"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"

VILLAGE LIFE IN UKRAINE FALLING FURTHER BEHIND IN
LIVING STANDARDS AND OPPORTUNITIES

"Village life in Ukraine, the subject of writers and poets for centuries,
remains almost as quiet and idyllic in some ways as in the time of
Shevchenko and others who chronicled it.

And therein may lie the problem, for most village life in Ukraine, while set
apart somewhat from the pressures of the cities, is also set apart from
some of the advantages and possibilities of the cities. Increasingly large
numbers of villages exist in which no child or young person may be seen.

Sadly, many of Ukraine's villages have become little more than waiting
rooms - for death." [article six]

"THE ACTION UKRAINE REPORT - AUR" - Number 493
E. Morgan Williams, Publisher and Editor
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, THURSDAY, May 26, 2005

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

1. "PLAY WITH MATCHES AROUND GASOLINE"
COMMENTARY AND ANALYSIS: By Yulia Mostovaya
Zerkalo Nedeli On The WEB, Mirror-Weekly, No. 19 (547)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 21-27 May 2005

2. UKRAINIAN PRESIDENT YUSHCHENKO DISMISSES REPORT
OF SPAT WITH PREMIER AS "FABLE'
Ukrayinska Pravda website, Kiev, in Ukrainian 25 May 05
BBC Monitoring Service, UK, in English, Wed, May 25, 2005

3. POLAND TO SUPPLY CHEAP PETROL TO UKRAINE
UNIAN news agency, Kiev, in Ukrainian, 25 May 05
BBC Monitoring Service, UK, in English, Wed, May 25, 2005

4. LIGHT OIL OPERA: "DON'T SAY GOODBYE"
ANALYSIS AND COMMENTARY: By Alla Yeremenko
Zerkalo Nedeli On The WEB, Mirror-Weekly, No. 19 (547)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 21-27 May 2005

5. EUROPEAN ATOMIC FORUM "UKRAINE - EU: NUCLEAR ENERGY
CO-OPERATION" IS HELD BY FORATOM
UNIAN, Kyiv, Ukraine, Wednesday, May 25, 2005

6. VILLAGE LIFE IN UKRAINE FALLING FURTHER BEHIND IN
LIVING STANDARDS AND OPPORTUNITIES
By Oksana Bondarchuk, FirsTnews
Kyiv, Ukraine, Tue, May 24, 2005

7. UKRAINE'S YUSHCHENKO PLEDGES BETTER RELATIONS WITH
BUSINESS, LESS BUREAUCRACY
AP Worldstream, Kiev, Ukraine, Wed, May 25, 2005

8. UKRAINE PRESIDENT ORDERS DEREGULATION
TV 5 Kanal, Kiev, Ukraine, in Ukrainian, 25 May 05
BBC Monitoring Service, UK, in English, Wed, May 25, 2005

9. UKRAINIAN DEPUTY PREMIER PROMISES GOOD INVESTMENT
CLIMATE FOR RUSSIAN COMPANIES
RTR Russia TV, Moscow, in Russian 1545 gmt 25 May 05
BBC Monitoring Service, UK, in English, Wed, May 25, 2005

10. UKRAINE: ZVARYCH CALLING FOR ABOLITION OF ECONOMIC CODE
Ukrainian News Agency, Kyiv, Ukraine, Wed, May 25, 2005

11. UKRAINIAN ENTREPRENEURS ASK GOVERNMENT NOT TO
WRECK SIMPLIFIED TAX SYSTEM
One Roundtable Conclusion: Ukraine has no real economic policy
International Centre for Policy Studies (ICPS)
Kyiv, Ukraine, Tuesday, May 24, 2005

12. PLAYING ON THE SAME SIDE: WHAT UNITES PRESIDENT YUSHCHENKO
AND YANUKOVYCH'S MAIN FINANCIER RINAT AKHMETOV?
East Ukrainian tycoon reportedly severs ties with opposition party
COMMENTARY: By Inna Pukish-Yunko
Vysokyy Zamok web site, Lviv, in Ukrainian 24 May 05
BBC Monitoring Service, UK, in English, Wed, May 25, 2005

13. EUROPE: THE FINAL FRONTIER
EDITORIAL: The Guardian
London, United Kingdom, Wed, May 25, 2005

14. PHOTO-EXHIBITION "ORANGE MOMENT OF LIFE" OPENED
IN EUROPEAN PARLIAMENT IN BRUSSELS
UNIAN, Kyiv, Ukraine, Wed, May 25, 2005

15. ORANGE REVOLUTION CAME TO PARIS
Alain Guillemoles, a French journalist, has authored a new book
Ukrayinska Pravda, Kyiv, Ukraine, Wed, May 25, 2005

16. 'NAMES THAT SHOULD HAVE NO PLACE ON THE MAP OF RUSSIA'
A new 'Black Book' has been released in Moscow
Window on Eurasia: By Paul Goble
UPI, Tartu, Estonia, Wed, May 25, 2005
===============================================================
1. "PLAY WITH MATCHES AROUND GASOLINE"

COMMENTARY AND ANALYSIS: By Yulia MOSTOVAYA
Zerkalo Nedeli On The WEB, Mirror-Weekly, No. 19 (547)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 21-27 May 2005

A dozen Russian oil traders and a dozen top Ukrainian officials witnessed
a “family quarrel” in the Ukrainian government. We deem it as our duty to
inform our readers about it, because turning a blind eye to symptoms of a
disease means letting it advance.

During a meeting with Russian oil traders on Thursday, President Viktor
Yushchenko suggested that Prime Minister Yulia Tymoshenko resign.
Declining to give any official comments, four participants in that meeting
confirmed the fact. The two sides describe it differently. Tymoshenko’s
proxies say, “Tymoshenko stated from the beginning that she disagreed
with the first part of the presidential decree, in which her government’s
steps to settle the oil crisis were called “non-market.”

The president apologized to the Russian oil traders for the Ukrainian
government that had obstructed their work. He added that the Ukrainian
government was the worst in Europe, saying he wished he had never
appointed Tymoshenko Prime Minister. He told her that she should join
the United Social Democrats and resign. And then he invited everyone
except her to the next room to have champagne.”

This version certainly sounds shocking and smells of exaggeration. A witness
on Yushchenko’s side tells the following, “The president was consistent: he
asked the Russian side to behave like a partner should, without plotting a
crisis every time Ukraine begins a crop-sowing campaign.

He also told them that the government had excessively relied on non-market
levers in an attempt to settle the crisis. But Yulia Tymoshenko stated her
categorical objection to the presidential decree and insisted that the
government had acted correctly. The president asked Tymoshenko to
refrain from any such public comments that exposed discord within the
team.Tymoshenko said again that she did not agree with the president’s
opinion.

After one more reproving remark made by the president, she reiterated her
categorical disagreement, thanking the Ukrainian and the Tartar companies
and saying she would talk to the Russian oil traders separately. That was
something unheard-of: the Prime Minister permitted herself to criticize the
president in the presence of foreign guests!

Yushchenko told her that she might as well resign, join the United Social
Democrats or the Regions Party, blow their pipes and beat their drums. The
president had stated many times that discussions were okay at the stage of
decision-making, but once a decision was adopted it had to be carried out.
“You either accept this rule or resign.”

No one drank any champagne. “We won’t drink champagne today,”
Yushchenko said in conclusion and added, addressing the Russian oil
traders, “We’ll have it next time and you’ll stand it.”

Presidential Press Secretary Iryna Herashshenko was very surprised to hear
about some smorgasbord after the meeting. “The president walked out of the
office looking very pleased. The prime minister and the NSDC secretary
[National Security and Defense Council Secretary Petro Poroshenko]
followed him talking.”

The prime minister’s “non-corporate” behavior insulted Yushchenko’s
presidential dignity. Such behavior is unacceptable in any democratic
European country, let alone Russia.

Tymoshenko’s self-esteem was crushed: she was compelled to capitulate
in her war against Russian oil traders. On top of that, the president told
her to resign in their presence.

Now what? - A champagne party in the Kremlin?

The May 18 presidential decree adds little to the steps the government is
already taking, but it contains something more valuable for the national oil
market: rigid rules of the game for all. The president declared that from
now on nobody would “artificially set prices for gasoline in Ukraine.” In
fact, we are witnessing the first graphic illustration of what ZN has
written about before: Yushchenko and Tymoshenko differ on economic
issues.

Yushchenko is for a “liberal market” while Tymoshenko is for regulatory
management. Yushchenko has his arguments. Tymoshenko has hers. They
had a million opportunities to exchange their arguments behind closed doors.
But they chose to follow through on the road of errors, ending up with this
confrontation and exposing Ukraine.

Tymoshenko’s road to the political dead end began when she failed to nip the
oil crisis in the bud. She may have overlooked the bud in a formidable flood
of information during the first weeks of her premiership. That was her FIRST
mistake. The SECOND mistake, according to experts, was her inadequate
response to the crisis when it blossomed two months ago.

She kept instructing the Antimonopoly Committee and the Security Service
and accusing Russian oil traders of sabotage and collusion against Ukraine,
instead of immediately lowering excise duties for petroleum products and
abolishing customs duties on their imports. She kept daydreaming about a
new state-owned oil refinery, instead of concluding contracts for oil
supplies from other parts of the world.

Independent experts see Tymoshenko’s THIRD mistake as her blind trust in
figures. The Economy Ministry advised her to set the price of A-95 gasoline
at UAH2.99 (US$0.56) per liter. Experts say that regulatory measures were
quite justified when prices were climbing at the peak of the vernal
crop-sowing campaign, when the inflation rate was 4.4 percent and prices for
gasoline grew by 11 percent. But if the government had set the temporary
price limit at UAH3.10 (US$0.59) instead of at UAH2.99 per liter, the
traders’ losses would not have been so tangible.

They reacted the hard way: the Lysychansk and Kremenchuk refineries
(Ukraine’s largest) closed for “planned repairs,” leaving practically all
filling stations without gasoline. Long lines appeared at filling stations
in central Ukraine, and in the eastern regions profiteers made the most
of the gasoline brought from Russia.

Then the president intervened. Tymoshenko is sure that he was “worked
up” by pro-Russian “well-wishers” in his close entourage, but this
allegation has no documental proofs.

It is known that Yushchenko has spent this week negotiating with Russian
President Putin and Prime Minister Fradkov and leaders of other
oil-producing countries. He rushed in to put out the fire when he understood
that the Russian oil traders would stand their ground and that, in their
relationships with the Ukrainian government, diamond was cutting diamond.
But where was Yushchenko before?

Did he convene an emergency session of the NSDC when he saw that the
government was heading up a blind alley? Did he meet with the Cabinet to
explain to Tymoshenko how else the problem could be resolved? Did he
forward to the Cabinet the analytical reports and recommendations prepared
by his sapient advisers? Did he authorize his envoy to the Cabinet Volodymyr
Lanoviy, who was present at all its meetings and watched every decision
discussed and adopted, to prevent erroneous steps?

No, he did not. But speaking in Dnipropetrovsk, he blamed the oil crisis on
oil traders and the absence of a strategic program for diversified oil
supplies. When all was said and done (when Yushchenko made critical remarks
about the government and Tymoshenko did all she could to settle the crisis),
the president evaluated the government’s performance as very satisfactory,
which meant that he did not regard its blunders as fatal.

Now he does. A-95 is sold at UAH3.20 (US$0.63). Western ambassadors and
Russian businessmen no longer accuse the Ukrainian government of manual
control. Russian traders net their profits, and the government learns a
lesson of market economy and subordination. Everything is fine as can be.

But there is a strong feeling of shame and apprehension. Will Yushchenko
ever be able to create a businesslike and respectful atmosphere in his team?

Hardly, judging from his declarations and emotional responses. Yushchenko
is king. Tymoshenko has a strong but difficult nature and a persecution
complex. Poroshenko will never tolerate limitations on his influence and
will never change his interests. That is why it does not matter much now
whether Tymoshenko retains her post or resigns. It is necessary to change
formulas, not variables.

This conflict is most likely to resolve in a hard talk between Yushchenko
and Tymoshenko, probably after the next NSDC meeting. Tymoshenko may
apologize for her indiscreet behavior and Yushchenko may apologize for his
unrestrained fit of anger. But will that add trust to their relationships,
or will it simply put off the traditional Kuchma-era finale of the
“President-Premier” competition?

Don’t they understand that their relationships are not just their personal
affair, but that the entire nation depends on them? Does it occur to them
that, if their disputes end up in a falling-out, they may frustrate millions
of hopes? All these petty subjective altercations might appear insignificant
while these two leaders still enjoy tremendous popular trust. But the devil
is in such trifles, ambitions, and mistrust. This team has everything for
success. All it needs is a good exorcist.

On Wednesday and Thursday, the Razumkov Center conducted a phone poll
among residents of Kyiv. Seven hundred and ten respondents aged 18 and up
were offered three questions. Question ONE was whether the gas crisis
created any personal problems or inconveniences. The results are as follows.
Nineteen point two percent of respondents said “Yes, big problems” (40 per-
cent of car owners gave the same answer). Nineteen point one percent of
respondents (26.4 percent of car owners) had “certain problems and
inconveniences.”

Sixty point seven percent had “no problems or inconveniences” (this concerns
34 percent of car owners). And 1 percent of lucky guys never heard of any
gas crisis. As we can see, the crisis created serious problems for drivers,
but the majority of Kyiv residents did not even feel it, although the
capital city was the epicenter of the gas shortage.

Question TWO was about possible causes of the gas crisis. Fifteen point six
percent of respondents explained it as “the Ukrainian government’s
unprofessional policy of price limitation.” Of course, Viktor Yushchenko has
a “market” approach to the issue, but he has to explain to the voters why
they have to buy gas at higher prices. Eighteen percent of respondents see
the root of the evil in “the oil traders’ desire to receive super profits.”

But most respondents explained the crisis by “Russia’s economic pressure
as a means of influence on Ukraine’s policy.” Such returns could be regarded
as a product of Tymoshenko’s propaganda, but for the president’s widely
broadcast criticisms of the government. Five point three percent of Kyiv
residents said that the gas crisis was “just a coincidence.” Six percent
found no acceptable explanation in the offered list, and 19 percent had no
answer.

Question THREE was about a feasible way out. Forty-nine percent of
respondents believe that “the government should secure supplies of gasoline
from other sources to saturate the national market and beat the price down.

Thirteen percent think that it would be optimal to “put pressure on oil
traders through the Antimonopoly Committee, the Tax Administration, and the
Prosecutor General Office and force them to lower the prices and sell enough
gasoline.”

Only 5.7 percent of respondents said that the government should abolish
price limitations. Two point three percent think that things will pan out
somehow sooner or later. Eight percent withheld their opinion, and 21
percent did not have any.

As we can see, the government’s steps are supported by an overwhelming
majority of Kyiv residents, while the president’s approach, which is correct
in terms of market economy, is supported by a mere 6 percent. Yet, the
ability to take unpopular steps is a must for the leader of any
country. -30-
-------------------------------------------------------------------------------------------------------------
LINK: http://www.mirror-weekly.com/ie/show/547/50107/
===============================================================
2. UKRAINIAN PRESIDENT YUSHCHENKO DISMISSES REPORT OF
SPAT WITH PREMIER AS "FABLE'

Ukrayinska Pravda website, Kiev, in Ukrainian 25 May 05
BBC Monitoring Service, UK, in English, Wed, May 25, 2005

KIEV - President Viktor Yushchenko has spoken out against raising the issue
of dismissing Prime Minister Yuliya Tymoshenko over her actions during the
petrol crisis. Asked by journalists whether Yushchenko will dismiss
Tymoshenko if she takes similar regulatory steps on other markets in
addition to the petrol one, the president said:

"Let's not ask questions like this. As soon as Zerkalo Nedeli publishes some
fable, you're then asked to comment on it." Zerkalo Nedeli [influential
independent weekly] reported that Yushchenko suggested that Tymoshenko
should step down after she voiced disagreement with him on several occasions
in public and said that the fuel crisis was the result of a conspiracy by
Russian companies.

[Yushchenko criticized the cabinet for using "non-market" methods in dealing
with the fuel crisis, including by introducing caps on petrol prices.]
"Let us forget this topic. There have been no intrigues by Russia or
Ukrainian citizens. The cabinet did something from which lessons should be
drawn. Don't invent myths or legends (about a conspiracy), just do the
honest thing," Yushchenko said.

"Given this sort of dynamics", A-95 petrol prices were fixed at the level of
A-92 petrol for weeks, "there is only one way out - liberalizing the
market", Yushchenko said. "And we settled [the crisis] in a matter of a few
hours," Yushchenko said. He added that A-95 was the petrol "rich people
use". "And putting caps on its price is not a social position we should
argue about," Yushchenko said.

He assured journalists: "I will make sure that the government uses
exclusively market means to deal with issues on the meat, oil products and
crude oil markets." "Friends, I am a tolerant but demanding sort of person.
I will demand one thing from the government - lessons should be drawn from
the things that have been committed. We should understand clearly that the
oil market is now the way it was made by the previous administration,"
Yushchenko said.

Yushchenko said that Ukraine "depends on supplies from one region". He said
there is only one way out of the situation: "As long as yesterday's methods
of keeping the prices down are used, we will not open up the possibility of
competitive supplies of even crude oil to Ukraine".

"Buying oil products at world prices makes it possible to buy them in
alternative regions. When this step has been made, Libyan oil, oil from the
Caucasus, Kazakh, Russian and any other sort of oil will become accessible
to us." [Passage omitted: Yushchenko says oil-refining industry set to
develop in Ukraine.] -30- [Action Ukraine Report Monitoring Service]
===============================================================
3. POLAND TO SUPPLY CHEAP PETROL TO UKRAINE

UNIAN news agency, Kiev, in Ukrainian, 25 May 05
BBC Monitoring Service, UK, in English, Wed, May 25, 2005

MOSCOW - Starting from next Sunday [29 May], Ukraine will receive 50,000
tonnes of A-95 petrol, that is the cheapest petrol to be supplied to
Ukraine, Ukrainian Transport and Communications Minister Yevhen Chervonenko
said after the first day of the 89th session of the council of ministers of
the European confederation of transport ministers.

"Poland will make a friendly move to resolve the fuel crisis in Ukraine,"
Chervonenko said. He said that the petrol would arrive by rail and added
that the supply had been agreed thanks to a member of the council of
investors under the Transport and Communications Ministry.

As for the situation on Ukraine's fuel market, Chervonenko said that he had
always been against forceful and non-market measures to resolve the fuel
crisis. (http://www.unian.net/eng) -30-
===============================================================
4. LIGHT OIL OPERA: "DON'T SAY GOODBYE"

ANALYSIS AND COMMENTARY: By Alla Yeremenko
Zerkalo Nedeli On The WEB, Mirror-Weekly, No. 19 (547)
International Social Political Weekly
Kyiv, Ukraine, Saturday, 21-27 May 2005

“One hundred and ten days: one hundred things done and one hundred thousand
problems” was how Prime Minister Yulia Tymoshenko summed up the first 100
days of her government on Thursday. The gravest problem was the oil crisis,
which she bluntly called “a cartel collusion of oil suppliers” and “sabotage
of oil market operators.”

After gas price hikes in April, drivers had to queue up at filling stations
in mid-May. Sometimes there were anecdotic situations: some smart operators
sold what they said was A-95 gasoline under the counter at UAH5 to UAH7
(US$1 to US$1.40) per liter, but engines died a few miles later.

That was a perfect pretext for criticizing the government. The loudest noise
came from those who call themselves the opposition and who failed to ensure
the country’s energy security when they were its government. But they were
not the only ones who “contributed” to this crisis.

This government certainly is liable, but what could it do if this crisis had
been programmed long before? Economy Minister Sergey Teryokhin complains
that “the government is completely debarred from the fuel market.” And
Tymoshenko blames suppliers of Russian crude oil for what she calls “cartel
collusion.”

At the peak of the crisis, President Viktor Yushchenko distanced himself
from the Cabinet and added his portion of criticism. His car is filled with
gasoline at UAH2.75 (US$0.55) per liter (thanks to the presidential
maintenance superintendents who concluded a long-term contract for fuel
supplies at fixed prices back in January). But the rest of Ukrainians were
not so farsighted.

Objectively, the situation on the national market of petroleum products
looks like this... It is an obvious fact that unlike any of its
predecessors, the Tymoshenko government tries to find a systemic solution
to the problem. However, it is going to take a lot of time, money, and
political will. We are in for another fortnight of gas shortages and
creeping prices. But we have to admit that it is a small price to pay for
stability and independence of the national energy market.

There are different attitudes to the government’s steps. But let us imagine
what would have happened if the Cabinet had not resorted to such
“non-market” steps as limitation of profitability rate and prices or a
temporary ban on exports of light oil products. Then prices would have
soared above UAH4 ($0.80) per liter of A-95 gasoline and reached
UAH4.70 ($0.83) per liter of A-98.

The Price Crisis and the Government -----

The reason is miserably simple: nobody has ever monitored or analyzed the
national oil market in all the 14 years of independence. Nobody has even
tried to forecast possible crises. Of course, there are lots of institutes
engaged in oil-related research, experts, and advisers. But there has been
no demand for their job. The government managed to more or less effectively
cope with the problem of fuel supplies to the agricultural sector, but got a
“present” on its first hundred days: “sabotage,” as Tymoshenko put it. The
word may be a bit too strong, but it is a fact that oil companies hated to
miss the natural opportunity to get super profits during motor fuel price
hikes.

The government admits that “manual control” of the oil market is not a
market method, but what should it do in this emergency? One may agree or
disagree with different assessments of the situation, but no assessment can
fill fuel tanks.

The government’s administrative measures are situational (and, hopefully,
successful). But the government went further: it finally embarked on a
complex and systemic approach to the oil issue. It reduced the excise duties
levied on supplies of diesel and gasoline to last year’s level and abolished
customs duties on imported light oil products. Until the market gets
saturated and stabilized, the government will not take any other fiscal
measures. And afterwards it means to leave it all up to market rules.

Commenting on the crisis situation, Prime Minister Tymoshenko, Economy
Minister Teryokhin, and Fuel and Energy Minister Plachkov explained what
basic measures the government was taking. According to them, the govern-
ment is:buying light oil products from the Baltic countries, Belarus, and
Poland; encouraging six Ukrainian refineries to maximally increase their
capacity; increasing crude oil supplies to the government-controlled
Nadvirna, Drogobych, and Kremenchuk refineries; and pressing the
Parliament for adequate legislative steps.

In order to prevent such crises in the future, the government undertook to
build at least 1,000 gas filling stations (the bulk of operational ones were
inconsiderately sold to Russian oil companies in the 1990s).

The government decided to build a new refinery, which is supposed to
process up to 10 million tons of crude oil a year. The project is going to
take huge investment and at least 18 months to complete.

This venture may seem inexpedient, because Ukraine already has more than
enough oil processing capacity. But firstly, the most technologically
advanced refineries in Lysychansk, Odessa, and Kherson are not under the
government’s control and their cracking level barely reaches 50 percent.

The government-controlled refineries use outdated technologies, and their
processing capacities are rather low. So a new refinery could solve several
problems at a time and produce fuels up to European standards.

The government undertook to create a strategic reserve of light oil as a
resource for stabilizing interventions in the future. But where is it going
to store 2 million tons of it?

Telling journalists about their intentions on Monday, the prime minister and
other members of her government hoped that on Tuesday Parliament would
adopt the bill that was supposed to considerably influence the oil market.

The Government and the Parliament -----

The lawmakers did adopt the bill, although not without difficulties, and the
debates were quite eloquent and exemplary.

In a rage of proletarian indignation, Communist MP Solomatin reminded all
that the biggest refineries were ceded to Russian oil companies when
Yushchenko was the prime minister and Tymoshenko was the first vice prime
minister in charge of the fuel and energy sector. But he omitted an
important fact: at that time, such strategic decisions were made personally
by Leonid Kuchma, not by the government.

Another Communist MP Kravchenko blamed the gas crisis on the Tymoshenko
government, saying, “As soon as this government steps down, life will get
better.” The Communist faction voted in a body against the bill. But the
rest 310 MPs said yeah.

This political bout was won, but it was rather protracted. While hundreds of
thousands of Ukrainian drivers were standing in long lines at gas filling
stations, the lawmakers were busy deciding the fate of the Transcarpathian
and Donetsk governors (currently kept in custody and indicted with
embezzlement and abuse of authority). The United Social Democrats blocked
the parliament rostrum on Tuesday morning, insisting that the issue of
“political persecution of opponents” be considered in the first place as the
prime agenda item.

The Economy Ministry Explains -----

Explaining why the crisis broke out, Economy Minister Teryokhin told the
lawmakers the following: “In the first half of May, the oil refineries
received 494,500 tons of crude oil, or 38.6 percent less than in the
respective period of last year. They processed 564,500 tons (11.1 percent
less than in the respective period of last year) and produced 91,000 tons of
gasoline and 173,000 tons of diesel fuel, or respectively 27.9 percent and
2.2 percent less.

Such a critical decrease in the volumes of processed oil resulted in an
imbalance between offer and demand. The shortage is estimated at 200,000
tons of light oil products.

“The shortage was also caused by the protracted spring and higher demand
for high-octane gasoline; exports of oil products during the period of low
demand in March; the suspension of operation at the Lysychansk and Kherson
refineries due to repairs. No imports can saturate the market within the
existent legal environments, especially with such heavy customs duties on
gasoline and diesel imports…

“In 12 days of May, only 200 tons of gasoline and 16,000 tons of diesel fuel
was supplied, which was about 11 percent less than in the same period of
last year. The shortage of motor fuel triggered price hikes… The best way
out is to abolish the customs duty on imported motor fuel and ease the tax
pressure in terms of excise duties.”

Describing the situation on the global oil market, Teryokhin noted that
Russia had raised its export duty from US$83 to US$102.6 per ton and
would raise it to US$136.2 on June 1. This is the first time that Russia has
set such a high export duty.

“It should be noted that the export duty rate has no direct correlation with
the price for crude oil,” said Teryokhin “But trying to make up for their
lowered profits, Russian oil companies raised the price of the crude oil
they supply to Ukrainian refineries. As a result, prices for oil products
grow.”

According to Teryokhin, in the first half of May, the price for crude oil
imported from Russia averaged US$291 per ton, and in the second half it
is US$308 per ton. After Russia raises the export duty to US$136.2 per
ton, the price may exceed US$330 per ton.

There have been sharp fluctuations on the global market of crude oil, with
the general upward trend persisting. In the first two weeks of May, the
price for the Brand oil went 2.7 percent down and totaled US$44.35 per
barrel (US$324 per ton). However, Ukraine can hardly count on cheaper
supplies of the Urals mix from Russia, at least because Russia revises its
export duties every two months, adjusting them to the global upward
dynamics.

On April 14, the Economy Ministry set a limit on wholesale prices for
gasoline and diesel (UAH3 per liter of A-95) and raised them a little a week
later. According to the minister, in mid-May average wholesale prices for
diesel and A-95 gasoline exceeded the set limits by 9.7 percent and 4
percent respectively. And retail traders responded to the price limits in
their own way: they simply closed their filling stations, and the few that
remained open had long lines of cars and trucks.

Heeding the government’s explanations and persuasions, the lawmakers
agreed to set excise duties for high-octane gasoline at Euro 60 per 1,000
kg and Euro 30 per 1,000 kg of diesel. Customs duties on imported
gasoline and diesel were abolished.

In the meantime, two tankers with fuel are heading for Ukrainian Black Sea
ports. According to well-informed sources, MP Alexander Volkov gave the
order. .

The President Is Against “Manual Regulation” -----

Having endorsed the bill on Wednesday, President Yushchenko issued a
decree “On Measures to Stabilize the Situation on the Market of Oil and Oil
Products.” He stated that, from now on, nobody would “regulate prices in
Ukraine by administrative methods.” By “nobody,” he must have meant the
Tymoshenko government.

Tymoshenko stated that the lowered excise duty and the zero import duty
rate gave a possibility for non-administrative influence on the national oil
market, referring to excise, export, and import duties as standard forms of
protection in all economies.

But Yushchenko went further, calling the government’s steps to stabilize the
national oil market “improper.”

Of course, the government should not regulate the oil market manually for
too long. But it had no choice in this emergency situation. And after all,
gas was already available at filling stations on Wednesday.

Back in April, Yushchenko talked about sabotage and collusion of traders.
And now, when the government has managed to put up the fire, he calls its
methods “non-market.” In his decree, he orders “to ensure stable and
unchanged principles of financial, pricing, taxation, and customs policies
in regard to transactions involving crude oil, oil products, and natural
gas, including their transit; to prevent promissory-note settlements in
import transactions; to ensure maximal transparency in decision-making on
the regulation of the oil market.”

It should be noted that deductions from oil transactions make up a
considerable part of revenues to the budget and are legislatively included
in its target parameters.

The president ordered the government to urgently draft a bill on “zero VAT
rate for transactions involving oil transit via Ukraine.” The move is
supposed to prevent unfair owners of transit carriers from profiting on the
reimbursement of export VAT. But it is unknown where the government is
going to get enough money to patch this hole in its widely advertised
“socially oriented” national budget. Besides, it is unknown whether the
parliament will adopt these amendments.

The presidential decree also authorizes the government to optimize the
tariffs for the transportation of oil, transit included, which have not been
revised in many years.

The decree orders the government to create, within four weeks, “a vertically
integrated scheme of managing the corporate rights that belong to the state
in the authorized funds of oil extracting and processing companies.”

In a separate instruction Yushchenko specifies that Tymoshenko must ensure
transfer of state-owned stakes in three major Ukrainian oil companies to the
authorized fund of the public holding Ukrnafta. Besides, the national
holding company Naftogaz Ukrainy must preserve its parcel of 50 percent plus
one share in the enlarged authorized fund of Ukrnafta. The deadline is June
10.

Notably, the president instructed his first aide Alexander Tretyakov to
control the execution of his decree.

The problem is that an instruction is not a decree and so is not a normative
act. Besides, the president is authorized to give instructions to his
subordinates but not to the government. According to the Constitution, the
government is subordinated to the president but reportable to Parliament.
Why is the presidential aide charged with control over the execution of this
instruction?

Nobody doubts Tretyakov’s competence in fuel-related matters. But
according to Yushchenko’s logic, an official of the presidential service is
authorized… to control the prime minister! This is illogical, illegal, and
immoral. Yushchenko thus exceeds his presidential authority stipulated by
Article 116 of the Constitution.

And finally, the legality of the presidential decree of May 18 looks rather
dubious: the Constitution terminated the president’s right to issue such
acts back in 1999.

The government has been instructed to adopt a program for creating a state
reserve of light oil products within a month and to develop a program for
diversified supplies of crude oil within two months. Besides, the government
has two weeks to determine a list of countries where Ukrainian delegations
must go to negotiate oil supplies.

These deadlines are hardly feasible: last spring the Yanukovych government
planned to create a strategic reserve of oil but never managed to find
enough financial and storage resources. Now the Tymoshenko government
is facing the same problems.

Yushchenko ordered the Economy Ministry to immediately abrogate all its
resolutions on administrative regulation of prices and to report regularly
on all trends (prices, volumes, and tariffs) on the global oil market.

In a separate clause, the decree praises the oil processing companies for
their “intention to further keep lower prices for socially oriented oil
products.”

On May 19, Yushchenko met with representatives of major oil processing and
supplying companies. The tenor of the meeting was “Guys, let’s be friends
and meet each other halfway.” He called for good partnership on a clean
slate.

Hopefully, they were inspired and encouraged by the president, who reproved
his government in the presence of Russian oil barons. -30-
-----------------------------------------------------------------------------------------------------------------
LINK: http://www.mirror-weekly.com/ie/show/547/50108/
===============================================================
5. EUROPEAN ATOMIC FORUM "UKRAINE - EU: NUCLEAR ENERGY
CO-OPERATION" IS HELD BY FORATOM

UNIAN, Kyiv, Ukraine, Wednesday, May 25, 2005

KYIV - The "Industry Day Ukraine - EU: Nuclear Energy Co-operation",
initiated by the European Atomic Forum (FORATOM), a Brussels-based
trade association for the nuclear energy industry in Europe, will be held on
25 May 2005.

The Seminar's objective is to lay the foundation for the subject oriented
co-operation between representatives and companies of Europe and Ukraine.
Also, discussion will be focused on the electricity generation by the
Ukrainian NPPs and relevant topical issues both sides deem to tackle.

The FORATOM's interest in Ukraine is explained by the scope of its nuclear
power potential as well as effective industrial, R&D and legislative base.
Representatives of industry, legislative and governmental bodies will
discuss ways and means of establishing productive direct co-operation ties
between the sides for the future.

The Ukrainian delegation will be represented by Head of the Ukrainian
Mission to the EU, Ambassador Roman Shpeck, Deputy Minister of Fuel and
Energy M. Steinberg, Deputy Chairman of the State Nuclear Regulatory
Committee S. Bozhko, President of NSEC "ENERGOATOM" Y. Nedashkivskyi,
First Vice-president, Director of Operating Body, NSEC "ENERGOATOM"
Y.Kovrizhkin.

Members of the European Parliament, the International Atomic Energy Agency,
the European Energy Forum, the European Commission etc. will also join the
discussion. (http://www.unian.net/eng) -30-
-------------------------------------------------------------------------------------------------------------------
UNIAN NOTE: The European Atomic Forum (FORATOM) is the Brussels-
based trade association for the nuclear energy industry in Europe. FORATOM's
main objectives are to promote the use of nuclear energy in Europe and to
represent the interests of the region's nuclear industry. In pursuing these
goals, FORATOM aims to participate fully in Europe's energy debate and to
make the voice of the industry heard in discussions about the EU's energy
future.

Also, FORATOM's main areas of interest include legal affairs, EU accession,
security of energy supply, transport, trade issues, research, safety, plant
decommissioning, waste management, quality management, climate change
and sustainable development. These issues are reflected in the titles and
terms of reference of the various working groups and task forces.
===============================================================
6. VILLAGE LIFE IN UKRAINE FALLING FURTHER BEHIND IN
LIVING STANDARDS AND OPPORTUNITIES

By Oksana Bondarchuk, FirsTnews
Kyiv, Ukraine, Tue, May 24, 2005

Village life in Ukraine, the subject of writers and poets for centuries,
remains almost as quiet and idyllic in some ways as in the time of
Shevchenko and others who chronicled it.

And therein may lie the problem, for most village life in Ukraine, while set
apart somewhat from the pressures of the cities, is also set apart from
some of the advantages and possibilities of the cities. Increasingly large
numbers of villages exist in which no child or young person may be seen.

Sadly, many of Ukraine's villages have become little more than waiting
rooms - for death.

KYIV, May 24 -- For centuries, villages served as a vibrant focus for life
in Ukraine, and many writers, artists and other creative people were
nurtured in and received inspiration from village experiences. Today,
however, many settlements show signs of gradual decline. The problems
villages face in modern Ukraine were addressed at a recent conference at
the Ministry of the Agroindustrial Complex.

Representatives of the All-Ukrainian Union Of Agricultural Companies
gathered with Minister Oleksandr Baranivskyi and Verkhovna Rada head
Volodymyr Lytvyn to discuss today's village problems, most centering on the
needs of agriculture, the basis upon which most of Ukraine's villages were
established. All participants agreed that rural villages are in a very poor
condition.

"Such a difficult situation, as it is today, has not been seen in the
village for the last 14 years. Today agricultural production is at the
post-war level," the head of the all-Ukrainian union of agricultural
companies Oleksandr Borovyk said. The social sphere is at its lowest
level of development here.

"All conveniences for city dwellers are supported by the state budget. But
renovation of certain level of life [in the country] is impossible without
any money," Borovyk added. Implying that money earmarked for villages
seems to disappear at the district level, he complained, "The agrarian
ministry has responsibility for the development of village social life, but
all the money we are sending is taken at the local level then."

The social sphere can't be improved without serious financing. At the same
time, people are leaving villages in search for a better life, away from
primitive conditions and in search of more stable income.

The basic principle of the reform in this field was that land must be in the
possession of those who work on it, said Hryhory Panasuk, the head of the
agricultural company, Peremoga. However, older people and pensioners
make up a substantial proportion -- about 30 percent -- of the rural
population. They can hardly cope with large land shares.

"I always give such an example: in my native village there is no child, no
young person," Baranivskyi said. Lytvyn agreed with the minister at the
conference that a serious problem for today is how to attract people to
villages.

"Neither teachers nor doctors want to go to villages. They need motivation.
There should be some compensation for lack of good roads, for the absence
of [centralized] gas, for wearing rubber boots [because of poor street
conditions]," Baranivskyi continued.

Baranivskyi told of an experience from one university. He said that about
150 students expressed their readiness to go to the country to work or start
a business, if they received financial support of about $20,000 to get
established. "Otherwise I don't know how to attract young people today to
the village after they finish the university," the minister added.

Nevertheless, there are some people who work in the country today and who
are spending their lives not only under difficult conditions, but also in
accordance with some strange rules. Panasuk told about the problems facing
a machine-operator. Even though there are usually 24 working days in a
month, machine-operators' work is seasonal and he does not need to work on
each of the 24 days. This is the peculiarity of the job that prevents him
from earning a full monthly salary. Consequently, workers like machine
operators and others who are seasonal, do not earn enough money to make
ends meet.

Agricultural reform was started back in 1990, but according to Lytvyn, the
basis of the reform was ill-conceived. The situation hasn't improved. He
said that the state of villages today is so difficult that it is necessary
to direct all the country's forces to improve the situation.

"The analysis of today's situation reveals that, in general, things are
getting worse. Does a village need reform? Without a doubt! But it [reform]
should be done differently," Borovyk concluded at the end of his speech.

"We need to stop talking and review everything that is left," Lytvyn
appealed. -30- [The Action Ukraine Report Monitoring Service]
---------------------------------------------------------------------------------------------------------
LINK: http://firstnews.com.ua/en/food/food.html?id=53428
===============================================================
7. UKRAINE'S YUSHCHENKO PLEDGES BETTER RELATIONS WITH
BUSINESS, LESS BUREAUCRACY

AP Worldstream, Kiev, Ukraine, Wed, May 25, 2005

KIEV - Ukrainian President Viktor Yushchenko on Wednesday urged dialogue
between the government and business leaders, promising to cut down on
bureaucracy and end the corrupt ties that flourished under former President
Leonid Kuchma's regime.

"I want to start dialogue with business from scratch," Yushchenko said at a
meeting with leading business executives and government officials in
downtown Kiev. Those hidden connections between officials and some
businesses were preventing the state from moving ahead with its reform
plans, Yushchenko said. The Ukrainian leader also said the government would
reconsider its tax policy to balance the burden on businesses.

Yushchenko who became president following last year's bitterly contested
presidential vote, pledged that the partnership between government and
business would be a key priority. He vowed to "drastically reduce contacts
between entrepreneurs with state bodies" and to curb bureaucracy.

At the meeting, Ukrainian Prime Minister Yulia Tymoshenko announced that
the government had created a new council of entrepreneurs that meets each
Monday to consider problems of business and said that the government would
not adopt any new decree without approval of the new body.

"I want you (business people) to trust the new government," said Tymoshenko.
However, Andriy Dashkevych, the head of the state committee on
entrepreneurship, claimed that many governmental moves involving small and
medium-sized businesses were made "in violation of the law."

"Our government makes one step forward and two steps back ... it is high
time to start a dialogue," said Aleksandra Kuzhel, a businesswoman.
===============================================================
NOTE: Additional names for the AUR distribution list are always welcome.
===============================================================
8. UKRAINE PRESIDENT ORDERS DEREGULATION

TV 5 Kanal, Kiev, Ukraine, in Ukrainian, 25 May 05
BBC Monitoring Service, UK, in English, Wed, May 25, 2005

KYIV - President Viktor Yushchenko has ordered the government to cancel
about a thousand decisions introducing licensing and permits for certain
types of business activity. Speaking at a business forum in Kiev, he also
called on the cabinet to stop blaming "conspiracies" by oil companies for
the recent petrol crisis. Also today, the cabinet lifted petrol price caps
in compliance with the president's decree issued last week.

The following is the text of report by Ukrainian television TV 5 Kanal on 25
May:

[Presenter] A business forum called "Regulation policy as a guarantee of
transparency and openness of the government" is underway in Kiev. President
Viktor Yushchenko is taking part in the forum. He has said he is ready to
start dialogue with business circles from a clean slate. Our correspondent
Yehor Sobolev is following the developments. Yehor, what are the president
and the businessmen talking about?

[Correspondent] They are talking about good news for business. Yushchenko
told the forum that the government is working on several initiatives on
changes to the taxation policy - something businessmen will obviously
welcome. We are talking about a simplification of the taxation system.

Instead of the current multitude of taxes on the payroll, the government is
planning to introduce a single social tax. This has long been called for to
reduce the shadow sector of the economy and so that companies could pay
wages to their employees legally [as opposed to untaxed cash].

Another thing Yushchenko talked about is making it easier to do business in
Ukraine. He ordered the cabinet, to the applause of the audience, to abolish
about a thousand government decisions which give the government the right
to issue various licences and permits, or to control business in other ways.
Yushchenko said such a measure was needed to enable business to work
freely.

In this context he also mentioned the energy crisis, saying that the
government had been abusing administrative methods of regulating the
[energy] market. This is what Yushchenko said:

[Yushchenko] I believe that the topic of the so-called energy crisis is now
closed. And I ask those who have patience and who have the sense to stop
making comments on this subject about conspiracies, plots and so on.
[Apparently alluding to repeated statements by Prime Minister Tymoshenko and
Deputy Prime Minister Mykola Tomenko accusing Russian oil companies of
orchestrating petrol shortages.]

[Presenter] And today the government ended price regulation on the energy
market. The Economics Ministry has cancelled its own decree which introduced
price caps on petrol and diesel. This comes after Yushchenko criticized the
cabinet's policy of trying to keep petrol prices from rising by
administrative means. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
9. UKRAINIAN DEPUTY PREMIER PROMISES GOOD INVESTMENT
CLIMATE FOR RUSSIAN COMPANIES

RTR Russia TV, Moscow, in Russian 1545 gmt 25 May 05
BBC Monitoring Service - United Kingdom; May 25, 2005

The guest in the 25 May edition of "Vesti-Podrobnosti" was Ukraine's First
Deputy Prime Minister Anatoliy Kinakh who spoke over video link from Kiev.
The programme was hosted by Dmitriy Kiselev, who noted that it was Kinakh
who had apologized before Russian oil companies for administrative price
restrictions on petrol, which had caused the petrol crisis.

Kinakh expanded on traditional closeness of relations between Russia and
Ukraine, said that the issue of petrol prices had been resolved and invited
Russian investors to the Ukrainian market: "I am convinced that the
Ukrainian market is very favourable for Russian investors. We invite
everyone to work with us and guarantee equal and transparent competition,
a high level of security for business and the protection of ownership
rights."

Kinakh said: "Ukraine will actively take part in forming single economic
space. We think that is a unique opportunity for all states - Ukraine,
Russia, Belarus and Kazakhstan - to create more favourable relations for
economic cooperation and for economic integration". He added: "I am
convinced that the single economic space should definitely go through its
first stage of forming a zone of free trade without exemptions and without
exceptions, on the basis of a free movement of goods and services in the
economic space of the four states." He also called for synchronized actions
with Russia in joining the WTO.

Kinakh rejected the reports that there are "blacklists" of enterprises in
the context of redistribution of enterprises. He promised improvement of
investment climate in Ukraine (Duration 15') -30-
===============================================================
10. UKRAINE: ZVARYCH CALLING FOR ABOLITION OF ECONOMIC CODE

Ukrainian News Agency, Kyiv, Ukraine, Wed, May 25, 2005

KYIV - Justice Minister Roman Zvarych is calling for abolition of the
Economic Code and inclusion of its main provisions in the active Civil Code.
Zvarych announced this on Tuesday, May 24, in a speech at a conference
entitled "Issues of Legal Support for Economic and Social Policies of
Ukraine" at the Yaroslav the Wise national Law Academy in Kharkiv.

According to Zvarych, professional lawyers are well aware of the problems
involving the fact that these codes regulate the same situations,
particularly the creation and operations of private legal entities.

"According to our calculations, it is necessary to draft at least several
additional new laws and amend 33 legislative acts. And this takes into
account the fact that the parliament has approved the first reading of the
law 'On Introducing Amendments in the Economic Code of Ukraine,'" Zvarych
said.

As Ukrainian News earlier reported, the code came into force on January 1,
2004. Among other things, the Economic Code includes provisions of the
laws on prevention of unfair competition, on enterprises, on bankruptcy, on
prices and price formation, on securities, etc. A section of the Economic
Code stipulates the sanctions that should be imposed open subjects of
economic activity.

For example, the Economic Code stipulates a fine equal to 20% of the value
of a contract for violation of the terms of the contract; a daily penalty
equal to 0.1% of the value of a contract for violation of the deadline for
implementation of the contract and a daily penalty equal to 7% of the value
of the contract after the thirtieth day of expiration of the deadline.

At the same time, the Economic Code allows stipulation of fines directly in
agreements concluded by subjects of economic operations. President
Viktor Yuschenko appointed Zvarych as Ukraine's justice minister on
February 4. -30-
===============================================================
11. UKRAINIAN ENTREPRENEURS ASK GOVERNMENT NOT TO
WRECK SIMPLIFIED TAX SYSTEM
One Roundtable Conclusion: Ukraine has no real economic policy

International Centre for Policy Studies (ICPS)
Kyiv, Ukraine, Tuesday, May 24, 2005

Representatives of Ukrainian SMEs are proposing that the Government
improve the prevention of tax evasion and raise single tax rates, but
not change the rules of the simplified tax system the way that has been
written into the amendments to the 2005 State Budget Law.

The conclusions of a roundtable called "PORA Povazhaty Pidpryyemtsiv"
[Time to Respect Business] were used by the Government to adopt
decisions aimed at improving the situation. However, these changes are
likely to have only a temporary impact if the Government does not develop
a full-fledged policy towards business soon

A roundtable called "Time to Respect Business" took place on 12 May
2005, the purpose of which was to arrange a dialog among Government,
business and the general public on the impact of amendments to the
current tax system and to regulations governing SMEs. The event was
organized by:

* the International Centre for Policy Studies (ICPS);
* PORA, a civic group;
* the Center for Institutional Development;
* the Institute for a Competitive Society;
* the Center for Political and Legal Reform; and
* the Civil Society Institute.

At the roundtable, all stakeholders were represented:
* regional and sectoral business associations;
* businesses operating under the simplified tax system;
* Government-Finance Minister Viktor Pynzenyk and First Deputy STA
Chair Mykola Katerynchuk;
* VR deputies Volodymyr Bondarenko, Ksenia Liapina, and Mykola
Onishchuk;
* experts from top community organizations and think-tanks.

Participants focused their attention on analyzing amendments to the
simplified tax system contained in the 25 March 2005 Law #2505-IV "On
amending the 2005 State Budget Law and certain other legislation." This
law changes the conditions for taxing SMEs in three major ways:

* legal entities subject to the 10% tax must register as payers of
the VAT;
* sole proprietors undertaking certain types of business activity are
no longer eligible to use the simplified tax system;
* certain types of business activity are effectively subject to
double taxation on the personal incomes of sole proprietors.

No common ground among opposing sides ----------

The debate was built around five questions:
* What is the purpose of changing the system for taxing and
regulating SMEs?
* How effectively do these decisions help achieve the declared
purpose?
* What problems have emerged as a result of these decisions?
* What are other alternatives to achieving the same purpose?
* How can the negative impact of these decisions be mitigated?

During the roundtable, two different views of these issues were
presented: the position of businesses, which was supported by experts
and analysts, and the position of the Government. It turned out that
these two positions have little common ground.

The position of government bodies ----------

Mssrs. Pynzenyk and Katerynchuk clearly and thoroughly explained the
immutable logic of the need to immediately increase tax revenues. The
Government decided to do this by amending certain tax regimes, including
the simplified one. The actual tax forms and rates remain intact. Had
these decisions not been made, they argued, Ukraine faced the threat of
an unbalanced Budget, leading to hyperinflation and hryvnia
depreciation. Amendments to the simplified tax system were primarily
intended to limit the abuse that the Minister said was very widespread.

Moreover, Q1'05 results showed a significant increase in Budget revenues
compared to 2004, which convinced the Finance Minister that the decision
was the right one.

The position of business ---------

Business representatives showed complete understanding of reasons
and purposes behind the Government's decision. However, they said
these decisions were not strategically appropriate, as they were based
entirely on the concerns of fiscal and tax policy, while the issue of
economic development was not taken into account. Their conclusion was
that the impact of these decisions was deadly for both business and the
country as a whole.

SMEs are one of the most law-abiding groups of taxpayers under the
simplified tax system, yet they are finding themselves forced either to
cease their activities, to move into the shadows, or to find ways around
the increased tax burden. Alternatives include registering relatives as
the owners of their businesses, formally changing the type of business
activity, changing the contents of agreements, and so on. As a
consequence, Budget revenues will fall and results for Q2'05 will be
much worse than results for Q1'05.

Businesses agree that the simplified tax system gradually needs to be
perfected. Indeed, they even offered an unheard-of suggestion: to raise
single tax rates to make them fairer. Their key demand was that fiscal
and tax policy serve the development of the country's economy and
business, and not the reverse.

The simplified tax system really does need reform because it is not
synchronized with the country's social security system and is often used
to launder money through payments for fictitious services and to reduce
the tax liabilities of individuals who are not actually engaged in
business.

In order not to destroy legal business through the proposed amendments
to the 2005 State Budget Law, it was proposed that the Government launch
a series of public hearings on the problems of the simplified tax system
and to use the conclusions to rework the Bill "On the simplified tax
system" and submit it to the Verkhovna Rada for adoption by 1 July 2005.

Other recommendations from business included raising the ceiling on the
single tax rate for sole proprietors and differentiating single tax
rates according to earnings. As to legal entities, the business
participants thought it made sense to raise the income limit that
determines eligibility to use the simplified tax system and to exempt
payers of the 10% single flat tax from mandatory registration as VAT
payers.

Ukraine has no real economic policy ---------

The business participants offered a strategic vision of Ukraine's
economic development, something that was not evident on the part of the
Government. The lack of a Government position on the development of the
country's economy-which participants had expected to hear from Economy
Minister Serhiy Teriokhin-was very sharply felt at the roundtable.

Decisions to change the 2005 State Budget should have been based on a
balance of two naturally competing interests: economic development and
Budget revenues. Instead, one-sided, purely fiscal decisions were made.

This seems to indicate that the function of the development strategies,
policies and even just a specific position on the development of the
commercial sector, business and investment is missing in the current
Government. The lack of this kind of activity makes it impossible for
business and Government to reach an understanding on tax policy issues.

The powers-that-be respond ---------

On 16 May, just four days after this roundtable, the presidential press
service announced that President Yushchenko had instructed the Cabinet
of Ministers to take steps to liberalize business activity and to
support business. The Cabinet was specifically instructed to:

* take measures to adopt laws on the simplified tax system for small
business;
* consolidate the social insurance funds and simplify procedures, and
amend the Law "On the VAT" to improve the administration of this tax;
* allocate more funds in the 2006 State Budget to finance measures to
implement the National Program for Contributing to the Development of
Small Business;
* introduce a mechanism for public oversight of the institution of
the Presidential Decree "On liberalizing business activity and
supporting business."

According to UNIAN, a news agency, on 17 May 2005, Premier Tymoshenko
announced that she intended to dismiss Andriy Dashkevych, the chair of
the State Business Regulation Policy Committee. Premier Tymoshenko said
that the working group of Government and SME representatives that was to
review the simplified tax system was not functioning. The premier also
criticized the work of First Vice-Premier Anatoliy Kinakh in this area
and relieved him of his duties in this work. Responsibility was turned
over National Deputy Ksenia Liapina instead.

The issue of business policy remains unresolved ----------

Although the efforts of the organizers of this roundtable were
successful, it is only a short-term victory. Ukraine still has no
clearly formulated business development strategy. Without such a
strategy, the Government risks finding itself in a situation where it
will have to listen on a daily basis to the recommendations of ever-new
interest groups who are dissatisfied and to cancel its decisions. -30-
------------------------------------------------------------------------------------------------------
Organizing public dialog on critical policy issues is one of the tools
ICPS uses to implement its strategy of introducing public policy in
Ukraine. ICPS wants to assist companies to better understand the
economic situation in Ukraine and to make more effective decisions.
We do research on external factors and risks that define the business
climate in Ukraine, and we also analyse the macroeconomic environment
and government policy on an ongoing basis. Our research results are
disseminated in our own publications.
-------------------------------------------------------------------------------------------------------
LINK: http://www.icps.kiev.ua/eng/publications/
CONTACT: Andriy Starynsky, Client Relations Manager
International Centre for Policy Studies
vul. Pymonenka 13A, Kyiv, Ukraine 04050
Phones: (380-44) 236-5464, 236-4477; Fax: (380-44) 236-4668
E-mail: astarynsky@icps.kiev.ua; Web-site: http://www.icps.com.ua
===============================================================
12. PLAYING ON THE SAME SIDE: WHAT UNITES PRESIDENT YUSHCHENKO
AND YANUKOVYCH'S MAIN FINANCIER RINAT AKHMETOV?
East Ukrainian tycoon reportedly severs ties with opposition party

COMMENTARY: By Inna Pukish-Yunko
Vysokyy Zamok web site, Lviv, in Ukrainian 24 May 05
BBC Monitoring Service, UK, in English, Wed, May 25, 2005

Donetsk tycoon Rinat Akhmetov, who reportedly financed the presidential
campaign of former Prime Minister Viktor Yanukovych, has broken off his
relations with Yanukovych and his Party of Regions, a Lviv-based paper has
said. Akhmetov has recently met President Viktor Yushchenko - apparently
to discuss a safe future for his business empire - and seems to have
succeeded in securing it.

The paper said Akhmetov had tried to hedge his bets before the 2004
presidential election in case the opposition won. He has been toeing the
line in relations with the new authorities, doing nothing to irk them,
steering clear of opposition rhetoric and staying out of the debate over the
arrest of the Donetsk Region council chairman and his associate, Borys
Kolesnykov.

For his part, Yushchenko is interested in Akhmetov's cooperation in
regaining control of Donetsk Region, which was Yanukovych's home base
during the presidential elections.

The following is the text of the article by Inna Pukish-Yunko entitled
"Playing on the same side: What unites President Yushchenko and
Yanukovych's main financier Rinat Akhmetov?" and published on the
Vysokyy Zamok web page on 24 May; subheadings inserted editorially:

Akhmetov severs ties with Yanukovych -----

Famous Ukrainian businessman Rinat Akhmetov, who is considered to be
the wealthiest person in Ukraine, has severed all relations with Viktor
Yanukovych.

It means that the Party of Regions headed by the former prime minister will
have to search for another financial patron (Akhmetov was referred to as the
main financier of Mr Yanukovych's presidential campaign). This information
appeared in the media after President Viktor Yushchenko said that he had
had a meeting with Rinat Akhmetov (early May).

Is there any relation between the Yushchenko-Akhmetov talks and Viktor
Yanukovych's becoming a political "orphan"? Both the president and Rinat
Akhmetov give assurances that their discussion concerned exceptionally
business and economic subjects. "We spoke on the (Donetsk) regional
economy, on the approach to a fair economy that I declared, on paying taxes
and taking the key structures, including small and medium business
structures, our of the shadow.

We were speaking on the necessity to hold a conference on business issues
and on my visit to Donetsk," Viktor Yushchenko told a news conference,
adding that the meeting with Rinat Akhmetov did not last long - some 15 or
20 minutes. The Donetsk oligarch did not make a single mention of politics
in his comments on his conversation with the president either.

Akhmetov stays calm -----

Rinat Akhmetov, who has steered clear of politics in public, keeps sticking
to his principles. Unlike the large businessmen who are trying to protect
their dubious fortunes with cries of political persecution by the
authorities, the Donetsk oligarch does not kick up a fuss despite the fact
that Kryvorizhstal purchased by Akhmetov together with former President
[Leonid] Kuchma's son-in-law Viktor Pinchuk turned out to be among the
enterprises suspected of unlawful privatization by the new authorities.
After all, Kryvorizhstal is not the only enterprise in the Donetsk
oligarch's business orbit. There is enough scope for checking the lawfulness
of Akhmetov's other acquisitions.

Meanwhile, Rinat Akhmetov is calm as a boa constrictor. He says that he "has
been feeling, feels and will keep feeling secure in Ukraine" and that he is
not going to sell his business and flee abroad. Does Akhmetov pretend to be
so brave, or does he have real grounds to consider himself to be immune even
now?

There are not so many businessmen one way of another related to the previous
authorities who can boast having the kind of relations with the authorities
that Rinat Akhmetov has. Of course, this concerns not the likes of the
Donetsk oligarch, but the results of his well-thought-out tactics. Akhmetov
took care not only of his capital, but also of insuring himself against the
situation where the Kuchma regime ends with Kuchma without a successor
taking over. The Donetsk businessman began to insure himself long before
the presidential elections.

Hedging the bets -----

Rinat Akhmetov was noticed at the same table with the then opposition
leader, Viktor Yushchenko, two years ago at [MP] Yukhym Zvyahilskyy's
birthday (he was the acting prime minister of Ukraine from September 1993
till June 2004). The "leak" of photographs from this party was interpreted
as a planned action aimed at discrediting oppositionist Yushchenko with his
appearance in the company of Akhmetov, who was far from being an
opposition member.

Viktor Yushchenko did not comment on whether it was an act of provocation or
not. He explained his appearance at the same table with Rinat Akhmetov by
the fact that the guests were seated by the organizers of the party, though
there was speculation that the place for Yushchenko at this table had been
reserved by Akhmetov himself to probe the grounds for possible agreements
in case the opposition, not the authorities, wins the presidential race.

There were also assumptions that the meeting between Viktor Yushchenko and
Rinat Akhmetov took place by their mutual consent. Advocates of this version
explained Yushchenko's position with understanding of the fact that, if he
won the presidential race, he would have to reckon not only with his allies,
but also with his opponents. If one takes power, he also has to succeed in
holding onto it, taking Ukrainian realities into account.

They are well-known: representatives of political and economic clans took
possession of the bulk of state property during Ukraine's independence. The
prospects in the scenario where a person not from their environment became
president were quite clear; moreover, if he were to "encroach" on the
immunity of their clans' business. To avoid political and economic
provocation, the new president would have to reckon with oligarchs and the
political forces under their supervision this or that way.

Thus, we cannot rule out that Viktor Yushchenko was interested in Akhmetov
the same way as Akhmetov was in Yushchenko. The Donetsk oligarch used
the well-known tactics of putting eggs into two baskets at once: that of the
authorities with Viktor Yanukovych and that of the opposition.

Rinat Akhmetov is known to have had meetings with Viktor Yushchenko even
during the presidential campaign. It was just the time when the Donetsk
oligarch made clear that he was not going to declare war on the new
authorities in case of the opposition's victory, and moreover, he was ready
to cooperate with it. Akhmetov has been demonstrating and further
demonstrates his declared amiability.

First, he invited [Prime Minister] Yuliya Tymoshenko to Donetsk. How he has
a discussion with Viktor Yushchenko on his forthcoming visit to Donetsk
Region. He even began to take care of expanding Radio Liberty broadcasts in
the region, though Donetsk Region is not famous for its love for free media.

Staying out of Kolesnykov case -----

It is obvious that the discussion between Rinat Akhmetov and Viktor
Yushchenko was not exceptionally dedicated to business and economic issues,
as the president says. There is abundant proof of this. The fact that Rinat
Akhmetov still remains in Ukraine is significant (though there has been
speculation on his escape during his lengthy business trip abroad). He is
not afraid that the [Borys] Kolesnykov case can affect him (the arrested
head of the Donetsk regional council is Akhmetov's close friend).

Moreover, his brother Ihor Akhmetov figures in it. The fact that Rinat
Akhmetov is cautious in his comments on Kolesnykov's arrest and does not
"assault" anyone is notable. "I would not rush to extremes," the businessman
said in response to a question on whether he considered Kolesnykov's arrest
to be political reprisal. Akhmetov must feel quite confident if he allowed
himself not to turn up for questioning in the presence of the head of the
Donetsk regional council.

Business interests -----

Concerning Akhmetov's business, things are much better than they might have
been. There is no final decision on Kryvorizhstal yet: one cannot rule out
that it will remain with Pinchuk and Akhmetov. The president said that he
had not taken a final decision yet on whether the owners of unlawfully
privatized enterprises would be able to purchase them again. While the
authorities are taking their time, Rinat Akhmetov is multiplying his
business assets.

The State Property Fund was recently reported to have sold a 39.91-per-cent
stake in the Krasnodonvuhillya open joint-stock company through the
Ukrainian Stock Exchange. It was purchased by the Avdiyivka coke chemical
plant, its 57.1 per cent stake belonging to the System Capital Management
closed joint-stock company controlled by Rinat Akhmetov.

Rinat Akhmetov's policy directly depends on his economic interests. Another
benefit for Rinat Akhmetov (in addition to security of his capital) from the
alliance with the new authorities is obvious against this background.
Ukraine exports 33m tonnes of steel every year, 22m of them originating from
Donetsk Region. The first position in volumes of purchasing these products
belongs to the European Union, followed by the USA and China.

If Ukraine, represented by Viktor Yushchenko and respected in both the EU
and the USA, achieves a drastic increase in quotas for steel supplies to
world markets, it would be a serious blow to Russia's competitiveness. But
this would also benefit the exporters controlled by Rinat Akhmetov.

Benefits for Yushchenko -----

What can Viktor Yushchenko gain from his agreements with the Donetsk
oligarch? FIRST, settle the situation in the previously "autonomous" Donetsk
Region by slightly changing rules of the game (with Akhmetov's assistance).
It means making the regional budget and authorities accountable to the
state, not to the Donetsk clan.

Another benefit [Second] for the authorities is related to the present-day
opposition, or to be more exact, to political projects funded by Rinat
Akhmetov. It is clear that burning the money bridges between the Donetsk
oligarch and Yanukovych's Party of Regions will substantially weaken the
party's positions. -30-
===============================================================
NOTE: Letters-to-the-Editor are welcome, send in one today
===============================================================
13. EUROPE: THE FINAL FRONTIER

EDITORIAL: The Guardian
London, United Kingdom, Wed, May 25, 2005

This is, by any standards, a momentous week in the affairs of Europe. But
of which Europe do we speak? It is never easy to answer this question.

Definitions of our continent are notoriously blurred by context. For
instance, Europe's first major event of the week - the Eurovision Song
Contest - took place in Kiev, while its second - the Champions League final
between Liverpool (Come on you Reds) and Milan - takes place tonight in
Istanbul.

Both Kiev and Istanbul have played decisive parts in European history (they
are, indeed, joined at the hip by the conversion of Prince Vladimir of Kiev
to Christianity in AD988 after negotiations with Emperor Basil II in
Constantinople). Nevertheless, to many citizens of France, where Europe's
third major event of the week takes place (see above), neither Ukraine nor
Turkey is truly a European nation.

Defining Europe's boundaries is a notoriously inexact science, as the song
contest, football and constitutional politics all separately attest. Each of
their Europes is different. As far as the organ isers of the Eurovision Song
Contest are concerned, both Iceland and Israel belong to Europe. Clubs from
both countries take part in European football competitions, too.

Yet neither Iceland nor Israel presses to join the EU, as Ukraine and Turkey
now do. If Turkey becomes a member of the EU, the union will have land
borders with Iran and Iraq, a prospect that may alarm some French voters who
remain unfazed by the fact that the EU already possesses a land frontier
with Brazil. Yes, really.

The most widely accepted definition of Europe remains that of "Europe from
the Atlantic to the Urals", of which General de Gaulle spoke with approval.
It was in the late 18th century that the Russian government erected a
boundary marker on the road from Yekaterinburg to Tyumen, at which tsarist
exiles would kneel to scoop up their final handful of European earth before
continuing their march to Siberia. By this definition, the heart (or at
least the midpoint) of Europe lies in Lithuania, which probably does not
find many takers in France either. -30-
===============================================================
14. PHOTO-EXHIBITION "ORANGE MOMENT OF LIFE" OPENED
IN EUROPEAN PARLIAMENT IN BRUSSELS

UNIAN, Kyiv, Ukraine, Wed, May 25, 2005

KYIV - The "Orange Moment of Life" photo-exhibition, devoted to the Orange
Revolution in Ukraine, opened in the European Parliament in Brussels on
Tuesday, 24 May.

The exhibition of photographs was organised with the assistance of the
Mission of Ukraine to the EU, the Ukrainian Fund "Ukraine-3000" (Fund of
Viktor Yushchenko) and with the sponsorship of the Vice-President of the
European Parliament Delegation to the EU-Ukraine PCC Dr.Charles Tannock,
according to the Mission of Ukraine to European Communities

The exhibition consists mainly of works by photo-correspondents of the
Ukrainian leading mass-media, such as : Eugen Savilov ("Kyiv Telegraph"),
Mykola Lazarenko and Mykhaylo Markiv ("Den"), Anastasiya Syrotkina ("Voice
of Ukraine"), representatives of "Korrespondent' magazine, Oleksandr Brams
(Kyiv2000.com), Oleksandr Kosarev, Anatoliy Medzyk, Yuriy Kosin, and
Anatoliy Stepanov.

During last several months The exhibition was held in France, Holland and
Russia during the last several months. (http://www.unian.net/eng) -30-
===============================================================
15. ORANGE REVOLUTION CAME TO PARIS
Alain Guillemoles, a French journalist, has authored a new book

Ukrayinska Pravda, Kyiv, Ukraine, Wed, May 25, 2005

KYIV - Through 100 days the Ukrainian Orange Revolution went over the
Europe. In France it became the object of a book that just has come out in
Paris “Even the snow was falling orange” (Les petits matins publishing
house). This book relates the events happened in Ukraine on last November
and December . Through a number of the reports, it relates, how the power
clan was forced to capitulate before the protesters.

They took bitterly the Maidan in hard frost all 17 nights and 17 days long.
The author got in behind the scenes of the revolution in order to disclose
the persons who led it and why they did it. The author reports how, at the
height of the revolution the Russian Embassy held the New Year reception
at the premises of the KGB.

The author discloses, how the young leaders of PORA, settling at the private
pub in Khreschshatyk street directed its troops, and worked out the strategy
how to complicate the life to Mr Kuchma. The author reveals how the power
was tempted to use force against the rally on the night of 28 November, and
why they failed.

Alain Guillemoles, French journalist, is the author of the book. He covered
the Orange revolution, he had been constant correspondent in Ukraine in
1995-1996. The book includes up to three dozens of snapshots, black and
white, by Syril Horiszny, which restitutes the atmosphere of the revolution.
To get more information, please, contact the publishing house:
lespetitsmatins@wanadoo.fr. -30-
===============================================================
16. 'NAMES THAT SHOULD HAVE NO PLACE ON THE MAP OF RUSSIA'
A new 'Black Book' has been released in Moscow

Window on Eurasia: By Paul Goble
UPI, Tartu, Estonia, Wed, May 25, 2005

TARTU - A new "Black Book" has just been released in Moscow
identifying 122 communist, secret police and other people whom the
Soviets gave kind of immortality to by putting their names on a variety of
places and institutions in the Russian Federation.

While later Soviet officials struck from the map names like
Stalin and Russian officials immediately after the end of the Soviet Union
eliminated others, Russian officials since then have done little or
nothing, the authors say, to remove the names of people and events that
should "have no place on the map of Russia."

Their book, which bears the name "The Black Book of Names That
Should Have No Place on the Map of Russia," was compiled by 17
different authors. It was published by Posev and released earlier this
month, although it bears the copyright date of 2004. (A full text of the
book is available for downloading at http://www.pvr.ru.)

The introduction to the volume argues that just as "the
quality of our environment is important for our physical health . no less
important is the symbolic milieu around us for our mental well-being." And
it calls for identifying and eliminating many Soviet-imposed place names.

The book consists of 122 articles divided into seven
chapters. Each article provides a detailed biography of the official or
event involved and a partial listing of the various places in the Russian
Federation which still bear these names.

The seven chapters include one featuring leaders of the October
1917 Bolshevik coup. Others include one on those who contributed
to the rise of Soviet totalitarianism, another on those involved with
revolutionary terrorism, and yet another listing foreign revolutionary
"heroes" that the Soviet government sought to memorialize.

The articles make chilling reading. Among the most notorious
people in the volume is Georgiy Atarbekov, a secret policeman who
oversaw and personally participated in the killing of thousands of priests,
peasants and others whom the Soviet government labeled as "enemies
of the people."

Atarbekov's name, the "Black Book" says, "adorns" various
towns in the southern part of the country, and it is also the name of a
street in Moscow's Preobrazhenskiy district.

Many people encountering that street probably do not know the
history of the man after whom it is named, but the continuing presence of
his name, the "Black Book" argues, nonetheless has an impact by keeping
that past alive and honored.

The book also describes the continuing presence on the map of
Russia of the names of Feliks Dzerzhinskiy, the notorious founder of the
Cheka, predecessor to the KGB and today's FSB, and of Pavlik Morozov,
a Soviet-era hero who was killed for turning in his parents.

The book also describes the many foreign communists and other
leftists who remain memorialized in Russia. Bulgaria's Georgiy Dmitrov, for
instance, who has been removed from the mausoleum in Sofia by that
country's post-communist regime, remains on the map of Russia.

Chile's Salvador Allende still as a Moscow street named after
him. And Vietnam's Ho Chi Minh has a square there bearing his name.
Indeed, that square is located at the intersection of the Avenue Named for
the 60th Anniversary of the Bolshevik Revolution and Dmitriy Ulyanov
Street, memorializing Lenin's elder brother.

The volume notes that many Russian officials as well as many
ordinary Russians raise two basic objections to renaming places even in
order to overcome the Soviet past. On the one hand, they say, "we have
become accustomed to these names." But as the authors show, after many
names were changed at the start of the 1990s, Russians quickly became
accustomed to the new ones.

And on the other, those opposed to changing these names, argue
that "this is part of our history and we cannot wipe it out." But as the
authors point out, slavery is part of the history of the United States and
Hitler is part of the history of Germany, but no one thinks of naming
streets or cities in their honor.

And many of the Soviet-imposed toponyms remaining on the map
of Russia have less to do with Russian history than some might
think. After all, this volume implicitly asks, just how central to
Russia's history is someone like leftist Chilean leader Salvador Allende?

Invoking Solzhenitsyn's dictum that people must "live not by
lies," the authors of these remarkable and disturbing portraits of many who
committed horrendous acts or elaborated ideas that lead others to do the
same conclude that removing these names from the map of Russia will
help Russians to recover.

Failing to remove them or worse restoring some of these
Soviet-era names as some Russian officials and nationalist activists now
want to do, the authors of this volume suggest, would only make the time
Russians will need to recover from that past longer and more difficult. -30-
===============================================================
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