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Action Ukraine Report

"THE ACTION UKRAINE REPORT"
An International Newsletter
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"

"I FEEL NOTHING BUT SHAME FOR MY NATIVE SUMY REGION"
"Don't you see what has happened here under your own eyes?"
"I can promise you that it will not be like this anymore."

Yushchenko said Monday that his government would seek to transform the Sumy
region. "Sumy could have created 10,000 working places, but instead you have
60,000 unemployed," he said. "What were you doing?" He appointed a new
governor who said he would try to "make Sumy the example of the rebirth of a
prosperous and beautiful Ukraine." [article one]

"THE ACTION UKRAINE REPORT" - Number 426
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, TUESDAY, February 8, 2005

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

1. IN VISIT TO HOME REGION, YUSHCHENKO PLEDGES TO FIGHT
AGAINST CORRUPTION AND POVERTY
Rebirth of a prosperous and beautiful Ukraine
Mara D. Bellaby, AP Worldstream, Kiev, Ukraine, Feb 08, 2005

2. YUSHCHENKO PROPOSES THAT KYIV SUBMIT PROPOSALS TO
PAY TRIBUTE TO THE MEMORY OF 1932-1933 FAMINE VICTIMS
Where is the famine museum? Where is the monument to famine?
President wants 9,000 snowball trees planted in Kyiv
Subject of famine has been covered insufficiently
Ukrainian News Agency, Kyiv, Ukraine, Tue, February 8, 2005

3. PRESIDENT YUSHCHENKO PROPOSING THAT KYIV CREATE
A NEW NATIONAL UKRAINIAN HERITAGE MUSEUM
Museum to be located in the Arsenal factory
Ukrainian News Agency, Kyiv, Ukraine, Tue, February 8, 2005

4. MAYOR SAYS KYIV WANTS TO REBUILD DESIATYNNA CHURCH
Desiatynna church was the first stone church of the Kyivan Rus,
built in 988-996. It was destroyed in the 13th century.
Ukrainian News Agency, Kyiv, Ukraine, February 8, 2005 (11:01)

5. YUSHCHENKO TELLS SECURITY SERVICE TO GET OUT OF
BUSINESS AND POLITICS AND TO FIGHT CORRUPTION
By Natasha Lisova, AP Worldstream, Kiev, Ukraine, Tue, Feb 08, 2005

6. ODESSA-BRODY PIPELINE TO BE EXTENDED AFTER ALL?
Polish News Bulletin, Warsaw, Poland, Tue, Feb 08, 2005

7. PRESIDENT YUSHCHENKO CALLS ON DIPLOMATS TO IMPROVE
ECONOMIC AND INVESTMENT RELATIONS
Ukraine needs to be introduced to the world investors, Yuschenko stressed.
Ukrainian News Agency, Kyiv, Ukraine, Tue, February 8, 2005 (13:12)

8. DPM RYBACHUK EXPECTS UKRAINE TO RECEIVE MARKET
ECONOMY STATUS FROM EU IN APRIL
Ukrainian News Agency, Kyiv, Ukraine, Sun, February 6, 2005

9. UKRAINIAN CABINET WANTS PROSECUTORS TO CHECK
LEGALITY ALL PRIVATIZATION DEALS
Interfax-Ukraine news agency, Kiev, in Russian, 8 Feb
BBC Monitoring Service, UK, in English, Tue, Feb 08, 2005

10. ORANGE PRINCESS TARGETS 'KUCHMA CLAN'
Andrew Osborn in Moscow, The Independent
London, United Kingdom, Tue, Feb 08, 2005

11. TYMOSHENKO: FIREBRAND OF CHOICE
By naming Yulia Tymoshenko prime minister, Viktor Yushchenko has
shown he is not afraid of strong personalities in his government, in tacit
recognition of the difficult task ahead.
By Ivan Lozowy, Transitions Online (TOL)
Prague Czech Republic, Mon, 7 February 2005

12. KRYVORIZHSTAL COMPANY RESALE: RESTORING JUSTICE
OR SETTLING SCORE
ANALYSIS: By Andrey Voltornist, IntelliNews -
Ukraine This Week, Kyiv, Ukraine, Monday, February 7, 2005

13. THE RISE AND FALL OF UKRAINE'S SOCIAL DEMOCRATIC PARTY
Medvedchuk vows to oppose Yushchenko, but he may be on his own
By Taras Kuzio, Eurasia Daily Monitor
Volume 2, Issue 25, The Jamestown Foundation
Washington, D.C., Friday, February 4, 2005
=========================================================
1. IN VISIT TO HOME REGION, YUSHCHENKO PLEDGES TO FIGHT
AGAINST CORRUPTION AND POVERTY
Rebirth of a prosperous and beautiful Ukraine

Mara D. Bellaby, AP Worldstream, Kiev, Ukraine, Feb 08, 2005

KIEV - President Viktor Yushchenko visited his home region of Sumy, lashing
out at the former government for its record on poverty and corruption. He
pledged vast changes to the former Soviet republic's administration.

The one-day visit on Monday to the Russian-speaking agricultural region was
Yushchenko's first official domestic trip outside the capital since his
inauguration.

"I feel nothing but shame for my native Sumy region," Yushchenko said in
Ukrainian to a packed hall of regional officials. "Don't you see what has
happened here under your own eyes?"

Yushchenko easily carried the eastern region of Sumy near the Russian
border, 340 kilometers (210 miles) east of Kiev, in the Dec. 26
court-ordered rerun, winning almost 80 percent of the vote. Elsewhere in the
more industrial east, support for Yushchenko's rival, Viktor Yanukovych, was
overwhelming during last year's bitterly contested election. Fears of
Ukrainian nationalism run high there and many residents consider themselves
Russian.

Yushchenko said Monday that his government would seek to transform the Sumy
region. "Sumy could have created 10,000 working places, but instead you have
60,000 unemployed," he said. "What were you doing?" He appointed a new
governor who said he would try to "make Sumy the example of the rebirth of a
prosperous and beautiful Ukraine."

Despite the widespread support for Yushchenko, many prominent regional
officials in Sumy supported Yanukovych. When a group of university rectors
who had backed Yanukovych entered the auditorium ahead of Yushchenko's
speech, the crowd booed. Yushchenko did not try to hide his disgust at how
the region had been run under ex-President Leonid Kuchma, repeatedly
pointing his finger.

"You've got unique possibilities. You've got everything in your hands,"
Yushchenko told the audience, which included glum-looking officials and
enthusiastic Yushchenko supporters. "I want you to live up to the
expectations of the people on Independence Square."

Yushchenko won the presidency after a weeks-long mass protest movement in
central Kiev, dubbed the Orange Revolution after Yushchenko's campaign
color. Officials in Sumy said as many as 20,000 people had also gathered on
this Soviet-style city's main square. Some 200 waving orange flags greeted
the president on Monday.

Yushchenko said 40 percent of the Sumy region's businesses are unprofitable,
half of the schools have no sanitation and corruption is so widespread that
most businesses say they must pay out money every year or face being closed.
"It makes my heart ache when I hear people say Sumy is a black hole," he
said. "I can promise you that it will not be like this anymore."

Yushchenko has pledged to this nation of 48 million that he will not allow
anyone in his government to take bribes or use their positions for their
personal benefit. He also laid out an ambitious program to raise living
standards and nudge Ukraine closer to Europe. "Everyone should feel a
change by December," he said.

Volodymyr Hortnynchenko, who listened in the crowd, said he was ready to
take up the challenge. "What can I say? It's time to roll up our sleeves and
start working." -30- [The Action Ukraine Report Monitoring Service]
==========================================================
2. YUSHCHENKO PROPOSES THAT KYIV SUBMIT PROPOSALS TO
PAY TRIBUTE TO THE MEMORY OF 1932-1933 FAMINE VICTIMS
Where is the famine museum? Where is the monument to famine?
President wants 9,000 snowball trees planted in Kyiv
Subject of famine has been covered insufficiently

Ukrainian News Agency, Kyiv, Ukraine, Tue, February 8, 2005

KYIV - Ukrainian President Viktor Yuschenko proposes that the Kyiv city
state administration and the Kyiv city council submit proposals for paying
tribute to the memory of the victims of famine in Ukraine in 1932-33. He
expressed this idea, addressing the municipal administration on February 8.
"I am saying this for you to feel that this is our duty," Yuschenko said.

He said that now, in his opinion, the subject of famine is covered
insufficiently. "Where is the famine museum? Where is the monument to
famine?.. When will we order a film on the famine, a drama or feature
film?.. I am waiting for the capital to make its say on the famine issue,"
Yuschenko stressed.

He proposed that snowball trees be planted on one of Kyiv's hills in memory
of the famine. "It seems to me that one of the hills may be planted with
snowball trees... There may be 8,000 or 9,000 of them," Yuschenko said.

As Ukrainian News reported, the Kyiv city state administration extended
UAH 6 million for the creation of a memorial complex to famine and political
repression victims. The complex, including a scientific research center and
a museum, will open in the reconstructed uninhabited building at 4b
Triokhsviatytelska Street.

As a result of the 1932-1933 famine, according to different estimates, from
three to seven million people perished. -30-
======================================================
3. PRESIDENT YUSHCHENKO PROPOSING THAT KYIV CREATE
A NEW NATIONAL UKRAINIAN HERITAGE MUSEUM
Museum to be located in the Arsenal factory

Ukrainian News Agency, Kyiv, Ukraine, Tue, February 8, 2005

KYIV - President Viktor Yuschenko has proposed that the Kyiv municipal
administration and the Kyiv municipal council develop the idea of creating a
[new national] museum that would serve as [a new depository of] the national
heritage. Yuschenko made the proposal in an address at the Kyiv municipal
administration.

"I am confident that we will strengthen the issue of the national heritage,"
Yuschenko said. He expressed the belief that numerous exponents [historical
artifacts] that are stored in museum warehouses could be better used.

Yuschenko also proposed that such a museum be located in the Arsenal
factory, which is located in front of Kyiv's Pechersk Cathedral. "We need to
do everything, friends, to ensure that the factory Arsenal-2 ... becomes a
national museum," Yuschenko said.

He also expressed the view that the Kyiv authorities should reach a decision
on the existence of exhibition halls on Instytutska Street as well as on the
construction of the Desiatynna Church. "I would very much like unity around
these facilities, and not disunity," Yuschenko said.

As Ukrainian News earlier reported, Yuschenko re-appointed Oleksandr
Omelchenko as chairman of the Kyiv municipal administration on February 4.
======================================================
4. MAYOR SAYS KYIV WANTS TO REBUILD DESIATYNNA CHURCH
Desiatynna church was the first stone church of the Kyivan Rus,
built in 988-996. It was destroyed in the 13th century.

Ukrainian News Agency, Kyiv, Ukraine, February 8, 2005 (11:01)

KYIV - The Kyiv municipal state administration wants to build Desiatynna
Church on the site of the former Desiatynna Church. Kyiv Mayor
Omelchenko told this to journalists. "And what Kyiv should do is build
Desiatynna church in two years," Omelchenko said.

Director of the Ukrproektrestavratsia institute, Anatolii Antoniuk told
Omelchenko in the Kyiv municipal state administration, that specialists of
the institute are studying the possibility of construction of the new church
in the Byzantium style on the site of the former Desiatynna church with
preservation of parts of the old church.

Specialists also believe it is necessary to use construction materials and
technologies that were used in construction of the ancient Desiatynna
church. Expected cost of construction is UAH 90 million.

Ukrproektrestavratsia earlier studied the possibilities for reconstruction
of the church, but it had to abandon this idea due to lack of reliable
evidence about its appearance. Desiatynna church was the first stone church
of the Kyivan Rus, built in 988-996. It was destroyed in the 13th century.
=========================================================
5. YUSHCHENKO TELLS SECURITY SERVICE TO GET OUT OF
BUSINESS AND POLITICS AND TO FIGHT CORRUPTION

By Natasha Lisova, AP Worldstream, Kiev, Ukraine, Tue, Feb 08, 2005

KIEV - President Viktor Yushchenko, introducing Ukraine's new security
chief, told the discredited State Security Service on Tuesday that it should
get out of politics and commerce and concentrate on fighting corruption and
winning the people's trust.

"With a joint effort from the president and the security service, we will
make this country honest," Yushchenko told security officials, according to
Ukraine's Unian news agency.

Yushchenko named Oleksandr Turchynov, an ally of new Prime Minister Yulia
Tymoshenko, to head the organization. The appointment immediately sparked
speculation that Turchynov, a civilian without any law enforcement
experience, was sent in to dismantle the agency.

The security service had been considered one of Ukraine's most corrupt
agencies, with officers accused of working for the business elite and
allegedly involved in illegal weapons sales. The agency was also accused of
playing a key role in Yushchenko's near-fatal poisoning last year during the
election campaign. Yushchenko has said he most likely received the dioxin
poisoning at a dinner with the agency's former top two leaders; both denied
any involvement.

But Yushchenko said that he purposely chose a politician rather than a
career security service officer to head the group. He said Turchynov, a
one-time government economic adviser and more recently a lawmaker in
Tymoshenko's parliamentary bloc, "didn't do anything to discredit himself
during the former government" and is "able to solve the problems."

Yushchenko gave Turchynov 10 days to develop a new program for the
security service. He ordered the service to get out of business and work for
the state's interests and to leave politics to politicians, Unian reported.

Fighting corruption must be a main goal, as well as ensuring that the
service works honestly, Yushchenko said. Turchynov promised that the
institution would "fulfill with dignity all the tasks that the agency is
assigned." -30- [The Action Ukraine Report Monitoring Service]
==========================================================
6. ODESSA-BRODY PIPELINE TO BE EXTENDED AFTER ALL?

Polish News Bulletin, Warsaw, Poland, Tue, Feb 08, 2005

WARSAW - There is a growing chance that the Odessa-Brody pipeline will
be extended to Plock, thus breaking up the monopoly of Russian companies
supplying oil to Polish refineries. Last week, the European Investment Bank
(EIB) announced it was ready to finance the pipeline extension on
preferential terms, as the project is also seen as a top priority for the
energy security of the European Union.

The declaration may have vital importance to the construction of the
pipeline linking Poland and Europe with Caspian oil fields beyond the
control of the Russian oil giants. The Russian on-line newspaper gazeta.ru
wrote on Monday that following the victory of the Orange Revolution in
Ukraine, the project of extending the Odessa-Brody pipeline to Plock has
received political support from President Victor Juschenko and new PM Yulia
Timoshenko. However, the future of the project will very much depend on
finding suppliers and contractors for the Caspian oil in Poland and other
European countries. -30-
==========================================================
7. PRESIDENT YUSHCHENKO CALLS ON DIPLOMATS TO IMPROVE
ECONOMIC AND INVESTMENT RELATIONS
Ukraine needs to be introduced to the world investors, Yuschenko stressed.

Ukrainian News Agency, Kyiv, Ukraine, Tue, February 8, 2005 (13:12)

KYIV - President Viktor Yuschenko has called on the diplomats to strive for
the improvement of economic and investment relations with foreign countries.
The president made the statement while introducing the new Foreign Minister,
Borys Tarasiuk, at the Ukrainian foreign affairs ministry.

According to the president, at the Economic Forum in Davos (Switzerland) he
agreed on holding similar forums in Ukraine. "Every year in June a small
Davos [forum] will be held in Ukraine," the president said.

In his words, the first such forum will be held yet in 2005, with the
participation of nearly a thousand of business representatives and men of
culture and art. Ukraine needs to be introduced to the world investors,
Yuschenko stressed.

He asked to commission ambassadors in each country to work on reaching the
level of economic relations, which would be maximum favorable for Ukraine.
The president also called on diplomats to strive for good relations with
neighbor countries.

Yuschenko focused special attention on Poland and asked to follow that
country's example. "Poland is our strategic foreign political partner,"
Yuschenko said.

According to him, that is the country, which began developing in difficult
conditions and showed an example of considerable progress. As Ukrainian
News reported, on February 4 President Viktor Yuschenko appointed
Tarasiuk the Foreign Minister. -30-
==========================================================
8. DPM RYBACHUK EXPECTS UKRAINE TO RECEIVE MARKET
ECONOMY STATUS FROM EU IN APRIL

Ukrainian News Agency, Kyiv, Ukraine, Sun, February 6, 2005

KYIV - Deputy Prime Minister for European integration Oleh Rybachuk
forecasts that the European Union will give Ukraine the market economy
status in April of this year. He made this statement to the press. Rybachuk
reminded that Ukraine has already adopted the bankruptcy law, a
requirement for obtaining the status.

He believes that granting of the status by the EU is only a political matter
and added that Ukraine has received political support in this issue at the
meetings in the European Parliament, and at the meeting between President
Viktor Yuschenko and European Commission President Jose Manuel Barroso.

Rybachuk added that Ukraine's accession to the World Trade Organization will
be more complicated as it requires adoption of some laws by the Verkhovna
Rada. At the same time, he forecasts formation of the parliamentary majority
around the idea of European integration, which is supported by all parties
represented in the Rada except for communists. Rybachuk believes that the
parliamentary majority will pass the lacking laws. -30-
==========================================================
9. UKRAINIAN CABINET WANTS PROSECUTORS TO CHECK
LEGALITY ALL PRIVATIZATION DEALS

Interfax-Ukraine news agency, Kiev, in Russian, 8 Feb
BBC Monitoring Service, UK, in English, Tue, Feb 08, 2005

KIEV - The Ukrainian government has instructed the Prosecutor-
General's Office to analyse the legality of sale of every facility
privatized in this country, Prime Minister Yuliya Tymoshenko has said.

"The analysis will be completed by 14 February, and the Prosecutor-
General's Office will be able to provide the government with the
full picture of how legal privatization has been," Tymoshenko said. She
was speaking today after a three-hour cabinet meeting on managing state
property.

Tymoshenko recalled that the Prosecutor-General's Office has appealed
to the Supreme Court against a ruling by the Supreme Court of Arbitration
on the legality of privatization of Kryvorizhstal.

[Critics of the Kryvorizhstal privatization say the steelworks was
unlawfully sold to businessmen linked to former President Kuchma at a
reduced price.]

Yushchenko added that the Pecherskyy district court in Kiev was also
considering individuals' lawsuits against Kryvorizhstal's privatization. If
Kryvorizhstal is returned into state property under a court ruling,
Tymoshenko said the cabinet would consider keeping it or holding a
new tender to sell it.

The cabinet meeting was attended by the State Property Fund
management, the finance, economics and justice ministers [Viktor
Pynzenyk, Serhiy Teryokhin and Roman Zvarych], as well as claimants in
the Kryvorizhstal case - lawyer Iryna Nazarova and MP Pavlo Ihnatenko,
who was appointed environment minister. -30-
==========================================================
10. ORANGE PRINCESS TARGETS 'KUCHMA CLAN'

Andrew Osborn in Moscow, The Independent
London, United Kingdom, Tue, Feb 08, 2005

UKRAINE'S NEW rulers have started to unwind the country's biggest
privatisation on the grounds that it was "bare-faced robbery" and set about
stripping the former president, Leonid Kuchma, of his official perks. The
process is being driven by the country's new Prime Minister, Julia
Tymoshenko, who suffered at the hands of the old regime when she spent more
than a month in jail on what she says were trumped-up embezzlement charges.

There is personal animosity between Mrs Tymoshenko - known as the "Orange
Princess" because of the role she played in the Orange Revolution - and Mr
Kuchma, who fired her when she was deputy prime minister in his
administration in 2001. And now that the tables have turned the so-called
"Kuchma clan" - the billionaire businessmen who grew rich under the former
president - are also believed to be firmly in her sights.

Her attack, which has apparently been sanctioned by Ukraine's new President
Viktor Yushchenko and is likely to see many of the country's most lucrative
assets redistributed, will be two-pronged.

Firstly, one of Mrs Tymoshenko's first acts as Prime Minister was to begin
the reversal of the 2004 privatisation of Krivorozhtal, Ukraine's biggest
steel producer. The company employs 52,000 people, and has pre- tax profit
of about $300m (pounds 161m).

The move, announced at the administration's first cabinet meeting last
Saturday, strikes right at the heart of the Kuchma clan. The company is
co-owned by Viktor Pinchuk, an MP who is also Mr Kuchma's son-in-law,
and by Rinat Akhmetov, Ukraine's richest man, who bankrolled the election
campaign of Mr Yushchenko's defeated presidential opponent, Viktor
Yanukovych.

Its sale last year took place amid accusations of corruption and nepotism.
The deal was pushed through by Mr Kuchma in the face of vocal opposition.
The tough auction rules set out by Ukraine's state property fund meant that
foreign bidders, of whom there were many, were barred from bidding. Mr
Kuchma's son-in-law and others snapped up Krivorozhtal for what was regarded
as a ludicrously low price of around $800m; a US-UK consortium had offered
$1.5bn.

Mrs Tymoshenko called the sale "a bare-faced robbery" and Mr Yushchenko
has said the sale needs to be reversed in order to give Ukraine a future. Mr
Yushchenko said: "Many of its shares were transferred without any
competition, in the same way as Catherine the Great handed out land in the
south of Ukraine to her lovers and favourites 200 years ago. "If ... we
forget how Krivorozhtal was stolen we will never bring order to this
country."

Legal proceedings to renationalise the firm have now begun and the
government has said it will re-auction Krivorozhtal fairly once these
proceedings are completed. Mr Kuchma's perks as a former president
are, it would seem, next in the firing line.

Mrs Tymoshenko has ordered the government to conduct a detailed analysis of
the "legality" of his state privileges, which are reported to include a
state-owned dacha (country house), two cars and four drivers, an undisclosed
monthly cash payout, two assistants, an adviser and a security detail. Calls
to prosecute Mr Kuchma, who does not enjoy legal immunity, have also begun.
His detractors accuse him of treason, corruption and of ordering the murder
of an investigative journalist.

Mr Kuchma denies he has done anything wrong. Mr Pinchuk has said Mr
Kuchma is relaxed about the situation. Earlier this month he said his
father-in-law was going to the gym every day and working on setting up
a special foundation. -30- [The Action Ukraine Report Monitoring Service]
==========================================================
11. TYMOSHENKO: FIREBRAND OF CHOICE
By naming Yulia Tymoshenko prime minister, Viktor Yushchenko has shown
he is not afraid of strong personalities in his government, in tacit
recognition of the difficult task ahead.

By Ivan Lozowy, Transitions Online (TOL)
Prague Czech Republic, Mon, 7 February 2005

KYIV, Ukraine--If politicians are supposed to speak softly but carry a big
stick, then Ukraine's newly inaugurated president, Viktor Yushchenko, has
made no secret of whom he has chosen as his stick. The day after his
inauguration on 23 January, Yushchenko designated the firebrand politician
Yulia Tymoshenko as acting prime minister. On 4 February Ukraine's
parliament confirmed Tymoshenko in the post by a resounding and
unprecedented 373 votes out of a possible 450.
DISARRAY ON THE FLANKS
The overwhelming vote for Tymoshenko reflects just how resounding was the
defeat of former President Leonid Kuchma and his handpicked successor
Viktor Yanukovych following the heady events of the "Orange Revolution."

The former government's supporters are in complete disarray. Political
groupings that provided close support to Kuchma, such as the Party of
Regions and the Social Democratic Party of Ukraine (United), have been
bleeding members of parliament profusely. Since November, the Party of
Regions has lost 12 parliamentarians out of 66, and 17 deputies have left
the SDPU(o) faction, which once numbered 50. The Workers' Ukraine party,
headed by Yanukovych's former campaign manager Serhiy Tyhipko, collapsed
entirely after losing 43 deputies, then revived through a merger with the
People's Democratic Party. That failed to stem the losses, however; the
united faction has since lost four out of 18 parliamentarians.

Following a meeting of the SDPU(o)'s governing council on 25 January, party
chairman Viktor Medvedchuk announced it was going into opposition, the only
party to formally do so. During the 4 February vote on Tymoshenko, however,
18 of the 23 SDPU(o) members present voted to confirm her as prime minister.
Medvedchuk has his task cut out for him, because apart from the vote and a
rash of parliamentary defections, over the past several weeks two ministers
from the previous cabinet left his party and the head of the State Reserve
Committee resigned from its governing council.

Yushchenko's own faction, Our Ukraine, remains the largest with 101
deputies; Tymoshenko's eponymous party has 18; and another Yushchenko
supporter, Socialist Party chairman Oleksandr Moroz, controls 21. New
parliamentary elections, together with local elections, are due in just over
a year's time, and much of what Tymoshenko's government does until then will
help draw the contours of the new parliament.
A DRIVING PERSONALITY
Most observers agree that Tymoshenko's strong personality and high ambition
will drive the current government and its initiatives.

Tymoshenko has been a steadfast supporter of Yushchenko's bid for the
presidency since the two signed a cooperation agreement entitled "Power of
the People" on 2 July 2004.

Educated in the eastern city of Dnipropetrovsk as an economist, Tymoshenko
went into business very early and by the mid-1990s took control over close
to a quarter of Ukraine's entire economy by monopolizing the supply of
natural gas to the heavily industrialized eastern regions and the shipment
of gas from Russia's Gazprom through Ukraine to Western Europe. Her company,
United Energy Systems, was granted the monopoly by then-Prime Minister Pavlo
Lazarenko, another Dnipropetrovsk native. In 2003, Lazarenko was convicted
on 29 counts of extortion and money laundering in the United States.

In 1999, the newly appointed Prime Minister Yushchenko, who had not yet
aroused Kuchma's ire, appointed her a deputy prime minister in charge of
fuel and energy, but in 2001 Kuchma removed her from the post. She was
arrested in 2001 on charges of tax evasion but was soon released; she then
initiated an impeachment drive against Kuchma. The party she founded, the
Yulia Tymoshenko Bloc, did well in parliamentary elections in 2002, winning
7.2 percent of the vote.

On 4 February, the same day parliament approved Tymoshenko as prime
minister, Yushchenko appointed 21 ministers by drawing heavily on the
coalition of political forces that supported his candidacy during the
presidential elections.

Though there were few surprises, the new cabinet represents a departure
from business as usual.

Out of four deputy prime ministers, only Anatoly Kinakh, who joined
Yushchenko's campaign after the first round of presidential voting last
October, once occupied a high government post (as prime minister in
2001-2002). The other three come from Yushchenko's inner circle: Oleh
Rybachuk, who is responsible for European integration, Roman Bessmertny,
in charge of administrative reform, and Mykola Tomenko in the humanitarian
policy slot.

Borys Tarasiuk, who has strong pro-Western leanings, returns to head the
Foreign Ministry for the second time.

The Socialists received three ministries: agriculture, education, and
interior. The new interior minister, Yuriy Lutsenko, was one of the leaders
of the anti-Kuchma campaign in 2000-2001, when he faced Interior Ministry
troops across barricades on a regular basis. Now he is in charge of them.
The Defense Ministry will be headed by Anatoliy Hrytsenko, formerly head of
a think tank called the Razumkov Center.

Tymoshenko's close aide, Oleksandr Turchynov, only a lieutenant by rank,
was appointed head of the Security Service.

Yushchenko named businessman Petro Poroshenko, Tymoshenko's chief
challenger for the premiership, to head the Council on National Security and
Defense, a position that will be upgraded under the new president. While in
the past the council was used occasionally to push through unpopular
personnel changes, Yushchenko has indicated that it will serve as his
principal policy-making body.

Oleksandr Zinchenko, Yushchenko's campaign manager, was named state
secretary and head of the presidential secretariat. For the last two years
of Kuchma's term, the office was headed by Medvedchuk and was a constant
source of discontent and controversy. Medvedchuk was held to be the author
of the 'temnyky,' or secret instructions to the media on how to cover,
or not cover, news events. He was also widely believed to have stood behind
numerous attempts to pressure politicians around Yushchenko and Tymoshenko
by instigating tax investigations and other forms of legal pressure.
THIS LADY'S NOT FOR PLACATING
If Tymoshenko's past statements are any indication, she will work
energetically to clean up a government machine that was a source of intense
and prolonged pressure against her and other opposition figures, including
Yushchenko himself.

Prior to her appointment, Tymoshenko stated repeatedly and forcefully that
Ukraine needed to be "cleansed" of the corruption of the past.

In this Tymoshenko has been supported by Moroz, who said on 27 December
on Ukrainian television that "the most important and most difficult task for
Yushchenko's team will be the return of the people's trust in government.
The guarantee for this should be the cleansing of the oligarchs [wealthy
businesspeople] from the government."

Tymoshenko has already coupled words to deeds. At its first meeting, on 5
February, her cabinet voted to return to government ownership the
Krivorizhstal steelworks, source of 20 percent of Ukraine's steel exports,
and to conduct a new privatization. In the original privatization,
Krivorizhstal was bought by a consortium of Ukraine's two richest men, the
Donetsk-based Renat Akhmetov and Kuchma's son-in-law, Viktor Pinchuk.
That deal is under scrutiny in several cases now making their way through
the courts.

The prime minister, who herself made a fortune on trading in gas during the
1990s, then put even more pressure on the oligarchs, saying at a press
conference that all of the government's decisions on property-related issues
since 1991 would be reviewed.

Following last week's whirlwind tour to Russia, Poland, Strasbourg, and
Davos, Switzerland, Yushchenko is due to meet U.S. President George W.
Bush during a NATO summit on February 22. While off on foreign visits, the
president can be sure that at home the fires are being stoked by his
determined new prime minister.
------------------------------------------------------------------------
Ivan Lozowy is a TOL correspondent and also runs an Internet newsletter,
the Ukraine Insider.
==========================================================
12. KRYVORIZHSTAL COMPANY RESALE: RESTORING JUSTICE
OR SETTLING SCORE

ANALYSIS: By Andrey Voltornist, IntelliNews -
Ukraine This Week, Kyiv, Ukraine, Monday, February 7, 2005

Intensive privatisation took place in 2004, . but not every deal is clear.
In countries with transition economy, privatization is crucial. First, it
reallocates resources and property for their optimal usage, second, it
enables government to obtain extra funds for future investment projects. In
2005 privatization of Ukrainian enterprises is expected to bring UAH 4.9bn
into the state budget. Last year privatization processes were extremely
rapid. After the substantial upward revision in mid-year, privatization
revenues were planned to bring UAH 5.2bn in 2004. However, State Property
Fund (SPF) transferred UAH 9.447bn to the budget, while total privatization
revenues made up UAH 9.582bn (USD 1.8bn) in 2004. Compare this with
UAH 2.02bn that SPF transferred to the state budget in 2003.

In 2004, the biggest privatization deals were sales of 9 enterprises of
mining major Ukrrudprom and metallurgic major Kryvorizhstal. The latter
asset brought UAH 4.26bn to the budget. However, many deals were
questionable, in the sense that tenders for buying enterprises had very
strict rules. For example, according to the law on privatization of
state-owned Ukrrudprom enterprises, the priority right to purchase stakes
was granted to companies that already own no less than 25% of the shares in
the company's enterprises ("investors"). According to the law, an "investor"
cannot be an offshore company. Thus, the circle of investors was narrow in
every bid. Besides, foreign investors (especially those from Russia) were
not often allowed to register for auctions.

IMU privatizes Kryvorizhstal in June 2004.. although LNM, Severstal and
Arcelor offered more, they were excluded from the tender In 2004 the #1 deal
was the purchase of Kryvorizhstal metallurgic plant. The largest producer of
metal products in Ukraine had annual production volume of nearly 6.3mn tons
of rolled metal products in 2003. The starting price of a 93.02% stake was
UAH 3.806bn. On Jun 14, 2004, SPF declared Kyiv-based Investment Metallurgic
Union (IMU) the winner of the competition for Kryvorizhstal. IMU concern
transferred to the national budget UAH 4.26bn for the stake. The buyer
intends to invest over UAH 4bn into the smelter's development, but no dates
for the investment were disclosed. The additional terms of the tender oblige
the buyer to have produced and sold at least 1mn tons of Ukrainian coke per
year over the past 3 years.

The other bidder for Kryvorizhstal, Industrial Group consortium, proposed
SPF just UAH 4bn for the stake. What looks strange is the fact that another
4 bidders were denied participation in the tender as they did not meet the
demands for the production of coke in Ukraine. "Partner" company did not
even transfer 10% of the starting price of the stake. International holding
LNM Group offered USD 1.5bn for the stake, while Russia's Severstal Group
offered USD 1.2bn together with Arcelor. However, SPF did not allow either
LNM Group or Severstal Group to bid for Kryvorizhstal. 65.5% in the
statutory fund of IMU belongs to System Capital Management company
(Donetsk). IMU was created by companies controlled by SCM and
Dnipropetrovsk-based Interpipe corporation. SCM controls 56.25% of IMU,
while Interpipe corporation owns 43.75%.

2004 was a successful year for KryvorizhstalKryvorizhstal's net profit
totalled UAH 1.864bn in full-2004. This was disclosed by Oksana Melnyk, head
of the mass media department of the plant. She noted that the financial and
economic results of Kryvorizhstal in 2004 were the best in the last 10
years. Kryvorizhstal's net profit made up UAH 870.8mn in 2003. Besides, net
income rose by 29.5% y/y to UAH 7.53bn. In 2004, pre-tax earnings of the
enterprise made up UAH 2.6bn, as profitability reached 37.53%. The plant
increased sale revenues by 33.3% y/y (UAH 2.5bn) to UAH 10bn. Presently,
Kryvorizhstal includes an ore mining and enrichment plant, coke and chemical
production, and mine administration for underground extraction of iron ore.

Yuschenko says new government to revise Kryvorizhstal's sale this
yearDespite the fact last year was a stroke of luck for the metal major,
during his press conference in Moscow, newly elected Ukrainian president
Viktor Yuschenko stressed the enterprise was "stolen", thus the deal should
be closely examined. To remind you, revision of the plant's privatization
was one of the major promises in his election campaign. According to
Yuschenko, the new government will protect Ukrainian as well as foreign
capital in the state. Later, on Feb 4, Yuschenko addressed parliament and
promised to restore state ownership of Kryvorizhstal already in 2005. "I
promise that honest privatization will take place this year. Those
facilities that were stolen - starting from Kryvorizhstal - will be returned
to the state," he stated. The president accused SPF of fabricating the terms
of the competition, as a result of which the state lost UAH 4bn in revenues
(the difference between IMU and LNM's offers).

Government also intends to return Kryvorizhstal in 2005Yulia Tymoshenko, who
got appointed as PM on Friday, Feb 4 announced intentions to return assets
of Kryvorizhstal to the state during a press conference after the 1st
government meeting. She said government will make analysis of all legal
documents on privatization of the metallurgic major signed by the former
government. During Saturday's meeting, the new ministers also decided to
nullify some documents adopted by their predecessors. Tymoshenko explained
that it means they started the process of returning Kryvorizhstal back into
the state ownership and then holding a new auction. She did not specify,
which decisions of the old government were cancelled, but promised to
provide reporters with the relevant list soon. Answering the question
whether government would revise privatization of other enterprises, the PM
answered she wants to make investors feel easy and assured that no decisions
would ever be made in Ukraine in defiance of the law. Tymoshenko added the
government is now checking into past privatization tenders.

Court prohibits IMU to alienate 93.02% stake in KryvorizhstalEarlier, the
Pecherskyi district court of Kyiv turned down a lawsuit of IMU, which asked
the court to prohibit State Property Fund from changing the results of
privatization of Kryvorizhstal metallurgical plant. The court made the
decision on Jan 27. Besides, the court prohibited the State Commission for
Securities and the Stock Market (SCSSM) to register the issuance of shares
by Kryvorizhstal. The court rejected IMU's request to ban ING Bank Ukraine
bank from freezing Kryvorizhstal's shares from the accounts of IMU.
According to the court, there are no reasons to uphold the lawsuit.

Scheme of revision might be extended to other doubtful dealsYuschenko
underlined many times that privatization of Kryvorizhstal (as well as some
other doubtful deals) will be revised if he becomes the president. He often
stressed that the steel major's case should be reconsidered. However, the
process of nationalization is obviously difficult from the legal point of
view. IMU already said it would accept only a court decision on the
nationalization. In our view, if Kryvorizhstal is nationalized, the scheme
of the revision will be applied to other privatisation deals that took place
during Kuchma's presidency. Still, we believe Yuschenko should be very
cautious in his further steps. He does not seem as popular as for example
Russian president Vladimir Putin was in 2000. Besides, the local oligarchs
might confront Yuschenko's intentions.

We do agree that tender terms seemed biased in favor of one of the
participants. Perhaps government can ask IMU to compensate the difference
between its and other participants' bid. Higher taxes may be imposed for a
certain period of time on Kryvorizhstal. But if a re-sale is conducted, it
has to be as done as carefully and transparently as possible. We hope the
deal would not be an instrument of settling old scores between various
political and business clans. -30-
==========================================================
13. THE RISE AND FALL OF UKRAINE'S SOCIAL DEMOCRATIC PARTY
Medvedchuk vows to oppose Yushchenko, but he may be on his own

By Taras Kuzio, Eurasia Daily Monitor
Volume 2, Issue 25, The Jamestown Foundation
Washington, D.C., Friday, February 4, 2005

Ukraine's Social Democratic United Party (SDPUo), the oligarchic party that
gained the most from Leonid Kuchma's second term in office, is now faced
with a deep crisis that will ultimately be its undoing. Unfortunately for
Viktor Medvedchuk, its leader and the former head of the presidential
administration, there will be few tears shed for the SDPUo's demise.

Since the drama surrounding Viktor Yushchenko's presidential victory, the
SDPUo's parliamentary representation has declined from 39 to 25 deputies.
Its faction is now smaller than that of the Agrarians, whose leader,
Parliamentary Speaker Volodymyr Lytvyn, gained from staying neutral in the
elections.

The SDPUo's decline is not simply in absolute terms but, more importantly,
involves high-ranking leaders whose departure will encourage others to
follow suit. The head of the State Committee for Construction and
Architecture, Valeriy Cherep, Education Minister Vasyl Kremin, Minister of
Labor Mykola Papiyev, and the head of the State Committee for Reserves
Mykola Pesotskyi are all recent departures (sdpuo.org.ua, January 28).

Three factors account for the SDPUo's rapid decline.

First, high-profile members were angered when Medvedchuk railroaded the
SDPUo into announcing its "opposition" to President Yushchenko before he
even had chance to publicly reveal his policies. The party itself seems
unable to act in concert. While Medvedchuk insists that the SDPUo stands in
"opposition" to Yushchenko, its parliamentary faction leader, Leonid
Kravchuk, is promising support to Yushchenko and a free vote for Yulia
Tymoshenko's confirmation as prime minister (Ukrayinska pravda, January 20).

There is little optimism in the SDPUo's ability to maintain itself as an
opposition party as the SDPUo has neither a clear ideology nor any
charismatic leaders. "Either they begin to support the new authorities and
will become more Catholic than the Pope in its defense, or they will
disintegrate as a party and disappear from the political map of Ukraine,"
predicted Dmytro Vydryn, a campaign advisor to the defeated Viktor
Yanukovych (Ukrayinska pravda, January 27).

Second, the SDPUo, like other centrist parties, has an artificial
"social-democratic" ideology that merely masks a political roof (krysha) to
support close, corrupt business ties to the executive branch. The
Yushchenko-Yulia Tymoshenko tandem plans to separate business and
politics and, without access to state resources, the SDPUo will find it
impossible to continue to exist in its current form.

In January the SDPUo politburo announced 80 policy positions to buttress its
claims to be in "opposition" (sdpuo.org.ua, January 28). These included
opposition to any revision of constitutional reform, support for the
creation of a coalition of "centrist and left-centrist forces," and a
populist hostility toward lower standards of living or reduced medical and
educational facilities. The SDPUo continues to support Russia and the CIS
Single Economic Space over Ukrainian membership in the EU, WTO, or NATO.

Third, SDPUo defectors seek to distance themselves from pending criminal
charges against Medvedchuk and other leading SDPUo members for their
involvement in election fraud and two assassination attempts against
Yushchenko.

Although Medvedchuk is a liability to the SDPUo, its members cannot remove
him, as he personifies the party and keeps it afloat. That he is a liability
is not in doubt. In a recent survey all political parties or blocs obtain
greater public support if their leaders' names are added (i.e. Our Ukraine
with Viktor Yushchenko). The only exception to this rule is the SDPUo; its
support declines from 2.5% to 1.5% when Medvedchuk's name is attached
(Zerkalo nedeli, December 25).

Unlike three high-ranking Kuchma officials, Medvedchuk is refusing to leave
Ukraine. He has also ruled out suicide, the option two others preferred.
Always eager for a fight, Medvedchuk is also refusing to seek the safety of
a parliamentary seat, where he would enjoy immunity until the 2006
elections.

Instead, Medvedchuk remains confident in his ability to evade prosecution.
He publicly stated, much to the chagrin of other Ukrainian politicians, "I
am a law-abiding citizen. I always was and will be." As to election fraud,
he continued, "It has yet to be proved that falsifications took place"
(Ukrayinska pravda, January 26).

This is a curious comment, as parliament rejected the official results of
the November 21 second round, which declared Yanukovych president, and the
Supreme Court then annulled the results and ordered a re-run of round two.
Our Ukraine deputy Viktor Korol sees Medvedchuk's attempts at whitewashing
himself as unlikely to work. "Mass fraud, which was confirmed by the Supreme
Court and in parliament, is evidence of the deep intervention in the
election process by state officials at all levels who are SDPUo members"
(Razom.org.ua, January 28).

Nor is it just the Prosecutor's Office that is planning to press charges
against Medvedchuk. Kostyantin Grygoroshin, a Russian businessman operating
in Ukraine, fell out with Medvedchuk. He was then set up by Interior
Ministry officers, who planted narcotics and a gun on him. Grygoroshin has
publicly stated his readiness to fight for the return of his businesses,
which he believes were stolen by Medvedchuk.

Our Ukraine deputy Mykola Tomenko has asked the Prosecutor's Office to
investigate attempts to fan religious and inter-ethnic hatred during the
elections. The principal channel for such efforts was Inter TV, the main
channel still controlled by the SDPUo and broadcasting to eastern Ukraine.
==========================================================
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SIGMABLEYZER MONTHLY MACROECONOMIC REPORTS
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1. UKRAINE -- Macroeconomic Situation - December 2004
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2. ROMANIA-- Macroeconomic Situation - December 2004
http://www.sigmableyzer.com/files/ROM_Ec_Situation_12_04.pdf

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