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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"

"THE ACTION UKRAINE REPORT" - Number 429
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, MONDAY, February 14, 2005

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

1. YUSHCHENKO PLANNING TO VISIT U.S. IN EARLY APRIL
Will be in United States week of April 4
Ukrainian News Agency, Kyiv, Ukraine, Friday, February 11, 2005

2. LOMBARD ODIER INVESTS IN UKRAINE FOR EAST EUROPE FUND
SEES REFORMS BOOSTING RETURNS
Bloomberg, Europe, Friday, February 11, 2005

3. ORANGE REVOLUTION CASTS A GLOW ON UKRAINIAN EQUITIES
New Europe, Athens, Greece, Monday, February 14, 2005

4. WORLD BANK MAY DISBURSE UP TO USD 3 BILLION
IN LOANS TO UKRAINE IN 2005-2007
Ukrainian News Agency, Kyiv, Ukraine, Thu, February 10, 2005

5. UKRAINIAN BUSINESS EXPECTS TRANSPARENCY
By Ania Tsoukanova, Business Report
Johannesburg, South Africa, Monday, February 14, 2005

6. A UKRAINIAN STORY THAT'S ANYTHING BUT CHEESY
UKRproduct Group first Ukrainian company to float on London market
By Joanne Wallen, Associate Editor, Citywire.co.uk, UK, Feb 2005

7. UKRAINIAN DEPUTY PRIME MINISTER SAYS CAPITAL AMNESTY
DEPENDS ON BUSINESS BECOMING LEGAL
UNIAN news agency, Kiev, in Ukrainian, 11 Feb 05
BBC Monitoring Service, UK, in English, Friday, February 11, 2005

8. OWNERS OF 66% OF UKRAINE'S BANKS ARE UNKNOWN
Nearly all of the real owners are in the Parliament
New Europe, Athens, Greece, Monday, February 14, 2005

9. POLISH-UKRAINIAN PIPELINE GATHERING SPEED
Polish News Bulletin, Warsaw, Poland, Monday, Feb 14, 2005

10. EUROPEAN INVESTMENT BANK READY TO FINANCE ODESSA-
BRODY PIPELINE IN POLISH TERRITORY TO GDANSK
New Europe, Athens Greece, Monday, February 14, 2005

11. UKRAINE SPACE INDUSTRY GROWING
United Press International (UPI), Kiev, Ukraine, Wed 9th Feb, 2005

12.UKRAINE BECOMING ATTRACTIVE PLACE FOR RUSSIAN COMPANIES
Ukrainian Journal, Kyiv, Ukraine, Tuesday, Feb 8, 2005

13. EU EYES WTO ENTRY FOR RUSSIA, UKRAINE, SAUDI ARABIA
AND VIETNAM IN DECEMBER OF 2005
Urges U.S. to speed up its talks
Reuters, Washington, D.C., Sat, February 12, 2005

14. UKRAINE: FIVE MILLION JOBS: WHAT DO THEY COST
AND HOW CAN THEY BE CREATED?
By Viktoriya Herasymchuk, The Day
The Day Weekly Digest in English, Kyiv, Ukraine, Tue, 8 Feb 2005

15. UKRAINE: THE MAINSTAY OF GOVERNMENT
Businesses should not factor bribes into the cost of their products
Inteview with Member of Parliament Yury Yekhanurov
By Svitlana Stepanenko, special to The Day
The Day Weekly Digest in English, #4
Kyiv, Ukraine, Tuesday, 8 February 2005

16. CORRUPTION IN UKRAINE'S COAL INDUSTRY RUNS DEEP
By Roman Kupchinsky, RFE/RL Organized Crime and Terrorism Watch
Reporting on Crime, Corruption, and Terrorism in the former USSR,
Eastern Europe, and the Middle East
Radio Free Europe/Radio Liberty, Prague, Czech Republic
Vol. 4, No. 23, Thu, 10 February 2005

17. "THE HERALD OF UKRAINIAN STATEHOOD"
Lev Rebet: politician, scholar, and publicist
By Ihor Siundukov, The Day Weekly Digest in English, #4
Kyiv, Ukraine, Tuesday, 8 February 2005
==========================================================
1. YUSHCHENKO PLANNING TO VISIT U.S. IN EARLY APRIL
Will be in United States week of April 4

Ukrainian News Agency, Kyiv, Ukraine, Friday, February 11, 2005

KYIV - President Viktor Yuschenko plans to visit the United States in early
April for talks with the government officials. Vice Prime Minister for
European Integration Oleh Rybachuk announced this to journalists.

According to him, Yuschenko is expected to visit Washington and New York,
hold high-level meetings, and address the United States Congress. Rybachuk
said that the United States Congress might abolish the Jackson-Vanik
amendment to the United States' Trade Act in relation to Ukraine ahead of
Yuschenko's visit.

Rybachuk also expressed the view that the task of Ukraine, specifically his
task, is to prepare as much as possible for coordinating the issue of
Ukraine's admission into the World Trade Organization with the United States
ahead of Yuschenko's visit.

Rybachuk stressed that Yuschenko has set the target of securing Ukraine's
admission into the WTO before the end of 2005 and that this would be a
significant step on the road to Ukraine's integration into Europe.

As Ukrainian News earlier reported, States President George Bush recently
invited Yuschenko to visit the United States. In December 2004, Yuschenko
promised to focus his foreign policy on securing recognition of Ukraine as
market economy, admission of Ukraine into the WTO, and granting associate
membership of the European Union to Ukraine if he were elected president
of Ukraine.

Ukraine is aiming to join the WTO in December 2005. It had signed 30
bilateral protocols on access to markets of goods and services, which are
part of the requirements for admission into the organization, as of December
17, 2004. The Jackson-Vanik amendment was included in the 1974 Trade
Act.

Under this amendment, the United States denies the "most favored nation"
trade status to imports from Soviet bloc countries where there existed
restrictions on the right to freely emigrate and religious rights. Since
1992, the United States has annually certified Ukraine as meeting the
Jackson-Vanik requirements. The Levin-Lugar bill would make this trade
relationship permanent. -30- [Action Ukraine Report Monitoring Service]
==========================================================
2. LOMBARD ODIER INVESTS IN UKRAINE FOR EAST EUROPE FUND
SEES REFORMS BOOSTING RETURNS

Bloomberg, Europe, Friday, February 11, 2005

Lombard Odier Darier Hentsch & Cie. is buying Ukrainian shares for its $275
million LODH Invest East Europe fund, gambling the election of President
Viktor Yushchenko will increase Western European investment in the country.

John Coast Sullenger, manager of the fund, said he added shares of
steelmakers Mariupol Steel Plant and VAT Zaporizhstal Metal Plant and power
producer Zakhidenergo. The fund gained 36 percent last year in dollar terms,
exceeding the 32 percent return for the MSCI Eastern Europe Index, according
to data compiled by Bloomberg.

"Yushchenko's victory is the catalyst that this market has been missing all
these years,'' Sullenger, 36, said in an interview from his office in
Geneva. "The market looks incredibly bullish and we will be increasing our
investments.''

Ukraine's benchmark First Trading System Index, known as the PFTS, rose
31 percent this year through Feb. 9 to a record after tripling in 2004, the
best performance in Europe. The country is the seventh-largest producer of
steel, and benefited from last year's 50 percent rise in the metal.

Yushchenko, who took office Jan. 23, vowed to boost economic growth and
improve living standards in the country of 47 million. He replaced Leonid
Kuchma, a one-time space engineer who ruled the former Soviet country for
the last decade.

Yushchenko, 50, was governor of the central bank in Kiev between 1993 and
the end of 1999 before an 18-month stint as prime minister. Before taking
office last month, he survived an assassination attempt and a two-month
dispute over election results that first showed he lost.
HERD MENTALITY
Ukrainian holdings make up about 4 percent of the Lombard Odier fund, whose
top three holdings are OAO Lukoil, Russia's largest oil producer, Mol Rt.,
Hungary's biggest oil company, and OTP Rt., Hungary's largest bank. Those
three stocks account for 31 percent of the MSCI Eastern Europe Index. There
are no Ukrainian stocks in the MSCI benchmark.

Brokerages including Moscow-based Aton Capital Group are skeptical the
market will yield the returns Sullenger is expecting.

"Investors are displaying herd mentality,'' Aton said in a Jan. 24 report.
"Ukrainian stocks surging on low volume looks like a bubble in the making.''
STEELY RETURNS
Sullenger began trading Russian stocks in 1994 after finishing a degree in
foreign affairs at the University of Virginia in Charlottesville three years
earlier. He joined Lombard Odier to manage emerging market funds in October
1998, two months after Russia defaulted on $40 billion in domestic debt.

The native of Lexington, Kentucky, said that enough Ukrainian companies are
increasing profits to keep the market rising. Steel producers, for example,
are helped by the combination of high prices and low domestic labor costs,
he said.

Benchmark hot-rolled coil export prices from the former Soviet Union are
13 percent higher than they were this time last year at $530 a metric ton,
according to data from Metal Bulletin, an industry publication.

Ukraine exports about 85 percent of its output, mainly to China, Southeast
Asia and Africa. Ukrainian steel workers average $1 an hour compared with
about $40 in the U.S., the world's third- largest steel producer, and $35 in
Japan, the second-largest steel producer, according to Kiev-based brokerage
Concorde Capital.
'REAL POTENTIAL'
Shares of Mariupol, which is named after the city where it's based and is
the nation's second-largest steel company, have gained 85 percent this year,
adding to a 72 percent advance in 2004. Net income last year probably rose
81 percent to $279 million, according to estimates by Concorde.

Zaporizhstal, the fourth-largest producer of the metal, has risen 35 percent
this year after surging 16-fold in 2004. Profit at the company from
Zaporizha in southern Ukraine probably rose 32 percent to $158 million,
Concorde said in a report last month.

A reputation for corruption has discouraged investment. Ukraine was tied for
being the 122nd most corrupt country out of 145 nations in the 2004
Corruption Perceptions Index, published by Transparency International. The
Berlin-based organization tracks measures such as bribery, election
financing and how governments award contracts.

Yushchenko said he may cancel the sale last year of the country's largest
steelmaker, VAT Kryvorizhstal, to a business group led by former President
Kuchma's son-in-law, a transaction Yushchenko described as the "theft of
state property.''

Sullenger said he expects Yushchenko to enact enough reforms to push
Ukraine westward, and stocks still higher. "No one took the Ukraine
seriously back in the 1990s, but the elections have given sentiment a
massive boost,'' Sullenger said. "There is real potential to create deeper
ties with Europe.'' -30- [Action Ukraine Report Monitoring Service]
==========================================================
3. ORANGE REVOLUTION CASTS A GLOW ON UKRAINIAN EQUITIES

New Europe, Athens, Greece, Monday, February 14, 2005

Ukrainian stocks and bonds aren't just hot these days, they're glowing -
orange, of course. "The Orange Revolution (that brought reformers into power
in the Ukraine) released a huge amount of pent-up demand," Deutsche
Presse-Agentur (dpa) quoted Tomas Fiala, director of Dragon Capital, by
volume the country's largest investment house, as saying last week. All the
institutional investors that have been watching Ukraine, all these years,
now they want to get in," he said.

The December inauguration of reformist President Viktor Yushchenko has
unleashed a bull stampede the likes of which Ukraine's electronic PFTS, the
country's main stock exchange, has never seen before. Stock volumes traded
on the exchange doubled in January - no small jump considering the market
tripled in value over 2004.

Market analysts are predicting at minimum another doubling of average prices
by the end of 2005, and up to a tripling of volume, which was USD 15 billion
last year. "It is absolutely amazing," investment banker Michael Bleyzer
told the Kiev Post newspaper. "I am getting phone calls from investors who
only a few years ago were avoiding even talking about investing in Ukraine."

Seasoned institutional investors, roughly half from western Europe and half
from outside Europe, are leading the charge, say market insiders. A typical
firm buying into Ukrainian markets has at least 10 years experience playing
European emerging markets, said Hryhory Vorobev, a Kiev-based investment
banker.

The Ukrainian stocks popular with longer-term investors are large companies
operating in sectors with international competitive advantages: steel,
chemicals, or machine building. The utilities that provide power to those
industries also are favourites.

The Kharkiv-based Turboatom, which mills and assembles high-tech turbines
used in hydroelectric dams and nuclear power plants, but long has kept its
shares off the market, is a typical example of an attractive long-term
investment, Vorobev said.

Top short-term performers include Zaporizhsal (steel), Ukrtelekom (the
national phone company) and Ukrnafta (the national oil and gas monopoly);
all up 5-7 percent in value this week alone, according to a Dragon Capital
report.

Market analysts predicted Ukraine would receive at least USD 3 billion
during the first year of Yushchenko's presidency - roughly double the entire
direct foreign investment in Ukraine since it became independent in 1991.

Their optimism (or possibly euphoria) stems from more than the dramatic
events of the Orange Revolution, when the world watched hundreds of
thousands of Ukrainians march to protest, and eventually overturn, a rigged
presidential election. The outlook for economic growth is positive indeed: a
12.4 percent GDP expansion rate for 2004 coupled with expectations of 6-7
percent growth in 2005. Ukraine's economy has expanded by 4 percent or
more every year since 2000.

The national currency, the hryvnia, is not only stable, but gaining against
the euro (never mind the battered US dollar).

Yushchenko has said his government would do everything it could to fight
corruption, reduce taxes, protect investor rights and make the judicial
system fair. Those changes would help bring into the open a black market
economy, whose size is estimated at 50 percent of official GDP, he
commented.

"In the medium to long term, of course, the Ukrainian stock market could
quite well overselling itself, and then you might see overpricing and a
bubble burst," said US-based risk manager Andreij Reputschenko. "But
short term, you're only talking skyrocket," he added. "Ukrainian equities
are pretty much the hottest in the world right now." -30-
==========================================================
4. WORLD BANK MAY DISBURSE UP TO USD 3 BILLION
IN LOANS TO UKRAINE IN 2005-2007

Ukrainian News Agency, Kyiv, Ukraine, Thu, February 10, 2005

KYIV - The World Bank may disburse up to USD 3 billion in loans to Ukraine
during the 2005-2007 period. Paul Bermingham, the World Bank's country
director for Ukraine, Belarus, and Moldova, announced this to journalists.
According to him, the money could be disbursed within the framework of its
Country Assistance Strategy for Ukraine for 2004-2007.

Specifically, the World Bank is planning to disburse USD 175 million to
Ukraine as the second tranche of its second Programmatic Adjustment Loan
(from which a total of USD 250 million is available; USD 75 million was
provided to Ukraine in late 2003 as the first tranche of the Programmatic
Adjustment Loan program) and USD 500 million as the third Programmatic
Adjustment Loan. The World Bank intends to review and update its Country
Assistance Strategy for Ukraine for 2004-2007 in the near future, taking
into account the priorities of the new Ukrainian government.

As Ukrainian News earlier reported, the board of directors of the World Bank
approved USD 250 million in loans to Ukraine under the Programmatic
Adjustment Loan-2 in December 2003. At that same time, the World Bank said
it would disburse the loan in two installments. The first installment (USD
75 million) was disbursed ion late 2003 while the second (USD 175 million)
was due in 2004. The World Bank disbursed USD 250 million to Ukraine
under the Programmatic Adjustment Loan-1 in September 2001. -30-
==========================================================
5. UKRAINIAN BUSINESS EXPECTS TRANSPARENCY

By Ania Tsoukanova, Business Report
Johannesburg, South Africa, Monday, February 14, 2005

KIEV - Ukrainian business leaders, many of whom backed new president
Viktor Yushchenko in disputed elections last year, hope he will bring
transparency and clear regulations, ending a past marked by murky
relationships between politics and business.

"Everybody is waiting for one thing - the same playing rules for
everybody, without exception," said Oleg Boiarine, the managing
director of Eurocar, which builds Audi, Skoda and Volkswagen cars in
the Ukraine.

Eric Francke, the managing director of the country's biggest cellular
operator, UMC, said: "We expect transparency from the new government.
Getting a permit should be open to everyone."

Many business leaders threw their weight - and their money - behind
the "orange revolution" that carried Yushchenko to power.

Ukrainian business sees the victory of Yushchenko, a former central
bank governor, as an opportunity to end the widespread corruption
common under former president Leonid Kutchma, leaving behind an
authoritarian regime that divided the country along the lines of
powerful clans.

Olexander Slobodian, the honorary president of major brewer Obolon,
said his company was the victim of constant harassment under Kutchma
for his support of Yushchenko.

After his election, Yushchenko vowed to fight corruption and "separate
politics from business. Taxes will be cut but they will be paid by
everyone." He promised that tax and sanitation authorities, as well as
firefighters would no longer stage raids to put pressure on firms.

"The state's policies towards business will be more transparent and
clearer," said Viktor Grigoriev, who heads Russian aerospace group
Kaskol. "That will make the Ukrainian economy more attractive to
investors." Since independence in 1991, the Ukraine has received
only $8 billion (R49 billion) in foreign direct investment. -30-
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==========================================================
6. A UKRAINIAN STORY THAT'S ANYTHING BUT CHEESY
UKRproduct Group first Ukrainian company to float on London market

By Joanne Wallen, Associate Editor, Citywire.co.uk, UK, Feb 2005

UKRproduct Group is not only the first Ukrainian company to float on
the London market, it is also a company with the sort of growth
potential now inconceivable in the UK.

To us, what UKRproduct Group (UPG) does hardly sounds unique. It is
one of Ukraine's leading producers of branded foods. The company's
main business is in producing and distributing mainly packaged butter
and processed cheese throughout the Ukraine. It also produces dried
milk for export to Europe and the Far East.

So what? UK and European supermarket shelves have been crammed
with the stuff for years. But the fact is that the former Soviet Union
countries are still very far behind West Europe. Less than 10% of
UPG's sales are to anything resembling a supermarket, with the
majority of its goods still sold in open, farmers' markets.

The fact that UPG has modern factories and an established distribution
and logistics set-up throughout the Ukraine also makes it pretty unique.

Chilton Taylor, head of capital markets at accountants Baker Tilly,
which was involved in the AIM flotation on Friday, told Citywire that
the growth potential for UPG is huge. The population of the Ukraine
alone is around 47 million people, not all that far off that of the
UK, and yet the Ukraine consumes only half the cheese that we do,
primarily because it is just not available. UPG is also in the unusual
position of being able to sell more than it can produce, hence coming
to the public markets for more working capital.

UPG placed around 11.2 million shares at 53.5p raising £5 million net
and valuing the company at £22 million. Shares closed at 60p on
Friday, the first day of trading.

The company is headquartered in Kiev and registered in Jersey. Sales
for the year to 2003 more than doubled to £17.6 million with profits
before exceptional income and tax of just over £1 million. In the
first six months of 2004, turnover was just over £11 million and
profits were £755,000.

One of the big opportunities for UPG is to move to producing hard
cheese as well as processed cheese, which it says is a significantly
larger market than that for processed cheese. It also believes it is
the only dairy producer in the Ukraine with its own distribution
network. It therefore intends to start distributing third party
products using its network.

The company has a British chairman, Jack Rowell, a former England
Rugby coach but more importantly one-time chief executive of Golden
Wonder and chairman of a number of public and private food businesses.
CITYWIRE VERDICT:
If you didn't make it to the Soviet Union before it was disbanded, you
may find it hard to imagine just how little there was in the shops and
how novel freely available packaged cheese and butter might be.

Yes, there may be concerns about political stability and the
immaturity of the private sector in the region, but with that goes the
opportunity to be involved in a business that has the sort of
opportunity that might just have existed here immediately after the
war, and even then our food supply chain was probably more sophisticated.

Were it a lower risk investment, a business like this would probably
have floated at a higher valuation. So you pay your roubles and you take
your choice. If risk is something you are comfortable with, this one could
be richly rewarding. -30- [Action Ukraine Report Monitoring Service]
==========================================================
7. UKRAINIAN DEPUTY PRIME MINISTER SAYS CAPITAL AMNESTY
DEPENDS ON BUSINESS BECOMING LEGAL

UNIAN news agency, Kiev, in Ukrainian, 11 Feb 05
BBC Monitoring Service, UK, in English, Friday, February 11, 2005

VINNYTSYA - Deputy Prime Minister Roman Bezsmertnyy has said that the
Cabinet of Ministers of Ukraine is ready to adopt a ruling on granting an
amnesty to capital and [unpaid] taxes provided that business becomes
absolutely legal. Bezsmertnyy said this when introducing the newly-appointed
head of Vinnytsya regional state administration, Oleksandr Dombrovskyy.
"We are ready to adopt the decision on an amnesty to capital and taxes, but
business has to become legal too," he said.

He said that the relevant cabinet decisions would be adopted soon and joint
meetings of representatives of businesses and the new authorities would be
held in order to reach an understanding between them. "The only thing that
we will not allow is conducting business in the shadow, which,
unfortunately, continues today," Bezsmertnyy said. He said the issue of
nationalization of illegally privatized facilities belongs to this area too.

"It will all start with Kryvorizhstal [Ukraine's major steel manufacturer
privatized by two major oligarchs for a fraction of its real price], will
continue at Boryspil [international] airport [in Kiev, where Ukraine's
largest air company, Aerosvit, privatized a separate terminal] and many
other facilities, for privatization of which no tenders were held, they were
simply stolen from the Ukrainian people," Bezsmertnyy said.

The deputy prime minister said that this also relates to land privatization,
pointing out that the leaders of Vinnytsya Region have to pay special
attention to this issue. "The problems that we have around Kiev [meaning
exclusive recreation areas that the old regime tried to allot to its leading
figures] do not end in Kiev Region. This work [to review illegal land
privatization deals] will continue across the country," he said.

He said that the Land Code, which regulates the land market, would come
into force only after the adoption of several additional laws. "Whatever
happens in this market now is illegal," Bezsmertnyy said. -30-
==========================================================
8. OWNERS OF 66% OF UKRAINE'S BANKS ARE UNKNOWN
Nearly all of the real owners are in the Parliament

New Europe, Athens, Greece, Monday, February 14, 2005

Ukraine's National Bank has no documents about the real owners of two thirds
of the country's banks, banking supervision department chief Vadym
Pushkaryov said in interview with Business weekly last Monday. This factor
seriously complicates banking supervision, he said. "As we don't know the
real owners of the majority of banks, we cannot build an effective system of
banking supervision. Often this results in the worsening quality of a bank's
assets and higher risks," he said, adding that the problem cannot be solved
in the foreseeable future.

"We need legislative changes. But this is hardly possible, considering that
nearly all of the real owners of banks are in the Supreme Rada, and most of
them certainly unwilling to be disclosed as bank owners," Pushkaryov said.
As for foreign banks that want to open branches in Ukraine, he said that
without a positive decision on this question, the "door to the EU and WTO
will be closed for Ukraine."

A complex, step by step approach is needed, he said. "First, it would be
logical to restrict the opportunities of foreign bank affiliates with
respect to some particular transactions, for example attracting resources to
the Ukrainian market," he said. Of the 182 banks currently registered in
Ukraine, 160 have been licensed by the National Bank to perform banking
transactions. -30- [The Action Ukraine Report Monitoring Service]
==========================================================
9. POLISH-UKRAINIAN PIPELINE GATHERING SPEED

Polish News Bulletin, Warsaw, Poland, Monday, Feb 14, 2005

WARSAW - A preliminary business plan for the construction of a new
Polish-Ukrainian oil pipeline should be ready by March of this year. The
pipeline will enable the pumping of oil from the Caspian Sea to Europe. The
final document is planned for June. With luck, it is possible that funds for
the project will be made available before the end of this year.

Representatives of UkrTransNafta, the Ukranian company responsible for
transporting oil outside of the Ukraine, and PERN Przyjazn, will resume
negotiations in Kijow next week, as the situation in Ukraine has finally
calmed down after the elections. According to Rzeczpospolita, a condition
has been made that part of the funding for the project must be obtained from
an institution such as the European Bank for Reconstruction and Development
(EBRD). The entire investment's cost is estimated at around EUR400 million.
==========================================================
10. EUROPEAN INVESTMENT BANK READY TO FINANCE ODESSA-
BRODY PIPELINE IN POLISH TERRITORY TO GDANSK

New Europe, Athens Greece, Monday, February 14, 2005

The European Investment Bank is ready to finance the construction of the
Odessa-Brody pipeline on Polish territory to Gdansk, EIB President Wolfgang
Rot told Polish reporters recently. A total of 500 million Euro is needed to
build the oil pipeline in Poland, and according to the Polish media, the EIB
is prepared to invest these funds.

Ukrainian press reports said that previously European experts frequently
supported the idea of the Polish-Ukrainian oil pipeline, but they were very
cautious when it came to specific plans to finance the project. The experts
said that the EIB may finance this project on certain conditions, but no
details of these conditions were announced. The idea of this bank financing
the project is due to Poland's entry into the EU and the bank's desire to
invest funds in improving Polish infrastructure in general. -30-
==========================================================
11. UKRAINE SPACE INDUSTRY GROWING

United Press International (UPI), Kiev, Ukraine, Wed 9th Feb, 2005

KIEV - The Ukrainian space industry grew by 16 percent last year, the
country's national space agency reported.

Earnings from the industry's products reached more than $200 million
in 2004, or 12 percent more than in 2003, according to Oleksandr
Negoda, director general of the National Space Agency of Ukraine. Some
38 percent of the products were sold abroad, he said.

Of the 54 space launches worldwide last year, NSAU carried out seven,
sending 15 spacecraft into orbit, according to Negoda. The foundation of
Ukraine's space potential is its launch vehicles, including the Zenit,
Cyclone and Dnepr rockets.

The preservation and further development of these existing launch
vehicles and the expansion of Ukraine's share of the world space
market are among NSAU's primary objectives for 2005, Negoda said.

Currently, the country is aiming at launching the Ukrainian Cyclone-4
rocket from Brazil's Alcantara launch center near the equator. In addition,
NSAU carries out its launches at the Baikonur cosmodrome in Kazakhstan,
from the Plesetsk cosmodrome in northern Russia and on Sea Launch,
the ocean-going platform. -30- [Action Ukraine Report Monitoring]
============================================================
12.UKRAINE BECOMING ATTRACTIVE PLACE FOR RUSSIAN COMPANIES

Ukrainian Journal, Kyiv, Ukraine, Tuesday, Feb 8, 2005

MOSCOW - A number of large Russian companies are considering
relocating their operations to Ukraine as a way of escaping a crackdown from
Russian tax authorities, Russian President Vladimir Putin's economic advisor
said Tuesday. Andrei Illarionov said Ukraine is becoming increasingly
attractive place for investors after the election of Viktor Yushchenko, a
pro-Western liberal reformer, to the presidency.

"Everyone is very closely looking at Ukraine, where the investment climate
is obviously warming," Illarionov said after a press conference in Moscow.
"Absolutely seriously, I do think that some businesses will relocate there."
As the investment climate in Ukraine improves, the Russian companies fear an
offensive at home from the tax authorities, which have unleashed a crackdown
against Yukos Oil, eliminating what used to be Russia's No. 2 oil company.

Yushchenko, who said Ukraine should join the European Union, has promised
sweeping economic reforms, liberalization and the rule of law to attract
investments.

By contrast, Illarionov said, he did not see even "a single liberal" in the
current Russian government led by Prime Minister Mikhail Fradkov.
Illarionov, a liberal Western-educated economist, was critical of the
Russian government ever since he had been appointed as an economic
advisor to Putin several years ago.

Some Russian companies, such as Renaissance Capital brokerage, have
already opened their offices in Ukraine in anticipation of a stock market
boom.

Renaissance Capital's Ukrainian subsidiary was named the most actively
trading brokerage in January. Ukraine attracted $7.8 billion in foreign
direct investments in the 13 years ending on Oct. 1, 2004, or about as much
as neighboring Poland gets each year, following the end of communism in
1991, according to Ukraine's State Statistics Committee. Ukraine said it
plans to sell more state assets and to fight corruption, to encourage more
business activity for sustaining a growth of its about $60 billion economy.

Analysts said the crackdown against Yukos was politically motivated as the
authorities seek to punish Mikhail Khorodkovsky, once Yukos chairman, for
his political activity and plans to challenge Putin at the Russian election.
However, there were reports that similar offensive is planned against other
Russian companies.

In order to protect their assets, some Russian have businesses asked the
Russian government to restrict number of tax inspections and to change a law
so that results of assets sales couldn't be revised until after a 10-year
period following the transaction expires.

Ukraine's economy expanded a record-high 12% in 2004, compared with
9.4% growth in 2003, increasing wages and strengthening purchasing power.
This year, the economy is expected to grow as much as 8%, according to
the government and the International Monetary Fund. (jp/ez)
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13. EU EYES WTO ENTRY FOR RUSSIA, UKRAINE, SAUDI ARABIA
AND VIETNAM IN DECEMBER OF 2005
Urges U.S. to speed up its talks

Reuters, Washington, D.C., Sat, February 12, 2005

WASHINGTON - The European Union on Friday applied subtle pressure on
the United States to finish talks this year with Russia and three other
countries on their bids to join the World Trade Organization. "I hope that
when we meet in Hong Kong in December (for the WTO's next ministerial
meeting) we can welcome into the WTO four important economies that remain
outside: Russia, Ukraine, Saudi Arabia and Vietnam," EU Trade Commissioner
Pascal Lamy said in a speech to a U.S. business group.

Each of those countries have to conclude individual market access agreements
with any of the 148 WTO members that seek such a pact. In addition, they
have to conclude an overarching agreement with all WTO members on rules for
protection of copyrighted and patented goods and other measures. The EU has
already finished its negotiations with Russia and Ukraine and "I hope to
very shortly to be able to move forward in negotiations with Saudi Arabia,"
Mandelson said.

In contrast, the United States has not finished WTO accession negotiations
with any of the four countries that the EU trade commissioner mentioned.
U.S. Trade Representative Robert Zoellick recently expressed hope that the
United States and Russia could wrap up their WTO negotiations talks this
year. Unlike most other WTO accession agreements, Congress would have to
approve the pact with Russia because of a provision in U.S. trade law left
over from the Cold War.

Mandelson told the business group he shared the U.S. goal of concluding a
new round of world trade talks by the end of 2006. To do that, countries
will have to make significant progress in negotiations on agriculture,
industrial and consumer goods and services by the Hong Kong WTO ministerial
meeting in December, he said. "We need to be ambitious and we need to show
a sense of urgency," Mandelson said.

He also stressed the need for quick progress in negotiations on anti-dumping
rules. That is a sensitive area for the United States because many members
of Congress have threatened to oppose any changes that would weaken
Washington's ability to restrict "unfairly" priced imports. -30-
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14. UKRAINE: FIVE MILLION JOBS: WHAT DO THEY COST
AND HOW CAN THEY BE CREATED?

By Viktoriya Herasymchuk, The Day
The Day Weekly Digest in English, Kyiv, Ukraine, Tue, 8 Feb 2005

Today 3.6% of Ukraine's able-bodied citizens have no permanent job.
Another million (according to pessimistic estimates, about seven million) of
our citizens are seeking jobs abroad. It should not be forgotten that
eliminating unemployment was part of the president's election program. Back
in the "pre-Revolutionary" days he promised to create five million jobs. The
question is when and how this promise will be fulfilled.

"This is a very complicated task," says Viacheslav Kredysov, chairman of the
New Formation National Association, "because it costs the state about
$50,000 to create one job. But this applies to Central European countries,
so in Ukraine the figure will be lower because we have a cheap workforce."

The cost of one job depends primarily on the extent to which it is equipped
with machinery. Economist Demyan Bohynia, who heads the Department of
Labor Economics, Demography and Living Standards at the Ukrainian Institute
of Economics, says that the cost of a job unconnected to any complicated
technological process is an estimated UAH 200,000. If any sophisticated
mechanisms are required, a job may be worth 200,000 dollars. It is difficult
to arrive at an average figure but, in any case, it's all a question of
money.

According to Mr. Kredysov, a state that wants to create such a large number
of jobs can go about this in two ways: borrow money from the West, i.e.,
attract foreign investments, or create conditions for the development of
small-scale and medium businesses. To create these conditions, it is crucial
to reform the law and taxation system, which are not business-friendly,
according to Mr. Kredysov. "The tax administration has drawn up a tax code
to suit itself, not the development of business," the expert says. Another
cause of unemployment is small businessmen's doubts about stability. "If
people see that the situation in this country is stable, they will invest in
business, but if the situation is totally unpredictable they will be putting
their money away 'for a rainy day'."

However, you can only invest or withhold money if you have some, and in this
case the much-discussed labor migration is playing quite a positive role.
Parliamentary Ombudsperson Nina Karpachova estimates that Ukrainians
working abroad earn a total of more than two billion hryvnias a month, which
far exceeds the average level of individual incomes in Ukraine. Moreover,
the greater part of this amount returns to the workers' homeland, thus
reducing poverty in this country. Still, the extent to which this money can
be invested in the Ukrainian economy depends on the stability of the
domestic situation, the tax system, etc. In other words, it is impossible to
eliminate unemployment without improving the tax and investment climate
as a whole.

On the other hand, economist Ella Libanova thinks it's not even worthwhile
talking about creating five million jobs. It is far more urgent to ask
whether it is worth doing in the first place. "This number worries me. Yes,
we badly need jobs, but 200-300,000 new or substituted jobs a year will be
quite enough." As this expert explains, Ukrainians will simply not have
enough money to buy the products made by such a large number of people.
"I see no sectors in which these jobs can be created, at least not until
wages have been raised," Ms. Libanova says.

In contrast, Demyan Bohynia thinks that the five-million figure may be too
small to solve the problem of unemployment, especially when the army is
being reformed. In his opinion, new jobs should be created in the high-tech
sector, construction, and agriculture. "In the past decade we've gone the
liberal-conservative route: we said the state should not meddle in the
market and as a result we got a bazaar, not a market. We must have the same
situation that exists in the West: the state stands between labor and
capital. The government should clearly define measures to regulate the labor
market," Mr. Bohynia says. -30- [Action Ukraine Report Monitoring]
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15. UKRAINE: THE MAINSTAY OF GOVERNMENT
Businesses should not factor bribes into the cost of their products

Interview with Member of Parliament Yury Yekhanurov
By Svitlana Stepanenko, special to The Day
The Day Weekly Digest in English, #4
Kyiv, Ukraine, Tuesday, 8 February 2005

Creating jobs and developing small- and medium-sized businesses are among
the central planks of the political platform of President Viktor Yushchenko
and his team. In the following interview Yury YEKHANUROV, chairman of
the parliamentary committee on industry and entrepreneurship and a longtime
Yushchenko ally, discusses the new government's plans.

[Q] "Thousands of people poured into Independence Square to support
Yushchenko. What will they get in return for their devotion?"

"Society's expectations are tremendous. More than half the people want
freedom for self-realization. Others are hoping to get a big spoon and a
kettle, along with social benefits. But without businesspeople, the kettle
will be empty. So, the new government is banking on the emancipation of
small and medium businesses. Over the next decade we expect to form a middle
class that will become the government's mainstay. This is Yushchenko's main
project."

[Q] "What steps will be taken to provide civilized jobs to millions of
people who depend on makeshift markets for their survival?"

"The experience of Eastern Europe has shown that makeshift markets go out
of business in the face of competition from supermarket chains. These stores
employ up to 250 persons and take away jobs from at least 1,000 small
businessmen and their employees. Kyiv's demand for supermarket chains is
currently satisfied by 50%. When this figure reaches 100%, few people, if
any, will continue buying their groceries from street markets. To avoid mass
unemployment, Yushchenko plans to create five million jobs both in major
enterprises and small businesses. People must find a place for themselves in
a civilized economy. The government will be doing everything to this end."

[Q] "Is there any specific market research to suggest the sectors in which
small and medium businesses can operate successfully?"

"People who have accumulated some startup capital will be able to obtain
counseling at business centers that will be opened at economic departments
of local government agencies. So far, there has been no focused research,
but now that Yushchenko has become president this process will get
underway."

[Q] "Won't such centers be a mere facade? Officials are funded from the
budget anyway. Why should they worry about problems that afflict small
businesses?"

"Business associations are much more active and qualified than officials. It
is therefore not ruled out that the government will entrust them with
providing counseling to startup businesses. The government will pay these
associations for their services. In general, the more duties we take away
from the government and delegate to local authorities and civic
organizations, the more civilized Ukraine will become."

[Q] "Will small business develop in the current police state system? My
neighbors, who work at a market, have to pay kickbacks to the police and the
tax people, on top of the rent. This way you can go bankrupt in no time at
all."

"This is commonplace in a state that is corrupt to the bone. Even during the
elections we estimated that 5.8% of the popular vote would be stolen owing
to the administrative resource. The same is true of business: every
businessman is forced to factor in bribes into his costs. In order to
prevent this, we have to dismantle the system of permits that are used in
this country. We are drafting a bill to abolish over 1,500 types of
mandatory permits."

[Q] "What else will the government do to make the life easier for small and
medium businesses?"

"Parliament is about to pass a bill that will classify businesses by
categories: a micro business with up to 10 employees, a small business with
up to 50 employees, and a medium business with up to 250 employees.
For them we will retain the single tax system and simplified financial
statements (monthly or quarterly), to prevent officials from harassing them.
The government will keep the local authorities in check, making it easier
for such businesses to lease or buy business premises, such as vacant
premises of mothballed industrial enterprises and ground floors of buildings
in the city.

Information on their lease and sale will have to be posted on the Web sites
of all local governing bodies. The authorities will openly discuss their
decisions and publicize all projects two weeks before they are approved. In
this connection, businessmen should decide who will be defending their
rights. Since it is difficult for the authorities to reach out to individual
businessmen, civic organizations of entrepreneurs will obviously emerge en
masse. Their lawyers and financiers will be able to push for the revocation
of unfavorable resolutions."

[Q] "Where will startup entrepreneurs secure loans to set them up in
business? After all, only people with money can afford such expenses."

"Back in 2000 the government of then Prime Minister Yushchenko began the
practice of issuing cheap loans. For the first time government subsidies
were not being channeled into individual sectors, but were used to make up
for the difference between high and moderate interest rates on bank loans
for businesses. The state paid the difference, while businessmen paid 2-3%
in interest, and everyone was satisfied. Incidentally, not everyone took out
loans. They were obviously afraid of the responsibility." -30-
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LINK: http://www.day.kiev.ua/131957
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16. CORRUPTION IN UKRAINE'S COAL INDUSTRY RUNS DEEP

By Roman Kupchinsky, RFE/RL Organized Crime and Terrorism Watch
Reporting on Crime, Corruption, and Terrorism in the former USSR,
Eastern Europe, and the Middle East
Radio Free Europe/Radio Liberty, Prague, Czech Republic
Vol. 4, No. 23, Thu, 10 February 2005

Reforming Ukraine's coal industry is one of the major problems facing
President Viktor Yushchenko and the government of newly appointed Prime
Minister Yuliya Tymoshenko. Tymoshenko knows the power of coal from
personal experience. She tried to reform the industry while she was deputy
prime minister from 1999 to 2001. She was abruptly removed from office
in January 2001 by former President Leonid Kuchma, charged with fraud
and money laundering, and jailed for several weeks. The charges against her
were eventually dismissed.

The problems plaguing the coal industry in the heavily populated and
economically depressed eastern Donbas Basin, which consists of the Donetsk
and Luhansk oblasts, are severe and multifaceted.
A LONG-NEGLECTED INDUSTRY
Ukraine has huge coal reserves, estimated at some 37 billion tons. The
industry employs 450,000 people and produced 90 million tons of coal in
2004. Poland, by way of comparison, had only 140,000 people employed in
the coal industry in 2002 and produced 95 million tons that year, according
to the World Bank.

According to the World Bank, approximately two-thirds of Ukraine's 193
existing mines are unprofitable and should be closed. Ukraine's coal
industry has been in a critical state of health for decades and survives
mainly due to subsidies from Kyiv, which amounted to some $2 billion in
2003 and 2004.

Such subsidies are not nearly enough, however, to maintain proper
safety standards. In its August 2000 country brief on Ukraine, the U.S.
Energy Information Administration found that "outdated equipment, a lack of
spare parts, and poor safety procedures have resulted in safety problems and
lost production, exacerbating the industry's inefficiency."

The industry's lack of productivity has also been calculated by the
World Bank: "While a coal miner in Ukraine produced on average about 100
tons of (washed) coal in 1995, the comparable figures were 200 tons in
Russia, 400 tons in Poland, 2,000 tons in the United Kingdom, and 4,000
tons in North America."

Most mines belong to state-owned coal enterprises run by managers
appointed by the Ministry of Fuel and Energy, into which the Coal Ministry
was incorporated in 2000. During the two Kuchma administrations, these two
ministries were headed by people close to the so-called Donetsk clan, an
informal grouping of business and political leaders in that region.

The Ukrainian Coal Ministry was described in a December 1998 World
Bank report, "Restructuring the Coal Industry in Ukraine," as
follows: "Arranging barter trades and bombarding the Finance Ministry and
cabinet with requests for additional investment funds and production
subsidies became the main occupation of the Coal Ministry."
THE HUMAN COST OF COAL MINING
The high rate of fatal accidents in the Ukrainian coal industry is mainly
due to criminal negligence, industry officials in Kyiv say. Four miners in
Ukraine are killed for every 1 million tons of coal extracted. Ukraine's
coal industry is considered the world's second deadliest, after China. More
than 4,000 coal miners have died in accidents in Ukraine since 1991.

Timber, needed to construct mine shafts, is in short supply in Ukraine
and is often reused until it rots, creating dangerous conditions.
Most mine fatalities in Ukraine are related to methane gas explosions,
and most of these accidents take place in mines that produce coking coal
used in the steel industry. These are also some of the most profitable mines
in the industry.

A former deputy director of a coal enterprise in the city of Krasny
Luch in Luhansk Oblast told RFE/RL that some fatal mine accidents in
coking-coal pits are connected to management directives to extract up to
three times the daily norm of coal, for which miners would receive double
their monthly wages. The average monthly wage of a Ukrainian coal miner in
January 2005 was 1,400 hryvnyas ($255).

Coal enterprise managers, according to this former official, had signed
profitable contracts with steel manufacturers to sell more coking coal in
order to increase steel production.

However, existing ventilator systems that pump out the deadly methane
gas that is a byproduct of mining are capable of removing only the amount of
methane released during normal levels of coal extraction. The increased
production results in an excess of methane gas that, when mixed with extra
coal dust, often leads to fatal explosions. This former official also says
that "rock dusting," a procedure of spreading limestone powder to make coal
dust inert, is often not implemented by management, despite its low cost.

These facts, sources in the coal industry told RFE/RL, are often
hidden from government commissions sent to investigate accidents. To date,
no mine director or enterprise manager in Ukraine has been punished for
allowing workers to mine coal in unsafe conditions. Only lower-level
managers have so far been disciplined.
INEFFICIENCY AND CORRUPTION
Coal-extracting machines widely used in Ukraine have drill bits fixed at
drilling seams with widths of 1 meter and are incapable of being adjusted to
dig narrower seams. This greatly increases the amount of waste rock mixed
with the coal and decreases efficiency.

A former coal enterprise manager from Luhansk explained to RFE/RL how
he had attempted to purchase a German-made extracting machine with an
adjustable drill bit. He said he was ordered by a high official in the
Ministry of Fuel and Energy to buy a fixed 1-meter drill made in Donetsk.
This enterprise manager said he later learned that the ministry official had
a vested interest in the drill-making factory in Donetsk.

Moreover, specialists in the Ukrainian coal industry told RFE/RL that
some profitable mines are declared bankrupt and closed, then flooded to
prevent their collapse. The closures are used as proof that the Fuel and
Energy Ministry is attempting to reform the industry. After some time,
however, these mines are bought by private companies at far below their
real value; the new owners drain the water and resume profitable mining.

On 7 February, Mykhaylo Volynets, the head of the Ukrainian
Confederation of Trade Unions and a member of the parliamentary Energy
Committee, told Ukrainian television that there are presently 6,000 illegal
coal mines operating in Ukraine that produce some 5 million tons of coal
annually. He said these unregistered mines employ women and children, who
work in unsafe conditions and receive no social benefits. Volynets added
that local authorities and law enforcement agencies in the Donbas Basin are
aware of the existence of these mines but are bribed to remain silent.
COKING COAL AND ACCUSATIONS OF STEEL DUMPING
For the past decade, successive Ukrainian governments have provided
massive subsidies to the coking-coal industry. This policy has been, in
fact, a subsidy to the metallurgical industry by providing it with low-cost
coke. These subsidies, in turn, led to accusations of Ukrainian
manufacturers dumping steel onto world markets.

On her website, U.S. Senator Debbie Stabenow says that "from
1997 through 2000, carbon steel slab imports [into the United States] from
key producers have risen dramatically: Brazil up 25 percent; Mexico up 13
percent; Russia up 106 percent, and Ukraine up 542 percent."

The corruption-prone cycle of "coking coal-coke-steel" is illustrated
by the 2004 tender terms for the privatization of the giant Kryvorizhstal
mining and smelting enterprise, which the Yushchenko government is
reviewing, saying that it serves as an example of corruption under Kuchma's
regime.

The terms announced for the tender included provisions that any bidder
must have a history of producing 1 million tons of coke and 2 million tons
of steel in Ukraine annually in the past three years. This limited the sale
to only two bidders: the Investment-Metallurgical Union (IMU) consortium and
the Industrial Union of the Donbas. The IMU is co-owned by Viktor Pinchuk,
the son-in-law of former President Kuchma, and Rinat Akhmetov, the widely
acknowledged leader of the Donetsk clan and one of Ukraine's richest
citizens. The IMU won the tender, paying almost $800 million for the
enterprise, while others offering up to $3 billion were disqualified. On 28
January, a court in Kyiv blocked the IMU from taking possession of
Kryvorizhstal, saying the bidding procedure discriminated against foreign
bidders.

The coke industry in Ukraine is largely owned by Akhmetov. According
to an article in "Invest Gazeta" on 13 January 2004, Akhmetov's
ARS company developed into a firm "that coordinated the mining and sales of
coking coal, as well as the production of coke. ARS now controls all the
coal and coke chemical assets among Rinat Akhmetov's business interests."

Pinchuk owns Interpipe Trust, the largest Ukrainian enterprise
producing wide-diameter pipes sold to Russia for use in its oil and gas
pipelines. The second largest is Khartsyzk Tube and Pipe, owned by Akhmetov.

In March 2004, Ukrainian Fuel and Energy Minister Serhiy Yermilov was
dismissed for, among other reasons, wanting to curtail state subsidies for
coking coal. This subsidy, Yermilov said, was, in fact, a subsidy to the
steel industries owned by a small circle of men close to former President
Kuchma.
THE POLITICS OF COAL
The troubles in Ukraine's coal industry far surpass those of other energy
sectors.
-- Restructuring the coal industry would mean the loss of hundreds of
thousands of jobs in a politically sensitive region.
-- Retraining programs for coal miners are not in place; the prospects
for miners performing other jobs are bleak.
-- Entire municipalities in the Donbas Basin rely on the coal industry
to pay for medical care, schools, public transportation, and other vital
infrastructure.

How the new Ukrainian government intends to handle this problem is
hard to forecast. Any coal reforms are sure to provoke angry reactions from
vested interests in the Donbas Basin and from members of parliament involved
in the metallurgical and energy-generation sectors of the economy.

The Donbas has shown itself willing to raise the specter of territorial
separatism in order to maintain existing coal subsidy policies and schemes.
The country's eastern regions had also threatened to secede as a possible
response to the Orange Revolution demonstrations in Kyiv. How real the
threat of separatism is remains questionable, but few have any doubts that
the owners and managers of the coking coal-coke-metallurgical industries in
Ukraine will lobby to prevent the implementation of far-reaching reforms and
will continue to use coal as a political weapon. -30-
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17. "THE HERALD OF UKRAINIAN STATEHOOD"
Lev Rebet: politician, scholar, and publicist

By Ihor Siundukov, The Day Weekly Digest in English, #4
Kyiv, Ukraine, Tuesday, 8 February 2005

At around 10 a.m. on October 12, 1957, a middle-aged man with strong-willed
features was walking quickly to his place of work in a building located at 8
Karlplatz in Munich. He must have been in quite a hurry, because he didn't
notice a stranger with a folded newspaper waiting for him in the entryway to
the building. As the man drew level with the unfamiliar gentleman, the
stranger darted forward with a jerk, causing the unsuspecting man to stagger
and collapse. Doctors and police who arrived on the scene established the
cause of death as "heart paralysis." The stranger vanished without a trace.

The deceased, or rather murdered, man was 45 year-old Lev Rebet, one of the
most outstanding political leaders of the Ukrainian national movement in the
1940s and 50s, professor of the Ukrainian Free University (Munich), editor
of the weekly Ukrayinsky Samostiynyk [The Ukrainian Independent], chairman
of the OUN Political Council (abroad), a celebrated journalist, political
scientist, and historiosopher. It was subsequently revealed that he had been
murdered.

His assassin, a veteran agent of the Soviet special services Bohdan
Stashynsky, aimed a pistol wrapped in newspaper, which was loaded with
potassium cyanide capsules, into Rebet's face and pulled the trigger. Two
years later, on October 15, 1959, Stashynsky stalked Stepan Bandera in
Munich and killed him the same way.

Explaining what motivated him to kill Rebet, Stashynsky told a court years
later that he had discovered that Rebet was "the leading theorist of the
Ukrainians in exile," since "in his newspapers (Suchasna Ukrayina
[Contemporary Ukraine], Chas [Time], and Ukrayinska Trybuna [Ukrainian
Tribune] - Author) he not so much provided accounts of daily events as
developed primarily ideological issues." This explains why the Soviet
special services resorted to liquidating Professor Rebet. We find more
answers in his biography and the ideas that he developed and championed.
Let us begin with an overview of his life.

Lev Rebet was born in 1912 into the family of a postal official in the town
of Stryi, Lviv oblast. Since childhood Rebet was known for his profound
piety and dedication to the Ukrainian national idea. He was a member of the
youth Plast movement, joined the Ukrainian Military Organization (UVO) at
age 15 while still a student at the Stryi Academic High School, and went on
to join the Organization of Ukrainian Nationalists (OUN).

Recalling those years, Rebet wrote: "The main base of the OUN was youth,
primarily students. These young people had been raised in the traditions of
Ukrainian statehood. They remembered the existence, even if short- lived, of
their independent country and saw the Ukrainian army with their own eyes. In
short, they had once experienced the independence of the Ukrainian state for
which they intended to struggle. For them, national independence was not an
unfeasible fantasy; the young people had seen this independence, and it had
a real shape in their imagination. All they had to do was achieve it."

This was Lev Rebet's lifelong goal. Like thousands of his contemporaries,
participants of the national movement, Rebet had hungered for action since
his youth, and was not content only to speak beautiful but abstract words
about freedom. Lev joined the OUN almost immediately after its creation in
1929. The Polish occupational forces accused Rebet of being an OUN member
and jailed him. His organizational skills and dedication to the national
cause were duly appreciated by the OUN leadership: between 1934 and 1938
Rebet served as the leader of the OUN Territorial Executive in Western
Ukraine. Characteristically, after the OUN split in 1940, Rebet sided with
Stepan Bandera and not Andriy Melnyk.

When the restoration of an independent Ukrainian state was proclaimed on
June 30, 1941 in Lviv, Lev Rebet was appointed Deputy Chairman of the
Ukrainian State Government headed by Yaroslav Stetsko. After Stetsko was
arrested, Rebet temporarily served as Prime Minister of the government.
Later he was arrested by the Gestapo and imprisoned in Auschwitz until the
fall of 1944. Between 1945 and 1948 Rebet served as chief justice of the
External Units of the OUN. At this time he moved to Munich. From 1948 he
was one of the leaders of the OUN Political Council (abroad) together with
Mykola Lebed, Ivan Butkovsky, and Myroslav Prokop, and soon became its
chairman. In his final years, from 1954 to 1957, Rebet was a professor at
the Ukrainian Free University.

This article will not discuss the political aspect of Rebet's activity, in
particular his complex relationship with Stepan Bandera, which is a subject
for a separate, long discussion. Instead we will focus on his studies on the
theory and history of the Ukrainian nation, such as The Theory of the Nation
(1955), Formation of the Ukrainian Nation (1951-1957), and Light and Shadows
of the OUN (a book of historical memoirs, 1955-1956). Rebet's ideas dating
back fifty years have not lost their validity and justly deserve greater
attention. The goal that he pursued in all these studies is both simple and
extremely complex: to discover the meaning of the nation as a general
phenomenon, and to uncover the meaning of the Ukrainian nation, its
historical process of formation and development, and its future prospects.

The following is Rebet's key thesis of his Theory of the Nation: "The
relationship between external and internal manifestations of national life
is determined by the cycle in which objective reality brings forth the idea,
and the idea forms objective reality. Man lives in the system of these
relations both as part of a natural process (i.e., he is born in his
environment) and out of his own choice (i.e., he shapes his identity and
realizes his ambitions).

A nation as a community has the greatest influence, and a man belongs to
it with all of his essence and all aspects of his life...For this reason,
nations are lasting forms of human existence, and the historically
conditioned social and socio-psychological structure of every nation is
directly related to the structure of the state, which reflects the nation's
whole nature. For states basically exist as nation-states, while the state
and the nation are linked in the same way as form and content."

The question that preoccupied Rebet the publicist was how the Ukrainian
nation was formed; what were the stages and chronology of this process.
After examining the complex historical collisions of the Khmelnytsky period,
he arrived at the controversial conclusion that "the Ukrainian people under
Khmelnytsky had not yet taken the shape of a modern nation. As a
representative of the Polish nobility, Khmelnytsky himself was in thrall to
its worldview, while the Cossack leadership, mostly formed from
representatives of old Cossack or Polish noble families, tended to build the
state on the foundations of an estate society as they saw fit.

It is therefore natural that privileges, the basis of an estate system, were

one of the Cossacks' main pursuits in all their uprisings against Poland."
This, Rebet concludes, "is undeniable proof of the absence of a modern
nation; this is evidence of an archaic approach to state building, which has
long since exhausted itself."

What was his idea of a future independent Ukraine, in the realization of
which Rebet never doubted? He primarily saw it as a democratic state.
Therefore, he flatly rejected the slogan "Ukraine for Ukrainians," which
drew criticism from Stepan Bandera's representatives. Rebet believed that
"the Ukrainian nation, an Eastern Europe people with the most ancient
grain-growing culture, has the potential to generate the most advanced ideas
of humanity in these parts. Ukraine can and must become an example of
political culture, and instead of the tyranny represented for centuries by
the white and red Russian empires in the East, be a model of a modern
democratic state, where personal freedom and dignity are not mere noise."

Obviously, the Soviet secret services considered such ideas to be extremely
dangerous for the indestructible USSR. Hence the order was given to kill
Rebet (it has not been ruled out that the facts that would substantiate this
are still buried in archives). Although the Soviets succeeded in killing an
outstanding politician and scholar (who was also a doctor of law), his ideas
live on. We are now witnessing a democratic rebirth of the nation that would
have been impossible without such figures as Lev Rebet. -30-
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Huntingdon Valley, Pennsylvania.
B. UKRAINIAN AMERICAN COORDINATING COUNCIL,
(UACC), Ihor Gawdiak, President, Washington, D.C., New York, NY
C. U.S.-UKRAINE FOUNDATION (USUF), Nadia Komarnyckyj
McConnell, President, Washington, D.C., Kyiv, Ukraine.
6. UKRAINE-U.S. BUSINESS COUNCIL, Washington, D.C.
7. ESTRON CORPORATION, Grain Export Terminal Facility &
Oilseed Crushing Plant, Ilvichevsk, Ukraine
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Mr. E. Morgan Williams, Director, Government Affairs
Washington Office, SigmaBleyzer Investment Banking Group
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morganw@patriot.net, www.SigmaBleyzer.com
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Senior Advisor; Ukrainian Federation of America (UFA)
Coordinator, Action Ukraine Coalition (AUC)
Senior Advisor, U.S.-Ukraine Foundation (USUF)
Advisor, Ukraine-U.S. Business Council, Washington, D.C.
Publisher, Ukraine Information Website, www.ArtUkraine.com
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