

Ihor Zvarych accused of taking bribes.
The general prosecutor started a criminal case against Zvarych in December after, authorities allege, he was caught taking a $100,000 bribe.

Searches of his home and office turned up $1 million and Hr 2 million in cash.

Zvarych disappeared from a private hospital on Dec.15.

The Verkhovna Rada revoked his immunity from prosecution, granted to all judges, on Dec. 18 and removed him as a judge.

After finding his hiding place, enforcement agencies drove up to the house in a fire truck, extended the ladder and entered the building.

The suspect attempted to escape through the roof.

Justice Minister Mykola Onishchuk said on March 10 that the Zvarych case should be a lesson to “other judges who are misusing their powers and are not fit for the posts they occupy.”

Source: Kyiv Post

Pensioners Are Among Those Hit Hardest By Crisis

KIEV, Ukraine -- With an average monthly pension of Hr 1,060 ($130), life is getting tough for older Ukrainians.

Abuse of drugs and alcohol are among the leading causes of suicide.
Ukraine’s minimum pension is Hr 596 ($73) per month. Converted into kilos of pork beloved by Ukrainians, it only buys nine kilos (19.8 lbs) from the supermarket.

But a typical pensioner would not succumb to the luxury of regular shopping in supermarkets, or of buying such expensive cuts of meat for other than a very special occasion.

Often their diet is based on staples such as potatoes and grains bought in bulk at the market.

An average pensioner receives Hr 1,060 ($130) – still a pittance for a lifetime of work.

Faced with a tiny pension that is constantly devalued by inflation (in 2008, it was a Europe-leading 22.3 percent), pensioners have to rely on relatives to survive, or try to supplement their income in any way they can.

They sell flowers or balloons in underpasses or play in the streets with an age-old accordion.

Hardship leads to despair, which can be tragic.

In Kyiv Oblast alone, one or two people commit suicide daily, according to the Interior Ministry.

Most often these are people in the 40-to-60 age group.

Economic reasons – such as inability to pay debts to banks, poverty and joblessness – top the list of causes cited by the ministry.

But personal reasons, such as the loss of loved ones and remorse, are also common.

Abuse of drugs and alcohol are also among the leading causes of suicide.

Source: Kyiv Post

Ukraine Official: Kiev Has Met IMF Demands, Billions Should Be Sent

KIEV, Ukraine -- Ukraine's government has met International Monetary Fund (IMF) demands by making politically-painful changes to monetary and fiscal law, a move opening the way for more emergency credits, a senior official said Wednesday.

Ukraine's Vice Minister Hryhory Nemyra.
Ukraine's cabinet in a morning session passed resolutions drastically limiting where future IMF loans to Ukraine might be spent, among other Fund pre-conditions for further loans, said Vice Minister Hryhory Nemyra, according to an Interfax news agency report.

The change obliged Ukraine's government to funnel any future IMF credits only into the country's banking sector, and banned government inference in currency exchange trading by the National Bank of Ukraine (NBU).

Refinancing rates allowed Ukrainian banks also will be tightened, Nemyra said.

The IMF in November issued Ukraine a 4.5 billion dollar tranche of a 16 billion dollar credit programme, but delayed paying out a second tranche scheduled in mid-February, citing the Ukrainian government's failure to meet IMF loan conditions.

Ukraine's government, led by populist Prime Minister Yulia Tymoshenko, faces a massive deficit and is struggling to find cash needed for food and energy subsidies popular with Tymoshenko's low- income electorate.

Tymoshenko has been outspoken in her criticism of the National Bank of Ukraine, whose managing board has allowed the value of the national currency the hryvna to fall by some 60 per cent since September, spiking food, housing, and energy prices.

She likewise has attacked higher bank refinancing rates supported by the NBU and the IMF, as likely to slow even further Ukraine's already depressed economy.

Led by Tymoshenko, Ukraine's government and parliament dragged its feet on implementing IMF conditions tied to the loan.

IMF leadership has insisted Ukraine implement tight monetary policies and only use the loan money to prop up its banking industry, as necessary to prevent a wholesale collapse of Ukraine's financial sector, and a spread of bank defaults to the rest of East Europe.

Source: DPA

Back Stabbing, Corruption And Masked Gunmen: Just Another Week In Ukrainian Politics

KIEV, Ukraine -- One would assume it would raise the odd eyebrow if Barack Obama were to name Rupert Murdoch deputy head of the CIA. Yet In Ukraine, President Viktor Yushchenko has apparently had no such qualms.

Yushchenko (L) and Tymoshenko are destroying the country with their constant political bickering.
Six weeks ago, the Ukrainian president appointed Valery Khoroshkovsky, a billionaire media magnate, as deputy director of Ukraine's spy agency, the SBU.

Khoroshkovsky has been useful to the president and his allies. His television station Inter has pulverized Yulia Tymoshenko, the prime minister who has long coveted Yushchenko's job.

But he proved even more useful last week, when masked SBU agents toting machine guns stormed the Kiev offices of Naftogaz, the state gas company.

The raid, which has further battered Ukraine's already tarnished image, was political payback.

In January, Tymoshenko brokered a deal with Russia to end a two-week gas dispute that left millions of Europeans without heating in the middle of winter.

The deal was praised because it locked out RosUkrEnergo, a controversial business entity that acted as a gas intermediary between Russia and Ukraine. RosUkrEnergo has made billions of dollars in the past three years, but for what no-one really seems to know.

A 50-50 venture between Russia's Gazprom and Ukrainian business, the Ukrainian face behind RosUkrEnergo is another oligarch by the name of Dmitry Firtash.

European diplomats would be delighted to see the back of him, but Firtash has refused to go quietly -- and he has friends in high places.

Not only does Firtash supposedly have business connections with Khoroshkovsky, he is also close to Yushchenko himself, although the president has denied any impropriety about the relationship.

Angered at being locked out of the gas trade with Russia, Firtash was also infuriated after Tymoshenko successfully managed to confiscate over US$ 1 billion worth of gas held in storage by RosUkrEnergo.

Hence last week's raid, presumably ordered by his chum Khoroshkovsky with, critics say, the tacit blessing of the president. The SBU gunmen were also under orders to confiscate papers related to the deal with Russia, which would have meant Ukraine could not make its monthly payments to Gazprom.

The president's men might have got one over Tymoshenko if the raid had been successful (it wasn't), but at the cost of re-igniting the gas crisis.

The unwholesome incident highlights the disastrous relationship between big business and politics in corruption-plagued Ukraine.

But if it seems that Tymoshenko is the victim in all this, nothing could be further from the truth.

An ambitious political opportunist, she has plotted against Yushchenko from the moment they came to power after the Orange Revolution.

Ukraine desperately needs political unity to see it through the financial crisis.

Yet instead of putting aside their differences, the two are using the crisis to score points off each other.

Two weeks ago, under intense Western pressure, Tymoshenko and Yushchenko issued a statement promising to work together for the sake of Ukraine.

A detente was essential to get the IMF to release the second tranche of a stalled $16.4 billion loan that stands between Ukraine and potential economic oblivion.

Tymoshenko promised to marshall her party in parliament four days later to pass two laws needed to secure the release of the second tranche.

Instead, Tymoshenko used the parliamentary session to sack the foreign minister Volodymyr Ohryzko, a close ally of the president. As for the two bills, one was rejected, the other shelved. The following day, the SBU raid on Naftogaz happened.

So, even though the IMF has made concessions -- widening the amount that the budget is allowed to go into deficit to 3 per cent of GDP -- the egos of Ukraine's leaders are still preventing a settlement to the impasse.

Ukraine's hard-pressed people deserve better.

Millions face losing their homes or cars because they can no longer afford to pay back loans as unemployment soars and the hryvnia collapses against the dollar.

With so many facing misery and disaster, many Ukrainians would like to see the country's leaders putting aside their differences for the sake of Ukraine. But most Ukrainians, inured to dashed expectations, are not holding their breath.

Source: Telegraph UK

Ukraine PM Promises Change To Unblock IMF Funds

KIEV, Ukraine -- Ukrainian Prime Minister Yulia Tymoshenko on Wednesday promised to alter government policies to to secure the International Monetary Fund's approval to release further credits from a $16.4 billion loan.

PM Yulia Tymoshenko
The IMF suspended the credit's second tranche after disagremeent over implementation of the programme, with one of the main disputes centring on the size of the budget deficit.

The office of President Viktor Yushchenko, the prime minister's former ally but now her arch rival, on Tuesday said the IMF was still at odds with Ukraine, mainly over the deficit.

Tymoshenko, addressing her cabinet, said decisions would be taken to restart talks with the Fund.

'After discussions in recent days, we have worked out a joint position on adjusting the programme between Ukraine and the IMF,' she said. 'The government's decisions today will set down initial measures so that the IMF mission can return.'

Present at the cabinet meeting alongside ministers were officials from the local offices of the IMF and the World Bank.

Yushchenko, Tymoshenko and central bank chief Volodymyr Stelmakh were to meet later in the day to discuss resumption of talks with the IMF.

They and other senior figures sent a letter to the Fund last week setting aside longstanding policy differences and pledging to implement the agreement.

Top politicians have suggested that the Fund is willing to accept a gap greater than 1 percent of gross domestic product.

Government officials have before said that while the IMF demanded a smaller deficit, that referred to a cut to 3 percent from a real deficit identified by the Fund as being 6 percent.

The IMF initially demanded a deficit-free budget, but has since said a 1 percent or even higher gap was acceptable, provided Ukraine could finance it without fuelling inflation.

But Tuesday's statement from the president's office said the Fund was seeking a reduction in the size of the deficit.

Ukraine has already received the first $4.5 billion tranche under the IMF programme. It hopes the remainder will help offset reductions in its foreign currency reserves, capital outflows and shrinking world markets for its steel and chemical exports.

Source: Life Style Extra

Kiev Spy Welcomes NATO’s Moscow Overture

KIEV, Ukraine -- Ukraine’s top spy has welcomed NATO’s decision last week to resume high-level ties with Russia, suspended after Moscow’s military standoff with Georgia last year.

SBU head Valentyn Nalyvaichenko
In a Financial Times interview, Valentyn Nalyvaichenko, head of Ukraine’s SBU [formerly known as the KGB] state security service, said Kiev also sought better relations with Russia, but would continue to crack down on “Russian politicians” who interfered in the country’s domestic politics.

“Good relations are when a neighbour does not stretch across the fence into your yard,” he said, referring to Russian support for pro-Russia political groups in Ukraine, including separatists on the Crimean peninsula, home to Russia’s Black Sea fleet.

Mr Nalyvaichenko insisted his own service was apolitical as he defended its recent raid on a state-owned energy company involved in the power struggle between President Viktor Yushchenko and the prime minister, Yulia Tymoshenko.

The former diplomat, who was put in charge of the SBU three years ago by Mr Yushchenko, also argued that Ukraine had made big gains in democracy since the 2004 Orange Revolution, despite its continuing economic and political upheavals. “The risks are now more economic in nature,” he said referring to the financial crisis, which has driven Kiev to take an emergency loan from the International Monetary Fund.

Kiev, an aspiring NATO member and rare Western ally on post-Soviet turf, strongly backed Georgia in the war, sparking fears of potential conflict between Moscow and Kiev in Crimea. Some nationalist Russian politicians openly want Moscow to annex the peninsula but late last year Vladimir Putin, the Russian prime minister, said publicly it was Ukrainian territory.

Moscow is also much involved in Ukraine’s politicised and lucrative energy sector. Fears resurfaced last week that Russian natural gas supplies via Ukraine to Europe could be cut off again after SBU guards raided state gas company Naftogaz, controlled by Ms Tymoshenko. The raid marked an escalation of tensions between the two leaders after they buried their differences to secure financial support from the IMF.

Mr Nalyvaichenko claimed that Naftogaz, on the orders of the government, had illegally stripped away ownership of more than $2bn worth of gas from Rosukrenergo, a gas trading intermediary, owned jointly by Russia’s Gazprom and Ukrainian businessman Dmytro Firtash.

Deputy SBU chief and billionaire Valery Khoroshkovsky headed the investigation despite admitting to joint interests in television channels with Mr Firtash, Gazprom’s partner in Rosukrenergo. Mr Nalyvaichenko ruled out a conflict of interest, but said another official would take charge of the investigation.

Mr Nalyvaichenko disputed allegations by Ms Tymoshenko that Ukraine’s president had lobbied on behalf of Rosukrenergo for it to regain the disputed gas supplies at the centre of last week’s raids.

He said he had offered to provide proof of Mr Yushchenko’s innocence to Russia’s Accounting Chamber, a public audit office, which was investigating Rosukrenergo’s Ukrainian shareholders.

Since then, Mr Khoroshkovsky appeared on his own TV channel to warn that the security services could next target government offices in a continued quest for documents to prove that gas was illegally transferred from Rosukrenergo to Naftogaz.

The west has repeatedly raised concerns about Rosukrenergo’s lack of transparency, not least because the intermediary has featured in the disputes between Kiev and Moscow that have periodically cut off energy supplies to the rest of Europe.

Mr Nalyvaichenko stressed however that the body was established by leaders in Ukraine and Russia before Mr Yushchenko became president. Gazprom has not publicly backed Rosukrenergo and Mr Putin described last week’s gas dispute as a “domestic” Ukrainian affair.

Source: Financial Times

Yushchenko: How Low Can He Go?

KIEV, Ukraine -- We all know about the rise and fall of Ukrainian President Viktor Yushchenko. He was respected as the head of the National Bank, then trusted during his short stint as prime minister, and finally swept into the presidency during the country's Orange Revolution.

SBU security service armed men, sent by Viktor Yushchenko, stand in the headquarters of Ukraine's state energy firm Naftogaz in Kiev on March 4, 2009.
It seemed like a fairy-tale political career - and indeed it was. A common thread that runs through Yushchenko's fairy tale is inaction: As the nation's top banker he was a technocrat, as prime minister he bowed to the corrupt President Leonid Kuchma (who ironically may go down in history as a more capable Ukrainian leader), and as president he has allowed himself to be manipulated by allies and bullied by opponents, many of whom are former allies.

Yushchenko isn't only the hero of his fairy tale gone wrong, he is one of the few people who still believes it. At one time, his fellow countrymen, with more hope than experience in democracy, also believed in Yushchenko. Now his public approval ratings are in the single-digit range.

He was hailed as 'the messiah' upon taking over the country in 2005. Part of the reason that Yushchenko was honored with this seemingly blasphemous appellation is that he suffered like a messiah during his rise to the presidency, particularly when his face was disfigured by poison during the 2004 election campaign. But despite the treachery and indignity of it all, Yushchenko showed himself to be more of a patient sufferer than an indomitable hero.

Over the succeeding years, the pro-Western Ukrainian president managed to squander the confidence of voters, foreign leaders and - most importantly - the vast majority of his political allies. His faction in parliament is no longer his, or apparently anyone else's; his appointments in the government are assailed and then dismissed, often later joining one of Yushchenko's political opponents. But Yushchenko's biggest mistake has been current Prime Minister Yulia Tymoshenko, his one-time co-revolutionary turned unrelenting competitor for the presidency.

Either because of her or in comparison to her, Yushchenko has come to be known as weak, incapable and indecisive. In turns and sometimes in league with the villain of the Orange Revolution, former Prime Minister Viktor Yanukovych, Tymoshenko has isolated the president from his power base while stripping him of his power. The presidential authority enjoyed by Yushchenko is a fraction of that wielded by his predecessor Leonid Kuchma.

As the road to the next presidential elections shortens, flanked by economic chaos, trench political warfare and sour foreign relations, it appears that Yushchenko is trying to consolidate his legacy. Resigned to electoral defeat, he might at least be trying to lay the foundations for future stability - European integration, NATO membership, Orthodox unity, confidence in Ukrainian culture, etc.

Whatever his drawbacks in terms of teambuilding, resolve and decisiveness, the man's integrity has never seriously been challenged, either because it is unassailable or because most Ukrainians wouldn't believe otherwise. Instead, Yushchenko's opponents have almost always accused him of surrounding himself with corrupt advisors and fellow travellers, thereby making him guilty of only bad judgment.

But now, after years of inter- and intra-factional instability, Yushchenko's enemies (i.e. Prime Minister Tymoshenko) are going for the juggler. No longer just the guy who failed to fulfill the values of the Orange Revolution, failed to reign in political infighting, failed to deliver economic prosperity, and ticked off the Russians to boot, Yushchenko is being painted as a desperate man willing to ally with the foulest of characters and betray the most basic of national interests in order to keep his job. And worst of all, the president himself is holding the paint brush.

Last week, the battle between Yushchenko and Tymoshenko for power reached a new low, when the nation's spy service, the SBU, raided the offices of its national energy company, Naftohaz-Ukrayiny. The SBU, which is controlled by President Yushchenko, claimed that Naftohaz, which is controlled by Ms. Tymoshenko, had "stolen" 11 billion cubic meters of natural gas from now redundant intermediary gas dealer RosUkrEnergo.

With no pipelines or gas fields of its own, RosUkrEnergo had made billions of dollars trading gas between Russia and Ukraine, before Tymoshenko agreed with Moscow earlier this year to get rid of the Swiss-registered company.

Connected in numerous media reports to a Russian gangster, RosUkrEnergo is championed and half owned by a previously little-known Ukrainian businessman named Dmytro Firtash.

Tymoshenko has made Firtash out to be a parasitic middleman, but RosUkrEnergo was also half-owned by Gazprom, and the gas-trade contracts were approved by the Kremlin and Mr. Yushchenko.

But up until now, everyone has sort of given Yushchenko the benefit of the doubt when he said that it was the Kremlin that included Firtash and company in the Russian-Ukrainian gas trade.

Then why - the question goes - is Yushchenko trying to protect the interests of Mr. Firtash by forcing Tymoshenko to turn over the 11 billion cubic meters of gas (about a fifth of what Ukraine imports annually)?

When customs chief Valery Khoroshkovsky refused to clear the "stolen" gas, Tymoshenko fired him. Yushchenko, however, rehired him as deputy head of the SBU, from whose ranks Khoroshkovsky began to try to get control of the gas from Tymoshenko.

Khoroshkovsky, who formally owns a major Ukrainian TV stations de facto controlled by Firtash, even went so far as to arrest the customs official who eventually cleared the gas, but lawmakers from Tymoshenko's faction in parliament pulled "a raid" of their own to free the official from the remand center where he was being held.

On the one hand, this incident is just the latest battle between Yushchenko and Tymoshenko over state revenues, which both suspect each other of planning to use to finance their presidential ambitions.

If we give Yushchenko the benefit of the doubt and assume that he is trying to stop Tymoshenko from commandeering state resources, the question remains as to the president's connection to Firtash.

If Yushchenko really isn't trying to help Firtash in return for the controversial businessman's financial backing, the president is really making it look that way.

As for Tymoshenko, she comes out relatively well either way: either she is robbing a man who is seen by many as having robbed Ukraine, or she is trying to keep gas prices low for ordinary Ukrainians.

Another issue is the lawlessness of it all. Yushchenko pushed the limits of legality before, during his power struggles with former Prime Minister Yanukovych. But Yanukovych had been trying to usurp presidential authority.

Tymoshenko, at worst, is trying to finance her campaign against a man destined to lose his re-election bid anyway. Surely these aren’t grounds for sending the nation's spy service into action?

We may never know who actually benefited from Ukraine's shady gas trade - except of course Mr. Firtash - but with the Kremlin having distanced itself from RosUkrEnergo, Yushchenko may end up holding the bag.

He's going to lose the presidency anyway, and his visions of Western integration may be lost as well, but the hero of the Orange Revolution's reputation is now in the air, along with the question: how low can he go?

Source: Eurasian Home

Raid 'Discredits' Ukraine: Putin

MOSCOW, Russia -- Russian Prime Minister Vladimir Putin on Tuesday said the recent raid at Ukraine's state gas company 'discredits' the country and could push Russia to find an alternative route for gas supplies to Europe.

Vladimir Putin
Last week Ukrainian security service agents burst into the headquarters of Naftogaz to conduct a search, in a dramatic display of the country's internal tensions.

The SBU security service - the successor to the Soviet KGB which is overseen by President Viktor Yushchenko - said the raid was aimed at seizing documents for a criminal investigation into the seizure of billions of cubic metres of gas.

The SBU was searching for contracts with Gazprom, the Russian energy giant whose stand-off with Naftogaz sparked a crisis that seriously disrupted gas supplies to Europe in January.

'That (raid) discredits the country and forces us to think about alternatives for sending Russian gas to Europe,' Mr Putin said on Tuesday during a press conference.

The January dispute between Russia and Ukraine resulted in the cutting of Russian gas supplies to Europe for almost two weeks, triggering the European Union's worst ever energy crisis.

The crisis ended with a contract between Naftogaz and Gazprom after Prime Minister Yulia Tymoshenko, Yushenko's rival, hammered out a deal with Putin.

Source: AFP

Kudrin: Russia Yet To Decide On Ukraine's Request For $5-Bln Loan

MOSCOW, Russia -- Russia has received Ukraine's request for a loan totaling $5 billion, but has yet to make a decision on the issue, Deputy Prime Minister and Finance Minister Alexei Kudrin said at a briefing on Tuesday.

Russian Deputy Prime Minister and Finance Minister Alexei Kudrin.
"The Finance Ministry has received an official proposal from Ukrainian Prime Minister Yulia Tymoshenko. No decisions on allocating the loan have been made yet," he said.

Ukraine is seeking a $5 billion loan from Russia, Kudrin said.

It was earlier reported that Ukraine planned to receive a $5 billion loan from Russia to cover its budget deficit. Prime Minister Tymoshenko said in early February that discussions were underway with various countries so that necessary loans would be received on the governmental level to cover the planned budget deficits.

President Viktor Yuschenko, however, compared the negotiations with Russia for a $5 billion loan with the Molotov-Ribbentrop Pact between Nazi Germany and the Soviet Union in 1939. In this way Yuschenko accused Tymoshenko of betraying Ukraine's national interests.

Asked about the extension of a $500-million loan to Belarus, an agreement on which was signed last week, Kudrin said the money has either been transferred or will be transferred within the next few days.

The loan is to be extended to Belarus for 15 years with a five-year deferment period on the payment on the principal debt at LIBOR plus 3%.

Belarus received a $1 billion loan from Russia on the same conditions in November 2008. Russia is financing Belarus under an agreement between the two presidents on providing a $2 billion stabilization loan to Belarus in 2008-2009.

Russia plans to transfer the remaining $500 million to Belarus after amendments to the 2009 budget are made into law, Kudrin said.

Source: Kyiv Post

IMF May Profit From Bailouts

WASHINGTON, DC -- The International Monetary Fund may turn a profit of almost $650 million next year, enriched mostly by emergency loans to East European countries, according to former IMF officials.

IMF Managing Director Dominique Strauss-Kahn.
The windfall would mark a $1 billion turnaround for an organization forecast two years ago to lose $360 million in 2010. Based on calculations in a 2007 study led by Andrew Crockett, the president of JPMorgan Chase International, interest and fees from at least $55 billion in new loans may refill IMF coffers depleted since the Asian financial crisis.

Written off as increasingly irrelevant before the credit market turmoil started, the IMF is undergoing resurgence in money and influence as countries in recession turn to the world's lender of last resort.

"It is the ultimate countercyclical institution and it will see an enormous increase in profits," said Claudio Loser, former director of the fund's Western Hemisphere department and now a fellow at the Inter-American Dialogue, a policy institute in Washington.

The return to profitability will enable IMF Managing Director Dominique Strauss-Kahn to hire more staff with expertise in international markets, an area he wants to improve. The revival could also lead the institution to shelve plans for a sale of some of its gold reserves, an idea floated a year ago to create an endowment to finance operating costs while loan volumes were low.

In the past six months, the IMF has approved $16.4 billion for Ukraine, $15.7 billion for Hungary, $10.4 billion for Latvia, $2.5 billion for Belarus, $2.1 billion for Iceland, $7.6 billion for Pakistan and $516 million for Serbia - a total of about $55 billion. Turkey is negotiating an IMF loan accord, and Romania has expressed an interest in borrowing.

If all the loans are dispersed, fund income would almost triple from projected levels, boosting profit to $646 million, according to the methodology in the Crockett report and affirmed by the former officials. The calculation assumes the debtor nations make payments on time and in full.

Crockett, the former general manager of the Bank for International Settlements, headed a panel that included then- Federal Reserve Chairman Alan Greenspan, European Central Bank President Jean-Claude Trichet and People's Bank of China Governor Zhou Xiaochuan. The panel projected losses from 2007 to 2010.

The most recent borrowing will reverse that trend, although the lending proceeds may not be realized until next year because loans are dispersed in phases and some money can be withheld if countries fail to live up to IMF conditions.

IMF spokesman William Murray declined to comment. Crockett couldn't be reached for comment.

Serbia and Romania seek loans

Serbia needs a new loan deal with the International Monetary Fund because of the global financial crisis, President Boris Tadic said Tuesday, and the Romanian government said it was in "preliminary" talks with international lenders.

Serbia already secured lending last year from the fund, and is now " ready" to change that package into a $2 billion stand-by agreement, Tadic said at a conference in Madrid. "We need to do that because of our economy, and we have to protect our companies," said Tadic. "We are facing real challenges."

In Bucarest, the Romanian Finance Ministry said it and the central bank had "started preliminary discussions with representatives of the European Commission, the International Monetary Fund and international financial institutions on the macroeconomic framework and potential financing needs." The government has not said how much financing it will seek, but an adviser to the central bank last month said the country needed €10 billion in external financing.

Source: International Herald Tribune

Former Judge Zvarych Arrested In Lviv

LVIV, Ukraine -- Former Head of the Lviv Administrative Appeals Court Ihor Zvarych, who was wanted on a bribery charge, was arrested in Lviv on Monday, the head of the press service of Ukraine's security service, Maryna Ostapenko, has told Interfax-Ukraine agency.

Former judge Ihor Zvarych.
According to Ostapenko, the former judge was seized by the Alpha special division on the roof of the house in which he was hiding.

Zvarych will be handed over to the prosecutors' office dealing with his case.

As reported on December 3, 2008, the General Prosecutor's Office of Ukraine opened a case on allegations that Zvarych took a $100,000 bribe.

Zvarych was dismissed as head of the Lviv Administrative Appeals Court on December 12.

On December 15, he was put on the wanted list after disappearing from a hospital in which he had been undergoing medical treatment.

Source: Kyiv Post

UK's Miliband: Keep EU Door Open To Iceland, Ukraine Amid Crisis

LONDON, England -- U.K. Foreign Secretary David Miliband said Monday the economic crisis has put European Union relations "under strain," testing the E.U.'s achievements as never before.

David Miliband
But he said the E.U. must keep the door open for countries such as Iceland and Ukraine -- both hit particularly hard by the global economic crisis - to possibly join.

"The sense of solidarity within Europe, between east and west, rich and poor, new and old is under strain," Miliband said in a speech at the London School of Economics.

"The achievements of the last 30 years -- from the single market and enlargement to the euro -- are being tested as never before."

Miliband said that are were countries like Iceland or Ukraine "for which, though there is no formal membership commitment, we must keep open the prospect of membership."

Source: AFP

At Least 7 Dead, Including Two Russians And Two Ukrainians, In Cargo Plane Crash

ENTEBBE, Uganda -- An Ilyushin cargo plane on a logistical mission to African peace forces in Somalia crashed into Lake Victoria on Monday after taking off in Uganda with 11 people on board, including three Burundian officers.

An Ilyushin IL-76 cargo plane, the type that crashed in Uganda.
Seven of those on board were confirmed dead, and an aviation source said he feared all 11 had been killed. "It plunged into the lake and went down deep," the source said.

Rescue boats and divers scoured the lake's choppy waters for survivors some 7 km (4.3 miles) from Uganda's main airport at Entebbe, where the plane began its flight. Two wheels and some wreckage were brought onshore.

Ugandan military sources had initially identified the aircraft as an Antonov, but the Ugandan government later said it was a chartered Ilyushin 76.

It was taking tents and water purification equipment to Somalia, where Uganda and Burundi both have soldiers in a small African Union peacekeeping mission, Ugandan officials said.

The aircraft burst into flames before plunging into the lake and hitting two fishing boats, injuring four fishermen, Uganda's government said.

"We have not rescued anybody... Time is really working against us," said Information Minister Matsiko Kabakumba.

A Civil Aviation Authority spokesman said there were four crew and seven passengers on board the aircraft when it crashed.

A Burundi army spokesman confirmed three of its soldiers -- a brigadier general, a colonel and a captain -- had died.

"The information we have is that the plane crashed five minutes after taking off at Entebbe Airport. Burundi deplores the death of three of its officers who were on the plane," Adolphe Manirakiza told Reuters in Bujumbura.

There was no immediate word on what caused the crash.

"We're not ruling anything out, and we're not ruling anything in," Kabakumba said, adding that the plane had flown some 20 missions in recent weeks.

Russian media said the pilot and copilot were Russian citizens and the navigator and flight engineer were Ukrainians. All four were killed in the crash, Ruslan Madiyev, an official at the Russian embassy in Kampala, told RIA news agency.

Uganda said the flight also carried one Ugandan soldier, an Indian citizen, a Ugandan loadmaster and a South African peacekeeper.

Africa's air accident rate is six times worse than the rest of the world, the International Air Transport Association says.

Source: Kyiv Post

Bank Crisis Spreads In Ukraine

KIEV, Ukraine -- After Ukraine's currency collapsed in the global meltdown, so did Valery Ilyin's household finances - and, he fears, his family's dream of a bigger home. Mr. Ilyin, a 37-year-old information-technology manager at a telecommunications company in the capital, Kiev, has a mortgage in dollars for a new, three-room apartment. His payments doubled because of the falling exchange rate, to more than his entire monthly salary.

Ukranians stand outside a Bank Kiev office. Some analysts predict that dozens of Ukraine's 180 banks will go under this year as many consumers are predicted to default on mortgage loans, and bankruptcies could threaten the solvency the banking system.
”First, I was shocked. Now, I am trying to think of ways how I can protect my family in this situation,” said the father of three, who is now forced to spend 10,200 hryvnia to buy $1,200 to cover his monthly mortgage payment on the new apartment, which cost $110,000. His salary is only $880 a month.

So far, he is up to date on his payments, but he can lose the apartment if he is three months late. “I never expected anything like this to happen,” he said.

Mr. Ilyin's story is familiar across Eastern Europe, where banks in countries like Ukraine, Poland, Hungary and Romania loaned recklessly in dollars, euros and Swiss francs and are now facing a wave of bad loans and defaults after the currencies of those countries plummeted.

Homebuyers took on debt not expecting that a sharp drop in their country's currency would balloon their payments.

The crisis dims hopes for quick prosperity for these post-communist countries, which had grown impressively over recent years in part because of foreign lending. The foreign-loan problem threatens to spread to an already shaken banking system in Western Europe, where some banks are heavily exposed to these emerging economies.

Analysts say the banking sector likely can stay afloat thanks to a hefty $31 billion aid package from the European Bank for Reconstruction and Redevelopment, the World Bank and the European Investment Bank.

But the region is learning a painful lesson in terms of personal hardship from imprudent borrowing.

”I think this was a serious failure of government policy, of bank regulation and of banks themselves who should have known better and been aware of the risk of the local currency depreciation,” said Toby Wight, an emerging markets banking analyst with Global Insight.

In Ukraine, consumers rushed to borrow in dollars to purchase vacuum cleaners, cell phones, apartments and the imported cars that brought Kiev a never-ending traffic jam. They were lured by lower interest rates than on hryvnia-based loans - Mr. Ilyin was offered a 13 percent interest rate in dollars as opposed to 23 percent in hryvnia - and the hryvnia's previous stable record.

The central bank ended four years of fixed rates for the hryvnia in May, letting the market set the rate. Since the crisis hit in September, the currency has lost 43 percent of its value, from 4.9 to 8.5 against the dollar, as exports fell and investors fled emerging markets.

About 70 percent of consumer loans, which constitute 36 percent of all loans here, were extended in foreign currency, mainly in dollars, according to the Renaissance Capital investment bank in Kiev, meaning that credit payments for these households almost doubled. About half of corporate loans also were denominated in dollars.

As a result, up to 25 percent of loans in Ukraine may go bad this year - some defaulted and some restructured, as opposed to 2 percent to 4 percent during a good year, according to Dragon Capital investment bank.

”The main risk is the growth of problem loans,” said Vitaliy Vavryshchuk, a banking analyst with Dragon Capital.

Troika Dialog Ukraine put the number of poorly performing loans this year at 11 percent to 12 percent.

The central bank already has taken control of eight banks, shaken by deposit withdrawals and bad loan problems.

The crisis threatens losses not only for Eastern European banks, but also their parent banks in Western Europe, such as Austria's Raiffeisen and Erste Bank, France's Societe Generale, Italy's UniCredit and others. Analysts are optimistic that Europe's banking sector will be revived thanks to the Western banks' support of their local subsidiaries and the hefty aid package.

Raiffeisen bank has said it will inject $160 million of capital to support its Ukrainian unit.

Mr. Ilyin, who shares a two-room apartment with his wife, Lesya, 36, and three children while their three-room apartment is being built, hopes to keep his mortgage current thanks to his wife's income as a computer programmer. But tens of thousands of other households here may not be so fortunate.

Ukraine moved closer last week to getting a second crucial installment of a $16.4 billion emergency fund from the International Monetary Fund, after the program was frozen last month because of policy disagreements. A chunk of that loan will go toward recapitalizing the banks.

In neighboring Poland, about 60 percent of retail loans were extended in Swiss francs. That is proving to be a questionable choice now that the Polish zloty lost about 60 percent of its value against the Swiss franc since August peaks.

Poland's National Bank reported that 3.5 percent of loans to consumers and 6.2 percent of loans to corporations were troubled.

In Romania, foreign currency loans, mainly taken in euros, constitute 60 percent of all retail loans. Defaults on personal euro loans grew 8 percent in December compared with November figures, according to the central bank - a rise attributable to a 20 percent drop of the Romanian leu to the euro last year.

Hungary has 70 percent of household loans denominated in Swiss francs, and with the forint down 50 percent to the franc, things are looking bleak.

“It seems that at that level banks start to feel that their foreign-currency debtors are having problems,” said Peter Duronelly, investment chief at the Budapest Fund Management Co.

Source: The Washington Times

The Case For Ukraine

KIEV, Ukraine -- Pessimists believe that Ukraine is on the verge of default. Fortunately, such a calamity is unlikely, but Ukraine badly needs more international financial support to handle a tremendous external shock.


A year ago, Ukraine’s economy was in sound health after eight years of an average annual economic growth of 7.6 percent. Ukraine has maintained a minimal budget deficit, and its public debt was as small as 12 percent of GDP in 2007.

Ukraine’s mistake, however, was to keep its exchange rate pegged to the US dollar, which encouraged speculative short-term capital inflows, driving up inflation to 31 percent last May and the current account deficit to 6.7 percent of GDP last year.

These flaws were not major, but Ukraine became a prime victim of the freezing of international financial markets after the Lehman Brothers bankruptcy. Without credit, most construction just stopped. Steel is Ukraine’s main export product, accounting for over 40 percent of exports, and both prices and volume of sales plummeted by half.

The blow to the Ukrainian economy has been horrendous. In January, industrial production fell by no less than 34 percent over January 2008, and GDP is estimated to have plunged by 20 percent. Steel production, mining and construction have fallen by half. In current dollars, Ukraine’s GDP is likely to plummet by 40 percent this year. Exports are likely to drop by half, and imports even more, reducing the current account deficit to an insignificant level. Millions of workers are being laid off, and the stock market has contracted by 90 percent.

No other country has been hit as hard as Ukraine, and it needs all the support it can get to mitigate the social shock. The Ukrainian government reacted swiftly, asking the International Monetary Fund for support last October. Within four weeks, Ukraine and the IMF had agreed on a large, strong two-year standby agreement with $16.4 billion of IMF credits.

The IMF had three key demands: A balanced budget, a floating exchange rate, and bank restructuring. Ukraine has delivered. It has done more on bank restructuring than most Western countries. After some hesitation, the National Bank of Ukraine let the exchange rate float. It has depreciated by about 50 percent and stabilized, endowing Ukraine with new cost competitiveness. The Ukrainian government has maintained the budget close to balance in spite of collapsing state revenues. Inflation has fallen to 22 percent.

The international financial institutions recognize Ukraine’s dilemma and the government’s heroic achievements. The World Bank, the European Bank for Reconstruction and Development, and the European Investment Bank have contributed some $3 billion in new funds.

Their support is sufficient to avert default. Ukraine still has $28 billion in reserves, which reassuringly corresponds to eight months of imports. The only reason for talk about default is the loud, public acrimony between President Viktor Yushchenko and Prime Minister Yuliya Tymoshenko, who accuse each other of treason and corruption.

But we should not complain about open democracy. Apart from the Baltic countries, Ukraine is the only bona fide democracy with free media in the former Soviet Union, and it is committed to Euro-Atlantic integration. Such a country needs support when in peril.

Amazingly, Ukraine has so far seen minimal social unrest, but unemployment is bound to skyrocket, especially in the East with its steelworks and mines. Naturally, the Ukrainian government is anxious to reinforce its social safety net and insists on a budget deficit of a moderate 3 percent of GDP.

The IMF understands the government’s predicament, but it cannot approve a budget deficit of more than 1 percent of GDP without additional financing. The finance gap in this year’s balance of payment amounts to $5 billion, quite a moderate amount.

Seventeen international banks have just given their vote of confidence in Ukraine’s economic policy, by making commitments to invest $2 billion of their own capital in their Ukrainian subsidiaries. Western governments should follow the example of their hard-tested banks.

The European Union has a vital interest in saving its banks that are heavily invested in Ukraine, and for the United States, Ukraine is of major geopolitical importance. The United States and the European Union should stand up and deliver. Ukraine has long been a loyal friend of the West. Now the time has come for the West to prove its friendship toward Ukraine.

Source: Eurasian Home

Who's Afraid Of Financial Collapse In Ukraine?

KIEV, Ukraine -- Ukraine is dangerously close to a sovereign default, the analysts are telling us. The currency has already dived to nearly half of its value of last summer, along with traded stocks. Worse yet, many of the nation's banks are expected to fail, taking down with them the hopes and savings of a fledgling consumer society.

Ukraine's National Bank
However, you don't see people jumping out of their windows from the glass business towers that have sprung up across downtown Kyiv over the last several years.

Many have lost their jobs, and there have been a few anti-government protests, but these are not uncommon occurrences in Ukraine in and of themselves.

Retail sales are down, but shopping malls and supermarkets in the capital are still bustling with buyers.

Optimists point to Ukraine's low debt relative to gross domestic product, and respectable currency reserves held by the country's much-embattled National Bank.

Pessimists raise the specter of unpaid pensions and the large state workforce in redundancy.

Meanwhile, the cavalry has not arrived as expected, although the horns are blowing from the West.

The European Bank for Reconstruction and Development has pledged 500 million euros to re-capitalize troubled Ukrainian banks.

The World Bank says it is ready to provide banks with up to $750 million, plus another $1 billion to rebuild the country's infrastructure.

Then there is the International Monetary Fund's much touted $16.4bn package. But that one has been cut off at the pass over disagreements with the government about this year's controversial budget deficit.

Nevertheless, Prime Minister Yulia Tymoshenko remains defiantly confident.

"There is currently nothing in the public sector to suggest raising the issue of default, or even uttering this word," she told journalists.

Her finance minister, Viktor Pynzenyk, didn't share her optimism, and hightailed it off into the sunset on a horse with no name.

Now, Ms. Tymoshenko is sending smoke signals to the indians, in the form of a five-billion-dollar loan request to the Kremlin.

Purportedly, Western lenders were also supposed to see those smoke signals, but one never knows who will respond to such a request, or what they will want as collateral.

Despite all the rumors of European bankers shaking in their boots, it's a bit premature to forecast a full retreat.

Many foreign banks have made a pretty penny lending to their eastern neighbors. Packing up and leaving now would make it a lot harder to come back later.

They paid top price for their entry on to the market and have every reason to expect a return on their investment later on down the road - barring another communist revolution (!).

And besides the expected help from international financial institutions such as the EBRD, WB and IMF, many of the Western banks that set up shop in Ukraine over the last few years can count on their parents back in Europe.

As for stock prices, what goes down eventually goes back up. In the mean time, it's a great time for bottom fishing.

World prices for the steel and chemicals that Ukraine exports will also eventually rise - along with producers' profits if long overdue investment into energy-saving technology is carried out.

Of course, some banks will go under, and small companies with no money will get swallowed up by big firms with plenty of liquidity.

But that's the way capitalism works.

Many a Ukrainian entrepreneur has been living like a character from the American soap opera ‘Dynasty’. Business is about risk taking, and the risks are a lot bigger when you put off the kind of legislative and regulatory reforms that make the market more rational.

Much of this is the fault of Ukraine's short-sighted and self-centered politicians. And many of them are the same business people now trying to claw their way out of the current mess.

Ordinary citizens who may lose their bank deposits, as well as the cars and apartments they recently bought on credit, deserve more sympathy.

If things get really bad, they may take to the streets, or at least vote their corrupt leaders out of office.

In this situation, they wouldn't differ much from the disillusioned citizens of other countries across the world who have also lost their homes and jobs over the last year.

For the many Ukrainians who never really had a chance to benefit from the short-lived prosperity that their country has undergone, life will continue as usual.

In fact, life may even get better, if the right laws are passed, the tax system is straightened out and the most vulgar forms of corruption are removed from officialdom.

For some Ukrainians, there is amusement if not justice in watching their country's new rich take a spill. President Viktor Yushchenko has certainly been knocked down a peg or two. Once heralded by his supporters as the country's messiah, he is almost certain to lose the upcoming elections.

His departure from politics may also be accompanied by a shift in Ukraine's foreign policy, from solidly pro-Western to a more middle-of-the-road approach.

In any case, the country may end up better off. It certainly has more pressing problems at the moment. If there is one certainty in Ukraine's current financial crisis, it's that change is long over due.

And that is nothing to be afraid of.

Source: Eurasian Home

Ukrainian Singer To Represent Russia At Eurovision

MOSCOW, Russia -- Ukrainian singer Anastasia Prikhodko will represent Russia at the Eurovision music contest in Moscow this May after receiving the most votes from Russian television viewers.


The 21-year-old singer, who won the 2007 edition of Russia's version of Star Academy, was confirmed as the winner by a professional jury for her song "Mama" in Russian and Ukrainian.

Prikhodko had tried to represent Ukraine at the May 16 contest in Moscow, but was disqualified for violating regulations.

She was admitted to the Russian qualification contest only shortly before the final round on Saturday.

Relations between Russia and Ukraine have been strained for several years, with a new "gas war" at the beginning of the year when Moscow turned off natural gas supplies for two weeks over a payment dispute, triggering supply shortfalls to Europe.

Source: AFP

Pulled From All Sides

MINSK, Belarus -- Russia is crumbling amid the economic crisis, but for its leaders there is a geopolitical upside. For years they have talked of creating "a new European architecture" in which Moscow would maintain hegemony over its near abroad, principally the now independent countries of the former Soviet Union.

Moscow at night
Now the Kremlin is seizing opportunities to bring that dream closer to reality. Still relatively better off than many in Eastern Europe—the Russian economy is set to shrink by 2 percent, compared with a hit of up to 10 percent in Ukraine—Moscow is moving fast to push that advantage, lending money and offering loans to old allies abroad.

That policy is starting to bear fruit. For the first time in a generation, Russia is starting to regain influence in the region. Last month Belarussian President Alexander Lukashenko signed an agreement to allow Moscow to station antimissile defenses in his country, after signing up for a $2 billion loan from the Kremlin.

Also last month, after Russia offered $2 billion in loans, Kyrgyzstan announced it would be kicking the United States out of the Manas Air Base, a key supply point for NATO troops in Afghanistan. The Kremlin has also floated the idea of setting up a development bank for former Soviet states, largely funded by Moscow.

And in January President Dmitry Medvedev launched plans to revive the old Commonwealth of Independent States by creating a military rapid-reaction force.

The European Union is pushing back with its own strategy. After Russia invaded the Georgian territory of South Ossetia in August, Brussels created the Eastern Partnership Program, designed to counter Russian expansionism.

Its goal was to engage with the neighbor states of Armenia, Azerbaijan, Georgia, Moldova and Ukraine by easing travel and trade. Last week the EU announced it would include Belarus in the partnership, and Javier Solana, the EU's representative for foreign and security policy, visited Minsk to offer Lukashenko €350 million in aid, as well as an offer to ease visa restrictions.

No one is asking the Eastern Partnership members to choose sides; indeed, none can afford to cut off either Russia or the EU. But several are gravitating more toward Russia, if only because Europe may already have enough on its plate saving the melting economies of its own member nations. Last week Moldovan President Vladimir Voronin refused to join the partnership, calling it "a plot to surround Russia."

Belarus's Lukashenko, even more than the others, is straddling the fence. He has so far resisted Kremlin demands to recognize the independence of South Ossetia and Abkhazia, and at the EU's prompting, met with opposition groups and has allowed the main group, the For Freedom movement, to legally register.

"Solana gave us this hope," says Alyksandr Milinkevich, the movement's leader. But Russian money and saber-rattling may talk louder than EU diplomacy. Belarus's economy is heavily dependent on cheap Russian gas, and the country owes Russia more than $15 billion. Moreover, after the Russian invasion of Georgia, "every Belarussian, including the president, felt the possibility of Russian tanks rolling into Minsk one day," says Andrei Sannikov, of the Minsk human-rights group Charter97. "The only option for Lukashenko is to listen to what Europe says but pretend he is still loyal to Russia."

Ukraine is in a particularly tough spot. It is close to bankrupt, and its national gas monopoly is on the edge of defaulting on payments to Russian energy giant Gazprom. Western institutions are reluctantly chipping in—but Kiev needs at least $5 billion more to plug its financing gap.

Last month Moscow offered to pick up the tab, but the majority of its citizens want Ukraine to one day join the European Union and look unkindly upon Russian meddling. So far Ukraine's leaders have held out against Moscow's siren song. But with the Ukraine economy on the brink, and little help forthcoming from Europe, the temptation may grow too great.

Still, Moscow's ambitious strategy depends on Russia's solvency. For now, oil profits set aside in a $150 billion stabilization fund are set to cover a 2009 budget deficit. But what happens when the money runs out?

Given the amount of time and energy the Kremlin has put into developing ties with its neighbors, its ambitions aren't likely to go away. One frightening possibility: if Russia has a hard time buying influence, it may have to resort to fighting for it.

Source: Newsweek

Dallas Cowboys Sign Former Chargers DE Olshansky

IRVING, Texas -- The Cowboys filled a large vacancy on their defensive line Friday by signing former San Diego Chargers defensive end Igor Olshansky.

Ukrainian born Igor Olshansky.
Ukraine-born Olshansky received a four-year deal worth $18 million with approximately $8 million guaranteed.

Like linebackers Keith Brooking and Matt Stewart, two other Cowboys additions this off-season, Olshansky (6-6, 309) has a history with coach Wade Phillips, who was his defensive coordinator for three seasons in San Diego.

With defensive tackle Chris Canty leaving via free agency for the New York Giants on a six-year, $42 million deal last week, the Cowboys acted quickly on Olshansky. He visited Thursday and signed Friday.

In 75 games with the Chargers, Olshansky, a second-round pick in 2004, was credited by the coaches with 151 tackles and 11 sacks. In 64 games with the Cowboys, Canty had 197 tackles and 10 sacks

The Cowboys now have Olshansky, Marcus Spears, Jason Hatcher, Stephen Bowen (restricted free agent) and Marcus Dixon, who spent last season on the practice squad, at defensive end. Jay Ratliff earned Pro Bowl honors at nose tackle but also can play defensive end.

Source: Dallas Morning News

Security Service Raids Ukrainian State Gas Companies

KIEV, Ukraine -- On March 4 and 5 armed units of the Security Service of Ukraine (SBU) conducted raids on the headquarters of Naftohaz Ukrainy, the state-owned oil and gas company, and UkrTranshaz, the operator of the Ukrainian gas pipeline company.


The raids were part of a recent SBU investigation into the acquisition by Naftohaz of 11 billion cubic meters of gas that once belonged to RosUkrEnergo (RUE), the shady Swiss-based middleman company, 50 percent of which is owned by Gazprom and 50 percent by Dmytro Firtash and Ivan Fursin, two Ukrainian businessmen.

The gas is kept in Ukrainian underground storage facilities and was formally taken over by Naftohaz after RUE's $1.7 billion debt to Gazprom was transferred to Ukraine as prepayment for the transit of Russian gas to Europe.

Ukrainian authorities took possession of this gas and began clearing it through customs, when the head of the Customs Service, Valeriy Khoroshkovskyi, a wealthy businessman with ties to Dmytro Firtash, blocked the clearance.

In response, the government headed by Yulia Tymoshenko relieved Khoroshkovskyi of his post, but Ukrainian President Viktor Yushchenko then appointed him deputy head of the SBU, apparently as part of his ongoing conflict with Tymoshenko.

Khoroshkovskyi told parliament that the seizure of RUE's gas was illegal and was carried out by "a criminal group that included the government leadership". Interestingly enough, Gazprom, the 50 percent of owner of RUE, did not file any complaint about its gas being stolen by the Tymoshenko government.

The only objection apparently came from Firtash, who was caught in the desperate situation of not being able to meet his contractual obligations to deliver 5 million cubic meters of gas a day to Poland or to supply his clients in Hungary.

Kommersant reported on February 20 that Gazprom had accused Firtash's Hungarian company EMFESZ Kft of illegally importing gas from Ukraine and had filed an official complaint with the Hungarian Energy Commission.

One high-level manager of Gazprom Export was quoted in Kommersant as saying, "We need to sort out why the Hungarians are receiving gas that was not contracted for." However, Alexander Medvedev, the head of Gazprom Export, is also a member of the RUE coordination council and was probably fully aware of what RUE was doing in Hungary.

During the raid on Naftohaz headquarters on March 4, members of parliament from the Yulia Tymoshenko bloc rushed to the building to intervene with the armed SBU unit and prevent them from seizing the original signed copy of the January 19, 2009, contract with Gazprom on gas purchases and transit.

Serhiy Davydenko, the chief of Naftohaz's legal department, told the press that the original contract was needed in order to clear customs for Russian gas bound for Europe and for domestic Ukrainian consumption.

First Deputy Prime Minister Oleksandr Turchynov told a press conference that he had urged the security agents to ignore their orders: "You must not become a tool of criminals and corrupt officials who, with the consent of the president, run the [security] service or coordinate its activities". The SBU agents eventually left the building without the original contract.

The key question in the dispute is why Gazprom, an interested party, is not contesting the legality of Naftohaz taking possession of the gas. The entire episode points to the possibility that Yushchenko and Khoroshkovskyi are, in fact, protecting Firtash's interests.

This would support Tymoshenko's long-held view that Firtash was not only helping the pro-Russian Ukrainian Party of Regions but also Yushchenko personally. What Tymoshenko carefully avoids mentioning is that Firtash enjoyed the long-time support of Vladimir Putin and Gazprom.

As Gazprom's (and Putin's) reputations began to suffer from their association with Firtash and RUE, they decided to break ties with the company. The RUE scheme was so muddled and opaque, however, that when it began unraveling it backfired on all the involved parties.

In a related matter, the Russian and Ukrainian auditing chambers announced that they had begun a joint investigation into the financial dealings of RUE. The Russian auditing chamber will look into RUE's books for 2007 and 2008, while the Ukrainian auditors intend to begin looking as far back as 2006.

One unnamed Ukrainian expert told UNIAN that the use of the state auditing commission to conduct such an investigation was highly unusual, since legally it could only audit state-owned companies, which RUE is not.

The 11 billion cubic meters of gas formerly owned by RUE, which is hidden in an underground cave in Western Ukraine, is critically important as technical gas for powering the compressing stations that keep Russian gas flowing to Europe.

If the Yushchenko administration returns it to Firtash, it would only harm Ukraine's ability to transit gas reliably and would give aid and comfort to one of the most bizarre gas scams of the century.

Source: Eurasia Daily Monitor

Financial Blows Batter Ukraine

KIEV, Ukraine -- The financial crisis here is also a crisis of confidence. Five years ago, hundreds of thousands ignored freezing cold to join demonstrations in Kiev's main square, convinced that their Orange Revolution could make an exemplary democracy of this former Soviet republic.

About 70 bank depositors, most of whom have been told they can't get their money for six months, protest on Kiev's Artema Street. "Even if they rob the people, they don't care," said Vjacheslav Karpenko, right, speaking into a mike.
Today, people's concerns are more mundane. On Artema Street, in front of one of the city's beleaguered banks, 70 protesters gathered this week to vent their anger. Most have been told they can't touch their money for six months. Similar protests are often seen in the city.

The people on Artema don't trust banks, bank regulators, the economy, the currency, the government or politicians. President Viktor Yushchenko -- the man whose orange banner led the revolution -- has an approval rating below 3 percent.

Few countries have been hit harder by the global economic crisis than Ukraine, which is the second-largest nation in Europe, with the sixth-largest population.

Until September, it was one of Europe's fastest-growing economies, with growth of more than 7 percent a year for eight years. Then the roof fell in. The crisis dried up foreign loans, crippled banks with defaults and triggered massive layoffs.

Yushchenko's pro-Western government still hopes to join NATO and the European Union. But some think this country, once seen as a keystone of a revived Eastern Europe, is on the verge of a meltdown.

"If the banking system collapses, and I think it will, we will produce nothing," said Alexander Dubinsky, chief correspondent for the Ekonomicheskie Izvestia newspaper. If production stops, he said, the situation could resemble the economic tumult of the 1990s.

In the chilly morning on Artema Street, bank customers lashed out at Yushchenko and other leaders as they grumbled about their finances.

An office manager who lost her job four months ago said she has a daughter in the hospital and needs money from the bank to get by. "It's impossible to find a job," she said.

An engineer said he can't go to work because his company didn't pay its electricity and Internet bills. One man said he desperately needs money for his wife's operation. "What if she dies?" he asked.

The crowd was mostly middle-aged and carefully dressed. Many were pensioners. Some clutched files of letters and telegrams to bankers and bank regulators, all unanswered. They spoke together about possible corruption on the part of the country's leaders, who are locked in an acrimonious power struggle.

"Even if they rob the people, they don't care," said Vjacheslav Karpenko, the unemployed engineer. A barrel-chested man in a black cap with fur earflaps, he stood on the front steps of the bank and snarled into a bullhorn, urging the crowd to chant angry slogans so the employees inside could hear them.

Some in the crowd said their only hope lies with the World Bank and the International Monetary Fund, if those global institutions make sure that relief money coming to Ukraine finds its way to Artema Street.

At the World Bank's offices above the thawing Dnieper River, Martin Raiser, director of the bank's programs in Ukraine, said, "I understand the sentiment." He added, "The fundamental problem here is the lack of trust in state institutions."

Ivan Lozowy, president of the Institute of Statehood and Democracy, said the banks have not only not failed to use cash infusions from the government to help their customers, but they have also misused the money by buying dollars. That drives down the Ukrainian currency, the hryvnia. As confidence in the currency sags, people attempt to unload it.

Many people are withdrawing money from banks that are still healthy, which weakens the banks. And people who get money are changing it into dollars and hoarding them.

Last May, a dollar traded for about five hryvnia. In recent weeks, the dollar has been worth almost 10 hryvnia. And because 70 to 80 percent of consumer loans are in dollars or other foreign currencies, the amount of hryvnia that borrowers must scrape together each month to repay loans has ballooned.

The banks find themselves pinched between depositors who want out and borrowers who can't repay their loans. A dozen banks are in some form of receivership.

"The blow to the Ukrainian economy has been horrendous," Anders Aslund, a former economic adviser to the Ukrainian government and a senior fellow at the Peterson Institute for International Economics in Washington, wrote in an article recently published by the institute. Construction has all but stopped, gross domestic product could drop 40 percent, the steel industry has been decimated by falling world demand and millions are being laid off. "No other country," Aslund concluded, "has been hit as hard as Ukraine."

Meanwhile, he wrote, the outlook for international assistance is clouded by the public acrimony between Yushchenko and Prime Minister Yulia Tymoshenko, "who accuse each other of treason and corruption."

The president and prime minister were allies in the Orange Revolution but have become bitter enemies. There had been signs of cooperation in the face of the crisis recently, but on Wednesday, security forces who report to Yushchenko raided the national gas company, which reports to Tymoshenko. The exchange that followed included accusations of "corruption" and "evil."

The IMF approved a $16.5 billion loan program to rescue Ukraine in October, but suspended it last month after the first $4.5 billion installment because the government failed to make politically unpopular spending cuts.

Despite the severity of the problems and the infighting, Aslund argued that this Western-oriented nation of 46 million people is too important strategically and politically to write off. "Such a country needs support when in peril," he wrote.

The World Bank's Raiser said government and financial institutions must bolster their credibility with the public, which has proved difficult, but he added that Ukraine's natural resources, as well as its relatively cheap land and labor, give it many long-term advantages.

In Raiser's analysis, the most hopeful scenario is that after a deep recession this year, the country will stabilize and bounce back with a reshaped economy. And, he said, the harsh economic environment could put an end to the infighting, having "the effect of concentrating minds."

But Lozowy said the country's messy politics are not such a bad thing. "Look, we have competitiveness in the political arena. At least there's vocal opposition," he said. Because the ruling coalition is so fractured, when one faction does something questionable, another side tells the public.

Much of the former Soviet Union may appear more stable, he said, but political opposition is almost nonexistent. "I've never seen the logic that political chaos is terrible," Lozowy said.

For the people on Artema Street, though, questions are often personal, not political. One man said he needed money to send to Ohio. It's for his son, he said, who is stuck with an apartment there he can't afford.

Source: Washington Post

Ukraine Plans To Tax Satellite Dishes, Air Conditioners, And Fireworks Displays

KIEV, Ukraine -- The coffers of the Ukrainian capital Kyiv are apparently empty, the passage of the city budget keeps being postponed, but the city fathers have come up with a plan.


Headed by Kyiv's colorful mayor, Leonid Chernovetsky, the politicians have proposed various new taxes in the hope of shoring up the capital's waning reserves.

(Chernovetsky is fondly referred to as Lonya Cosmos. Lonya is a diminutive of Leonid. Cosmos because people say the mayor often goes off on weird tangents and appears to be lost in space.)

According to media reports, Chernovetsky plans to introduce several direct and indirect communal taxes, which aim to raise at least 30 billion-40 billion hryvnyas (about $4.7 billion).

Satellite dishes and air conditioners are among the first to be taxed (50 hryvnyas monthly per dish, 24.5 kopiyky for every air-conditioner kilowatt-hour). Mobile operators will also be subjected to an additional tax.

Each transmission tower will be taxed to the tune of $100 per month and all newlyweds will be forced to be photographed only by municipal photographers for a set fee.

The city government also plans to levy a tax on private fireworks displays (very popular in Ukraine). As if that wasn't enough, word has it that Chernovetsky wants to institute a special tax on unmarried people.

All these wacky taxes would be collected by a special department the mayor's office will set up.

Mayor Chernovetsky is not the first functionary to levy strange and mysterious taxes.

In the 18th century, sparrows in the German state of Wurttemberg were taxed. Wurttemberg's environmentally unsophisticated burghers thought that all sparrows did was eat the harvest, therefore, each landowner was obliged either to destroy the pesky little birds, or pay a tax on them.

In 1910, Tsarist Russia introduced a municipal bicycle tax in Lenin's hometown of Simbirsk.

Peter the Great, Russia's modernizing tsar, was constantly running out of money. Some of his creative tax ideas involved facial hair. In an attempt to make Russians more European (at least in appearance), Peter instituted a beard tax in 1698.

The tax differentiated between social classes: if you were a merchant of the highest order and insisted on keeping your beard, your tax was 100 rubles per annum.

But an average citizen was charged only 30 rubles for his facial shagginess. Mustaches were much cheaper. Villagers were left untaxed, unless of course they decided to visit a city. At that point they had to pay a tax of one kopeck.

The United States is also no stranger to funky taxation. Several states in the union have an illegal drug tax, Maryland taxes homeowners and businesses for flushing, Arkansas has a tattoo and piercing tax, and in Maine anyone who grows, buys, sells, handles, or processes blueberries is subject to a penny-and-a-half-per-pound tax.

Source: Radio Free Europe

Who Will Win The Economic Battle For Ukraine?

NEW YORK, NY -- Ukraine, a geopolitical linchpin that could tip the balance of power between Russia and the West, is divided right down the middle... and the fate of Europe potentially hangs in the balance.


Now, the potential collapse of Europe might be considered a pretty big deal, right? Of course it is. But there is another flashpoint here... one that ties into the longer-term possibility of war. We are speaking of Ukraine.

The most notable thing about Ukraine, from a geopolitical standpoint, is the long border it shares with Russia.

The political orientation of Ukraine is deeply important to Russia for the following reasons:

• As a “Russian satellite state,” Ukraine offers aid and comfort to the Kremlin. With Ukraine under the sphere of Russian influence, Russia enjoys an extension of power and a natural buffer between itself and Western Europe.

• As a “Western state,” Ukraine is a nightmare for Russia. The geographical layout means that, were Ukraine to fully throw in its lot with the West, Russia’s entire southwestern flank would be exposed. This would dramatically complicate the Russian defense question in the event of future military conflict.

Ukraine Is Now “In Play”

On Wall Street – the Wall Street of old at any rate – there were occasional excited whispers of a company being “in play” when a potential takeover was in the offing.

On a balance beam between the influences of Western Europe and Russia, Ukraine is now “in play” as a country.

Ukraine itself is in a deep shambles – much worse so than many of its neighbors. A New York Times piece captures the scene:

Steel and chemical factories, once the muscle of Ukraine’s economy, are dismissing thousands of workers. Cities have had days without heat or water because they cannot pay their bills, and Kiev’s subway service is being threatened. Lines are sprouting at banks, the currency is wilting and even a government default seems possible.

The Financial Times further reports on the trials of Olexander Pavlenko, a young man who is “one of tens of thousands of Ukrainians who cannot get their money out of the bank.”

“I stood in line a couple times with other bank clients who were protesting, crying and screaming,” Pavlenko said. “But the bank told me: ‘Sorry, we simply don’t have the money now and can’t help you.’”

Remember Ukraine’s “Orange Revolution” some five years ago? Putin and the Kremlin were both infuriated and humiliated by that turn of events. In the aftermath of that moment, the die seemed to be clearly cast against Russia and in favor of Europe. Ukraine was on the path to becoming a full-fledged part of the West.

But now the pro-Western strides of the Orange Revolution are coming undone. Even within Ukraine itself, the political leadership is split...

Yushchenko Versus Tymoshenko

On one side of the chasm, you have Ukrainian President Viktor Yushchenko. Mr. Yushchenko was the pro-Western leader who came out on top in the Orange Revolution. He is also the leader who was famously poisoned by Dioxin around the time of the 2004 elections, with facial disfigurement that lasts as a reminder to this day.

It’s little wonder that President Yushchenko is widely considered a “Russia basher.” After all, he has ample reason to believe that Russia tried to kill him (after their attempt to install a puppet via ballot box fraud came up short).

Opposite Mr. Yushchenko stands Yulia Tymoshenko, the Prime Minister of Ukraine. The two are bitter rivals... and where Mr. Yushchenko is anti-Russia, Ms. Tymoshenko is very much pro-Russia.

Ms. Tymoshenko’s poll numbers are now rising, according to Bloomberg. Western Europe’s dithering further helps her pro-Russia cause. While Germany and other EU nations hem and haw over the possibility of writing a bailout check, the Kremlin makes soothing noises of friendship and cooperation.

It’s a fascinating situation. Ukraine, a country of 46 million and a geopolitical linchpin that could tip the balance of power between Russia and the West, is divided right down the middle – even down to the sentiments and loyalties of its leaders.

And then you throw our good buddy Vlad into the mix...

Putin’s Peril

As mentioned earlier, there are key reasons why Ukraine is vital to Russia’s long-term strategic interests. But there are also a few compelling short-term reasons for Russia’s interest in Ukraine.

St. Petersburg native Alexander Etkind points out that, “ever since Vladimir Putin came to power a decade ago, the Kremlin regime has relied on two pillars: the security forces and energy exports. By suppressing internal rivals and absorbing their assets, the regime created a dual monopoly.”

So the basic strategy behind Vladimir Putin’s invincible mantle of popularity ran roughly as follows:

• Exploit high and rising oil and gas revenues by partnering up with the oligarchs (and destroying the ones who refused to “cooperate” on dictated terms).

• Use the flood of oil and gas cash to buy popularity among the Russian populace via rounds of rising salaries, bank loans, business opportunities, charitable handouts and so on.

• Keep the virtuous circle sealed and intact with an overlay of security forces, suppressing anti-state opinion wherever or however it arises. (And, perhaps, killing off the overly nosy journalist/spy or two.)

Trouble is, the whole shebang relied on a fat pipeline of oil and gas revenues. With the price of oil and gas collapsing in the face of synchronized global recession, Putin’s magic popularity formula is collapsing too.

This is why the world now hears unsettling whispers of growing unrest among the Russian populace... outbursts of popular violence and calls for Putin’s resignation... and even signs of open rebellion from President Medvedev and Putin’s clutch of once-loyal Kremlin cronies.

Bottom line: Ol’ Vlad is in a tight spot. And that’s why Ukraine could factor even bigger in Russia’s short-term plans.

Winning Ukraine back from the West – i.e. nestling it firmly once again in the sphere of Russian influence – would be a huge win for Putin.

It would play well to the Russian masses in terms of fierce nationalistic pride – especially after the deep humiliation of the Orange Revolution five years back. And it would also play well to Putin’s Kremlin cronies, who would be delighted and relieved to see Russia’s vulnerable flank shored up once again.

Not to Be Ignored

Meanwhile, across the Atlantic, the United States has its own headaches to worry about. But America cannot afford to ignore the tug of war that is playing out in Ukraine for much longer.

After all there are deep strategic concerns for America, too, in the idea of a cracked and battered Europe facing down a wounded (but resurgent) Russian bear.

Not only that, but if the West were to truly “lose” Ukraine, other Eastern European nations – the ones who deeply fear Russia – could be thrown into an emotional maelstrom, mixing feelings of betrayal, terror, rage and despair.

That’s an extremely volatile cocktail... the stuff from which wars ignite. It's not an overstatement to say that Ukraine is a domino that could lead to some truly hair-raising chain reactions. The fate of Europe could depend on how future dominoes fall.

Source: Seeking Alpha

Ukraine’s Economy May Rebound ‘Relatively Quickly,’ S&P Says

KIEV, Ukraine -- Ukraine’s economy may rebound “relatively quickly” next year after a sharp contraction in 2009, helped by exports, said Frank Gill, Standard & Poor’s primary credit analyst.


Ukraine’s economy may expand 4.5 percent in 2010, compared with a 12 percent contraction expected this year, said Gill in a phone interview from London yesterday.

“We see the potential for a relatively quick rebound next year,” he said. Still, “the outlook remains highly uncertain as it hinges on external demand for metals as well as metals prices.”

The economy is shrinking after nine years of growth as the global crisis cuts access to credit and investment. Prices of commodities, including the former Soviet state’s major exports such as grains and industrial metals, have collapsed and economic turmoil has been aggravated by a political struggle between President Viktor Yushchenko and Prime Minister Yulia Timoshenko over policies needed to meet terms of an international bailout.

“Ukraine faces shocks, which would damage any economy,” said Gill. “Prices for chemicals and steel have declined sharply, while import prices are being pushed higher by rising natural gas tariffs and the exchange rate depreciation. At the same time ongoing political uncertainty is very unhelpful.”

The Reuters/Jefferies CRB Index of 19 farm, energy and metal futures has fallen to the lowest level since June 2002 this year and was down 50 percent from a year ago through March 5. It fell 9.1 percent this year through March 5.

‘Strong Commitment’

Ukraine was forced to turn to the International Monetary Fund help to avoid a default, stabilize the banking system, and aid its currency. The Washington-based lender approved a $16.4 billion loan and gave an emergency handout of $4.5 billion in November. The government’s plans to run a state budget deficit of 5 percent of gross domestic product have jeopardized the second installment, which was expected on Feb. 15.

S&P cut Ukraine’s credit rating to CCC+, seven levels below investment grade and the lowest in Europe, on Feb. 25 saying political turmoil poses risks to the loan. S&P left the outlook negative, indicating a possible further cut.

“It is not clear how strong the commitment of the Ukrainian authorities is to implement the IMF program,” said Gill. “Government debt is quite low, though rising significantly, but the willingness to pay the debt is not clear ahead of the presidential elections,” scheduled to be held by January.

‘Out of Date’

S&P, like the IMF, urges the Cabinet to review this year’s state budget, which assumes economic growth of 0.4 percent.

“Ukraine’s budget is out of date,” said Gill. “A revision of revenues is needed in line with deteriorating growth prospects. Last year, the budget largely relied on revenue of value-added tax, which come from imports but imports are seen collapsing this year. Corporate taxes will be lower too.”

S&P expects the hryvnia’s rate to weaken further, said Gill Ukraine’s national currency lost more than 40 percent against the dollar in the last six months. It was trading yesterday at 7.85 per dollar in Kiev.

“The hryvnia depreciation will further drive the deterioration of banks’ asset quality and that is ultimately going to raise sovereign debt levels as the government will need to recapitalize local banks,” said Gill.

Further “exchange rate depreciation raises the risk of bank and corporate defaults and rescheduling,” said Gill. Still, “in the long-term perspective, it will help the economy to be more competitive as balance sheets are freed up again.”

S&P expects Ukraine’s current-account deficit to shrink to 2 percent of gross domestic product by the end of 2009, compared with 6.7 percent last year, said Gill.

Source: Bloomberg

Ex-Premier: Yushchenko Should Resign And Ensure Elections Of President, Parliament Are Held Simultaneously

KIEV, Ukraine -- Former Ukrainian Prime Minister Valeriy Pustovoitenko (1997-1999) has said that incumbent President Viktor Yushchenko should resign and ensure snap presidential and parliamentary elections are held simultaneously in the country.

Former Ukrainian Prime Minister Valeriy Pustovoitenko.
"I think that for the sake of Ukraine and the Ukrainian people, [President] Viktor Andriyovych Yushchenko should resign and ensure that presidential and parliamentary elections are held simultaneously, bringing political stability to our country, which, in turn, will guarantee economic stability in Ukraine," he said at a press conference in Kyiv on Friday.

Pustovoitenko said that it is currently clear that disagreements between particular branches of power are so serious that they could not be resolved peacefully.

"This confrontation has reached a point when we shame ourselves in front of other countries," he said.

He called for early presidential and parliamentary elections to be held and for an "absolutely professional government" to be formed.

Pustovoitenko said that the current Cabinet of Ministers should be 80% replaced. He said that the issue concerns, first and foremost, the government's industrial and energy ministers.

Source: Kyiv Post

Putin Warns Of New Ukraine Gas Crisis After Raid

MOSCOW, Russia -- Russian Prime Minister Vladimir Putin warned Thursday of the risk of a new gas crisis with Ukraine and Europe, saying he was "extremely worried" about a raid on the Ukrainian state gas company in Kiev.

Russian Prime Minister Vladimir Putin, seen here on March 05 in Moscow, warned Thursday of the risk of a new gas crisis with Ukraine and Europe, saying he was "extremely worried" about a raid on the Ukrainian state gas company in Kiev.
A January dispute between Russia and Ukraine resulted in the cutting of Russian gas supplies to Europe for almost two weeks, triggering the European Union's worst ever energy crisis.

Armed Ukrainian security service agents on Wednesday burst into the headquarters of the Ukrainian state gas firm Naftogaz to conduct a search, in a dramatic display of the country's internal tensions.

Putin said that "we can only be extremely worried about the possible consequences" of the raid.

"Once again the question has been raised about the reliability of this country (Ukraine)," he added.

The raid came as Russia set a March 8 deadline for payment by Ukraine of a 360 million dollar debt for February.

As Putin warned that failure to pay would lead to a halt in supplies to Ukraine and possibly European consumers, there was an immediate response from Naftogaz.

By the end of business hours Naftogaz said it had paid the February debt in full.

Naftogaz spokesman Ilya Savin said Naftogaz on Thursday paid the final 50 million dollars outstanding after it paid 310 million dollars earlier this week to Russian energy giant Gazprom.

Gazprom confirmed in a statement that "Naftogaz has entirely paid for gas deliveries in February."

The January dispute was eventually resolved with an agreement signed after talks in Moscow between Putin and Ukrainian Prime Minister Yulia Tymoshenko, a pro-Western figure who nonetheless has good relations with Russia.

Her domestic rival -- President Viktor Yushchenko who is targeting EU and NATO membership for his country -- is despised by Russia for his support of Georgia in its August war with Moscow.

The Naftogaz raid, conducted by the SBU Ukrainian security service which answers to Yushchenko, was seen as the latest step in the poisonous feud between the two politicians.

The SBU agents had notably been seeking documents over the January gas deal with Russia brokered by Tymoshenko, which Yushchenko has denounced as a sell-out.

Earlier, SBU investigators had failed to carry out another search at Ukrtransgaz, a Naftogaz subsidiary which operates Ukraine's gas pipeline network.

This time they were not accompanied by the armed agents who had caused Wednesday's drama and were blocked in the hallway by lawmakers belonging to the Tymoshenko parliamentary faction.

The turmoil in Ukraine coincides with a grave economic crisis in the country which has seen its industrial production nosedive and its currency halve in value against the dollar.

The country also risks losing the second tranche of an IMF loan -- its main source of foreign income this year -- due to budgetary strains. This prompted Standard and Poors last week to slash Ukraine's ratings to a pre-default level.

Ukraine's economy "is more or less already experiencing a balance of payments crisis" because of plummeting prices for exports, Standard and Poor's analyst Frank Gill told a conference call Thursday.

"The refinancing risk for the banking system is enormous," he added.

Bulgaria, one of the EU states worst hit by the the halt in Russian gas deliveries via Ukraine in January, said Wednesday it was preparing a new gas rationing plan for the industry and bracing for possible new cuts.

"We have no reasons to believe that the crisis is inevitable but there is a problem and we are preparing," Economy and Energy Minister Petar Dimitrov told the national radio.

Source: AFP

Ukraine Security Forces Try To Enter Pipeline Group

KIEV, Ukraine -- Officials from Ukraine's SBU security service tried on Thursday to gain entry to the offices of the authority overseeing Ukraine's gas pipelines, but later left the building, a spokesman for the company said.


It was the second such incident in as many days and served to highlight tensions between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko.

On Wednesday, armed SBU officers burst into the offices of Ukraine's national energy company Naftogaz as part of investigations into what it said were abuses -- as the firm was making arrangements to settle a critical bill for Russian gas.

Ukraine is the main transit route for Russian gas exports to Europe, and a dispute over prices with Russia in January disrupted supplies to many countries.

Yushchenko's spokeswoman said the SBU had acting within the law. But Tymoshenko, the president's estranged ally and now arch rival, said the investigation was aimed at disrupting Ukraine's system of gas distribution and payment.

Yushchenko has criticised the prime minister for her conduct in clinching a deal in January under which Ukraine is to pay far more for imported Russian gas. Naftogaz said it had paid 80 percent of the February gas bill and would settle the rest on Thursday.

Last month, the SBU launched criminal proceedings into what it said was an illegal deal by Naftogaz to secure control over more than 6 billion cubic metres of gas.

Tymoshenko said Wednesday's action by security forces was linked to a new row over the takeover by customs of 11 billion cubic metres of gas from RosUkrEnergo, an intermediary eliminated from the gas trade under the latest deal.

A spokeswoman for the Ukrtransgaz company that runs Ukraine's pipelines said a group of men in civilian clothes and apparently unarmed had demanded entry to the building. She said the group presented no documents or warrants.

A Naftogaz spokesman, Ilya Savin, said the group left the premises after about an hour after a standoff with members of parliament who had rushed to the scene.

SBU spokeswoman Maryna Ostapenko had earlier said: "Representatives of the SBU are conducting an investigation within the framework of a criminal case over abuses in the gas sector."

On Wednesday, SBU officers in riot gear pushed their way into Naftogaz offices, conducting a search for what company officials said were the original copies of a gas supply deal signed in January with Russian giant Gazprom .

Naftogaz said they left hours later without the documents.

Ukraine's key industries and its currency have been battered by the financial crisis. Yushchenko and Tymoshenko briefly abandoned their antagonism this week to make a joint submission to the International Monetary Fund to keep intact a $16.4 billion loan programme.

Source: Kyiv Post

Yatsenyuk, A Yushchenko Clone, Will Bring Stagnation

KIEV, Ukraine -- It would not be the first time when Ukrainian politicians have overly ambitious views of their futures after serving as parliamentary speaker. Ivan Pliushch, Oleksandr Moroz, Oleksandr Tkachenko and Volodymyr Lytvyn all have harbored presidential ambitions during different stages of Ukraine’s independence.

Arsensiy Yatsenyuk
But none has succeeded in coming close to winning the coveted presidency. Being speaker of the Verkhovna Rada is not a good position from which to launch a presidential bid.

What happens if you launch a presidential bid after you have been ousted as speaker? Arseniy Yatsenyuk was removed as parliamentary speaker last November, a vote made possible by 10 votes provided by presidential secretariat head Victor Baloha’s United Center Party.

Nobody doubts that Baloha acted on President Victor Yushchenko’s instructions, even though the president, on a visit to Poland at the time, feigned surprise.

Yatsenyuk’s popularity has soared in recent months. He is now three times more popular than Yushchenko. Of the top six presidential candidates, Yatsenyuk comes in third, while Yushchenko is at the bottom. Much of Yatsenyuk’s recent popularity is due to public protest against the squabbling of senior leaders.

Consequently, all three (Yushchenko, Prime Minister Yulia Tymoshenko and ex-Prime Minister Victor Yanukovych) have lost support.

It is highly doubtful that current protest feelings found in opinion polls will translate into votes during an election. Voters make strategic choices based on whether their vote will be wasted. That’s why fewer vote for the Liberals in British elections.

In Ukraine, this factor is enhanced by negative voting as Orange Revolution backers will choose whoever (Tymoshenko, Yatsenyuk?) is best placed to (again) defeat Yanukovych. A large proportion of voting in 2004 was negative voting on both sides.

Yatsenyuk’s case has two additional factors that could work against him: age and religion. He only turns 35 in May, a few months before candidates are registered by the Central Election Commission for the presidential elections, and 35 is the minimum age to be president in Ukraine.

Yatsenyuk’s youth will attract young voters, his perceived inexperience will deter middle and older generation voters.

A second factor – bigotry – should not play a role in any democracy. Unfortunately it does. We will never know how many Americans did not vote for Barack Obama because he was black. But the figure must have been high among uneducated, rural, white and small-town America.

Yatsenyuk has Jewish origins and, although Ukraine has not witnessed the levels of anti-Semitism found in Russia, it does exist. The extreme right (such as Oleh Tyahnybok’s Freedom Party) is growing in support during the global crisis. Elections to the Ternopil Oblast council have been stopped because Tyahnybok is running a close second to Tymoshenko’s bloc.

Western Ukrainian members of Our Ukraine, such as Yaroslav Kendzor, who is also head of Lviv’s Rukh movement, have spread anti-Semitic remarks about Tymoshenko such as “the Jew with the Braid (zhydivka z kosoyu).”

Indeed, the whispering campaign against Tymoshenko as being unfit to be in a leadership position because she is “not ethnic Ukrainian” – a slander spread from Yushchenko’s secretariat – has reached a crescendo and is a slur on the once-Orange president’s legacy.

Tymoshenko does not have Jewish origins. Hers are Armenian and Ukrainian. Nevertheless, the campaign against her gives one the ability to imagine how Yatsenyuk’s bonafide Jewish origins could become the brunt of anti-Semitic remarks in a presidential campaign.

The best position for success in winning the presidency is that of opposition leader, as Leonid Kuchma and Yushchenko did in 1994 and 2004, respectively, not that of parliamentary speaker. The one exception to this rule was in 1999, when opposition Communist Party leader Petro Symonenko was defeated by President Kuchma.

But this was a special case, analogous to Russia in 1996, when the incumbent won a victory through negative voting: Voters did not vote for Kuchma or Russian President Boris Yeltsin, but against their Communist opponents.

Yatsenyuk is handicapped by an inability to become an effective leader in opposition or in government because his socialization is like that of Yushchenko. Like Yushchenko, Yatsenyuk’s pragmatic, economic background makes him uncomfortable in opposition. Yatsenyuk, for example, has never criticized Yushchenko, even after the president betrayed him last November by giving chief of staff Baloha the order to vote to remove him as parliamentary speaker.

Yatsenyuk, similar to Yushchenko, is the perennial “constructive oppositionist.” Since Yushchenko was removed in April 2001 as prime minister, he never once criticized Kuchma.

This makes Yatsenyuk very different from another rising young generation politician, Anatoliy Hrytsenko, who has been willing to criticize the president. Hrytsenko survived three governments as defense minister (including Yanukovych’s). But he was replaced after he ran afoul of Baloha, who wanted access to Ministry of Defense property.

With Yatsenyuk’s popularity more than twice that of Yushchenko, Yushchenko could decide not to run (as many are advising him). He could groom Yatsenyuk as Yushchenko’s “candidate” in the presidential elections. Yatsenyuk’s (and Yushchenko’s, if he stood) main opponent would be Tymoshenko.

But do Ukrainians really want another five years of a “Yushchenko clone,” an imitation of reform and further stagnation? This would be my major concern in a Yatsenyuk presidency. Namely, I fear that he would not implement the radical (Orange Revolution) policies that Ukraine desperately needs.

One major indicator of Yatsenyuk’s allies can be seen in his sources of financing. As the Kyiv Post wrote on Feb. 19, oligarchs Victor Pinchuk and Serhiy Taruta have openly provided funding.

Pinchuk funded a similar “new generation” group of young politicians in the 2002 elections – the Winter Crop Generation that was meant to woo votes away from Yushchenko’s Our Ukraine. Winter Crop was led by Inna Bogoslovska and Valery Khoroshkovsky, neither of whom has made good names for themselves ever since.

Bogoslovska has earned herself a reputation as a deranged and hysterical anti-Tymoshenko baba in the Party of Regions, while Khoroshkovsky has worked with RosUkrEnergo co-owner Dmytro Firtash in the rabidly anti-Tymoshenko Inter TV channel.

The Tymoshenko bloc accused Yatsenyuk of being funded by Firtash. There were rumors that he was offered a position at Nadra Bank that was purchased by Firtash in October. Yatsenyuk’s denial that he received Firtash funding would appear to be disingenuous. A source in a presidential think tank told me recently: “As for Yatsenyuk, he’s 90 percent made by Firtash money: Some friends of mine work for him and confirm that.”

Yatsenyuk would join similar former parliamentary speakers with pragmatic backgrounds, such as Plyushch and Lytvyn who have had little political success in their post-speaker political careers or in building up ideologically-driven political parties.

Yatsenyuk’s embryo political project, the Front for Change, is ideologically amorphous, claiming that it “will be a team of professional, expert people from different generations.” Have we not heard this before?

In an Oct. 20 interview in Ekonomicheskie Izvestiya, Yatsenyuk described the party’s ideology as encompassing vague formulations, such as in support for democracy, preventing the monopolization of power, equal rights for economic actors and backing of diverse political influences. In another interview, he described his party’s ideology as that of “state-regulated form of liberalism,” according to UNIAN news agency on Dec. 2.

The ideological vagueness of these ideas gives little grounds for optimism for Yatsenyuk’s political project. Ukraine has countless such political projects and few have had much success.

Ukraine’s young democracy needs not another political party based on the inflated ego of yet another Ukrainian Hetman, but a consolidation of center and center-right reformist forces. The creation of Yatsenyuk’s political force will merely add to the deep splintering of Ukraine’s center-right.

With only 72 deputies, the Our Ukraine-People’s Self Defense faction already has three sub-factions: a pro-Tymoshenko wing that has joined the Orange coalition, Vyacheslav Kyrylenko’s For Ukraine 17 deputies (including Yatsenyuk) who have not joined the coalition, but who do not want anything to do with Baloha and the pro-Baloha United Center’s 10 deputies.

The president has lost control over Our Ukraine and has only 27 supporters left in parliament. But these two groups – For Ukraine and United Center – hate each other.

Ukraine certainly craves a new generation of political leaders. The question is whether Yatsenyuk resembles something new. This is doubtful.

Yatsenyuk’s project is built on ego and personality politics, with little ideological content, and therefore unlikely to represent a significant break with the false dawn of the Yushchenko era. Yatsenyuk would be a replica of Yushchenko, a “pragmatic, constructive oppositionist” imitation of reform.

If you want another five years of Yushchenko, then vote for Yatsenyuk.

Source: Taras Kuzio for the Kyiv Post

Infighting In Ukraine Behind Raid On Gas Firm

KIEV, Ukraine -- Security agents raided the offices of Ukraine's state energy company Wednesday in what appeared to be an escalation of a power struggle between the president and the prime minister.

An armed man walking along the corridor in the headquarters of state energy firm Naftogaz in Kiev, Ukraine, on Wednesday.
"This is all about the conflict between the president and the prime minister," said Yuri Yakimenko, director of political and legal programs at the Razumkov Center, a research institution in Kiev. "What shouldn't be happening though is that the law enforcement bodies are now being used for political purposes."

At the heart of the dispute are the Ukrainian state-run gas concern Naftogaz and RosUkrEnergo, a private energy company in Switzerland.

The two companies played large roles last month in a confrontation over gas between Russia and Ukraine that temporarily cut off energy supplies to parts of Europe.

Naftogaz answers primarily to the government of Prime Minister Yulia Tymoshenko. RosUkrEnergo, until the gas dispute, was the sole distributor of Russian gas in Ukraine, and one of its owners, Dmitri Firtash, is considered by experts to be a key power broker.

Officials from the Ukrainian Security Service, or SBU, some wearing black ski masks and carrying automatic weapons, swooped down on the headquarters of Naftogaz in central Kiev in an attempt to seize documents for a criminal investigation that began two days ago.

In dispute, according to Marina Ostapenko, spokeswoman for the security service, are 6.3 billion cubic meters, or 222 billion cubic feet, of gas, worth 7.4 Ukrainian hryvna, or $880 million. The gas, she said, was illegally claimed by the Ukrainian government and should be delivered to its rightful owner, RosUkrEnergo. Agents had attempted to enter the Naftogaz building the evening before, but were rebuffed, she added.

"Our agents were attacked," Ostapenko said. "That is why we included this time members of the Alpha security services."

Naftogaz officials and pro-Tymoshenko parliamentarians told a different story. They said that the offices were raided unexpectedly, by agents who initially refused to identify themselves, in an attempt to confiscate gas that rightfully belongs to the state.

SBU officers did not succeed in removing any documents, they said - not even the agreement between Naftogaz and Gazprom to end the gas dispute. That agreement has been a point of contention between Tymoshenko and President Viktor Yushchenko, who called it a defeat for Ukraine.

"The SBU has now become the private security service for Ukrainian businessman Dmitri Firtash," said the parliamentary deputy Sergei Vlasenko, a member of Yulia Tymoshenko's political bloc.

Although Yushchenko was not directly involved in initiating the criminal case, political observers said the raid Wednesday was the latest battle in the power struggle between him and Tymoshenko, a conflict that has paralyzed this former Soviet republic of 46 million just as its economy unravels.

Industrial output plunged by 34 percent year-on-year in January, and social tensions are mounting. Gazprom has vowed to cut off gas supplies to Ukraine again this month if Naftogaz does not pay $400 million by the end of the week.

Source: International Herald Tribune

Masked Men Break Into Ukraine's National Natural Gas Company Office

KIEV, Ukraine -- Masked men believed to be government agents broke into the headquarters of Ukraine national natural gas company Naftogaz Ukrainy on Wednesday and are searching the premises, witnesses said. The men were armed and wore camouflage uniforms commonly used by Ukrainian special force police and military units.

An armed man stands in the headquarters of Ukraine's state energy firm Naftogaz in Kiev, March 4, 2009. Armed men burst into the headquarters of Ukraine's state energy firm Naftogaz on Wednesday in what the SBU security service said was part of a criminal inquiry. Both Naftogaz and Russia's Gazprom said the raid could threaten Ukraine's latest payment for Russian gas, due by the weekend.
The assault teams were moving through Naftogaz offices, the witnesses said.

The entire senior board of Naftogaz had been placed under arrest, according to an unconfirmed Interfax report.

The incident came only hours after Ukraine's secret police the SBU arrested a senior tax administration official for allowing some 13.7 billion cubic metres of natural gas of disputed title and held in Ukrainian reservoirs and pipelines, to be marketed in Ukraine.

The SBU was in the process of investigating a suspected secret agreement between Naftogaz officials and Ukrainian industry managers to sell the gas worth some 3.9 billion dollars, according to a morning SBU statement.

Ukrainian President Viktor Yushchenko and Prime Minister Yulia Tymoshenko are locked in a bitter battle for control of the country's natural gas reserves.

They have accused each other of attempting to use the massive cash stream generated by natural gas sales to advance their political careers.

Control of natural gas is critical to political power in Ukraine, as the government subsidizes low prices, creating shortages and allowing politically well-connected industrial tycoons to produce goods at cheaper than market cost.

Conflict between Yushchenko and Tymoshenko over Ukraine's natural gas priorities sparked an two-week energy crisis in Europe in early January, after Russia cut off supplies to Ukraine after months of failing to reach a 2009 contract agreement with the Yushchenko- Tymoshenko government.

Source: DPA

Ukrainian Military Attaché In Bucharest, Expelled

BUCHAREST, Romania -- Regnum news agency quoted by ‘Gandul’ daily yesterday stated the military attaché of the Ukrainian Embassy to Bucharest had been declared ‘persona non-grata’ and expelled by the Romanian State.


It is not known yet if the person is Anatoliy Yatseniuk, Defence and Naval Attaché, or Serghii Ilnitskii, Military Attaché. The connection of the two scandals refers to the secret information sold by Bulgarian citizen Zikolov Marinov and ending up with a Ukrainian official in Romania.

The High Court of Cassation and Justice yesterday postponed the hearing of the appeal made by Defence Ministry (MoD) non-commissioned officer Floricel Achim and by the foreign citizens who have been remanded to custody awaiting trial on charges of treason by transmission of secret information and espionage. The case has been postponed because the other defendant, the Bulgarian citizen Marinov Zikolov, had no defender. Mediafax informs that Floricel Achim has admitted to the offence in the Bucharest Court of Appeal that issued his preventive arrest warrant. The defendant said he had committed the offences ‘because of his precarious economic circumstances.’

According to the on-line edition of ‘Gandul’ daily, Marinov Zikolov said he was a friend of a representative of Ukraine in Bucharest, who had expressed interest in military information for which he was ‘paying’ between USD 800 and 1,000. Floricel Achim and Marinov Zikolov were meeting in public places to exchange the ‘goods’ - military documents Achim would supply to Zikolov.

The documents were on military communications systems, radar frequencies, NATO standard maps, schemes and maps of military sub-units and techniques, military unit indicatives and defence plans. Mediafax quotes the spokesperson for the Bulgarian Ministry of Foreign Affairs, Dragovest Goranov, stating that the Bulgarian citizen arrested in Romania for espionage does not work for any official institution.

The Ministry of Defence says it has started an official investigation at the unit where Achim has been working to establish the circumstances of the leakage of military information, according to Realitatea TV. The Romanian Intelligence Service (SRI) says, according to Mediafax news agency, that Marinov Zikolov was operating in Romania as an intelligence agent for a foreign special service. According to the same source, the two were rewarded with various sums in foreign currencies for their activity, in keeping with the importance of the documents supplied.

The Romanian NCO and the Bulgarian national have been remanded to custody for an initial period of 29 days, during the investigations conducted by the prosecutors with the Organised Crime and Terrorism Investigating Directorate (DIICOT) for treason by transmission of secret information and espionage. DIICOT explained that, after processing the data through a complex liaison system, Marinov Zikolov was sending it to representatives of a non NATO state.

‘Our investigations show that the motivation of the criminal activity was material gain as various sums of money. Defendant Zikolov was regularly rewarding defendant Achim using the amounts obtained for the information transmitted,’ DIICOT states, according to Agerpres. The two defendants were taken before the Bucharest Court of Appeal on Saturday, with the proposal of preventive remand in custody for 29 days.

Basescu meets Boc on espionage case

President Traian Basescu and Prime-Minister Emil Boc met up at Cotroceni Palace, on Monday, to discuss the case involving the Defence Ministry NCO who had been arrested on charges of treason and espionage. Another subject was the Brussels informal meeting on the economic crisis, Mediafax informs.

Source: Nine O'Clock

Ikea May Open Ukraine Store In 2011, Targets Odessa

OSLO, Sweden -- Ikea, the world’s largest home-furnishings retailer, may open its first outlet in Ukraine earliest at the end of 2011.


The first store is likely to be in Odessa on the Black Sea coast, where Ikea owns land, said Frida Malmquist, country manager for Ukraine. The retailer opened an office in the country in 2005 and sees potential for six to seven stores, she said.

Ukraine, with a population of 46 million, is a “huge” and “underdeveloped,” she said. In Sweden, for example, the company has about 16 stores for a population of 9 million, she added.

“If you make that Swedish comparison, even though of course Ikea is overly popular in Sweden, because it has a long history, for sure you should be able to have 25 here, but it all depends on the development of Ukraine and its middle class,” she said.

Ukraine is facing a recession after nine years of growth. The global financial crisis forced the country, like Hungary, Romania and Latvia, to turn to the International Monetary Fund for help to avert a default and stabilize its banking system.

While Ikea isn’t halting plans in the country, the company isn’t in a “big rush,” Malmquist said. “It’s tricky to say when the Ukrainian market is ready for the size of retailing that we are coming with,” she said.

Source: Bloomberg

Ukraine Foreign Minister Sacked

KIEV, Ukraine -- Ukraine's parliament has voted to sack Foreign Minister Volodymyr Ohryzko for poor handling of government policy.

Foreign Minister Volodymyr Ohryzko
A total of 250 members in the 450-seat assembly backed a no confidence motion in Mr Ohryzko, including 49 from Prime Minister Yulia Tymoshenko's bloc.

He was criticised for his approach to a ruling last month by a UN court on a territorial dispute with Romania, and for his aggressive approach to Russia.

Mr Ohryzko's dismissal was the second departure of a minister this year.

Finance Minister Viktor Pynzenyk resigned last month after clashing with Ms Tymoshenko over the budget, including the size of the deficit.

Mr Ohryzko, a career diplomat, was one of two ministers appointed by the prime minister's ally-turned-rival, President Viktor Yushchenko.

Correspondents say the decision to sack the minister is likely to be contested in court as, according to some MPs, only the president has the power to do so. Opposition MPs dispute the assertion.

Last month's ruling by the International Court of Justice, which both parties agreed in advance would be binding, gave Romania about four-fifths of the area it had claimed from Ukraine in a long-running territorial dispute over a part of the Black Sea.

At stake were drilling rights in an area which Romania says may contain some 100bn cubic metres of gas and 10m tonnes of oil.

The ruling was welcomed as a victory for diplomacy by nearly all politicians and the media in Bucharest, but criticised by many in Kiev.

Source: BBC News

Pinchuk Says He Paid Pirate Ransom To Free Faina Crew

KIEV, Ukraine -- A Ukrainian business magnate paid a ransom to secure the release of 20 crewmen held on their ship by Somali pirates for five months, his office said on Monday.

Ukrainian business magnate Viktor Pinchuk.
The office of Viktor Pinchuk, who runs a variety of businesses from industrial pipes to media and engages in a wide range of philanthropic activities, did not say how much was paid in exchange for the release last month of the crew of the Faina.

It gave no details of conditions attached to the deal to free the vessel and its cargo of 33 Soviet-era T-72 tanks and other weapons after long negotiations off Africa's east coast.

"Viktor Pinchuk did, in fact, provide the sum required to secure the release of the sailors being held hostage aboard the Faina," his press office said in a statement.

It quoted Pinchuk as saying: "No one in Ukraine was indifferent to the fate of our sailors. The hijacking of the Faina was a challenge to the whole country."

The pirates released the ship after receiving a ransom initially estimated at $3.2 million from the ship's owners. Ukrainian media later said the sum was about $4 million.

The Faina's Russian captain died in the first days of the hijacking. Representatives of the ship's owners said talks complicated by differences among the pirates. Pinchuk, the son-in-law of former President Leonid Kuchma, owns Interpipe, Ukraine's largest producer of pipes, as well as television channels and other businesses.

He engages in high-profile charitable works, running a modern art gallery in Kiev and bringing to Ukraine well-known artists to perform at free open-air concerts.

Earlier on Monday, President Viktor Yushchenko's chief of staff said Pinchuk had provided the "lion's share" of the money paid to secure the ship's release.

Viktor Baloga, writing on the president's website, said authorities had sought the help of businessmen as there was "no section of the state budget allocated to liberating hostages".

Baloga said four senior officers of Ukraine's foreign intelligence service had been decorated for helping secure the hostages' release.

Ukraine and Kenya say the arms cargo was intended for the Kenyan armed forces. Kenyan officials condemned the payment of ransoms to secure the release of hostages seized by hijackers off the coast of east Africa.

A regional maritime group based in Kenya and diplomats in the region say it was destined for south Sudan via Kenya -- a possible embarrassment for Kenya, which helped broker a 2005 peace deal there.

Source: Kyiv Post

Protesting Ukraine Lorry Drivers Block Key Road In Tax Demo

KIEV, Ukraine -- Hundreds of Ukrainian lorry drivers protesting against newly-imposed taxes blocked a key motorway connection Odessa with Kiev on Monday, local media reported. A make-shift barrier of old lorry tyres blocked four of the six lanes on the highway, Ukraine's largest inter-city thoroughfare, according to Korrespondent magazine.


Traffic was forced to a snail's pace as drivers made their way past in the single lane left open in each direction by the protestors.

More than 200 truckers working in 12-hour shifts manned the blockade, set up near Odessa city limits. Orange emergency cones and flashing lights were in place to warn motorists.

Traffic police were on the scene and were directing traffic, but making no attempt to interfere with the protestors or to remove the roadblock, Channel 5 television reported.

The demonstration was an attempt by Ukrainian truckers to draw attention to recently-passed laws aimed at increasing government revenue by targeting lorry transport, said Ihor Semenov, a trucker spokesman.

"And we are not moving until our complaints are heard," he said. "We'll give the authorities 24 hours, and if no one comes to talk to us, we'll shut down the road completely."

Ukraine's government last month changed regulations, hiking customs, road, and vehicle registration fees levied on 18-wheelers.

A key point of dispute between the government and drivers is the operators' license fee. Currently priced at the equivalent of $2 dollars, the new fee structure would see it rise to around $1,800 dollars.

The price spikes will make freight transport by lorry unprofitable and will force thousands of truckers out of work, leaving Ukrainian cities short of food and fuel, Simenov claimed.

Two heavy lorry drivers committed suicide after the new truck fee system went into effect, "and we have had zero reaction from the authorities," Simenov said.

The pro-Europe government in Kiev faces a ballooning deficit and since the New Year has attempted to increase revenues with across- the-board tax increases, with hikes hitting small business and individual taxpayers particularly hard.

Ukraine Transport Minister Iosif Vinsky told Channel 5 television last week that fee increases on the trucking industry were necessary as previously the country's lorry drivers had effectively paid no taxes, nor been regulated by the state.

Source: DPA

Ukraine Risks Unrest As Ills Worsen

KIEV, Ukraine -- Olexander Pavlenko, a young computer programmer, is one of tens of thousands of Ukrainians who cannot get their money out of the bank. He stood in line in Kiev at Nadra Bank and Ukrprombank, two big troubled banks, planning to withdraw more than $10,000 (€7,950, £7,125). But like many others, he was told the cash was not available.

A man from a group calling itself "Enough is Enough" protests in front of the Ukrainian parliament, against the ways authorities fight the financial crisis, in Kiev last month. The signs read "Enough is Enough!".
“I stood in line a couple times with other bank clients who were protesting, crying and screaming. But the bank told me: ‘Sorry, we simply don’t have the money now and can’t help you.’”

With about nine banks now under the central bank’s special control, Ukrainians are increasingly worried.

Even those with their money in apparently solid banks, including those controlled by west European banking groups, are concerned because the central bank has banned the early redemption of term deposits, the most popular form of saving in Ukraine.

Altogether, hryvnia bank deposits have dropped 20 per cent since September and those in foreign currency 10 per cent.

“This is very serious,” said Olexander Suhonyako, president of the Association of Ukrainian Banks.

The growing discontent among bank clients is matched by other signs of public anger at the impact of the global crisis – and at the seeming inability of the country’s divided leaders to respond effectively.

Recent weeks have seen protests by truck drivers complaining about taxes and the dramatic decline of the hryvnia, which has complicated the repayment of foreign currency vehicle loans.

Meanwhile, the owners of street kiosks in Kiev successfully demonstrated against the city’s plans to take over their stalls.

But with demonstrations drawing only up to 5,000 people, the authorities are confident there is no serious threat to stability.

They say Ukraine is remarkably calm given the country’s economic problems. Gross domestic product growth is forecast to contract 5-10 per cent in 2009, while unemployment is rising and non-payment of wages is becoming more common.

But with political leaders focused on the forthcoming presidential elections due before the end of the year, some observers fear that the protests will become bigger.

Oleksiy Haran, a political science professor at Kiev’s Mohyla University, says:

“If [the economic situation] worsens, if more banks run into trouble, and if more layoffs pile up, then I would expect large crowds to materialise. This will be dangerous for a country that is struggling already to deal with the economic crisis.”

There seems to be no end to the disputes between Viktor Yushchenko, president, and Yulia Tymoshenko, his prime minister.

Much now depends on the implementation of the $16.5bn package assembled by the International Monetary Fund, including money for bank refinancing. After disbursing $4.5bn last autumn, the IMF suspended further loans after a policy disagreement with Kiev.

But Mr Yushchenko and Ms Tymoshenko pledged at the weekend to co-operate with each other and the IMF on implementing reforms.

Meanwhile, the IMF agreed to relax its desired deficit target from less than 1 per cent of GDP to about 3 per cent, in the light of the deepening recession.

Co-operating with the IMF will allow Ukraine not only to secure loans but also support from other international institutions including the World Bank and multinational banks, which have pledged to back their local subsidiaries.

On Monday, Austria’s Raiffeisen International promised to support Aval, its Ukrainian affiliate.

Hryhoriy Nemyria, deputy prime minister, insists Ukraine “is not a basket case”. Ceyla Pazabasioglu, the IMF’s Ukraine mission chief, agrees, saying the country’s difficulties are not “insurmountable”.

But investors are not so sure. Ukraine’s credit default swap rate – a risk measure – stands at around 3,700, compared with about 1,000 for Latvia and 560 for Hungary, two other east European states on IMF support.

Every week seems to bring a new crisis – the next could come this weekend, when Kiev is due to pay a $400m bill to Gazprom, the Russian gas monopoly.

Source: The Financial Times

More Trouble Ahead

KIEV, Ukraine -- What is up with Ukraine? As if the January gas dispute with Russia was not bad enough, the country is lurching from one crisis to another. Political infighting is endless. The Russian ambassador, former Prime Minister Viktor Chernomyrdin, provoked a diplomatic storm by saying Ukraine's leaders were "at each other like dogs."

Leonid Kravchuk, Ukraine's first post-Soviet