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Action Ukraine Report

"THE ACTION UKRAINE REPORT"
In-Depth Ukrainian News, Analysis, and Commentary

"The Art of Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World"

WHY are the world's two biggest steelmakers, plus a host of smaller ones,
still interested in bidding for Ukraine's Kryvorizhstal? The state-owned
firm produces a hefty 20% of the country's steel output, making it a good
entry point into one of the world's hitherto-protected steel industries; but
the auction on June 11th, when a 93% stake will be offered at a starting
price of 3.8 billion hryvnyas ($714m), is rigged so blatantly as to be a
joke. ["The Economist" article two]

"THE ACTION UKRAINE REPORT" Year 04, Number 90
Action Ukraine Coalition (AUC), Washington, D.C.
Ukrainian Federation of America (UFA), Huntingdon Valley, PA
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C.; Kyiv, Ukraine, TUESDAY, June 1, 2004

-----INDEX OF ARTICLES-----
"Major International News Headlines and Articles"

1.UKRAINE: MUKACHEVE'S EMBATTLED NEW MAYOR RESIGNS
"TO EASE POLITICAL TENSION"
TV 5 Kanal, Kiev, Ukraine, in Ukrainian, 29 May 04
BBC Monitoring Service, UK, in English., May 29, 2004

2. BUSINESS IN UKRAINE: STEEL CRAZY
Steel Company Auction rigged so blatantly as to be a joke.
COMMENTARY From The Economist
London, UK, Thursday, May 27th 2004

3. US EX-IM BANK READY TO OPEN 6 BILLION IN CREDIT LINES
FOR EXTENSION OF UKRAINIAN OIL TRANSIT PROJECT
Prime-TASS news agency, Moscow, Russia in English, 28 May 04
BBC Monitoring Service, UK, in English, Friday, May 28, 2004

4. RUSSIAN PRESIDENT PUTIN PUSHING FOR QUICKER
DRAFTING OF COMMON ECONOMIC SPACE BILLS
Interfax, Moscow, Russia, Monday, May 31, 2004

5.UKRAINIAN OPPOSITION LEADER VIKOR YUSHCHENKO
LAUNCHES PERSONAL WEB SITE
UNIAN news agency, Kiev, Ukraine, in Ukrainian, 28 May 04
BBC Monitoring Service,UK, in English, May 28, 2004

6. KUCHMA WANTS MORE ACTIVE CONTACTS BETWEEN
UKRAINE AND EUROPEAN UNION BUSINESSES
Interfax, Kyiv, Ukraine, May 31, 2004

7. EU'S PRODI SAYS COMING ELECTION WILL INFLUENCE
ATTITUDE TOWARD UKRAINE
"Romano Prodi: 'I did not make the statement which they say I did'"
Interview with Romano Prodi, President, European Commission
Den, Kiev, Ukraine, in Ukrainian 27 May 04; p 1, 3
BBC Monitoring Service,UK, in English, Friday, May 28, 2004

8.UKRAINIAN TV PROFILES STATE AGENCY THAT REPORTEDLY
PAYS FOR EXPENSIVE UPKEEP OF PRESIDENT AND OTHERS
TV 5 Kanal, Kiev, Ukraine, in Ukrainian, 27 May 04
BBC Monitoring Service, UK, in English, Monday, May 31, 2004

9. UKRAINIAN ÉMIGRÉ CLAIMS TOP OFFICIALS KNEW OFFICE
OF PRESIDENT KUCHMA WAS BUGGED
Interview with Volodymyr Tsvil by Olha Dmytrycheva
Zerkalo Nedeli, Kiev, Ukraine, in Russian, 29 May 04; p 2
BBC Monitoring Service, UK, in English, Sunday, May 30, 2004

10."VOICE FROM PAST HAUNTS UKRAINE PRESIDENT-HIS OWN"
Mykola Melnychenko secretly recorded hundreds of hours of conversations
By Adam Tanner, Reuters, Thursday, May 27, 2004
========================================================
THE ACTION UKRAINE REPORT-04, No. 90 ARTICLE NUMBER ONE
Politics and Governance, Building a Strong, Democratic Ukraine
http://www.artukraine.com/buildukraine/index.htm
========================================================
1. UKRAINE: MUKACHEVE'S EMBATTLED NEW MAYOR RESIGNS
"TO EASE POLITICAL TENSION"

TV 5 Kanal, Kiev, Ukraine, in Ukrainian, 29 May 04
BBC Monitoring Service, UK, in English., May 29, 2004

KIEV - [Presenter] There has been a new development concerning the situation
in [Transcarpathian town of] Mukacheve. The story behind the issue is very
plain if you look at the last two months. An election was held in Mukacheve
and victory in it was simultaneously celebrated by Ernest Nuser, who is said
to have been supported by the USDPU [propresidential United Social
Democratic Party of Ukraine], and Viktor Baloha, an [opposition bloc] Our
Ukraine supporter.
After numerous irregularities and accusations [of vote-rigging from the
opposition], Ernest Nuser was declared the winner. Today he tendered his
resignation. We spoke to him about it an hour ago, and here is what he had
to say.
[Nuser, by telephone] In order to ease political tension and stabilize the
political situation [changes tack] - I am saying the political situation
because all these events have no relation whatsoever to the life of the town
and its problems, just like the post of mayor itself, which seems to be of
no interest to anyone, except as a testing area for a great political
battle.
And because the post of the Mukacheve mayor was the central figure on that
testing ground, with my name figuring in it, I would hate to see Ukraine,
Mukacheve and Transcarpathia become objects of research, monitoring and
whatnot. I don't want anyone to be threatened with problems, physical
violence and so on, because of the mayoral election.
That is why I took the step [to resign]. I think our residents will
understand this, and I believe this will be the first step towards putting
an end to the political settling of scores and starting mutual
reconciliation and joint work.
[Presenter] So, Mukacheve has no mayor again. In accordance with the law, if
the resignation is accepted, a new election can be held no sooner than 2005.
Chronologically, Mr Nuser's resignation occurred after he had met a
rapporteur of the [Parliamentary Assembly] of the Council of Europe, Hanne
Severinsen. [Audio and video available. Please send queries to
kiev.bbcm@mon.bbc.co.uk] (END)
=========================================================
THE ACTION UKRAINE REPORT-04, No. 90: ARTICLE NUMBER TWO
Current Events Gallery: http://www.artukraine.com/events/index.htm
=========================================================
2. BUSINESS IN UKRAINE: STEEL CRAZY
Ukraine gives foreigners the finger.
Auction rigged so blantantly as to be a joke

COMMENTARY From The Economist
London, UK, Thursday, May 27th 2004

WHY are the world's two biggest steelmakers, plus a host of smaller ones,
still interested in bidding for Ukraine's Kryvorizhstal? The state-owned
firm produces a hefty 20% of the country's steel output, making it a good
entry point into one of the world's hitherto-protected steel industries; but
the auction on June 11th, when a 93% stake will be offered at a starting
price of 3.8 billion hryvnyas ($714m), is rigged so blatantly as to be a
joke.
Among the qualifying conditions announced earlier this month is the
bizarrely precise one that any bidder must have produced at least 1m tonnes
of coke and 2m tonnes of rolled steel in Ukraine for the past three years,
two of them profitably. That rules out the foreign firms that long ago
showed an interest-the world leader, Arcelor; the number two, LNM; US
Steel; Russia's Severstal; and India's Tata Steel, which has said it would
pay $1 billion for Kryvorizhstal. But it also rules out most Ukrainian
bidders.
And by giving them only a month to submit tenders, the government made the
necessary due diligence, as well as any bid-qualifying tie-up by a foreign
firm with a Ukrainian partner, virtually impossible.
The auction seems designed to favour a consortium formed by two Ukrainian
oligarchs, Rinat Akhmetov and Viktor Pinchuk. The latter just happens to be
the son-in-law of the president, Leonid Kuchma. "Ukraine doesn't seem to
care at all about how it's perceived," says Rob Edwards at Renaissance
Capital, a Moscow investment bank. "For many people, Ukraine is still off
the track as an investment destination."
Such tactics, typical in former Soviet countries, usually deter foreigners
from even bidding. But the Kryvorizhstal sale is both unusually big and
unusually brazen. That has strengthened foreign resolve. Severstal and
Arcelor said in April that they would join forces on the bid, which would
let them attack through the courts in both Europe and America, where
Severstal has a subsidiary; the Russian firm says that the tender
contradicts investment agreements that Ukraine has with both Russia and
America. LNM and US Steel, which already have several central and eastern
European steel mills, this week announced that they will mount a joint bid
too, while not sounding terribly optimistic.
Such pressure, and protests from Ukraine's divided but boisterous
opposition-last week even the parliament's speaker, Volodymyr Lytvyn, one
of Mr Kuchma's protégés, added his voice-may shame the government into
delaying the auction. But even if it does there will still be profit to be
made from rigging privatisations: another 312 of them are slated for this
year alone. (END)
=========================================================
THE ACTION UKRAINE REPORT-04, No. 90: ARTICLE NUMBER THREE
Check Out the News Media for the Latest News From and About Ukraine
Daily News Gallery: http://www.artukraine.com/newsgallery.htm
=========================================================
3. US EX-IM BANK READY TO OPEN 6 BILLION IN CREDIT LINES
FOR EXTENSION OF UKRAINIAN OIL TRANSIT PROJECT

Prime-TASS news agency, Moscow, Russia in English, 28 May 04
BBC Monitoring Service, UK, in English, Friday, May 28, 2004

KIEV -The US Export-Import Bank is ready to open credit lines worth 6bn
dollars for the Odessa-Brody pipeline and for its extension to the Polish
city of Plock, the press secretary of Andriy Klyuyev, Ukraine's deputy prime
minister, told Prime-TASS on Friday [28 May].
The president of the Export-Import Bank, Philip Merrill, discussed this
issue with Klyuyev on Thursday [27 May]. "We are interested in diversifying
oil supplies to the West," Merrill said, adding that he is talking about an
alternative to Middle East oil supplies. According to Merrill, the bank has
the permission of the US Congress to provide loans worth 100bn dollars.
The talks between Klyuyev and Merrill also referred to providing loans to
Ukrainian energy and transport companies. No specific details on the
projects were available.
The Odessa-Brody pipeline was built to transport Caspian oil from the Black
Sea terminal of Pivdennyy to the European markets. The 673-kilometre
Odessa-Brody pipeline is in place and ready to move oil, but has not been
put into full-scale operation yet, as Ukraine has not been able to secure
sufficient oil supplies for the pipeline. The first stage of the pipeline
was constructed in May 2002.
In February, Ukraine refused to allow Russian oil companies to use the
pipeline in reverse. Reportedly, Russian companies are ready to pump 9m
tonnes of oil through the pipeline annually. (END)
=========================================================
THE ACTION UKRAINE REPORT-04, No. 90: ARTICLE NUMBER FOUR
The Genocidal Famine in Ukraine 1932-1933, HOLODOMOR
Genocide Gallery: http://www.artukraine.com/famineart/index.htm
=========================================================
4. RUSSIAN PRESIDENT PUTIN PUSHING FOR QUICKER DRAFTING
OF COMMON ECONOMIC SPACE BILLS

Interfax, Moscow, Russia, Monday, May 31, 2004

MOSCOW. May 31 (Interfax) - President Vladimir Putin has instructed Prime
Minister Mikhail Fradkov to intensify the drafting of top-priority bills for
the common economic space [single economic space, SCS] that will include
Russia, Ukraine, Kazakhstan and Belarus.
Putin told Fradkov "to control the matter personally" at a Monday meeting
with the government. The chiefs of member-states of the common economic
space "concluded at their summit that [top-priority bills] could be drafted
by fall," Putin said.
Foreign Minister Sergei Lavrov said that preparations for a meeting between
Putin and Ukrainian President Leonid Kuchma during a CIS summit were
discussed at a meeting of the board of the Russian and Ukrainian foreign
ministries. (END)
=========================================================
THE ACTION UKRAINE REPORT-04, No. 90: ARTICLE NUMBER FIVE
Ukraine's History and the Long Struggle for Independence
Historical Gallery: http://www.artukraine.com/histgallery.htm
=========================================================
5. UKRAINIAN OPPOSITION LEADER VIKTOR YUSHCHENKO
LAUNCHES PERSONAL WEB SITE

UNIAN news agency, Kiev, Ukraine, in Ukrainian, 28 May 04
BBC Monitoring Service,UK, in English, May 28, 2004

KIEV - The leader of the [centre-right opposition] bloc Our Ukraine, Viktor
Yushchenko, today presented his personal web site called My Ukraine.
"This demonstrates my great desire to hold a closer dialogue with people,"
Yushchenko told a news conference called on this occasion.
The Internet "is the most objective and independent medium for
communication", Yushchenko said. The idea behind the web site is to
concentrate in one place as much various data about the Our Ukraine leader
as possible, make searching for necessary information easier, especially
taking into account the great interest in the Our Ukraine leader ahead of
the [presidential] election campaign.
At the same time, Yushchenko said that his web site is not exclusively about
him, it is primarily "about Ukraine seen through Yushchenko's eyes".
Therefore, the web site is structured in such a way so as to "give the
broadest possible picture of Ukraine".
Under the section called the Present, there are several subsections dealing
with current events, including a news ticker tape, information about the
2004 election, an interview with Yushchenko, articles written by him and
about him, Yushchenko's activity as an MP, the activity of the Our Ukraine
faction in parliament and the activity of his international fund.
The Past section is based on Yushchenko's views of Ukrainian history, in
particular its tragic and still unexplored pages. Among them are
Yushchenko's articles and speeches on such topics as the famine [in Ukraine
in the 1930s], World War II, the Bykivnya tragedy [in which thousands were
executed by the Soviet secret police in the 1930s-40s], the forgotten names
of Ukrainian artists, historical figures, etc.
In the Future section there will in due course appear Yushchenko's election
programme in the presidential election campaign. At the moment, the section
contains Yushchenko's views of Ukraine's prospects and its future.
The web site is located at www.yushchenko.com.ua/eng. (END)
========================================================
THE ACTION UKRAINE REPORT-04, No. 90: ARTICLE NUMBER SIX
The Story of Ukraine's Long and Rich Culture
Ukrainian Culture Gallery: http://www.ArtUkraine.com/cultgallery.htm
=========================================================
6. KUCHMA WANTS MORE ACTIVE CONTACTS BETWEEN
UKRAINE AND EUROPEAN UNION BUSINESSES

Interfax, Kyiv, Ukraine, Monday, May 31, 2004

KYIV - Ukraine's President Leonid Kuchma has called for building economic
relations with the EU member countries after its enlargement and invited
European business to foster more active contacts with Ukraine.
On Friday Kuchma took part in the second meeting of heads of states on the
stability of the western Balkans and role of regional cooperation. He
addressed representatives of European business during a round table
discussion at the Mamaia summit of Eastern and Central European countries,
the presidential press service reported.
He said the round table discussions were of special importance, as they
followed the EU enlargement and would contribute to drawing up a strategy of
relations between the EU and Ukraine.
He also touched on economic losses of Ukraine due to the EU enlargement, as
Ukraine had had free trade agreements with the new members of the EU. He
said it is important to build up economic relations with the countries.
President Kuchma has wound up his visit to Romania. (END)
=========================================================
THE ACTION UKRAINE REPORT-04, No. 90: ARTICLE NUMBER SEVEN
The Rich History of Ukrainian Art, Music, Pysanka, Folk-Art
Arts Gallery: http://www.artukraine.com/artgallery.htm
=========================================================
7. EU'S PRODI SAYS COMING ELECTION WILL INFLUENCE
ATTITUDE TOWARD UKRAINE
"Romano Prodi: 'I did not make the statement which they say I did'"

Interview with Romano Prodi, President, European Commission
Den, Kiev, Ukraine, in Ukrainian 27 May 04; p 1, 3
BBC Monitoring Service,UK, in English, Friday, May 28, 2004

Progress on the Ukraine-EU action plan will depend on the democratic nature
of the coming presidential election, the president of the European
Commission, Romano Prodi, has said. Speaking in an interview with a
Ukrainian daily, he denied saying recently that Ukraine has no chance of
joining the EU. Work is being actively pursued on developing relations, he
said. However, there are still obstacles to granting Ukraine the status of a
country with a market economy, he said.
The following is the text of the interview Prodi gave to an unnamed
correspondent entitled "Romano Prodi: `I did not make the statement which
they say I did'", published in the Ukrainian newspaper Den on 27 May;
subheadings have been inserted editorially:
The president of the European Commission, Romano Prodi, is a significant
figure to some extent. The job fell to him of "resuscitating" the image of
the European Union's executive body following noisy resignations in 1999 in
connection with a corruption scandal. It was during his presidency that the
biggest expansion of the EU occurred: from 1 May this year another 10
countries joined the 15.
At the same time Prodi's image among Ukrainians is not the most popular. In
recent years the foreign media have several times quoted the European
Commission president, who allegedly rejects even in principle a remote
prospect for Ukrainian membership of the EU. But here Prodi has always
accused journalists of wrongly interpreting his words. The 65-year-old
Italian is, in actual fact, more than diplomatic.
The traditional statement from Brussels saying that "further expansion is
not on the agenda" is aimed more at a West European audience, frightened by
the latest entry of 10 of not the richest countries into the EU. Therefore,
it should hardly be viewed as some sort of signal of the hopelessness of
Ukrainian membership of the EU, and even more so in that similar statements
cannot serve as an argument for heading off into other integration
associations if, of course, Euro-Atlantic integration is our foreign policy
strategy.
Replying to a question from Den, Mr Prodi quite precisely linked the
establishment of a free trade zone between Ukraine and the EU with our
country's acceptance into the World Trade Organization. Here one also feels
the extent of the influence of the SES [Single Economic Space, economic
union between Ukraine, Russia, Belarus and Kazakhstan] on Ukraine's European
integration: any simultaneous WTO entry will negatively affect the prospects
for free trade with the EU. The reason why Den put questions to the European
Commission president was the sensation-provoking statement about the absence
of prospects for Ukrainian EU membership.
UKRAINE'S PROSPECTS FOR EU MEMBERSHIP
[Correspondent] On 2 May The Financial Times quoted your statement that
Ukraine and Belarus had no prospects of joining the EU. These words caused
significant resonance in Ukraine. How correctly did the media quote you? If
correctly, what is the reason for your position?
[Prodi] I did not make the statement attributed to me. We have a precise
position on this question. The EU welcomes Ukraine's European choice.
Ukraine is a strategic partner for the EU and, as a result of EU
enlargement, its closest neighbour. We are working together on further
strengthening our relations in the framework of the European policy of
neighbourhood. This policy arose in response to EU expansion, but it is not
aimed at expansion. This policy is not connected with entry (to the EU -
Per.). This question is not yet on the agenda.
[Correspondent] What are the main problems now remaining in cooperation
between the EU and Ukraine? How successful was your meeting on 18 May with
Prime Minister Viktor Yanukovych?
[Prodi] Prime Minister Yanukovych came to Brussels for the annual meeting of
the EU-Ukraine Cooperation Council. We also had a bilateral meeting within
the framework of the commission. It was an excellent opportunity to assess
the state of our bilateral relations, to exchange views on the achievements
of the two sides and discuss current questions in the area of international
relations. Naturally, much attention was paid to the current state of
affairs in work on the European neighbourhood policy and our expectations of
finally working out an action plan for the European neighbourhood policy in
the near future.
UKRAINE-EU ACTION PLAN
[Correspondent] When will work on the Ukraine-EU action plan be completed?
What will its specific features be, and how will it differ from similar
documents with other EU neighbours? Why does Brussels reject the idea of
associate membership for Ukraine in the future?
[Prodi] The next of three rounds of consultations with Ukraine will be held
in Kiev on 2 June. On 12 May the commission presented its report on European
neighbourhood strategy (European Neighbourhood Strategy Paper) as well as
reports on several countries, including Ukraine. This strategy report is now
being discussed with EU member countries, and on 14 June it will be
considered by the council for basic questions and external relations. We
intend completing our consultations with Ukraine immediately after that
consideration, to wit on 15 June, i.e. before the Ukraine-EU summit in The
Hague on 8 July. Final approval by the EU Council will follow later.
The specific features of the action plan for Ukraine reflect the stage of
implementation of the Agreement on Partnership and Cooperation (APC) in
Ukraine, the level of our cooperation as a whole, the internal situation in
Ukraine and its specific problems. For example, the action plan mentioned
will primarily feature such questions as the democratic conduct of the
presidential elections in Ukraine, an examination of the feasibility of
establishing a free-trade zone after Ukraine joins the WTO, the beginning of
constructive dialogue on simplifying the visa regime between the EU and
Ukraine and ensuring fulfilment of international norms of security in
completing construction of nuclear reactors (at Khmelnytskyy and Rivne
nuclear power plants - Per.).
The question of achieving a new level of treaty relations will be discussed
when the time is right, taking account of further progress in implementing
the APC and the Expanded Europe action plan. It is not within our remit to
create a "road map" to an agreement on associate membership.
MARKET ECONOMY STATUS
[Correspondent] Ukrainian government representatives have said several times
that Ukraine's compliance with criteria for gaining the status of a country
with a market economy. What is the European Commission's position on this?
Is it not connected with some political factors?
[Prodi] At present the European Commission classifies Ukraine as a country
with a transitional economy. To raise its status to a country with a market
economy, it has to comply with certain criteria. It is not a political
question. The EU has been closely following the state of affairs in Ukraine
and has compiled a detailed report that recognizes that it has achieved much
progress on the road to a market economy. As far as anti-dumping is
concerned, two questions concern us. The first is excessive state
intervention in determining pricing policy, which does not comply with the
criteria of a market economy. We recently saw this, in particular, in the
metallurgy sector. The second is that in the legislation on bankruptcy and
its implementation there are several aspects that create difficulties for
investigations connected with commercial security.
We have assured the Ukrainian authorities that as soon as they take the
necessary measures to correct these failings, Ukraine will be awarded the
status of a country with a market economy. Speaking in general terms, we are
continuing to support Ukraine in its efforts to achieve progress in
structural economic reforms in such areas as taxation, release and
compensation regarding VAT, restructuring the coal industry and widescale
privatization. But we do not consider that this is a barrier for Ukraine's
aspirations to gain the status of a country with a market economy.
EU ENLARGEMENT CONSEQUENCES
[Correspondent] What measures is Brussels prepared to take to avoid possible
negative consequences of EU enlargement that the Ukrainian leadership is
talking about?
[Prodi] We worked very intensively, in close cooperation with the Ukrainian
authorities, on the eve of EU enlargement on 1 May to ensure that becoming a
close neighbour of the EU would be advantageous for Ukraine. As neighbours,
we both have an interest to ensure that the new EU external border does not
become a barrier for trade and social and cultural exchange. We were pleased
with the expansion of the APC between Ukraine and the EU to include all 25
member countries.
Following enlargement, the EU became Ukraine's biggest trade partner. The
overall dynamic trade potential with the world's biggest trade market will
be so substantial for Ukraine that it will cover short-term losses. However,
we have touched on some practical problems like, for example, the need to
study measures on trade protection, where the situation could change in
connection with enlargement in order to avoid excessive "shock" caused by
enlargement. The only serious practical problem is the steel trade. We hope
as early as this month to conclude a new steel agreement based on
traditional directions of Ukrainian trade with adjacent countries, but
Ukraine's application of taxes on scrap metal exports still presents a
problem. We would like to receive precise confirmation that export taxes
hindering free trade in scrap metal will be gradually abolished.
We also know that Ukraine is concerned by the movement of people between
Ukraine and the new EU members. We need to achieve an effective management
of borders from both sides. On that condition, the Schengen system is
sufficiently flexible to allow citizens from both sides of the border
legally to travel without unnecessary administrative obstacles. The EU
remains open to dialogue with the Ukrainian authorities on visa and other
issues in order to improve mutual understanding and use of the existing
potential. We have to work together to make sure that Ukrainian citizens
wanting to cross the border do not come up against unnecessary obstacles.
For example, in the event of the adoption of a proposal on local
cross-border movement recently tabled by the commission, that will ease
border crossing for Ukrainians living in border regions and having
legitimate and serious grounds for regularly crossing the border.
ELECTION FACTOR
[Correspondent] How does the EU view the influence of the coming
presidential election in Ukraine on our country's European integration
prospects?
[Prodi] We are following the election campaign with great interest. I see
with satisfaction that the strongest candidates are simultaneously most
oriented towards Europe, which, I hope, will characterize the support of
society for the idea of EU integration.
For the EU, in turn, how the elections are conducted will be an important
indicator of Ukraine's adherence to European values. Respect for common
values is a key element lying at the basis of the relationship between the
EU and Ukraine. By holding democratic elections in accordance with European
values, Ukraine can demonstrate that it really shares them.
[Correspondent] Does the EU have a clear vision of a strategy of relations
with countries of our region and, in particular with Ukraine? Or is the EU
focusing only on relations with Russia and developing contacts with other
countries on a residual principle?
[Prodi] European neighbourhood policy is aimed at countries that are
neighbours with the EU and those that have become its neighbours as a result
of enlargement. This applies to Russia, Ukraine, Belarus and Moldova.
However, the EU and Russia have decided to develop their strategic
partnership by means of creating a different instrument, the so-called "four
common spaces" as determined at the 2003 summit in St Petersburg.
Our neighbours are very different. They have different situations and
different histories of relations with the EU. They are ready and capable to
a varying extent to carry out reforms necessary for getting closer to the
Union. And so, action plans have to be individual. How far and quickly we go
together depends on how much we have in common in our political values,
economic systems and so forth. With Ukraine we have most of those values in
common. (END)
========================================================
THE ACTION UKRAINE REPORT-04, No. 90: ARTICLE NUMBER EIGHT
Ukraine's History and the Long Struggle for Independence
Historical Gallery: http://www.artukraine.com/histgallery.htm
========================================================
8. UKRAINIAN TV PROFILES STATE AGENCY THAT REPORTEDLY
PAYS FOR EXPENSIVE UPKEEP OF PRESIDENT AND OTHERS

TV 5 Kanal, Kiev, Ukraine, in Ukrainian, 27 May 04
BBC Monitoring Service, UK, in English, Monday, May 31, 2004

Ukrainian President Leonid Kuchma has given the Directorate of State
Affairs, which is subordinated to him, "exclusive rights to manage state
property", a Ukrainian opposition TV channel has said. This agency costs
Ukrainian tax payers 1 per cent in budget funds a year but is completely
close to public scrutiny.
Apart from budget funds, it reportedly uses profits derived from lucrative
businesses for the upkeep of the president and other top officials.
Ukrainian MPs failed to find the origin of the money President Kuchma spent
to buy expensive furniture for his office and a Carpathian residence and to
receive medical treatment at an expensive German clinic, the TV said.

The following is an excerpt from the report by the Ukrainian television TV 5
Kanal on 27 May; subheadings have been inserted editorially:

[Voice-over] There is nothing more expressive and terrible than the eyes of
a child that lives in poverty. The little eyes have not realized yet why
this has happened to them. There are tens of thousands of these children in
Ukraine. They live at the expense of the state which allocates for their
food 7 hryvnyas [about 1.5 dollars] a day.
[Video shows a black coffin with the word democracy painted on it. On-screen
text reads: No-one has ever managed to use to good ends the power that was
seized by criminal means. Tacitus. Video shows children dancing and singing
in an orphanage.]
The Directorate of State Affairs, which is ironically called Dusya after the
Ukrainian abbreviation [resembling a diminutive to a Russian female name],
was established by a presidential decree on Soviet Army Day, 23 February
2000. The decree carries a not-for-publication seal. This body takes care of
housing the president and other top officials. The 2004 state budget
allocated over 480m hryvnyas [over 90m dollars] to Dusya. This is 1 per cent
of the total spending of the state. [Video shows singing orphans]
The authorities may call themselves genuinely popular if the most
underprivileged people are well off. There is an abyss between the
accommodation of public servants and orphans, which no-one has even
attempted to cover. Towards the polling day, the authorities sometimes give
gifts to orphans out of their wealth. Can this be called charity if children
have not seen anything good done by these authorities for years? [Passage
omitted: orphans say whom they want to become when grown up]
[Reporter Volodymyr Aryev] The Directorate of State Affairs exists at the
expense of the state budget which is filled by taxes. But Ukrainian tax
payers are deeply mistaken if they think that they can learn anything about
how their money is spent. Dusya is one of the most off-limit areas on the
map of Ukraine. It is so large that it might be called a state within a
state. Government dachas in the Carpathians and Crimea, thousands of
hectares of forests and hunting estates, limos, helicopters, planes, costly
presidential apartments and so on. Glamour and luxury with poverty in the
background. So far no monitoring agency has officially explained what the
Directorate of State Affairs is doing. Let us try to make sense of what the
agency, which all of us finance, does.
EXPANDING POWERS
[Voice-over] According to the document [a presidential decree], the
directorate is subordinated directly to the president. All the units which
ensure the operation of the supreme state agencies have been transferred to
Dusya. First, the list was rather modest. It featured hotels, health
resorts, state dachas, car pools, several farms which used to supply their
products to the [Soviet-era] Central Committee of the Communist Party of
Ukraine, government blocks of flats, printing houses and so on. Later on,
however, Dusya expanded its powers. In the summer of 2002, the leader of the
United Social Democrats [propresidential United Social Democratic Party of
Ukraine], Viktor Medvedchuk, was appointed head of the presidential
administration. Six months later, on 17 December, another presidential
decree carrying a not-for-publication seal was issued. It significantly
expanded the powers of the newly created agency. But the document deals not
just with providing top public servants with all they need for their work.
[Aryev] The following is an excerpt from regulations on the Directorate of
State Affairs. In accordance with its mission, the Directorate of State
Affairs makes decisions on setting up, reorganizing and liquidating
companies, agencies and organizations that were established on the basis of
state property, coordinates the appropriation of residential and
non-residential buildings by companies belonging to the Directorate of State
Affairs, except for cases prohibited by law.
[Voice-over] This decree alarmed the parliamentarians. The agency reporting
to the president received exclusive rights to manage state property.
PROFITS FROM BUSINESSES
[Valentyna Semenyuk, the head of the parliamentary commission for
privatization and Socialist MP] The Directorate of State Affairs was
created. It gathered together the most profitable state-run companies. This
means vodka distilleries, forestry, fishery companies, greenhouses, over 30
health resorts and tourist camps which are basically closed to outsiders.
[Voice-over] By that time, [Ukrainian President] Leonid Kuchma had lost the
right to issue decrees of this kind. The constitution, which was adopted
four years earlier, cancelled Kuchma's temporary right to regulate property
issues.
[Semenyuk] I filed a request with the presidential administration, to which
Mr Medvedchuk replied that he could make available no original decrees or
their copies. If you like, he went on, come to see us and we would
familiarize you, but you will be allowed to read, not to take anything away.
But to file a lawsuit with the Constitutional Court I will need at least a
copy of this decree.
[Voice-over] Shortly thereafter, Dusya gets hold of the best resorts, state
clinics, government residences and companies.
[Semenyuk] Today, the presidential administration and the so-called Dusya do
not ask permission to sell health resorts or to change their owners. There
are several former Soviet farms which used to belong to the state and to
produce agricultural products. Under the law on privatization in the
agroindustrial sector, people wanted to privatize agricultural companies and
to rent the land. So we received an appeal to this effect, but the so-called
Dusya replied that there would be no redistribution of property and that
there would be no privatization. The situation is similar in Chernihiv
Region where the national park has been transferred to the Directorate of
State Affairs. Citizens are virtually banned from it. Everything boils down
to one thing: Dusya is doing what it pleases. [Video shows Carpathian
terrain]
[Voice-over] Huta, Ivano-Frankivsk Region, is the last village on the way to
Horhany, or steep Carpathians. This is a half-abandoned and poor village.
The road ends here. Next are only steep peaks. Exactly in this mountainous
terrain, Kuchma decided to build himself a residence, and his dream came
true swiftly. The construction began in the late 1990s. Foreign builders
worked here. Ukrainians were used as cheap labour. [Passage omitted: Huta
residents recall the construction.]
It is not quite clear who financed the construction project. There is
information that the then head of the Lviv railway company and current
Ukrainian Transport Minister, Heorhiy Kyrpa, presented this gift to the
president. The estimated cost of the construction is 200m [as heard]. The
Synyohora residence [in Huta] resembles a palace. Its area is 5,000 sq.m.
This is a three-storey building with underground halls, a 25-metre-long
swimming pool and all sorts of Jacuzzis and saunas. The foyer and staircases
shimmer with marble. The residence can accommodate five VIP visitors along
with their secretaries, guards and assistants. In 2001, Synyohora
immediately became Dusya's acquisition. The adjacent territory was fenced
off and the land was taken away from local residents.
[Passage omitted: Village residents say their pasture land and forests are
gone, complain of being treated like cattle.]
[Aryev] Those who treat their own people like cattle can hardly complain of
any restrictions. However, those who bathe in luxuries are still lacking the
wealth to become sultans. From time to time, some details about the
lifestyles of high-ranking public servants become known and we are
astonished at the contrast between our rulers and the people, who, according
to the constitution, are the sole source of power.
[Voice-over] There are almost 11m children in Ukraine. Some of them were
lucky to have been born into wealthy families, but the majority of them have
no reason to hope for a happy childhood. According to unofficial statistics,
almost 300,000 Ukrainian children are orphans. Only 10 per cent of them live
or study at special state-run facilities - boarding schools and orphanages
with old furniture, second-hand clothes for students and, at times, the
absence of meat or butter in their daily meals. [Passage omitted: A
boarding school teacher and principal speak about their daily routine.]
Former police general [Yuriy] Dahayev was the first chief of the Directorate
of State Affairs. He did everything in his power to make sure that the
public never learnt about the operations of his directorate. In 2003 Dahayev
unexpectedly died. The former head of [Ukrainian oil and gas monopoly]
Naftohaz Ukrayiny and former MP, Ihor Bakay, was appointed to replace him.
The successful businessman stepped up efforts to gather property under
Dusya's cover.
[Aryev] It is common knowledge that spirits are rather lucrative business.
Zhytomyr and Chudniv spirit distilleries are probably the most striking
acquisition of the Directorate of State Affairs. I am just curious about how
many bottles of vodka it takes to ensure the normal operation of the
president, prime minister, cabinet ministers or to cure all the
parliamentarians with this salutary beverage. However, one will find not a
single sample of the company products in the parliamentary canteen, although
it is allegedly tasked with providing supplies to parliament. Control over
the vodka industry is an excellent idea. One can both earn money and keep
people happy. Indeed, it is better to keep people away from thinking about
what is going on in the state today.
[Voice-over] The office of the Chudniv spirit distillery still bears a
plaque calling the distillery a plant. But one can feel Dusya's attention to
this facility. Envoys from the presidential administration come here
regularly.
[Semenyuk] According to my calculations to date, the Directorate of State
Affairs owns seven distilleries. The Chudniv plant is on the list of those
exempt from privatization. To merge it with the Zhytomyr distillery, they
are abolishing its legal entity status, turning it into a shop of the vodka
distillery and preparing it for privatization.
[Voice-over] In addition to multi-million donations from the state budget,
the Directorate of State Affairs can make big money on its own and not just
on vodka. Even one facility among those lucrative pieces under the
Directorate of State Affair's control could give the directorate many
millions in profits.
CLOSED TO SCRUTINY
[Aryev] It is impossible to keep track of what the Directorate of State
Affairs does, how much it earns and whether or not it pays taxes. Dusya is a
real no-go area not only for Ukrainian citizens but also for monitoring
agencies. The Audit Chamber has failed to learn what funds pass through the
Directorate of State Affairs. MPs who wanted to learn what is happening to
public money have not been extremely successful either.
[Voice-over] On 5 June 2002, the Supreme Council [parliament] supported an
inquiry by MP Hryhoriy Omelchenko filed with then Prosecutor-General
Svyatoslav Piskun, Security Service of Ukraine Chairman Volodymyr Radchenko
and State Tax Administration Head Yuriy Kravchenko. These public servants
were asked to check the circumstances of the Directorate of State Affairs
purchasing Italian furniture worth a total of 2.6m dollars for Kuchma's
office. The figures mentioned in the inquiry were astonishing. The furniture
was supplied by a company called (?Omnia Areda). A desk for presidential
phones cost 10,500 dollars, a desk for visitors cost 16,500 dollars, a chest
of drawers was of the same value, a portable table cost over 21,500 dollars,
a stand for a TV set cost almost 16,000 [dollars], two rocking chairs cost
almost 19,000 dollars and paintings in wooden frames cost 50,000 dollars.
Altogether the furniture of the presidential office in Bankova Street cost
2,600,132.99 dollars. [Video shows orphans, a principal of a boarding
school]
MPs QUESTION PRESIDNET'S STAY IN GERMANY
Late in 2003, Ukrainians learnt from their president that he was going on
vacation to Baden-Baden. Kuchma even publicly invited all those wishing to
come to see him there. But the president's trip to Germany was covered with
secrecy. It was not clear where Kuchma was staying and undergoing treatment,
there was no information about his entourage. A week later it turned out
that Kuchma was on a course of medical treatment outside Baden-Baden proper.
The Ukrainian president was staying far away from onlookers, in the
mountainous area 800m above the sea level in Schwarzwald.
[Aryev] The Max Grundig Clinic is believed to be one of the best in Europe.
It is located near Schlosshotel Buhlerhohe, 15 km from the world's most
famous resort Baden-Baden. In the winter of 2004, the Ukrainian president
was on vacation there. The place is really like paradise.
[Voice-over] Ten per cent of the clinic's customers come from Ukraine and
Russia. The prices are also moderate. The least expensive room costs 340
euros per person per day, meals and treatment included. However, expensive
rooms have stunning interiors.
[Passage omitted: The head of the clinic shows a room.]
[Aryev] The Ukrainian head of state had a chance to relax in this armchair
for 23 days. This armchair is situated in one of the most expensive rooms of
Germany's most expensive clinic. At the height of the season this room would
cost at least 1,500 euros per day.
[Voice-over] The room is perfectly equipped - the bathroom decorated with
sexy paintings, the cosy study and the comfortable conference hall. From
this chair, Kuchma was running Ukraine during recuperation treatment after
he had been operated on in Karlsruhe.
[Ernst Martin Lemmel, captioned as head of the clinic, in English, overlaid
with Aryev's voice] Normally, we do not talk about our customers but his
visit became known in Ukraine because people said that he died here.
Actually, he left our clinic in a very good condition. He came here for a
checkup and recuperation treatment. He looked very busy and, to my mind, he
was in permanent control of his cabinet from here.
[Voice-over] Doctor Lemmel did not go into detail of Kuchma's stay in the
clinic. He said that he was quite a cooperative patient and that guards were
patrolling around the clinic all the time. Meanwhile, the head of the clinic
settled all technical issues with Mr Bakay. It was Ihor Bakay, the head of
the Directorate of State Affairs, who organized this trip. This is basically
all that the parliamentarians, who made an inquiry regarding funds from
which Kuchma's stay abroad had been financed, managed to learn.
[MP Mykola Tomenko of the opposition Our Ukraine bloc] The only name that
was named was Bakay. All the rest were his guests, Kuchma included.
[Voice-over] Bakay's first reaction to the inquiry was very laconic - all
the expenses were covered by the receiving party. He did not specify which
one right away. An inquiry with the German federal authorities clarified the
situation a bit. Germany did not pay for Kuchma's stay. The only remaining
option was to ask the clinic.
[Tomenko] If he was on vacation as a public servant and, say, the clinic
paid for him as for a public servant, of course his actions were unlawful.
There were some elements of violating the law on the president, the law on
financing public and local self-government bodies, and the law on corruption
in his actions.
[Voice-over] Soon afterwards Bakay made a correction which coincided with
MPs' suspicions.
[On-screen text] To MP M.V. Tomenko, in response to your parliamentary
inquiry, we inform you that the Ukrainian president's recuperation treatment
in Germany took place at the invitation of the Max Grundig Clinic which
covered all his expenses abroad. The head of the Directorate of State
Affairs, Ihor Bakay. 2 April 2004.
[Voice-over] It turns out that foreigners pay for the Ukrainian president's
costly vacation. The situation is very interesting as no-one does anything
for free in this world. So the one who paid should have wanted some services
from Kuchma. Something similar ended in an impeachment in Lithuania and
President Rolandas Paksas was forced to resign.
However, the clinic vehemently denied Bakay's statement that Kuchma was on
vacation at the Max Grundig Clinic at the clinic's expense.
[Ernst Martin Lemmel] No, no, no. We received a payment. We do not know if
it was from him, but we did not pay for him.
[Voice-over] Someone is lying here, and it seems that it is not difficult to
tell who. At least the German doctor has no reason to conceal anything. He
is not interested that much in the fine points of political life in Ukraine.
Who paid hundreds of thousands of euros for Kuchma's medical treatment?
Kuchma was not alone. In addition to his wife, he was accompanied by
friends, guards, aides and secretaries, who probably did not pay their own
money for recreation and treatment courses. This money either came from
Ukraine, or someone donated it from abroad. Neither version looks very good.
[Passage omitted: journalists unable to contract Bakay to arrange an
interview] (END)
========================================================
THE ACTION UKRAINE REPORT-04, No. 90: ARTICLE NUMBER NINE
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9. UKRAINIAN ÉMIGRÉ CLAIMS TOP OFFICIALS KNEW OFFICE
OF PRESIDENT KUCHMA WAS BUGGED

Interview with Volodymyr Tsvil by Olha Dmytrycheva
Zerkalo Nedeli, Kiev, Ukraine, in Russian, 29 May 04; p 2
BBC Monitoring Service, UK, in English, Sunday, May 30, 2004

The present defence minister and Security Service chief were in the know of
the famous recordings which President Leonid Kuchma's former bodyguard
Mykola Melnychenko claims to have secretly made in Kuchma's office, the
Munich-based Ukrainian businessman Volodymyr Tsvil has claimed an interview
with a serious Ukrainian weekly. There are hints that the presidential
administration chief was also aware of the bugging, the article said.

The following is the text of the article by Olha Dmytrycheva entitled "Lest
they forget..." published in the Ukrainian newspaper Zerkalo Nedeli on 29
May; subheadings have been inserted editorially:

The time has passed when the recordings made by the former bodyguard of the
Ukrainian president gave cause for discussions about the fate of the
motherland, debates about legal consequences for the authorities of the
publication of excerpts from Melnychenko's audio library and disputes about
participation of foreign special services in the bugging of Leonid Kuchma's
office [the recordings allegedly implicated Kuchma and other top officials
in serious crimes]. The world did not turn upside down. The country survived
and almost forgot the cassette scandal. And its people, having further
boosted their immunity to such sensations, started to regard new dialogues
with the president's participation that appear in the media from time to
time as simply background noise in their lives far away from the problems on
Bankova [Street where presidential administration is located].
However, what can you say about the people, if the main instigators of the
promotion of the major's tapes, who at one time not without justification
believed that their content was a weighty basis for the president's
resignation, are now meeting with the head of that same president's
administration [Viktor Medvedchuk] and are acting as allies of Bankova in
its strategic plans. Should we be surprised that even the most hopeless
romantics have stopped expecting that politics would provide a logical
completion of tape-gate? And indeed, frankly speaking, how could that
completion be expressed except in a replacement of the authorities?
Apart perhaps from an end of the investigation of the [murdered journalist
Heorhiy] Gongadze case and punishment of those guilty of his murder. That,
it seems, would also mean a replacement of the authorities. Otherwise
Bankova would not have put the brakes on that difficult process, but which
was still making some progress under [former] Prosecutor-General
[Svyatoslav] Piskun. With the arrival of Henadiy Vasylyev at Riznytska
[Street where Prosecutor-General's Office is located] any prospects for the
case, so far as can be judged, disappeared. This is confirmed by the actions
of key figures in the investigation group in the case of the dead journalist
and the Melnychenko case, who tendered their resignation after statements
from Mr Vasylyev that all this time the investigation had been on the wrong
track.
Now, when the slogan "Ukraine without Kuchma!" has lost its topicality, and
the sharpness of impressions of the game of actors in the theatre of the
major's microphone has become blunted, attempts are made to revive flagging
interest in the tapes either by Melnychenko himself by releasing new
excerpts from his library or by other people involved in the affair.
NEW REVELATIONS
This happened recently. Another figure in the cassette scandal made himself
known. His existence had been known only to a narrow circle of politically
concerned citizens, individual journalists and representatives of the
Ukrainian special services. Volodymyr Ivanovych Tsvil, who at one time was
in the closest entourage of the leader of the Socialist Party of Ukraine (at
the 1999 elections he was the election agent of Oleksandr Moroz as
presidential candidate), helped Mykola Melnychenko to leave the country,
seeing him off on his departure for the Czech Republic. True, from what he
says, he has not broken off links with the leader of the Ukrainian
Socialists. This leads one to think that the statements made by Tsvil to
Deutsche Welle radio were agreed with Mr Moroz. On the other hand, Tsvil
himself denies it.
The statements essentially boil down to the fact that Mykola Melnychenko's
bugging activity was known to people who headed the SBU [Security Service of
Ukraine] at various times - [current Defence Minister] Yevhen Marchuk,
[secretary of the Security and Defence Council] Volodymyr Radchenko and the
current chief, Ihor Smeshko. "Don't look for other traces in this affair,"
Volodymyr Tsvil advises, "neither American, nor Russian nor European. It is
all homegrown... [ellipsis as published] products." Today, Ukrainian citizen
Volodymyr Tsvil, who is engaged, he said, in business, lives with his family
in Munich. Having got through to him by telephone, Zerkalo Nedeli tried to
clarify the reason for his statement to the media precisely now, and why Mr
Tsvil did not consider it necessary to do so until now.
[Tsvil] I made my statement precisely at this time, since it was connected
with the work that I have been doing over the past three and a half years. I
did not choose that work, it found me itself. That can happen in life. There
is an opinion current in Ukraine that if someone suddenly starts making some
statements and talking about something, it means that someone has offended
him or has not fulfilled some promises. For example, they have started
writing about me that I was not put on the Socialist Party election list. In
actual fact, there was never any conversation about entering my name on the
party's election list. I still have normal, business-like relations both
with Oleksandr Moroz and his party, of which I am still a member. But the
point is that everyone sooner or later has to answer the questions facing
him.
[Dmytrycheva] What is the basis for your claims that Yevhen Marchuk,
Volodymyr Radchenko and Ihor Smeshko allegedly knew about the recordings of
the president's conversations being made even before Moroz and Melnychenko
published the first tapes?
[Tsvil] At the time when the recordings were being made, Yevhen Marchuk knew
about it. Soon after Melnychenko left the country, Mr Marchuk went to
Germany together with the then foreign minister, Anatoliy Zlenko, to present
awards to the rector of the Ukrainian Free University in Munich. I was
present at that function, since at the time I was doing an internship and I
had the opportunity to speak with Marchuk face to face. Although many people
observed our conversation. I informed him about Melnychenko's whereabouts
and said that it was possible to make contact with him in order to in some
way minimize the consequences of the tape scandal for Ukraine's national
security, since I knew about information contained in the recordings
relating to state secrets. For example, about the SBU's agent network.
I was not against exposure through the tapes of crimes relating to
individuals. But excerpts from the tapes affecting state security could be
kept secret. And we had every opportunity for that then, which I said to
Marchuk. Melnychenko was then living in the Czech Republic without money,
documents or visa. We were helping him purely for humanitarian reasons. And
so he was practically dependent on our help. Mr Marchuk replied, "Let's not
be hasty, let's see how events develop and then decide." At the same time, I
have information from reliable sources that Marchuk was using information
obtained from the recordings back at the time when the presidential office
was being bugged.
[Dmytrycheva] What about the other high officials you mentioned?
[Tsvil] You mean Radchenko and Smeshko? They had the possibility to direct
the work of their department to ensure that the tape scandal did not have
such consequences for the state as it now has. I don't rule out the
possibility that the lengthy silence of Melnychenko in America was connected
precisely with this. He was probably not against entering negotiations on
this. But it seems to me that the heads of our security agencies and the
president of Ukraine have different goals. By way of confirmation, I'll tell
you about one case. The day that Leonid Kuchma flew to Baden-Baden, 26
December, I was waiting for him in the hotel where Mr [head of Directorate
for State Affairs Ihor] Bakay and other accompanying people were staying.
But the president did not appear there, going straight into the clinic. And
I, as a law-abiding citizen, not making a secret of anything, went up to the
head of presidential security, Lyashko and Bakay and asked them to pass a
letter to Leonid Kuchma. I told them that the letter dealt with how the
country's interests could be further protected. They instructed me to pass
the letter to the room reserved for the president. And meanwhile, Leonid
Sokolyuk, who is now working in Berlin in the place of Gen Valeriy
Kravchenko (possibly he got the job as encouragement for work done) took my
letter and handed it to the SBU chief, Ihor Smeshko. The letter never
reached the president.
[Dmytrycheva] How do you know?
[Tsvil] >From the president himself.
[Dmytrycheva] Are you on speaking terms with him?
[Tsvil] I had three meetings with him, both abroad and in Ukraine.
[Dmytrycheva] After Baden-Baden?
[Tsvil] Before. The topic of the conversation during those meetings was
state security in the context of the tape scandal And the president approved
of the steps that I proposed.
[Dmytrycheva] Mr Tsvil, you have stated that the tape scandal was not the
work of foreign special services, but a product of purely domestic
production. Who initiated it?
[Tsvil] I cannot say who initiated it. I don't know. I was never that close
to Maj Melnychenko. It's his secret, his life, in which he is trying to make
some changes.
[Dmytrycheva] In the same way that you took care of Melnychenko in Europe,
in the USA the major was looked after by Yuriy Lytvynenko, who is known to
be equally close to Moroz and [tycoon MP] Hryhoriy Surkis. What do you
think, the interests of which of those politicians did Mr Lytvynenko
represent more in dealings with Melnychenko?
[Tsvil] The level of care for Melnychenko in America cannot in any way be
compared with what we did for him in Europe. Since Melnychenko had gained
political asylum in the USA. And he no longer needed care, because he had an
apartment from the state, an allowance and other benefits. The person who
looked after Melnychenko in America was doing it for a specific purpose: to
invest money in order to get more. (It cannot be ruled out that he was
talking about the payment for Melnychenko's lawyers in exchange for the hope
of acquiring the recordings and trading them - Auth.)
As for Melnychenko's stay in the Czech Republic, he intended to go there
only for two weeks. And from what he said, the purpose of the visit was to
get medical treatment for his child. Therefore we sent him an invitation
from our firm to give him guarantees for staying and getting treatment
abroad. The invitation was sent by fax from a number listed as belonging to
the Socialist Party faction. For our part there were no secrets there. We
did it entirely officially. Because at the time we still did not know
anything except that this person by his job was the bearer of state secrets
and so could not freely travel abroad. Of course, I guessed something about
him. But it did not interest me. I have never been a member of the special
services.
MEDVEDCHUK APPEARS IN NEWLY RELEASED TAPES
[Dmytrycheva] However, no less absorbing are the freshly released episodes
from the Melnychenko recordings. Speaking at a news conference in San
Francisco, Mykola Melnychenko showed journalists a recording of a
conversation with the participation of Viktor Medvedchuk. This was the debut
of the present presidential administration chief in the DJ-major's hit
parade. Until now, observers who have been following all the audio novelties
put out by the Ukrainian's president's former bodyguard had been surprised
by the permanent absence in them of Mr Medvedchuk's voice. We cannot claim
that rumours about the involvement of eminent representatives of the
domestic social democrats in Melnychenko's activity were well-grounded
[Medvedchuk is the leader of the United Social Democratic Party - USDP].
However, in an interview with Zerkalo Nedeli, the former head of the special
parliamentary commission on the Gongadze case, Oleksandr Zhyr, who met
Melnychenko several times, said that there was every reason to suppose that
allegedly "before becoming public knowledge, the major's tapes had been
listened to at a football base near Kiev". And in America, the major was
often seen in the company of (?Barry Blyufer), a representative of the Apko
firm, which, according to some reports, was engaged in creating a positive
image of Viktor Medvedchuk in the USA.
In the recording of the conversation with Leonid Kuchma on 22 June 2000
presented by Mykola Melnychenko, Viktor Medvedchuk the then first deputy
chairman of the Supreme Council [parliament], tries to convince the
president of the absence of proof of a crime in the actions of Mykola
Ahafonov. The late former deputy Ahafonov, whose name was directly linked
with the already disgraced [former Prime Minister] Pavlo Lazarenko, was
nevertheless stripped of his powers as a deputy and made criminally liable.
But in the conversation presented, Viktor Medvedchuk looks either like a
great democrat or like someone who knows that his words could be heard and
recorded by the enemies of the president and therefore was working for the
microphone.
The other excerpt from the fresh recordings of Melnychenko's audio library
carries a conversation between Leonid Kuchma and Ihor Smeshko, the present
SBU chief, and then the head of military intelligence. The latter is trying
to persuade the president to refrain from contacts with the not unknown
Mogilevich, a businessman with an extremely specific reputation. Prior to
that, a conversation had been aired between [former SBU chief] Leonid
Derkach and the president, during which it became known that the country's
special service chief was organizing a meeting between Mogilevich and Kuchma
on Ukrainian soil. There are grounds for believing that Mr Kuchma had
contacts with Mogilevich, and that those contacts are still in place.
Against this background, Smeshko (whose appointment as SBU chief, as is
known, was lobbied for by the present head of the presidential
administration) looks like a positive hero. And indeed he fought sincerely
with the Derkaches [Leonid and his son Andriy, a people's deputy] at the
turn of the century. The fact that the connections of his present patrons
with Mogilevich are far closer than those of the Derkaches is another
matter.
The renaissance of the tape scandal, so far as can be judged, is timed for
the start of the election campaign. There is a view that, having despaired
of using his audio library in accordance with the original design,
Melnychenko, it seems, is now acting primarily from temporary, and possibly
mercantile considerations. There are rumours that SBU representatives have
placed an order with the major for that part of the recordings in which
[opposition leader] Viktor Yushchenko figures.
On the other hand, one can predict an uncontrollable release of more and
more new tapes capable of playing into the hands of the most varied
political forces. Including opponents of the future candidate from the
authorities, whoever he might be. The seriousness of the situation is shown
by yesterday's dismissal of the deputy secretary of the National Security
and Defence Council, Petro Shatkovskyy (previously a deputy of Derkach and
Radchenko in the SBU). According to one theory, it was the result of
scandals within the authorities, deeply mothballed and connected with the
resuscitation of tape-gate. (END)
========================================================
THE ACTION UKRAINE REPORT-04, No. 90: ARTICLE NUMBER TEN
Politics and Governance, Building a Strong, Democratic Ukraine
http://www.artukraine.com/buildukraine/index.htm
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10. "VOICE FROM PAST HAUNTS UKRAINE PRESIDENT--HIS OWN"
Mykola Melnychenko secretly recorded hundreds of hours of conversations

By Adam Tanner, Reuters, Thursday, May 27, 2004

SAN FRANCISCO (Reuters) - A ghost of seasons past is haunting Ukraine's
leader, one who bears President Leonid Kuchma's own voice.
In the often secretive halls of post-Soviet power, conversations typically
stay secret, but thanks to a former KGB agent who worked on the president's
security staff, his words keep coming back to haunt him.
Mykola Melnychenko secretly recorded hundreds of hours of conversations in
the president's office from 1998-2000, then he was granted asylum in the
United States where he has only gradually revealed their contents.
"I knew that president of my country was a bandit and I decided to stop
these crimes," he told Reuters during a visit to San Francisco. "No one
ordered me to make these tapes."
"Some say the CIA must have ordered up these tapes; others say it was
Moscow," he said. "It wasn't. If I had worked with anyone, it would have
come out long ago."
The 37-year-old said he acted on his own to make more than 700 hours of
recordings because of his concern about Kuchma's policies, which he said
were enriching corrupt politicians.
The tapes have already inflamed several scandals.
The U.S. government suspended some aid to Ukraine in 2002 after concluding
parts of the Melnychenko tapes showed Kuchma had breached U.N. sanctions
and sold Iraq an early warning system. In 2001, the tapes caused a sensation
when they appeared to link Kuchma to the murder of Ukrainian journalist
Georgiy Gongadze.
In the latest tape excerpts made available to Reuters, a voice Melnychenko
identified as that of Igor Smeshko, chairman of Ukraine's security service,
talks to Kuchma about what he describes as an American CIA analyst working
as a spy for the former Soviet republic.
"A very valuable source in the United States," Smeshko tells Kuchma in
Russian. "She is an official with the Central Intelligence Agency."
"Mainly she looks through the CIA reports with evaluations of the situation
in Ukraine and the opinions of the highest political leaders."
When the tapes were made in the late 1990s, Smeshko was the head of
intelligence at the Defense Ministry.
The veracity of the tapes and the allegation could not be independently
confirmed and neither the CIA nor Ukrainian officials would comment.
In the past, Ukrainian officials have questioned the authenticity of the
recordings, saying they were edited after they were made.
It's unclear what impact the tapes, recorded more than four years ago, might
have on U.S.-Ukraine relations. Ties were already strained over illegal arms
sales to Baghdad before the overthrow of Saddam Hussein, but Kuchma has
since sought to improve relations by contributing Ukrainian troops to the
U.S.-led occupation of post-Saddam Iraq.
PRESIDENTIAL INTRIGUE
One expert on Ukraine said he thought the latest tapes were likely
authentic, although he said that Smeshko may have exaggerated the alleged
spy's ties to the CIA.
"Everything he (Melnychenko) has revealed has been proved to be correct;
he's not lied about anything," said Taras Kuzio, a Resident Fellow at the
Center for Russian and East European Studies at the University of Toronto.
But Smeshko "may be using that (spy) label too broadly," he said, referring
to the Russian word "sotrudnitsa" or official linked to the CIA. "They use a
lot of consultants and outside people who have maybe links or advisers or
whatever."
Another expert on espionage said it is also possible that a CIA official was
working as a double agent and deliberately feeding information to Ukraine.
The latest recordings surfaced on the sidelines of the trial of ex-Ukrainian
Prime Minister Pavlo Lazarenko in U.S. federal court in San Francisco on
money laundering charges.
Defense lawyers cited the recordings as they wanted to show that Kuchma
attempted to influence the case against Lazarenko. But the judge ruled the
tapes were not pertinent and would not be heard by the jury.
In Kuchma's conversation with Smeshko, who served as the military attache at
Ukraine's Embassy in Washington from 1992-1995, the intelligence officer
tells him that the CIA spy had produced documents related to the Lazarenko
trial. Kuchma can then be heard paging through papers.
Melnychenko would only play certain segments so as to prevent the name of
the CIA analyst from being heard.
Even though some years have passed, Melnychenko, who lives in the Washington
D.C. area, bristles at the suggestion that it was improper to record Kuchma
secretly.
"I had a right to record the Ukrainian president," said Melnychenko, who has
tightly cropped hair and a reserved manner typical for an-ex Soviet security
agent. "To stop a crime, the police are allowed to exceed the speed limit."
"I'm doing everything I can to improve things in Ukraine," he continued. "I
don't want to be a hero. I don't even know if I will live to see the results
of all this." "I could be killed at any time." (END)
=========================================================
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