"THE ACTION UKRAINE REPORT - AUR"
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 - AUR" - Number 473
Morgan Williams, Publisher and Editor
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, FRIDAY, April 29, 2005

SHE TOOK THE TRUTH INTO HER HANDS

The newscaster was reading the officially scripted text about the results of
the election, and Dmytruk was signing along. But then, "I was not listening
anymore," she said.

In her own daring protest, she signed: "I am addressing everybody who is
deaf in the Ukraine. Our president is Victor Yushchenko. Do not trust the
results of the central election committee. They are all lies. . . . And I am
very ashamed to translate such lies to you. Maybe you will see me again -- "
she concluded, hinting at what fate might await her. She then continued
signing the rest of officially scripted news. "My legs became so heavy. I
was terribly scared," she said. [article one]

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

1. AS UKRAINE WATCHED THE PARTY LINE, SHE TOOK THE
TRUTH INTO HER HANDS
Four Ukrainians Honored in Washington, D.C. by Vital Voices
DIPLOMATIC DISPATCHES: By Nora Boustany
The Washington Post, Washington, D.C.
Friday, April 29, 2005; Page A19

2. YUSHCHENKO IS NOT DELIGHTED WITH HRYVNYA RATE AND
ADMITS THAT IT WILL HIT HARD AT SMALL BUSINESS
Ukrayinska Pravda, Kyiv, Ukraine, Thu, April 28, 2005

3. KINAKH NEGATIVELY ASSESSES REVALUATION OF HRYVNIA
UNIAN, Kyiv, Ukraine, Thu, April 28, 2005

4. NATIONAL BANK NOT PLANNING FURTHER SHARP
STRENGTHENING OF HRYVNIA IN 2005
Ukrainian News Agency, Kyiv, Ukraine, Thu, April 28, 2005

5. WB, IMF SAID TO APPROVE UKRAINE'S MONETARY POLICY
Inter TV, Kiev, in Ukrainian 1700 gmt 28 Apr 05
BBC Monitoring Service, UK, in English, Thu, April 28, 2005

6. DOLLAR IN THE DOLDRUMS...BUT NOT FOR LONG!
The Kyiv Weekly, Kyiv, Ukraine, Thursday, April 28, 2005

7. ECONOMIC MINISTRY FORECASTS 5.8-6% GDP GROWTH,
6.5-7.1% INFLATION IN FIRST HALF-YEAR
Ukrainian News Agency, Thu, Kyiv, Ukraine, April 28, 2005

8. UNITED NATIONS ENVOY CRITICAL OF UKRAINIAN
GOVERNMENT'S ECONOMIC POLICY
Korrespondent.net web site, Kiev, in Russian 28 Apr 05
BBC Monitoring, UK, in English, Thu, April 28, 2005

9. MILK AND MEAT PRICES ARE SKYROCKETING IN UKRAINE
ITAR-TASS, Moscow, Russia, Friday, April 29, 2005

10. INVESTORS ARE STEADILY MOVING "OUT OF HOME, INTO OFFICE"
Kyiv Weekly, Kyiv, Ukraine, Thu, April 28, 2005

11. YUSHCHENKO ASKING WORLD BANK TO PROVIDE LOANS FOR
AGRICULTURAL,ENERGY SECTORS AND FOR FIGHTING HIV/AIDS
Ukrainian News Agency, Kyiv, Ukraine, Thu, April 28, 2005

12. YUSHCHENKO EXPECTS FOR IMF INVESTMENTS IN ECONOMY
DRAWING FROM SHADOW AND WAR ON CORRUPTION
Ukrainian News Agency, Kyiv, Ukraine, Thu, April 28, 2005

13. EBRD, ING BANK PROVIDE $30 MILLION LOAN TO ILLICHIVSK
OIL-EXTRACTION PLANT FOR SUNFLOWER SEEDS PURCHASE
ADM Nederland and Risoil Group
Ukrainian News Agency, Kyiv, Ukraine, April 28, 2005

14. UKRAINE: ZIGZAG POLITICS OF ANATOLIY KINAKH
ANALYSIS: Kyiv Weekly, Kyiv, Ukraine, Thu, April 28, 2005

15. FLAT TAX REVOLUTION SWEEPS IN FROM EASTERN EUROPE
Ukraine has introduced a flat tax
By Stephen Castle in Brussels, The Independen
London, UK, Friday, 29 April 2005

16. RUSSIAN AMBASSADOR SAYS EX-HEAD OF STATE AFFAIRS
DEPARTMENT IHOR BAKAI IS CITIZEN OF RUSSIA
Ukrainian News Agency, Kyiv, Ukraine, Thu, April 28, 2005

17. ESSAY: MORE POWER TO YOUR ELBOW
Democracy and the assertion of people's power on the streets
ESSAY: By Geoff Mulgan, Financial Times
London, UK, Friday, April 29 2005

18. THERE IS REST IN THE FOREST, NO TROUBLE WITH THE TREES!
Kyiv, Ukraine, is justly called one of the greenest cities in the world.
Kyiv Weekly, Kyiv, Ukraine, Thu, April 28, 2005

19. RUSSIAN VICTORY FESTIVITIES OPEN OLD WOUNDS IN EUROPE
The 60th anniversary of Nazis' defeat is hit by boycotts and bitterness
By Ian Traynor in Warsaw, The Guardian
London, United Kingdom, Friday, April 29, 2005
=============================================================
1. AS UKRAINE WATCHED THE PARTY LINE, SHE TOOK THE
TRUTH INTO HER HANDS
Four Ukrainians Honored in Washington, D.C. by Vital Voices

Natalia Dmytruk, sign language interpreter on state TV who signed the
truth during the Orange Revolution; Oksana Horbunova, a human rights
pioneer in her country and the head of the International Organization of
Migration's Ukraine office; Oksana Yarosh, a professor who was a leader
in the Orange Revolution and helped organize students; and Lyudmila
Merlyan, founder of a nongovernmental who has helped draft legislation
to bring about equality between men and women.

DIPLOMATIC DISPATCHES: By Nora Boustany
The Washington Post, Washington, D.C.
Friday, April 29, 2005; Page A19

Natalia Dmytruk did not have to learn sign language at school. Her first
words had to be mimed. Both her parents are deaf.

The baby was crying. Big sister Natalia, then a 20-month-old toddler,
alerted their mother by cradling an imaginary baby in her arms and tracing
invisible tears down her cheeks. These were Natalia's first words, her
mother would later tell her.

Her mother, a soft and loving woman, made the best Ukrainian cookies and
the tastiest borscht. Her father bought his daughters a cheap record player
so they could learn to appreciate classical folk songs. When Dmytruk was
older and her parents needed medical care, she accompanied them to
give them a voice. Her eyes talk when she expresses herself.

Dmytruk, 48, made sign language her vocation and today interprets for
Ukraine's state-run television. Her face and hands appear in a little box at
the bottom of the screen as she sends out the news on the mid-morning
and early afternoon telecasts to the hearing-impaired.

During the tense days of Ukraine's presidential elections last year, Dmytruk
staged a silent but bold protest, informing deaf Ukrainians that official
results from the Nov. 21 runoff were fraudulent. Her act of courage further
emboldened protests that grew until a new election was held and the
opposition candidate, Viktor Yushchenko , was declared the winner.

Dmytruk and three other Ukrainian women received the Fern Holland Award
on Tuesday night at the Vital Voices Global Partnership's fifth annual
ceremony honoring women from around the world who have made a
difference.

Dmytruk's "courageous actions sparked the public outreach and ultimately
new and fair elections on Dec. 26, 2004," said Melanne Verveer , chair of
the board of Vital Voices.

Election monitors had reported widespread vote-rigging immediately after
the runoff between Yushchenko and the Russian-backed prime minister,
Viktor Yanukovych . With Yanukovych leading by a slim margin, the opposition
urged Ukrainians to gather in Independence Square in front of the parliament
building to protest the results.

Each time Dmytruk went to Independence Square with her 20-year-old son
and teenage daughter and saw the thousands of protesters, she felt herself
transformed .

"I was impressed by the expression on my children's faces. I was so fired
up by other people I observed passionately voicing their discontent," she
said in an interview this week. "It was that special spirit and energy of
people coming together, uneasily at first, but looking in the same
direction." Dmytruk would then return to work and broadcast the state's
version of events.

"I was observing it from both sides, and I had a very negative feeling," she
said. "After every broadcast I had to render in sign language, I felt dirty.
I wanted to wash my hands."

The opposition had no access to the state-run media, but Dmytruk was in
a special position as a television interpreter to get their message out.
On Nov. 25, she walked into her studio for the 11 a.m. broadcast. "I was
sure I would tell people the truth that day," she said. "I just felt this
was the moment to do it."

Under her long silk sleeve, she had tied an orange ribbon to her wrist, the
color of the opposition and a powerful symbol in what would become
known as the Orange Revolution. She knew that when she raised her arm,
the ribbon would show.

The newscaster was reading the officially scripted text about the results of
the election, and Dmytruk was signing along. But then, "I was not listening
anymore," she said.

In her own daring protest, she signed: "I am addressing everybody who is
deaf in the Ukraine. Our president is Victor Yushchenko. Do not trust the
results of the central election committee. They are all lies. . . . And I am
very ashamed to translate such lies to you. Maybe you will see me again -- "
she concluded, hinting at what fate might await her. She then continued
signing the rest of officially scripted news. "My legs became so heavy. I
was terribly scared," she said.

Dmytruk's live silent signal helped spread the news, and more people began
spilling into the streets to contest the vote. She returned to work to give
the 3 p.m. news, but was not admonished by her superiors. When she
finished, she went into the technicians' studio and told them what she had
done. They hugged her all at once. "You are terrific, Natalia," she said
they told her.

She showed up for work the next day, and still her manager did not utter
a word about what she had done. Slowly, she became confident that she
had won. A rerun of the runoff was scheduled for December, and this time,
Yushchenko was declared the winner.

In addition to Dmytruk, the other Ukrainian women honored by Vital Voices
were Oksana Horbunova , a human rights pioneer in her country and the
head of the International Organization of Migration's Ukraine office; Oksana
Yarosh , a professor who was a leader in the Orange Revolution and helped
organize students; and Lyudmila Merlyan , the founder of a nongovernmental
organization who has helped draft legislation to bring about equality
between men and women.

On Tuesday, Dmytruk will visit Gallaudet University, a school for the deaf
and hard of hearing, to lecture about her act of defiance.

In the days that she has been in the United States, Dmytruk said her
inability to speak English has left her feeling isolated. "I know now what
it must feel like to be deaf," she said. "When Ukrainian Americans addressed
me in my own language, it was like someone had poured me fresh water."
-30- [The Action Ukraine Report Monitoring Service]
============================================================
Shock And Awe Monetary Policy Public Debate Continues
============================================================
2. YUSHCHENKO IS NOT DELIGHTED WITH HRYVNYA RATE AND
ADMITS THAT IT WILL HIT HARD AT SMALL BUSINESS

Ukrayinska Pravda, Kyiv, Ukraine, Thu, April 28, 2005

KYIV - The President Viktor Yushchenko doesn't approve the policy of
the government and the National Bank as to strengthening of hrivnya,
however considers that such activity should be carefully coordinated
and discussed.

Thus he negatively assesses the abrupt changing of hryvnya rate. "I
negatively asses any shock change of the currency rate, because it
undermines the authority of its stability, which was formed for years. Even
if the question is about strengthening of hryvnya, it can not be settled in
one day and in such drastic steps", declared Viktor Yushchenko in the
interview to the newspaper Ukraina Moloda. As the press-service of Viktor
Yushchenko reports, an interview will appear in one of the next issues of
the newspaper.

The President expects that both institutions will make a document in
relation to a general policy which allows for the government to pursue a
future social policy successfully, and for the National bank to retain the
stable hryvnya rate.

"In fact, revaluation of hryvnya worsens and complicates the conditions of
work mainly for a national producer", the President said. He marked it was
that category of business which must become the focus of attention of the
government.

Viktor Yushchenko marked that the flow of foreign investment in Ukraine was
growing daily. "This is already a tendency", he established. In view of the
aforesaid, the leader of the country assumed necessity to develop a new
conception of the strengthening of hryvnya rate for the next few years in
order for, "above all things, the exporters and people saving money in
dollars not to suffer from it".

Being asked what currency is it better to keep savings in, the President
answered that he had kept his money in hryvnyas in one of the Ukrainian
banks for four years and was convinced hryvnya would become stronger
in the future. (translated by Irina Yakovina) -30-
============================================================
3. KINAKH NEGATIVELY ASSESSES REVALUATION OF HRYVNIA

UNIAN, Kyiv, Ukraine, Thu, April 28, 2005

KYIV - Top Deputy Prime Minister of Ukraine Anatoliy Kinakh has
claimed about his negative attitude to the abrupt revaluation of the
national currency, stressing that it is a result of "very uncoordinated
actions of the National Bank of Ukraine and the financial-economic
block of the government".

According to an UNIAN correspondent, A.Kinakh is confident that it is
necessary to draw serious conclusions, as the revaluation of hryvnia
creates not only problems for the population, but also forms conditions
for reduction of investor's trust to Ukraine.

He has added that it is necessary to take into account that Ukraine is
an export-oriented country, some 60% of the gross domestic product
of Ukraine are exported. "It is impossible to conduct a deep revaluation
of the national currency, which negatively influences the export, and, at
the same time, to reduce customs tariffs and render cheaper the import,
thus opening the internal market", said he. -30-
============================================================
4. NATIONAL BANK NOT PLANNING FURTHER SHARP
STRENGTHENING OF HRYVNIA IN 2005

Ukrainian News Agency, Kyiv, Ukraine, Thu, April 28, 2005

KYIV - The National Bank of Ukraine is not planning further sharp
strengthening of the hryvnia in 2005. The National Bank's Chairman
Volodymyr Stelmakh announced this to journalists. "We have reached
the budgetary indicators [regarding the exchange rate of the hryvnia]. If
the budget is implemented the way it was drafted, then this level will be
optimum," he said.

According to him, the gains of exporters, individuals, and corporate
depositors with banks as a result of the strengthening of the hryvnia exceed
their losses. "And the exchange rate will be 5.05 [UAH/USD] in September,"
Stelmakh said when asked about the hryvnia's exchange rate in the second
half of the year.

As Ukrainian News earlier reported, Stelmakh recently told the parliament
that the NBU intended to continue strengthening the hryvnia. President
Viktor Yuschenko has expressed the belief that the policy of strengthening
the national currency that the NBU and the Cabinet of Ministers are
implementing has raised the hryvnia's value too sharply.

The National Bank of Ukraine believes that its policy of strengthening the
hryvnia is in line with the real trends on the market and says that it
intends to continue strengthening the hryvnia. The cash exchange rate of the
dollar fell to 4.90/5.20 UAH/USD at currency exchange bureaus on April 21
following the NBU's April 20 decision to officially strengthen the hryvnia
by 14.0 kopecks to 5.05 UAH/USD. The hryvnia has risen by 5.57% from
5.3056 to 5.0100 UAH/USD on the interbank currency market since the
start of this year. -30- [The Action Ukraine Report Monitoring Service]
==============================================================
5. WORLD BANK, IMF SAID TO APPROVE UKRAINE'S MONETARY POLICY

Inter TV, Kiev, in Ukrainian 1700 gmt 28 Apr 05
BBC Monitoring Service, UK, in English, Thu, April 28, 2005

KIEV - [Presenter] The World Bank has expressed its support for the
Ukrainian government's actions. The bank's managing director, Shengman
Zhang, who today completed his visit to Ukraine, said that Kiev can count
on assistance from international financial organizations. The International
Monetary Fund's delegation also left Ukraine with good impressions. Olha
Klyuyeva has the details.

[Correspondent] The guests admitted that economic processes in Ukraine
arouse their lively interest. The bankers said that the Ukrainian leaders'
plans were ambitious but achievable.

Kiev hinted that it counts on financial support. President Viktor Yushchenko
proposed that the financiers invest in projects to clean up the economy,
combat corruption and improve living standards in Ukraine. Last month the
IMF's board decided to provide a stand-by loan to Ukraine. These 605m
dollars will be a sort of insurance which the Ukrainians will get if they
have an economic emergency.

It must be noted that after the Orange Revolution the fund upped its
forecast of economic growth in Ukraine in 2005 from 6 per cent to 7 per
cent, but at the same time it expects higher inflation - up from 9 per cent
to 12.5 per cent. During meetings with Ukrainian leaders, the guests said
they liked the situation on the currency market and welcomed Kiev's steps
to strengthen the national currency.

[Prime Minister] Yuliya Tymoshenko told the IMF about the bill on
re-valuation of strategic assets which will be returned to state ownership.
One of the IMF's executive directors, who represented Korea, said
half-jokingly that international market economy specialists are not familiar
with the term "reprivatization". -30-
============================================================
6. DOLLAR IN THE DOLDRUMS...BUT NOT FOR LONG!

The Kyiv Weekly, Kyiv, Ukraine, Thursday, April 28, 2005

On April 7-8 the NBU prepared the market for serious revaluation indirectly
by simply not making a presence on the interbank exchange.

The situation there directly depends on the central bank. The fact is that
the currency trading market continues to operate on anti-crisis rules set
back in 1998, which restrict the maneuvers of dealers on the interbank
exchange.

Last week, not only did the NBU lower the buy value of the dollar on the
currency trading floor, but also secured it by setting the official rate at
Hr 5.05/US $1. This was the first time the central bank allowed itself such
a liberty over the past several years. Earlier, it only reduced the official
rate of the dollar by a hundredth of a kopek.

Nobody expected such a move on the part of the central bank. For this
very reason, currency traders are quite pessimistic in their forecasts. An
employee in a department of Aval Bank commented to KW, "The rate of
the dollar to the hryvnia fell by almost 2.7% in comparison with the
previous day and has fallen 5.07% since the beginning of the year.

Taking into account the statements made by the Finance Ministry and the
pace at which the national currency is strengthening, as well as the fore-
casts of analysts concerning inflation in 2005, the declared level of Hr
5.00-5.10/US $1 will not be the last position of the hryvnia rate. It is
highly possible that the market will see a rate of Hr 4.50-4.70/US $1 during
the year." Meanwhile, bankers are not ruling out the possibility that the
rate might soon fall to Hr 4.90/US $1.00.

At the moment, there is little doubt that such a sharp collapse of the
dollar, whose rate was to be lowered smoothly and unnoticeably for the
market, is due to the anti-inflation mood in the government. There is even
a rumor that the Cabinet of Ministers intends to pay for goods from
abroad that will help prevent a growth in prices in the country.

First and foremost, this concerns oil and meat. Some say that it was in
order to purchase such commodities at lower prices, that the value of
the U.S. currency fell.

At present, the bankers are counting economic losses in the battle against
inflation. UkrSotsBank Chairman Borys Tymonkin commented, "There is no
doubt that the population will see positive income growth, even if to factor
in inflation. Be that as it may, there is no such thing as a miracle in the
economy and this will happen at somebody's expense. The question is "at
whose expense"?

The answer is at the expense of industry, primarily heavy industry and
companies exporting goods. The light and food industries and all companies
exporting goods at a small profit margin will experience problems. Highly
profitable steel mills and metallurgical plants and chemical companies will
survive, though their profits will fall.

Generally speaking, all large enterprises that pay the lion's share of taxes
to the national budget will suffer." Exporters believe that strengthening of
the hryvnia is directed against them. "Hryvnia revaluation leads to direct
losses for companies, which encourages them to shut down operation. In
the end, the situation will hit metallurgists as well," says President of
the Ukrainian Association of Secondary Metals Valentyn Kulychenko. A
weaker dollar creates risks for financial markets as well. By taking the
course of strengthening the hryvnia, Ukraine has attracted the attention
of the world's largest currency traders.

The interbank exchange is presently not capable of processing the flow
of foreign currency that is pouring into it every day. These are not the
strategic investments that President Viktor Yuschenko invited by traveling
around the world, rather so-called "hot money". It is brought in by
speculators that turn a profit both on the difference in the exchange rate
and on Ukrainian securities, which remain interesting for buyers despite
their lower profit margin.

At the moment, not many people are thinking about a potential market crash
should pseudo-investors decide to withdraw their money from Ukraine. The
fact is that all of them will emerge onto the currency market to convert
hryvnia into hard currency. In such a case, the hryvnia might fall even
faster than it is rising now. After all, a change in the moods of foreigners
could happen for many reasons: unfavorable changes in the politics of the
country or the emergence of more interesting objects for investment.

One should also not forget average citizens. They were forced to sell
dollars at a rate of Hr 4.90-5.00/US $1.00, instead of the previous Hr
5.30/US $1.00. People have not yet fully recovered from the December
shock when, in panic, they purchased dollars at Hr 7-8/US $1.00. Nobody
can say for sure which path the NBU will follow tomorrow, be it fixing the
exchange rate at the current level or helping the government solve other
problems over the next several months or maybe that it needs to turn its
rate policy upside down again. -30-
============================================================
7. ECONOMIC MINISTRY FORECASTS 5.8-6% GDP GROWTH,
6.5-7.1% INFLATION IN FIRST HALF-YEAR

Ukrainian News Agency, Thu, Kyiv, Ukraine, April 28, 2005

KYIV - The Ministry of Economy is forecasting a GDP growth between
5.8% and 6% and inflation between 6.5% and 7.1% for the first half of
2005.

Economy Minister Serhii Teriokhin announced the forecast speaking at an
enlarged meeting of the Cabinet of Ministers held with the participation of
President Viktor Yuschenko. "Under our estimates, the real GDP growth will
total 5.8-6% against 5.4% in the first quarter. It is not a significant
acceleration of the economy dynamics," Teriokhin said.

He added that the forecast is made considering the expected 2-2.6% price
increase in the second quarter and based on the positive scenario for
economic development provided for in the 2005 state budget - namely, an
8.2% annual GDP growth and 9.8% inflation. The minister noted that he
sees no reasons for revision of the forecast.

At the same time, he stressed that for it to come true, government and the
National Bank must take joint actions for strengthening the pricing and
monetary disciplines. Teriokhin added that the petroleum and food markets
are under government control.

He emphasized on the necessity to conduct more transparent government
policy so that the public community can have a clear notion of Cabinet
steps.

Here, he mentioned announcement to the public of the 2005-2009 socio-
economic development program, the drafting of which is about to be complete,
and of the NBU's monetary-and-loan policy for 2005-2006 to be made public
before adoption of the 2006 budget resolution in parliament. All these are
vital for stability on the financial and other markets, according to the
minister.

He further informed about a second, pessimistic, scenario for this year's
economic development, which will come true in the event of low industrial
growth and inactivity of investors. This scenario contains expectations of a
slowdown in GDP growth to 6.5% and inflation of up to 15% (a 7.5% increase
during the second half-year). Teriokhin stressed that a well-coordinated
work of the government and the NBU is required in the pricing and monetary
policy in order to avoid the second scenario.

As Ukrainian News earlier reported, Ukraine's real gross domestic product
rose by 5.2% in March to UAH 29,292 million compared with March 2004. In
January-March, it grew by 5.4% over the same period of last year to UAH
79,356 million. The 2005 state budget provides for a 6.5% GDP growth, or
UAH 409.5 billion by the end of the year. President Viktor Yuschenko admits
that GDP growth is likely to remain at the level of 12% this year. -30-
============================================================
8. UNITED NATIONS ENVOY CRITICAL OF UKRAINIAN
GOVERNMENT'S ECONOMIC POLICY

Korrespondent.net web site, Kiev, in Russian 28 Apr 05
BBC Monitoring, UK, in English, Thu, April 28, 2005

KIEV - The rule of law and democracy are the main prerequisite conditions
for economic growth and attracting investment, the Resident Coordinator of
the UN System and UNDP Resident Representative in UN, Francis O'Donell,
has said.

"The current situation in Ukraine shows that investment is decreasing and
economic growth is decreasing too - they dropped by half in the first
quarter of this year," O'Donell has told a news conference following the
Strategic Consultative Process on Reform in Ukraine meeting of Ukrainian
and foreign experts and politicians [organized by the United Nations
Development Programme and the Ukrainian government], which was held
in Ukraine this week.

O'Donell said that decrease in investment and economic growth was
triggered by lack of coordination of macroeconomic, fiscal and structural
policies. "Structural reforms should be carried out in line with the
principles of economic and fiscal policy, not otherwise," he said.

"The more the state interferes in the economy, the fewer opportunities will
arise for development. It is not correct to fix prices manually, one should
seek to liberalize the market," O'Donell said. He believes the rule of law
and democracy are the main criteria for Ukraine's accession to the European
Union and the WTO, as well as attracting investment and increasing economic
growth.

"These are the observations of a big group of Ukraine's foreign friends. The
government should be more productive in carrying out administrative reform
and managing the process of changes in [governmental] institutions,"
O'Donell said. -30- [The Action Ukraine Report Monitoring Service]
============================================================
9. MILK AND MEAT PRICES ARE SKYROCKETING IN UKRAINE

ITAR-TASS, Moscow, Russia, Friday, April 29, 2005

KIEV - Foodstuff prices are skyrocketing in Ukraine on the eve of May
holidays. Odessa residents were the first to respond to this situation: they
staged a "foodstuff" protest rally in front of the townhall, Tass learnt on
Friday at the police department of the Odessa Region. Residents
expressed indignation at doubled prices for meat and milk.

A drop for meat prices, promised by the Ukrainian government in mid-March,
has remained so far "an Easter fairy tale". Meat producers refused to sell
their goods at depressed prices, as the government demanded. Inspections
of Ukrainian markets showed that slimy meat is put on counters at these
prices, while fresh meat, as was the case in Soviet times, lies hidden under
the counter. Markets in Zaporozhye, Odessa, Lvov, Uzhgorod, and Vinnitsa
now sell one kilo of veal at five US dollars, while a kilo of pork or
sirloin at six-seven dollars.

The Ukrainian government claimed that the meat market was grabbed by
sharpsters, lining their pockets at the expense of producers and shoppers.
According to Prime Minister Yulia Timoshenko, "the difference between
wholesale and retail prices reaches up to 70-80 percent".

Following the Easter and May Day holidays, "the government intends to
shake up second-hand dealers," the government press service reported.
Peasants complain at rising costs of fodders, veterinarian control and
leasing of cold storages. According to Ukrainian economist Andrei
Yarmak, "if the government runs, in the future too, the meat industry by
administrative methods, the crisis will plunge deeper".

Agricultural producers refused to sell the State Reserve Committee meat
below its production cost. The government granted a loan of 500 million
grivnas (around 100 million dollars) to this state committee to purchase
foodstuffs so as to beat down prices on the domestic market with
interventions. -30- [The Action Ukraine Report Monitoring Service]
============================================================
10. INVESTORS ARE STEADILY MOVING "OUT OF HOME, INTO OFFICE"

Kyiv Weekly, Kyiv, Ukraine, Thu, April 28, 2005

The stable growth in the prices of real estate observed in Ukraine over the
past five years facilitates attracting speculative capital to the market. By
purchasing a highly liquid object of real estate in Kyiv, for example a one
or two-room apartment in a new high-rise under construction, the buyer not
only protects their money from inflation, but also turns a profit of
anywhere between 30-50% per year. At the moment, the profitability of
such deals is decreasing, while other segments of the real estate market
are becoming more attractive.

"The percentage of buyers on the residential housing market concluding
speculative deals has been around 15% over the past several years," says
Oleksandra Bondarenko, President of the Association of Real Estate
Specialists of Ukraine (ARESU). At the same time, the number of such
buyers could be much greater. Indeed, many prefer to strike deals with
construction companies directly, without involving a realtor. Incidentally,
in Ukraine realtors control only 20-25% of the market. Meanwhile, medium-
sized apartments are the leaders in terms of liquidity of investments.

Director of the Starokyivskiy Branch of the Blagovest real estate agency
Natalia Lyapina thinks that the construction of "economy-class" apartments
is the most promising area in residential real estate market development.
"Just take a look at a newly commissioned apartment building and it
becomes clear at once: apartments of such class are worth their weight
in gold.

Demand for affordable apartments exceeds supply by 2.5 times, which
indicates the prospects for development of this field in terms of
investments." For example, having US $100,000 to dispose of, you can
buy the most popular apartments. Realtors recommend spending such
money on the acquisition of two two-room apartments in different buildings
located in areas with a developed infrastructure and good transportation.

The best time to make a deal is at the initial stage of construction. The
one concern is that, due to recent mass protest acts, work on many
construction sites has been suspended. It has not been ruled out that in
some cases land allocation will be reconsidered. In such a situation,
Bondarenko advises closing a deal when the first several floors of the
building have already been built. One has to be cautious about the
construction of single buildings in densely populated districts, because
such projects often have complications and end up in the courts at the
initiative of the residents of neighboring buildings, which is likely to
disrupt the schedule of construction.

For a long time, turning a profit by leasing apartments was one of the most
widespread methods of making money on living quarters. "Due to a serious
shortage of areas for lease in Kyiv, practically any object in the downtown
area of the city or near subway stations spurs increased interest among
lessees," says Lyapina. "Every year, more objects in the city's center are
used for commercial leasing purposes. There are examples when owners
take out a loan using their apartment in the city center as collateral and
then lease it out.

The loan allows them to buy an apartment further outside the center, while
the proceeds from the lease go to paying off the loan," says Tekt-Realty
Director Artur Pylypchuk. Still, at present the leasing business is not as
profitable as it used to be two years ago due to declining profitability and
growing competition.

In search of a more profitable alternative, private investors are showing
greater activity on the market of office buildings. This was made possible
thanks to the fact that Ukrainian developers are actively selling out spaces
in business centers, while in world practice it is more customary to lease
space under a single manager. As a result, retail and office space in
business centers is sold not only to end users, but also to individuals and
legal entities that turn around and lease the space out.

Pylypchuk finds this method of investing capital more prospective than
investments into the rental business on the residential housing market.
"Such capital investments will pay off within 3-5 years. For high class
business centers, the period could turn out to be longer, but such
investments will be the most reliable due to the longer life cycle of a good
quality site," he explained.

Another "hot spot" on the real estate market is the land market. According
to Bondarenko, the price of land is still far from reaching its peak,
something that cannot be said about the cost of residential real estate. In
the next 2-3 years, the prices of land plots will be growing faster than
prices on the residential real estate market. "According to our forecasts,
the most prospective area of this business is investing money into the
construction of residential communities with small homes (150-200 m2),"
Lyapina commented. "The practice of building communities has long ago
proven itself in Russia."

At the same time, the attractive land market at first glance is also the
most risky. Investors showing great interest in the land market often have
to face the problem of the absence of acceptable offers. For example, the
targeted purpose of the plot might not coincide with what the investor
wants. Legal gaps and the skewed history of the law on ownership could also
create obstacles. Nevertheless, as the saying goes, "the greater the risk
the greater the return". For example, over the year 2004, in certain areas
of the Kyiv oblast the cost of 0.1 hectare of land grew by an astounding
233%. -30- [The Action Ukraine Report Monitoring Service]
============================================================
11. YUSHCHENKO ASKING WORLD BANK TO PROVIDE LOANS FOR
AGRICULTURAL,ENERGY SECTORS AND FOR FIGHTING HIV/AIDS

Ukrainian News Agency, Kyiv, Ukraine, Thu, April 28, 2005

President Viktor Yuschenko is asking the World Bank to review within one
month its Ukrainian projects that are no longer urgent following the changes
that have taken place within the country and increase loans to the
agricultural and energy sectors as well as loans for fighting HIV/AIDS.
The presidential press service disclosed this to Ukrainian News, citing
Yuschenko's meeting with the World Bank's Managing Director Shengman
Zhang.

'It would be right to conduct a review of that portfolio of loans that
exists between the World Bank and Ukraine, since certain projects are
already completely not urgent,' Yuschenko said. Zhang agreed that it is
necessary to review the World Bank's projects following the change of
the domestic situation in Ukraine.

In the agricultural sector, Yuschenko believes that the World Bank's
assistance is necessary in acquiring government land deeds. 'As of today,
7 million Ukrainians have still not received government land deeds,' the
press service said.

Yuschenko also requested assistance in social and humanitarian projects,
including projects for fighting HIV/AIDS and tuberculosis. Moreover,
Yuschenko and Zhang discussed joint projects in the areas of energy supply
and energy conservation. Zhang assured Yuschenko of the World Bank's
readiness to cooperate and assist Ukraine in concrete projects, particularly
in attracting investments. 'We are prepared for cooperation in the sphere of
investments, particularly investments in the real sector,' he stressed.

At the same time, he said that the World Bank was hoping for the support of
the Ukrainian authorities. Concluding the talks, Yuschenko proposed that the
World Bank regulate its cooperation with Ukraine by drafting a roadmap for
2005. As Ukrainian News earlier reported, the State Committee for Land
Resources intends to complete the issuance of government land deeds
by 2006.

In total, about 7 million government land deeds are planned to be issued.
The World Bank intends to provide USD 300 million for development of
the energy, education, and financial sectors of Ukraine in 2005. -30-
============================================================
12. YUSHCHENKO EXPECTS FOR IMF INVESTMENTS IN ECONOMY
DRAWING FROM SHADOW AND WAR ON CORRUPTION

Ukrainian News Agency, Kyiv, Ukraine, Thu, April 28, 2005

President Viktor Yuschenko hopes that the International Monetary Fund
(IMF) will invest in the process of drawing Ukraine's economy from shadow,
war on corruption, institution of justice and increase of social standards
in Ukraine. The presidential press service reported this to Ukrainian News,
referring to a meeting between Yuschenko and IMF leaders.

In addition, among possible areas for investments he named development
of the tax system and distribution of preferences. "To improve the situation
in these areas we need investments," he said. These issues were mentioned
in the context of Ukraine's policy for integration into Europe.

"Ukraine understands all challenges of the European way and needs
cooperation and assistance of the IMF in this trend," the statement reads.
Yuschenko said that Ukraine understands that conducive climate is necessary
for investments and promised to find optimal form of cooperation with
foreign investors. He also offered the IMF to jointly formulate a
cooperation plan with Ukraine.

As Ukrainian News reported earlier, at a meeting with World Bank Managing
Director Shengman Zhang Yuschenko asked the Bank to review within one
month its Ukrainian projects that are no longer urgent following the changes
that have taken place within the country and increase loans to the
agricultural and energy sectors as well as loans for fighting HIV/AIDS.

On March 29, the IMF Board of Directors approved the 'precautionary
stand-by' program for Ukraine, contemplating reservation of loan funds in
the amount of USD 605 million for 12 months (until March 28, 2005) that
can be used by Ukraine only at its express request in exceptional
situations.

The program targets economic growth support, inflation control, and
minimization of vulnerability of the Ukrainian economy. -30-
============================================================
13. EBRD, ING BANK PROVIDE $30 MILLION LOAN TO ILLICHIVSK
OIL-EXTRACTION PLANT FOR SUNFLOWER SEEDS PURCHASE
ADM Nederland and Risoil Group

Ukrainian News Agency, Kyiv, Ukraine, April 28, 2005

KYIV - The European Bank for Reconstruction and Development (EBRD)
and the ING Bank N.V. have granted a loan of USD 30 million to the
Illichivsk oil-extraction plant (Odesa region) to buy sunflower seeds. The
EBRD's press service made the statement to Ukrainian News. The funds
will be used for the purchase of sunflower seeds and financing of turnover
assets.

The resumed loan receiver is the Illichivsk oil-extraction plant, which is a
joint fifty-fifty venture of ADM Nederland B.V. (subsidiary of Archer
Daniels Midland, the largest sunflower seed processing company) and
Risoil Group, Risoil SA, registered in Switzerland, which is engaged in
agricultural products trade and is operator of ports.

The loan is structured as the A/B credit. At this, the EBRD will provide a
loan to the sum of USD 15 million and will be official loaner for the credit
in general. Loan B will be granted by the ING Bank N.V., and ING Bank
(Ukraine) will serve as local agent to secure loan and bank for payments.

The Illichivsk oil-extraction plant is situated in the Illichivsk port near
Odesa and will produce unrefined sunflower oil and fodder flour of
sunflower seed cake.

As Ukrainian News reported earlier, EBRD is owned by 60 countries and
two intergovernmental institutions. Its goal is promotion of the Central and
Eastern European and CIS countries' transition from central planning to
market economy. The Ministry of Agrarian Policy forecasts that export of oil
that is manufactured from sunflower seeds of the harvest of 2004 will be
nearly 1 million ton in 2005.

Production of sunflower-seed oil in 2004 was 1,287,289 tons, which was
7% or 84,556 tons more than in 2003. Sunflower harvest in 2004 fell by
28.2% or 1,195,700 tons to 3,051,900 tons, compared with 2003.
Compared with 2003, the export of sunflower in 2004 fell by 59.2% or
513,400 tons and it totaled 354,150 tons worth USD 98.32 million. -30-
============================================================
14. UKRAINE: ZIGZAG POLITICS OF ANATOLIY KINAKH

ANALYSIS: Kyiv Weekly, Kyiv, Ukraine, Thu, April 28, 2005

When former president Leonid Kuchma was in office, Kinakh, who was
premier at the time, appeared to be simply a blind tool in the hands of the
president. Today, as the second in command in the government, he has
finally begun to spread his wings. Furthermore, Kinakh has even surpassed
President Viktor Yushchenko in terms of critical attacks against Premier
Yulia Tymoshenko and her decisions.

The first vice premier is known for his negative attitude towards the recent
raise in tariffs on the transport of freight by rail. He also protested
lowering the threshold of payers of a single tax on monthly turnover from
Hr 1 mn to Hr 300,000.

The faction of industrialists and entrepreneurs voted against the revised
edition of the national budget for 2005. Along with Kinakh, the faction is
now pointing to the erroneous policy of the government and the National
Bank of Ukraine. The logical conclusion of this opposition was UPIE
founding its own political union named For the People's Will.

Incidentally, four other parties joined this organization as well, including
the Democratic Party, the Liberal-Democratic Party, the Party of National
Economic Development of Ukraine and the Party of Pensioners of Ukraine.

Besides that, the Federation of Employers of Ukraine headed by Kinakh, the
Ukrainian Agrarian Confederation, the League of Insurance Organizations of
Ukraine, the Ukrainian Association of Quality and about forty other
organizations joined the newly established union.

The reserved and laconic first vice premier has enough ambition that such a
union could place him on an equal level with such politicians as Volodymyr
Lytvyn, Yuliya Tymoshenko and even President Viktor Yushchenko. The fact
is that these political figures all have their own parties and factions in
the parliament and all three will run in the parliamentary elections as a
single, united force.

Meanwhile, the For the People's Will bloc intends to go after people's votes
independently, mainly aiming at the electorate in the southern and eastern
regions of Ukraine, which previously supported Viktor Yanukovych and at the
moment are not too pleased with the latest economic decisions of the new
government. In criticizing certain steps the government has taken, which in
the opinion of Kinakh are populist in nature, the first vice premier is
attempting to win over an electorate dissatisfied with the policies of the
new government and is offering his political force as an alternative. !

This force only has a nominal presence in the government, but it is capable
of strengthening its position.

Interestingly enough, the parties and organizations which signed the
declaration for the foundation of the For the People's Will union, were
until recently considered loyal to the former ruling authority. That said,
the Democratic Party of Ukraine looks particularly interesting in this
crowd.

Its leader, the people's deputy of Ukraine Anna Antonyeva, is notorious
for heading the Artemida Fund, which, according to the Ministry of Internal
Affairs, had transferred funds to support the election campaign of Viktor
Yanukovych in 2004. A criminal investigation was recently launched
against a group of functionaries working for this fund. -30-
============================================================
15. FLAT TAX REVOLUTION SWEEPS IN FROM EASTERN EUROPE
Ukraine has introduced a flat tax

By Stephen Castle in Brussels, The Independent
London, UK, Friday, 29 April 2005

Flat taxes, once a fantasy of free-market ideologues, are sweeping
across the European Union and could be introduced in more than 10
of the bloc's 25 member states.

The European commissioner for taxation, Laszlo Kovacs, described flat
taxes, - one rate for all income and corporate taxation - as "absolutely
legitimate" and said Western European nations may be tempted to adopt
them. His comments will fuel debate that low-tax, low-cost economies of
the East are undercutting Europe's industrial heartland.

In place in Slovakia and the three Baltic states, which joined the EU last
year, flat taxes are credited with helping them grow fast and creating
thousands of jobs. French politicians have led complaints about "social
dumping" and the risk to their employment and social standards. Others
argue that such a regressive system, under which a millionaire and a road-
sweeper pay the same rate, can never be fair.

Mr Kovacs, a former Hungarian foreign minister, said: "As far as the
position of the EU is concerned, we consider it as absolutely legitimate
because the EU does not tackle the issue of income and corporate tax
rates.

"Four countries have introduced it and are satisfied, and they claim that it
works properly. Some six or seven are considering flat taxes - that makes
10 or 11 member states that could introduce flat tax. "But it means the
majority of the member states do not apply and do not have the aspiration
to introduce flat taxes." Dispensing with the need for exemptions and
allowances, flat taxes rely on simplicity: all those whose earnings exceed
a threshold pay the same rate.

Sometimes, revenues have increased because fewer people take the risk
of evading lower thresholds and there are fewer exemptions for accountants
to exploit. Applying a basic - if regressive -system also saves time for
citizens completing tax returns and for civil servants.

Mr Kovacs argued: "The advantage is that it limits tax avoidance but also it
is more simple, so it reduces the administrative burden and reduces the
compliance cost. The disadvantage is the lack of progressivity in the case
of personal income." The commissioner did not name the nations considering
flat taxes, though Hungary, the Czech Republic and Poland are known to be
among them, and the issue has been raised in Cyprus and Malta.

However Mr Kovacs said that the idea is not "specific to the new member
states". Greek politicians have debated the subject and Germany's opposition
Christian Democrat party discussed a simplification of the tax system -
though it would not be a classic flat tax but comprise three income
categories. Policy advisers and political parties in the Netherlands and
Spain have also given the idea a hearing.

Former Communist countries were open to the experiment because they did
not inherit sophisticated tax collection machinery. In 1994, Estonia
pioneered the move when its prime minister, Mart Laar, took the plunge, to
be followed by Latvia and Lithuania. Others jumped on to the bandwagon
including Russia, Serbia, Ukraine and Georgia. Slovakia, which joined the
EU last May, introduced a flat tax of 19 per cent on income, corporate tax
and VAT, in 2003. Romania - to become a member of the bloc in two years
- has followed suit.

In Slovakia, the experiment has gone hand in hand with a boom in foreign
direct investment worth $2.29bn (£1.5bn)this year.

The positive impact of flat taxes is almost certainly exaggerated.
Slovakia's position as a magnet for car companies, such as VW and Peugeot,
is based on a cheap and skilled labour force and its geographical position,
rather than its tax regime.

Mihir Kotecha, CEO of Cologne-based Getrag Ford Transmissions, which
has invested in Slovakia, said: "The tax rate did not swing our decision. A
19 per cent tax rate is very attractive but will it be there in five years?"
=============================================================
16. RUSSIAN AMBASSADOR SAYS EX-HEAD OF STATE AFFAIRS
DEPARTMENT IHOR BAKAI IS CITIZEN OF RUSSIA

Ukrainian News Agency, Kyiv, Ukraine, Thu, April 28, 2005

KYIV - Russian Ambassador to Ukraine Viktor Chernomyrdin has
announced that former head of the Ukrainian State Affairs Department
Ihor Bakai has a Russian citizenship. He made the statement to the
press in Chernihiv. "He [Bakai] indeed received [Russian] citizenship
yet prior to all these events," Chernomyrdin said.

The ambassador added that Bakai had no place to live in Russia and was
looking for an opportunity to buy dwelling, however Chernomyrdin did not
know where Bakai is now. "I cannot says where Bakai is staying now - in
Russia or not, he is so itinerant," the Ambassador said.

He specified that Bakai cannot have double citizenship, and he could obtain
Russian citizenship only after abandoning Ukrainian. "There is no agreement
on double citizenship between our countries; we have not yet settled this
issue," Chernomyrdin said.

Asked by reporters in Kyiv Wednesday, Chernomyrdin said Bakai became
Russian citizen nearly 1.5 months ago, but not for sure. "I am not sure. I
just know he has it, but how long... It must be not more than a month and a
half," the Russian ambassador said. Chernomyrdin refused to answer the
question if Bakai addressed the Russian embassy in Ukraine. "Keep this
subject with yourselves. This is not mine. You go and seek, but I do not
need it," Chernomyrdin said. The ambassador also noted that he did not
believe the issue of Bakai's possible extradition to Ukraine to be highly
important. "I do not think this issue is so acute," he said.

As Ukrainian News reported earlier, the Russian Interior Ministry refused
to provide information about the citizenship of former head of the State
Affairs Department Bakai in response to the request of the Ukrainian
Interior Ministry. Bakai, who had been invited by the Interior Ministry to
make comments on money transfers for reconstruction and development
of international youth center Artek, was among those who failed to come.
The Interior Ministry established that Bakai lives and works in Russia.

The National Interpol Bureau of Ukraine is now checking the allegation made
by Verkhovna Rada deputy from the Social Democratic Party (united) Nestor
Shufrych that Bakai holds Russian citizenship. The Interior Ministry's press
service said that if Bakai is a Russian citizen, the legitimacy of his
holding the post of the State Affairs Department head will be called in
question.

During its checks February through April, the chief audit department
established that the State Affairs Department and its heads misused UAH
828.5 million. Prosecutors launched seven criminal cases following
inspections into financial activities of the State Affairs Department and
organizations subordinated to it, which was conducted by the Ministry of
Internal Affairs.

Bakai headed the State Affairs Department October 2003 through December
2004. During 1998-2000 he chaired national joint stock company Naftohaz
Ukrainy. From 1997 to 2000 he was the President's adviser and a Verkhovna
Rada deputy in 1998. -30- [The Action Ukraine Report Monitoring Service]
============================================================
17. ESSAY: MORE POWER TO YOUR ELBOW
Democracy and the assertion of people's power on the streets

ESSAY: By Geoff Mulgan
Financial Times, London, UK, Friday, April 29,l 2005

Last December, one of the thousands of orange rebels demonstrating on
the streets of Kiev for a rerun of the Ukrainian election was a middle-aged
postmistress named Nadia Berezovska. When asked what they were fighting
for she told a reporter: "We used to go down on our knee before the people
in power but now we have got to our feet." Her parents' generation had
experienced both Tsarism and Stalinism, and an ugly interlude of Nazi rule.
Now democracy had become the only serious option, and the assertion of
people's power on the streets had become the only way to get it.

But what does "people's power" really mean? Is it really power? And is it
really with the people? Two new books ask these questions from radically
different perspectives, which echo 2,000 years of argument between radicals
and conservatives. On the one side, the radical British political theorist
John Dunn argues that free and fair elections are but a pale shadow of what
democracy once was, and could be again. On the other, the Hungarian-born
historian John Lukacs warns that popular sovereignty is most likely to
precipitate a slide towards vacuous populism and nationalist chauvinism.

Both are responding to the remarkable novelty of a world in which there
are more than 120 democracies, where the daily news brings us stories
of uprisings for democracy in such unlikely places as Kyrgyzstan and
Mongolia, and where even dictators feel the need to hold elections in
order to legitimise their power.

During the first half of the 20th century democrats were repeatedly
outcampaigned, and often outgunned, by more ruthless parties and regimes
that portrayed democratic governments as congenitally weak and fractious.
During the second half of the century things were little better. The Soviet
Union energetically rigged elections in dozens of countries, while the US's
dominant "realist" school of international relations encouraged the west to
support some truly appalling autocrats (so long as they were on our side)
and to overthrow democratically elected leaders such as Iran's Mohammed
Mossadegh and Chile's Salvador Allende (if they weren't).

Today democracy appears triumphant. Never before has a single model of
government been the benchmark by which all regimes are judged, and never
before has the world's strongest power been so committed to promoting
democracy - by force, if necessary.

There is much to celebrate in this. But, both in theory and in practice,
democracy is rich in contradictions and ambiguities. Dig a little deeper,
for example, and you soon find that exuberant scenes such as those in
Kiev mask more complex stories of machination and struggle between
elite groups.

Inevitably, perhaps, a slew of books have come out recently to rain on
democracy's parade. For some, the main concern has been that in
democracy's heartlands its health looks uncertain: voter turnout has started
falling (although last year's US presidential election saw turnout rise) and
in many countries party affiliation and membership have declined. Others
have questioned whether democracy really is so compatible with free
markets and liberty.

Amy Chua's World on Fire, for example, showed that markets and elections
often pull societies in opposite directions. Open markets tend to favour
entrepreneurial minorities, such as the Jews in Russia or the Chinese in
Indonesia, whereas newly empowered majorities tend to want to rein them in,
or worse. Michael Mann's "The Dark Side of Democracy" painted an even
starker picture, showing that emerging democracies may be the most prone
to genocidal horrors.

Old-fashioned autocracies are generally stable, as are mature democracies.
But as the people are brought into politics for the first time, their
energies are often directed against unlucky minorities, such as the Tamils
in Sri Lanka, the Tutsis in Rwanda or the Catholics of Northern Ireland. It
is telling that all of the countries listed in a recent Human Rights Watch
report on interethnic conflict at the beginning of this decade, from Armenia
to India to Turkey, had recently held openly contested elections where
opposition groups were more nationalist than the government.

For some of these reasons, Fareed Zakaria argued in his recent book, "The
Future of Freedom," that the west should generally support liberty over
democracy: only when rights and liberties were firmly established could we
be confident that democratically elected governments would turn out to be
benign.

Yet democracy is the dominant idea, and in "Setting the People Free" John
Dunn gives an original account of the twists and turns that have made it so.
It began, he writes, as "an improvised remedy for a very local Greek
difficulty". Far from being founded on any deep principles, the idea of
involving the people in government was a tactical move by the Athenian
leader Cleisthenes to "muster support against his aristocratic rivals and
their Spartan allies".

For the next 2,000 years democracy disappeared, and until the 19th century
the arguments about democracy versus monarchy were overwhelmingly won
by the monarchists. Democracy's critics warned that any popular assembly
would be bound to be incompetent and too easily swayed by emotion. The
worst demagogues would thrive and leaders would shamelessly pander to
special interests. Plato was a particularly influential critic of democracy,
perhaps understandably, since two of his uncles had been killed trying to
avert the return of democracy to Athens, and his teacher Socrates fell
victim to democratic intolerance.

For the leading lights of early modern political thought - such as
Montesquieu or Hegel - democracy lay in the past. It was a form of
government that had been tried and failed. Just as many modern autocrats
have presented the fundamental political choice as one between order and
disorder, so most informed opinion before 1800 saw democracy as far too
unstable to sustain good government. Even John Adams, one of America's
first presidents, wrote that "there never was a democracy yet that did not
commit suicide".

History has, of course, proven them wrong, and most democracies look
vigorously healthy, despite the occasional bout of depression. But what has
triumphed is a very different democracy. The Athenians constructed an
elaborate system of self-rule, covering everything from war and taxation to
justice, that allowed them to make choices over how they should live
together.

Modern democracy, by contrast, consists of occasional and highly constrained
choices as to which small group will make decisions on the people's behalf.
The result, in Dunn's words, is that "what we mean by democracy is not that
we govern ourselves... it is that our own state... draws its legitimacy from
us", and that we have a "reasonable chance" of being able to dismiss it when
it no longer serves our interests.

Dunn's main concern is not so much that a representative version of
democracy has triumphed but rather that in the late 18th and early 19th
centuries the ideals of democracy were co-opted and distorted by believers
in a competitive market. What he calls "the egoists" degraded democracy in
service to a market economy which has turned out to be "the most powerful
mechanism for dismantling equality that humans have ever fashioned".

Dunn is right to point out the parallels between the rise of competitive
democracy and the rise of competitive markets. But democracy has done as
much to shape markets as vice versa. The spread of universal suffrage in the
late 19th and early 20th century was mainly a response to the rising
economic and political weight of the working class. Wherever they won the
vote they soon won pensions, health services and schools. Recent research
shows fairly strong correlations across the world between the presence of
democracy and higher spending on public services and welfare, as well as
stronger environmental controls.

The historical exegesis that Dunn presents is compelling, particularly his
detailed reconstruction of the arguments that accompanied the French and
American revolutions, and he raises some very important questions. Why,
for example, are the greatest advocates of aggressive policies to promote
democracy abroad so averse to promoting it within businesses, or, for that
matter, families? But he is unsure where to take the argument and the book
rather fizzles out with a muted hope that democracy might become more
than a parade of electoral entrepreneurs.

John Lukacs, the author of brilliant books on Churchill and Hitler, takes a
very different view in "Democracy and Populism: Fear and Hatred."
Democracy's fundamental flaw for him, as for so many conservative critics
in the past, is that untrammelled popular sovereignty unleashes a host of
evils and ultimately degrades civilisation. If the people are truly
sovereign, all sorts of pathologies become possible, including not only
the victimisation of minorities but also the destruction of democracy
itself.

The book includes an interesting quote from Heinz Krekeler, who helped to
draft Germany's postwar constitution in 1946. Krekeler had argued against
including in the constitution the sentence "all power derives from the
people" on the grounds that if popular sovereignty was absolute the people
could choose once again to replace the democracy with a dictatorship.
There had to be laws and rights to constrain the people as well as the
state.

The framers of the American constitution had been well aware of the danger
of popular sovereignty, and tried to build a model of "mixed government" to
hold it in check. There was to be a monarchical element represented by the
president; an aristocratic element represented by the electoral college and
the senate; and a democratic element in the House of Representatives. Yet
over the course of 200 years, in Lukacs' account, the middle "aristocratic"
element has been hollowed out, leaving only an unhealthy populism.

America's "roiling and mobile civilisation" has, he writes, been "marked by
a steady increase in carnality, vulgarity, brutality", and its state has
become the ultimate example of nationalism in the modern world, intoxicated
with the cult of the flag and national exceptionalism.

Democracy promised to be more open, direct, simple and honest, but instead
it has often turned out to be complex, obscure and deliberately
manipulative. This might matter less if government was marginal to people's
lives. Yet democracy has grown in tandem not only with a capitalist market
economy but also with the vastly greater powers of the modern state. For
many governments the problem is that their authority lags behind their
power, making it hard for them to take difficult decisions, for example on
welfare reform or climate change.

It is undoubtedly progress that we now solve our problems by counting
heads rather than cutting them off. But democracy is neither a single thing
nor a culmination of history - it is evolving fast, not just through the
manifestations of people's power, but also through innovations around
referendums and recalls, participatory budgeting and deliberative polls, and
the dramatic tide of decentralisation that has swept over countries as
varied as India, China and the US. Neither Dunn nor Lukacs offers any
solutions, or any comfort to those who are worried about the health of our
politics. But they do provide a timely reminder of the profound, and still
unresolved, arguments that lie just behind the apparently universal triumph
of democracy. -30- [The Action Ukraine Report Monitoring Service]
--------------------------------------------------------------------------------------------------------
Geoff Mulgan is a former head of policy in Tony Blair's office and is author
of "Good and Bad Power: On the Morality of Government", to be published
next year by Penguin.
SETTING THE PEOPLE FREE: The Story of Democracy by John Dunn
Atlantic Books 16.99, 246 pages
DEMOCRACY AND POPULISM: Fear and Hatred by John Lukacs
Yale University Press 16, 248 pages
=============================================================
18. THERE IS REST IN THE FOREST, NO TROUBLE WITH THE TREES!
Kyiv, Ukraine, is justly called one of the greenest cities in the world.

Kyiv Weekly, Kyiv, Ukraine, Thu, April 28, 2005

Kyiv is justly called one of the greenest cities in the world. There are so
many parks, public gardens and even forests that it is often difficult for
Kyivans to decide where to go on the weekend.

The problem of choice will become even more relevant in the beginning of May
with the upcoming Easter, May Day and Victory Day holidays lasting almost
ten days. Indeed, one must keep in mind that the city authorities are now
actively engaged in the reconstruction of green areas throughout the
capital.

Besides that, festivities connected with victory in World War II and the
much talked about Eurovision Song Contest are just around the corner. So,
you should be selective in choosing a place to take a stroll or go for a
picnic with your family so as not to walk right onto some construction site.
In short, you really need to have a guide through Kyiv's parks. So, for your
convenience our KW special correspondent thought it appropriate to compile
a short classification of Kyiv parks by splitting them into three
categories: romantic, family and forest parks.

WITH A ROMANTIC VIEW

The most romantic places in Kyiv are traditionally considered the Dnipro
hills. The parks that spread across their slopes offer a great view of the
picturesque left bank of the Dnipro and are crowded both during the day and
particularly in the evening. The most popular parks are Volodymyr's Hill and
the park stretching from European Square to Mariyinskiy Palace.

The first of the two has practically not been affected by all the
renovations undertaken in recent years. The benches here are remnants
of the Soviet era and its paths have not been renovated. But this drawback
does not scare off dreaming couples and there are always lots of people
on the viewing terrace near the monument to St. Volodymyr.

Having crossed Volodymyrskiy Uzviz, you can get into the park to which city
authorities have been paying much attention over the past 2-3 years. Here,
there are two pointed towers built, one of which hosts a museum of water.

Besides that, new paths have been paved, the lawns have been sown with
seeds and an attractive pavilion with a drinking water fountain resembling a
gazebo has been built. In addition, lately the infamous Bridge of Lovers has
been renovated. The only obstacle you might encounter on your way is a
protracted building of the Puppet Theater on the sight of the former Dnipro
movie theater.

Meanwhile, on the other side of the Bridge of Lovers, in Mariyinskiy Park,
nothing will disturb you from your romantic dreams. The park is especially
beautiful in the evening, when modern lamps are lit and hundred-year-old
restored fountains with iridescent illumination are running.

The Botanical Garden in the vicinity of the Vydubychi Metro Station enjoys
no less popularity. Monks from the local Ioninskiy Monastery brought
adjacent territory to order, while the city authorities promise to complete
this year the construction of one of the largest greenhouses in the garden
for exotic plants and trees. Local residents and tourists visit the garden,
stretching over grassy knolls, to enjoy the fragrances and beauty of the
magnolia flowers and blossoming lilac trees.

FAMILY PARK VALUES

Earlier the favorite place for family rest was Hydropark, but loud and
obtrusive music and companies of drunks have somewhat tarnished its
reputation over recent years. The only features attractive for guests these
days are the entertainment facilities and sports grounds, where you can
play different kinds of sports, including tennis and table tennis. The city
authorities recently announced their intention of opening a museum of
miniature points of interest in Kyiv.

A park located near Glory Square called Park Slavy is far more pleasant for
family walks. A little bit lower than the Monument to the Unknown Soldier is
a wonderful children's playground town with a fantastic panorama of the Left
Bank.

Incidentally, you will find exactly the same type of playground, with
intricate swings and stairs, in Shevchenko Park in front of the famous
central "red" building of the Shevchenko National University campus.

Elsewhere, Nyvky Park remains as popular as ever, although its entertain-
ment facilities were worn down long ago and the number of benches is
gradually decreasing. This place is unique for the cascade of artificial
lakes, where you can have a great time rowing a boat or riding in a
paddleboat.

The park, located near the National Aviation University, will entertain
Kyivans and guests of the capital with its kozak-like settlement with
clay-walled huts, windmills and a Zaporizhzhyan church - basically a scaled
down version of Pirohovo outside of Kyiv proper.

A WALK IN THE WOODS

There are many forests sprinkled throughout Kyiv between residential areas
of the capital. A walk through such forest parks creates the illusion of
being somewhere beyond the city limits. This gives Kyiv residents good
reason to pack up some food and drink supplies and go for the whole day
on outings and picnics with family and friends.

Druzhby Narodiv Park located on Trukhanov Island just past the Moskovskiy
Bridge is especially popular among city residents. It stretches for many
kilometers along the Dnipro River in the direction of the outlying town of
Vyshhorod. Here you will find a large number of spots for sunbathing in an
area remote from urban civilization.

If you wish to wander through a nice forested area offering loads of
entertainment, then Holosiyivskiy Park is the best place to suit this
purpose. The most beautiful part of this park is considered to be Kitayevo.
Here there is an ancient monastery on the banks of a lake and there is a
spring with holy water, which you can reach by taking a set of convenient
stairs on a nearby hill.

Dubky Park is somewhat similar to Holosiyevo with similar hills covered
mainly with deciduous trees like oaks and maples with tiny brooks and
springs running throughout. This park stretches from the newly opened
Syretska Metro Station all the way to Peremohy Avenue and is somewhat
smaller than Holosiyevo.

Parks under reconstruction:

- Park of Partisan Glory in the Darnytsya district - construction of a
museum, paved paths, grassy lawns and flowerbeds.
- Park of Victory in the Dniprovskiy district - renovation of Burial Mound
of Immortality, construction of a cascade and round fountains, installation
of decorative lamps, planting of trees.
- Park of the National Technical University (KPI) - paved paths, felling of
dangerous trees, reconstruction of a memorial to students and teachers.
- Kurynivskiy Park in the Podil district - construction of a children's
playground and sports areas, installation of a watering system, a fountain,
a decorative fence and a supporting wall. -30-
============================================================
19. RUSSIAN VICTORY FESTIVITIES OPEN OLD WOUNDS IN EUROPE
The 60th anniversary of Nazis' defeat is hit by boycotts and bitterness

By Ian Traynor in Warsaw, The Guardian
London, United Kingdom, Friday, April 29, 2005

As President Vladimir Putin gears up for the biggest spectacular of his
five-year rule, Moscow and its former satellites in eastern Europe are
mired in rancour and recrimination about the chapter of history they are
about to commemorate.

Most central and east European leaders are due to join President George
Bush, Tony Blair, the German chancellor, Gerhard Schröder, and more than
50 heads of state and government in Moscow next month when Mr Putin will
preside over lavish ceremonies to mark Russia's finest hour - the defeat of
Nazi Germany 60 years ago.

The east Europeans, however, are heading to Moscow in anxiety and even
antipathy. After all, Stalin's "liberation" of the space between Russia and
Germany was a conquest that brutalised as well, entrenching the 45-year
cold war division of Europe.

Poland, which was invaded and partitioned by both the Third Reich and the
Russian army, and which saw its military and intellectual elite murdered by
Stalin's henchmen, is deeply ambivalent about taking part in the Red Square
parades. The Baltic republics, invaded first by Stalin, then by Hitler, and
annexed by the Soviet Union at the war's end, are also divided, with two of
the three presidents boycotting the ceremonies.

President Viktor Yushchenko of Ukraine is in two minds about going to
Moscow.

The Kremlin, seizing on the events of 60 years ago as the brightest spot in
Russia's dark 20th century, is unapologetic about the ravages its imperial
rule inflicted on central Europe for two generations.

"There is Russia with its pride and its sense of history and then there is
central Europe which is being more or less isolated, left alone with a very
different history," said Janusz Reiter, a former Polish ambassador to
Germany and director of Warsaw's Centre for International relations. "The
problem is that this history is not only selective, it eliminates the most
sensitive parts of Russian history."

Lithuania, according to the country's former president, Vytautis
Landsbergis, is being asked to go to Moscow to "celebrate its own
captivity". "Unlike Germany, Russia has never recognised its responsibility
for the war and the mass graves of the innocent," he wrote last month.
Such remarks are viewed as outrages in Moscow, given the 27 million
dead the Soviet Union suffered in defeating Hitler.

The Baltic countries were trying to equate Stalin's Soviet Union with
Hitler's Germany, a Putin aide told Russian television. "Of course, we
cannot accept these blasphemous attempts to rewrite history," said
Sergei Yastrzhembsky.

PROVOCATIONS
The mood of bitter recrimination has worsened in recent weeks with a string
of pronouncements from Moscow that Mr Reiter characterises as calculated
provocations.

Mr Putin directly attacked Poland's President Alexander Kwasniewski by
name. The Russian foreign ministry issued a statement on the allies' Yalta
conference of February 1945, declaring that Poland should be "grateful"
for the pact which divided Europe and erected the iron curtain.

Yalta is broadly seen in Poland as the burial site of postwar Polish
sovereignty and independence. For the Poles "to complain about Yalta is
a sin ... unconscionable," the Russian government stated.

More grievously, the Russian authorities have closed down a 14-year
investigation into the Katyn massacre of 1940, when Stalin's secret police
murdered 21,768 Polish military officers, intellectual leaders and clergy.
Throughout the cold war, the Kremlin had blamed the massacre on the
Nazis.

The Poles have launched their own investigation into what they term a war
crime and an act of genocide. They demand that Russia hand over the
historical dossier. The Russians refuse, saying that most of the papers are
classified. Katyn, they add, cannot be classified as a war crime, since the
Soviet Union was not at war with Poland.

The Polish parliament said last month: "Only the disclosure of the whole
truth about the crime and the condemnation of the perpetrators can heal
the wounds and lead to good relations between Poland and the Russian
Federation."

The Katyn murders occurred in the wake of the non-aggression pact between
Hitler and Stalin, reached in August 1939, a month before the Nazis began
the war by invading Poland. The secret appendixes to the pact carved up
central Europe between Berlin and Moscow. When Hitler invaded, Stalin
seized eastern Poland and nine months later took the Baltic republics.

The Kremlin has never abrogated or denounced what is known as the
Molotov-Ribbentrop pact, named after the Soviet and Nazi foreign ministers.
In the run-up to the Moscow parades on May 9, the Russians continue to
insist that they were not at war with Poland, nor did they invade or occupy
the Baltic countries, but "liberated" them.

Amid such entrenched differences over the past, the presidents of Lithuania
and Estonia are refusing to travel to Moscow.

Mr Landsbergis warned that the world leaders in Moscow next month could
end up "validating Soviet war crimes."

Mr Kwasniewski, the Polish leader, is going to Moscow despite the deep
reservations and the attacks from Russia that Polish analysts say may be
aimed at forcing a Polish boycott and discrediting the biggest of the new
EU members.

Jerzy Osiatynski, a prominent Polish analyst, says Mr Kwasniewski should
go, but only "if he is given a chance to speak out, to talk clearly in
Moscow about both attackers".

The "Victory-60" parade is as much about the future as about the past. Mr
Putin, after a string of foreign policy blunders, is looking to enhance his
prestige, while emphasising Russia's great-power status as the saviour of
Europe.

The east Europeans fear that Brussels, Berlin and Paris may acquiesce
in Mr Putin's aims, ignoring their historical grievances and their fears and
suspicions of Mr Putin's Russia.

"This is all about how to make use of history, the politicisation of
historical events," Mr Reiter said. "Putin is trying to modernise Soviet
mythology for Russia's present needs. That causes a clash with us and
the Baltics. And it shows the gap in the EU between western Europe and
central Europe, between realpolitik and the moral dimension. The priorities
for Berlin and Paris are not to upset Putin."

Stalin's epic triumph on the eastern front 60 years ago turned the Soviet
Union into a superpower. But it spelt disaster for the countries of central
and eastern Europe, which spent the next 45 years behind an iron curtain
ruled by Kremlin commissars.

The Victory-60 parades planned for Moscow next month are complicating
rather than helping reconciliation between the rulers and ruled of the old
Soviet bloc.

"This should not be about shaming and blaming the Russians," Mr
Osiatynski, the Polish analyst, said. "But we need an honest appraisal
of history." -30- [The Action Ukraine Report Monitoring Service]
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