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Action Ukraine Report

"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"

NEW LEADERS START TO SHAPE THE GREAT LEAP FORWARD

"A historic transformation is under way on Europe's eastern frontier.
Emerging from centuries of misrule, Ukraine, the continent's second largest
country and sixth most populous nation, has set its sights firmly on joining
the club of developed democracies.

"As a popular set of new leaders shape their plans for this hoped for great
leap forward, many foreign companies, especially those with experience in
central Europe's transition economies, are keenly studying where they could
fit in.

"For centuries Ukraine had been kept apart from the European mainstream by
a series of empires. When independence finally came in 1991 power stayed
with a corrupt clique leaving Ukrainians watching from the sidelines as
central Europe reunited with the west.......

"No other country in Europe has so many people who are so poor. Ukraine's
47.2m population lives on a per capita income of less than $80 per month
with per capita gross domestic product last year at just $1,350." (Article
One)

"THE ACTION UKRAINE REPORT - AUR" - Number 497
E. Morgan Williams, Publisher and Editor
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, THURSDAY, June 2, 2005

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

1. NEW LEADERS START TO SHAPE THE GREAT LEAP FORWARD
By Tom Warner and Jan Cienski
World Reports: Ukraine 2005
Financial Times, London, UK, Wed, June 1, 2005

2. CHUMAK: ROAD TO RICHES OFFERS TOUGH LESSON
By Jan Cienski, Financial Times
World Reports: Ukraine 2005
London, United Kingdom, Tue, May 31, 2005

3. UKRAINE: BUSINESS ANGER AS 24 ECONOMIC ZONES DISAPPEAR
"It changes our vision of the country and undercuts our faith
in the government." The new rules came as a complete surprise.
By Jan Cienski, Financial Times
World Reports: Ukraine 2005
London, United Kingdom, Tue, May 31, 2005

4. SHOPPING: RETAIL REVOLUTION LOOMS AS FOREIGNERS INVADE
By Jan Cienski, Financial Times
World Reports: Ukraine 2005
London, United Kingdom, Tue, May 31 2005

5. UKRAINE: BROAD COALITION SET TO SURVIVE
Oxford Analytica, Relevant Country Pages: Ukraine
United Kingdom, Wednesday, June 1, 2005

6. FIVE PRESIDENTS TO ATTEND UKRAINE'S MINI-DAVOS
Interfax-Ukraine news agency, Kiev, in Russian, 1 Jun 05
BBC Monitoring Service, UK, in English, Wed, Jun 01, 2005

7. UKRAINE OFFERS SETTLEMENT TO JOURNALIST GONGADZE'S WIDOW
Inter TV, Kiev, in Ukrainian 1700 gmt 1 Jun 05
BBC Monitoring Service, UK, in English, Wed, Jun 01, 2005

8. PRESIDENT VIKTOR YUSCHENKO DISCUSSES WITH THREE U.S.
SENATORS HOW TO BOOST UKRAINE-U.S. RELATIONS
Interfax-Ukraine, Kyiv, Ukraine, Wed, June 1, 2005

9. VIKTOR YUSCHENKO, GEORGE SOROS DISCUSS UKRAINE'S
COOPERATION WITH RENAISSANCE FOUNDATION
Interfax-Ukraine, Kyiv, Ukraine, Wed, June 1, 2005

10. UKRAINE PARLIAMENT PREPARED TO RETURN TO DRAFT ON
IMPORTANT INTELLECTUAL PROPERTY RIGHTS BILL, SAYS LYTVYN
Interfax-Ukraine, Kyiv, Ukraine, Wed, June 1, 2005

11. CANADA TO INCREASE ASSISTANCE TO UKRAINE, SAYS
CANADIAN AMBASSADOR ROBINSON
Interfax-Ukraine, Kyiv, Ukraine, Wed, June 1, 2005

12. "OUR MAN AMONG THEM"
Ukrainian National Security & Defence Council Secretary Poroshenko
Interview with Petro Poroshenko by Roman Kulchynskyy
Kontrakty, Kiev, Ukraine, in Ukrainian 30 May 05; p 16-19
BBC Monitoring Service, UK, in English, Wed, Jun 01, 2005

13. PROSECUTOR GENERAL AROUND $1BN ILLEGALLY TRANSFERRED
OUTSIDE UKRAINE DURING ORANGE REVOLUTION
Interfax-Ukraine, Kyiv, Ukraine, Wed, June 1, 2005

14. IFC INVESTS USD 20 MILLION IN AND OPENS USD 60 MILLION CREDIT
LINE FOR UKRAINE'S LARGEST PRODUCER OF POULTRY MEAT
Ukrainian News Agency, Kyiv, Ukraine, Wed, June 1, 2005

15. "EUROPE SYMBOLIZED IN SONG"
The renowned Ukrainian director Vasyl Vovkun
Kyiv Weekly, Kyiv, Ukraine, Friday, May 27, 2005

16. RESCUING THE "VALLEY OF THE DAFFODILS"
Located in the Khust region of the Zakarpattya
oblast
A Wonder of Nature: By Vasyl Khudytskiy
Kyiv Weekly (KW), Issue #20 (160)
Business & Socio-Political Weekly
Kyiv, Ukraine, Friday, May 27 - June 3, 2005

17. A MAN INCAPABLE OF ADAPTING TO INJUSTICE
One year has passed since the untimely death of Dr. James Mace
By Klara Gudzyk, The Day
The Day Weekly Digest in English, #18
Kyiv, Ukraine, Tuesday, May 31, 2005

18. MAY DAYS IN CRIMEA!
SPRING GETAWAY: by Volodymyr Pimonenko
Kyiv Weekly, Volume #15, (155)
Kyiv, Ukraine, Friday, April 22-27, 2005
===============================================================
1. NEW LEADERS START TO SHAPE THE GREAT LEAP FORWARD

By Tom Warner and Jan Cienski
World Reports: Ukraine 2005
Financial Times, London, UK, Wed, June 1, 2005

A historic transformation is under way on Europe's eastern frontier.
Emerging from centuries of misrule, Ukraine, the continent's second largest
country and sixth most populous nation, has set its sights firmly on joining
the club of developed democracies.

As a popular set of new leaders shape their plans for this hoped for great
leap forward, many foreign companies, especially those with experience in
central Europe's transition economies, are keenly studying where they could
fit in.

For centuries Ukraine had been kept apart from the European mainstream by
a series of empires. When independence finally came in 1991 power stayed
with a corrupt clique leaving Ukrainians watching from the sidelines as
central Europe reunited with the west.

That situation changed emphatically last winter when vast crowds filled
central Kiev's streets and squares in what came to be known as the Orange
Revolution. While demanding the old guard steps down, the protesters also
used the moment to wave a big hello to the outside world and revelled in
having finally made their country the centre of attention. One of the new
government's first moves was to drop visa requirements for EU and Swiss
visitors.

Viktor Yushchenko, the president, has spent much of his first months in
office travelling, especially in the European Union where he tirelessly
lobbies his vision of making Ukraine a member in spite of persistent replies
that neither his country nor the union is ready. His face scarred by severe
dioxin poisoning - which he believes was an attempt to remove him from last
year's presidential election - he makes a fitting ambassador for a country
with such a troubled history.

His goal of EU membership is ambitious but the truly daunting challenge
will be to pull such a large and populous country out of its traditional
backwardness and into the fast moving global economy of the 21st century.

No other country in Europe has so many people who are so poor. Ukraine's
47.2m population lives on a per capita income of less than $80 per month
with per capita gross domestic product last year at just $1,350.

In an interview, Mr Yushchenko reaffirmed his commitment to liberalism with
a social conscience. He said he was proud to have succeeded in funding a
big pension increase pushed through by his rival just before the election,
and also of the independence he had given to judges and prosecutors,
"something this nation was wanting for many years".

He also appealed for patience as his government dealt with inflation and
other problems, urging potential investors not to pay too much attention to
the firefighting techniques adopted by his government, particularly price
caps put on petrol, which he intervened last month to cancel.

"I proceed from what is best for any market: a market buyer and a market
producer will better manage themselves. The state will be ineffective if it
takes on the role of producer and tries to somehow control," he said.

Ukraine's economy has staged a rapid recovery since 2000 with growth
peaking at 12 per cent last year. Much of this has come from the steel and
chemicals industries, spurred by surges in world prices.

Under former president Leonid Kuchma, big business developed as a
preserve of the politically connected with privatisation often used to
nurture a loyal group of oligarchs.

However, small and medium sized businesses were granted an increasingly
liberal climate so long as they did not challenge the political order. That
helped foster a broad based recovery but did not work out for Mr Kuchma,
who retired in disgrace in January.

The recovery is most evident in central Kiev which is lined with fashionable
shops, restaurants and nightclubs and clogged with imported cars, many of
them luxury models. Farther out, the ratio of affluence to poverty reverses
and traditions from the Soviet Union live on, especially in workplaces.

Perhaps the biggest question hanging over Ukraine is how Mr Yushchenko will
handle his relationship with Russian leader Vladimir Putin and their starkly
differing visions of the former Soviet region's future. "Western and central
regions, where identification with Ukrainian nationality is stronger,
supported Mr Yushchenko"

Ukraine shares much with Russia, from Orthodox religion to pop music, and
Russian is for many Ukrainians their first language. And yet Ukraine is also
strikingly different: more relaxed, down to earth and open to foreign people
and ideas. Walkers encountered on Kiev's chestnut tree lined central
Khreshchatyk street are more likely to be strolling than shopping, much less
rushing to a business meeting.

In domestic politics the main question is how strongly Mr Yushchenko wants
to hold on to the reins of power and how forceful he will be in ensuring
that economic policy matches his liberal vision.

Before turning over power Mr Kuchma demanded and got constitutional changes
weakening the presidency. These are scheduled to be phased in from January
and would mean that after parliamentary elections next March Mr Yushchenko
would have less power than the prime minister who would be elected by
parliament.

Mr Yushchenko and others close to him have said these reforms could be
cancelled either by asking the constitutional court to rule them invalid
because of the hurried way they were adopted or through a national
referendum which would also require a supportive court ruling.

Mr Yushchenko initially left domestic policy in the hands of his cabinet
while he promoted Ukraine abroad. The result was a cacophony of conflicting
statements from his cabinet - a diverse coalition of leftists, centrists,
liberals and moderate nationalists who had backed him during the protests -
that left everyone confused.

Many potential investors have been turned off according to a businessman
who works for foreign companies. "The overall attitude is changing from 'we
have to get in now'' to 'let's wait and see what happens in March'," he
said.

Yulia Tymoshenko, the prime minister, won the job by being a popular speaker
at rallies and a tough negotiator. But in her first months she charted a
broadly leftist economic course including plans to beef up the state's
involvement in business. Political analysts believe she is staking out an
independent political line aimed at winning the parliamentary election.

While intervening to cancel the petrol price caps, Mr Yushchenko criticised
his cabinet but refrained from criticising Ms Tymoshenko by name, including
in his interview with the FT. He also criticised the cabinet for making too
little progress towards joining the World Trade Organisation, which he wants
done by the end of this year.

Ms Tymoshenko postponed a scheduled interview with the FT after the scolding
but appeared with Mr Yushchenko at the final of the Eurovision song contest
the same weekend. Both have insisted she will keep her job.

While parliament is dominated by businessmen who were allied to Mr Kuchma
the only forces sure to remain are Mr Yushchenko's Our Ukraine, Ms
Tymoshenko's Fatherland and two groups that have connected with pro-Russian
voters in Ukraine's east and south: the Regions party, led by Mr Kuchma's
last prime minister, Viktor Yanukovich, and the communists.

In last autumn's presidential elections, Mr Kuchma had rallied the oligarchs
behind Mr Yanukovich, a former regional governor with a popular base in his
native Donetsk region. Russia's president Vladimir Putin also endorsed Mr
Yanukovich.

Western and central regions, where identification with Ukrainian nationality
is stronger, poured their support behind Mr Yushchenko. The middle class
and moderately wealthy also mostly backed the former central banker. These
groups poured into central Kiev after Mr Yanukovich was declared the winner
of a run-off in November amid evidence of fraud.

The campaign inflamed Ukraine's historically rooted east-west divide to
sometimes hysterical extremes. During the protests Mr Yanukovich led a
meeting of local councillors from southern and eastern regions where threats
were made to formally split the country. Ukraine's supreme court defused the
crisis with a ruling that fully backed Mr Yushchenko's complaint and ordered
a repeat election in December, which he won.

Mr Yanukovich is now the main opposition leader. He claims his supporters
are being persecuted, pointing particularly to the arrest of the chief of
his Donetsk party organisation, Boris Kolesnikov, who is accused of using
threats and violence to force a department store owner to sell out cheaply.
Mr Yanukovich and Mr Kuchma have been called in for questioning in different
cases, while several former top officials have fled to Russia and two former
cabinet ministers have committed suicide.

When Kiev recently hosted the Eurovision song contest Mr Yanukovich's
supporters protested outside comparing the situation in Ukraine to Stalin's
purges. However, in an interview, Mr Yanukovich said he was ready to
co-operate with Mr Yushchenko. He said it would be "good for Ukrainian
society" if he were premier and Mr Yushchenko were president - a scenario
Mr Yushchenko and his camp are keen to avoid. -30-
===============================================================
2. CHUMAK: ROAD TO RICHES OFFERS TOUGH LESSON

By Jan Cienski, Financial Times
World Reports: Ukraine 2005
London, United Kingdom, Tue, May 31, 2005

When a Swede meets his local police chief a polite nod usually suffices but
when Carl Sturen meets the authorities he pulls his car over, climbs out and
gives the chief a big bear hug because that is the way one does business in
Ukraine.

Mr Sturen and Johan Boden, his partner and close relative, made the leap
from the staid world of running a family food processing company in Sweden
to wilder and hugely more profitable Ukraine a decade ago.

The two are founders of Chumak, one of Ukraine's leading makers of ketchup,
sauces and sunflower oil, which last year had sales of $60m, up from $34m
in 2003. "I fell in love with the huge opportunity here," says Mr Boden.

The two have done very well in Ukraine but at a time when the country is
attracting increased investor interest following last year's Orange
revolution, their road to riches offers a lesson in the hurdles outsiders
face from bureaucracy, corruption, inertia, an underdeveloped financial
system, and the sheer difficulty of building a business in the former Soviet
Union.

In 1993 the two were in their early 20s when they looked to Ukraine for a
quick supply of pickles after their cucumber crop in Estonia failed. They
found their pickles and also got a look at a country with enormous
agricultural potential and with almost no foreign investment.

Sitting in a Swedish sauna a year later the serial entrepreneurs decided to
take the plunge and shift out of Sweden and Estonia - where they had a $6m
a year business starved of opportunities, says Mr Boden - to Ukraine.

Mr Storen spent nine months and 70,000km on Ukrainian roads investigating
agriculture and looking at local canning factories. The trick was taking the
time to figure out how Ukraine worked before putting in any money.

"That's our first lesson of business," says Mr Boden, "avoid doing business
from day one - try to understand your market first." In 1995, they decided
to set up a test production run in a rented factory, producing Ukraine's
first domestic ketchup under a brand called South Food.

They realised that using a workforce used to communist production methods
was almost impossible. "It's difficult to change the past," says Mr Boden.
Instead, in 1996 they decided to buy an unfinished food production factory
in southern Ukraine [Kahovka], near 2m ha of irrigated land, where enormous
fields hundreds of hectares in size dwarf anything seen in the European
Union.

A crucial partner who provided capital and advice was Hans Rausing, who
had earned more than $7bn from his share of the Tetra Pak packaging maker.

They set up a joint venture with the government but insisted on holding a 76
per cent share, having seen that other entrepreneurs with a smaller share
could lose control of their investment to aggressive locals.

Unable to buy land because of Ukraine's restrictive laws, they were forced
to lease land from hundreds of owners - the former workers of collective
farms who had been given possession of pieces of their old farms. Both
growing their own tomatoes and cucumbers, and contracting with local
farmers, they ran into one of the largest problems investors face in
Ukraine - bureaucratic interference.

When local officials saw that the business had money behind it, inspectors
from the police, health department, tax police and any other department that
could squeeze the two Swedes began making frequent visits.

But in July 1997, Leonid Kuchma, then Ukraine's president, dropped in for a
quick visit while touring the region. He was so impressed by what he saw
that the local governor became agriculture minister. It also sent a signal
to the local bureaucrats.

"All the local authorities immediately understood that the only boss of
Chumak is the president. After that visit these people went like this," Mr
Boden says, making a bowing motion. The nuisance inspections stopped.

The lesson is that in Ukraine you have to stand out if you want to succeed.
In developed economies such as Sweden it is bad form to trumpet your
success and make a show of being tight with the powers that be.

But in Ukraine: "You have to be colourful and loud. You have to be a parrot
among the sparrows," says Mr Boden. That explains Mr Storen's hugging
relationship with the local police chief, as witnessed by his bank manager.

In the early years Ukraine was starved for modern looking, quality food and
Chumak's main problem was production. They spent almost nothing on
marketing, relying on a few stunts such as buying old truck-mounted missile
carriers and replacing the rockets with enormous ketchup bottles to get out
their message.

That changed after the 1998 Russian economic collapse which saw their sales
drop by 90 per cent. Chumak decided to shift almost all of its sourcing to
Ukraine to protect against currency fluctuations. It also created a modern
marketing and product development team.

With a $15m investment from the EBRD and the sale of 15 per cent of their
shares to Norway's Orkla Foods, Chumak is gearing up to fight to protect its
market share as Ukraine becomes more attractive to larger and more
established foreign competitors. "We will fight very hard to maintain our
market leader position," says Mr Boden. -30-
-----------------------------------------------------------------------------------------------------------
FOOTNOTE: The Chumak company was named by Carl Sturen and Johan
Boden after the wagoners and traders who were common in Ukraine from
the 17th to the mid-19th century. The Chumaks brought by wagon salt from
the Crimea and salted and dried fish from the Black and Azov seas and the
Don River to the north.

The name 'chumak' is derived from the term 'chum', which refers to a
wooden container used by the chumaks for transporting salt and fish.
According to another theory a 'chum' was a measuring scoop used buy
the salt traders when they sold salt.

The chumak population was common among all classes of the Ukrainian
population, particularly among the Cossacks and well-to-do peasants.

The difficulties and perils of travel compelled the chumaks to organise
themselves into trains of 10-100 wagons for the duration of the trip. In
this way they could defend themselves from attack by the Crimean Tatars
and robbers.

The life and customs of the wagoners are vividly depicted in the 'chumak
songs.' From the 17th to the mid-19th century the chumaks controlled 50
percent of the salt trade in Ukraine. In the 1830's-1850's these wagoners
imported about 41,000 tonnes of fish each year.

They carried wheat, farm products, and manufactured articles south into the
steppes, the Crimea, and Moldovia. With time the chumaks became the
main carriers of bulk cargo.

They played an important role in Ukraine's economy by promoting the
development of internal and external trade. In the second half of the 19th
century the wagoners' trade began to decline as railways were built and
steppe pasturage for oxen shrank.

The chumaks' life is extensively reflected not only in Ukrainian folklore
but also in literature by such authors as Taras Shevchenko, Marko Vovchok,
I Karpenko-Kary, and M. Kotsiubynsky. Painters were also attracted by
the subject. (Information about the chumaks from the Encyclopedia of
Ukraine, published by the University of Toronto Press, 1984)

I have been to the Chumak headquarters in Kahovka in southern Ukraine
near Kherson several times and met with Carl Sturen and Johan Boden.
They run a very impressive operation. [EDITOR]
===============================================================
3. UKRAINE: BUSINESS ANGER AS 24 ECONOMIC ZONES DISAPPEAR
"It changes our vision of the country and undercuts our faith in
the government." The new rules came as a complete surprise.

By Jan Cienski, Financial Times
World Reports: Ukraine 2005
London, United Kingdom, Wed, May 31 2005

A decision by the government to eliminate all 24 special economic zones -
which sought to lure foreign investors with tax breaks and customs
privileges - was aimed at rooting out corruption but has enraged legitimate
businesses which are threatening legal action.

"We launched a pre-emptive nuclear strike against the shadow economy. As
they say, there are always some civilian casualties, who in this case are
the real investors," says Oleh Rybachuk, deputy prime minister for European
integration, of the March decision.

The government says that many of the zones were controlled by political
clans and mafia barons loyal to the government of Leonid Kuchma, the former
president, and that many investors were shadow companies dodging taxes
and customs regulations.

But for a company such as Cyfral, a Polish telephone maker, the government's
step is putting its Ukrainian investment at risk. Cyfral came to Ukraine
three years ago after it had been hammered by the wide adoption of mobile
telephones in Poland, which decimated the handset market. Management
sought other markets in order to save the company, eventually settling in
part on Ukraine.

While the company's main Polish operation switched to making apartment
intercoms, Cyfral also looked east where managers saw a country that
reminded them a lot of Poland a dozen years ago, when economic reforms
were still taking hold. "We thought we could do the same thing we did then
in Poland," says Michal Kowalski, the company's president.

Cyfral chose to open its assembly plant three years ago in Yavoriv, a
special economic zone near the Ukrainian-Polish border. But now the zone
is gone, angering Cyfral, which would have otherwise chosen to invest in
western Ukraine's leading city Lviv, if not for the attraction of Yavoriv.

"We invested under certain conditions which have changed," says Mr
Kowalski. "It changes our vision of the country and undercuts our faith in
the government." Cyfral is waiting to see how the situation develops before
acting, but is thinking of combining with other Polish businesses to take
legal action if the subsidies are not returned.

The company's Ukrainian assembly plant, employing 20, may curtail a planned
expansion of its workforce to 50, says local manager Myroslava Voloshchuk.
"We've had our legs knocked out from under us," she says. "We really aren't
sure whether to continue or not."

The Ukrainian government has heard protests from Poland and other EU
countries about its decision to roll back the special privileges for
economic zone investors.

Viktor Yushchenko, Ukraine's president, told the Financial Times that "where
there were zones that worked successfully, I will raise the question of
re-establishing them. "But we must talk about how there must be a mechanism
so the market and budget don't suffer from shadow turnover, uncontrolled
payments and so on."

Other investors, such as Inter Groclin, a Polish car parts maker, are also
very upset. Groclin has built a factory in a special economic zone near the
border with Slovakia at Uzhgorod, home to many large car plants. The new
rules came as a complete surprise as did the tougher customs inspections
which caused weeks long delays in shipping parts to the factory.

"We want to remain in Ukraine but we will not remain passive in the face of
the actions of Ukrainian authorities," says Mr Wojciech Witkowski, Groclin's
chief executive.

Those kinds of warnings raise fears in Yavoriv, which has seen its
unemployment rate drop from 16 per cent to 5 per cent, thanks in part to the
$70m invested by 91 businesses in the special economic zone since 1999.
The region's only other large employer is a floundering sulphur plant, which
has cut its workforce heavily.

"I'm convinced that those companies already here aren't going anywhere, but
no one else will come," says Rostislav Novozhenets, the head of Yavoriv's
regional administration.

Mr Novozhenets says the reason few companies will leave is that salaries in
a place such as Yavoriv are about $100 a month, one-quarter of those in
neighbouring Poland and a tiny fraction of the pay in advanced economies
such as Germany's.

Ukraine's 47m people and its fast growing, albeit still poor, economy
provide added attractions. For smaller investors like Cyfral, the tax breaks
in the zones played an important part in making the decision to invest in
Ukraine.

Mr Kowalski cites the otherwise difficult task of dealing with Ukraine's
bureaucracy, corruption, inefficiency and decrepit infrastructure.
Cyfral's Ukrainian subsidiary is breaking even although it has yet to earn
much of a return for its Polish parent. "There is still uncertainty about
investing here," says Mr Kowalski. "But Ukraine has real perspectives."
===============================================================
4. SHOPPING: RETAIL REVOLUTION LOOMS AS FOREIGNERS INVADE

By Jan Cienski, Financial Times
World Reports: Ukraine 2005
London, United Kingdom, Tue, May 31 2005

Ukraine's orange revolution was played out in Independence Square, Kiev.
But the square is more than the scene of a political revolution, it is also
a sign of Ukraine's retail transformation, symbolised by the Globus shopping
centre, its curved glass walls framing the back of the square.

In the 12 years since Ukraine broke free from the Soviet Union, the country
has moved from dingy Soviet-style stores complete with empty shelves and
snarling service to modern shopping malls and hypermarkets.

But Ukraine's retail transformation is still far from complete and will
likely face changes as foreign investors begin to enter the market.
Kiev, Ukraine's largest and wealthiest city, is at the cutting edge of the
changes in the sector.

The city of almost 3m has 25 modern shopping centres, the largest of which
is Karavan, at 42,000 sq metres, and located in the suburbs, where it is
served by minibuses taking shoppers from distant metro stations.

In total, Kiev has 530,000 sq metres of modern shopping space, far below
the totals for central European cities such as Prague and Warsaw. This year,
an additional 220,000 sq metres of shopping malls will be built, with two
new malls of more than 100,000 sq metres coming on line, according to
Astera real estate.

The Olympic Plaza, built by UZTS Trust, one of Ukraine's leading property
developers, will have 120,000 sq metres of space and include modern
amenities such as cinemas, restaurants and a health spa, part of the
international trend to turn malls into family entertainment destinations.

By 2007, an additional 810,000 sq metres of shopping malls are scheduled
to be built. By then Kiev will have 191m sq metres of shopping space per
1,000 inhabitants, about double the current level. That increasingly modern
shopping sector will strive to lure away cash-poor buyers who still largely
shop at open air markets and discount shops.

Roman Lunin, chairman of the Velyka Kyshenya grocery store chain, estimates
that the quick turnover consumer goods market in Ukraine was about $8.5bn
last year, and supermarkets and hypermarkets got only about $1.5bn of that
business.In Kiev about half of quick turnover goods are in the hands of the
formal sector.

For many years after independence, corruption, bureaucracy and a murky
business environment kept foreign investors at bay, allowing local retailers
such as Velyka Kyshenya and their rivals at the Fozzy Group to grow.

In the early years the stores were far behind in technology, management,
sourcing and quality compared with the few foreigners on the market, such
as Austria's Billa, one of the earliest entrants.

"When the first Ukrainian chains appeared in 1999, the foreign chains were
much better," says Mr Lunin, whose 17 grocery stores had sales last year of
$125m and hopes for $250m this year. "But now Ukrainian chains are learning
fast and acquiring western technology."

Vladimir Kostelman, president of Fozzy Group, which has 85 stores and had
revenues last year of $290m, expects that as Ukraine stabilises politically,
its fast growing economy will begin to draw in more foreign investors,
presenting large challenges for domestic chains. "We still have a long way
to go to reach their level," says Mr Kostelman. "It will be possible for us
to survive but it will depend on cutting costs."

Foreign groups are already taking a closer look. Germany's Metro Group is
expanding its cash and carry chain in Ukraine. IKEA is planning a $300m
megastore on the outskirts of Kiev for 2006, an echo of its two successful
ones in Moscow. Russia's Paterson opened its first Kiev grocery store this
year and plans several more.

The new players will have to learn how to deal with Ukraine's often
overweening bureaucracy, which Mr Kostelman says may give local retailers
an edge because they know how to deal with the system. Foreign retailers
will also have to adapt to a much poorer population than in central Europe.

Dmitry Ermolenko, who runs four Esprit stores in Ukraine, says that sales in
Ukrainian shopping malls average about Euro 3,800 per sq metre while the
average in western Europe is closer to Euro 5,000 per sq metre

While much of the early action has been in Kiev, retail chains are now
beginning to look to other large Ukrainian cities. Metro already has stores
in Kharkiv, Dnipropetrovsk and Odessa and plans to open in Donetsk, Lviv,
and Zaporizhia. Local chains such as Fozzy are also expanding outside Kiev
and moving away from smaller grocery stores toward hypermarkets, often
fringed with smaller shops, in effect mini-malls. -30-
===============================================================
5. UKRAINE: BROAD COALITION SET TO SURVIVE

Oxford Analytica, Relevant Country Pages: Ukraine
United Kingdom, Wednesday, June 1, 2005

EVENT: First Deputy Prime Minister Anatoliy Kinakh criticised Prime
Minister Yulia Tymoshenko's handling of the recent fuel crisis in an
interview
published on May 26.

SIGNIFICANCE: The crisis brought divisions in the governing coalition into
focus, and raised questions over the future of Tymoshenko. In previous
transitions in Eastern Europe, broad alliances such as that now governing
Ukraine have, once their unifying aim of ousting the former authorities is
achieved, proven inherently unstable and tended to fragment fairly quickly.

ANALYSIS: President Viktor Yushchenko's election victory in 2004 came
about as a consequence of a broad political alliance that includes left and
right-wing populists -- the Socialist Party (SPU) and Yulia Tymoshenko Bloc
(BYT) -- alongside free-market liberals and centre-right national
democrats -- the Party of Industrialists and Entrepreneurs (PIE) and
Yushchenko's Our Ukraine (see UKRAINE: Yushchenko rule holds out hopes
for change. - December 29, 2004).

There are few divisions in this alliance over political and institutional
aims. Populists, liberals and national democrats all broadly agree on the
need to:

democratise political life;
build respect for the rule of law;
reform the judiciary and court system;
fight corruption and organised crime; and
bring to trial members of the former regime implicated in
corruption and election fraud.

The only area that could seriously strain the coalition in the
political/institutional field relates to the constitutional reforms agreed
in December 2004 as part of a compromise package to break the deadlock
over repeat elections (see UKRAINE: Constitutional changes will weaken
Yushchenko - January 5, 2005). The fate of these reforms, which would
transfer considerable powers from the presidency to parliament, remains
unclear.

However, only the SPU support the changes; the BYT and the PIE are opposed,
while Our Ukraine is evenly divided, fearing both to weaken the presidency's
ability to push through reforms and advantage the Left. The reforms could be
challenged in the Constitutional Court, over procedural irregularities in
their initial passage.

DIVISIONS. The main divisions are over economic reform and, to a lesser
extent, foreign policy. The latter will only become an issue of serious
contention as Ukraine moves closer to NATO or EU membership, both of which
remain only medium-term possibilities. In the coalition, the only solidly
pro-NATO and pro-EU constituency is grouped around Our Ukraine. The BYT
and the PIE favour Ukraine only joining NATO together with Russia, while the
SPU is strongly opposed to NATO membership. The SPU and BYT will baulk
at many of the demands raised by the EU to qualify for membership.

ECONOMIC POLICIES.On economic policies, the coalition is fundamentally
split between state interventionists (the SPU and BYT) and free-market
liberals (PIE, Our Ukraine), who have clashed over key issues:

(1) REGULATING FOOD AND FUEL PRICES. The government's decision
to impose price caps after an oil price hike in April, alongside
Tymoshenko's
decision to confront directly the Russian oil companies that supply most of
Ukraine's oil, arguably only succeeded in creating a petrol shortage (see
UKRAINE: Fuel prices continue to challenge government - May 9, 2005).
Yushchenko and certain figures in the cabinet, notably First Deputy Prime
Minister (and PIE leader) Anatoliy Kinakh, criticised the government's
handling of the crisis, in particular the departure from allowing market
forces to determine pricing. Yushchenko reportedly suggested in a meeting
with Russian oil executives that Tymoshenko should resign, although he later
stepped back from this.

(2) RE-PRIVATISATION. Tymoshenko has voiced support for investigating
3,000 privatisations undertaken since 1992, while Yushchenko and Kinakh
support a list of 29 (yet to be released). Tymoshenko's views are supported
by the new head of the State Property Fund, Valentyna Semeniuk (SPU).
Tymoshenko appears unconcerned at the risk that re-privatisation could
negatively affect foreign investor confidence.

Yushchenko by contrast seems very conscious of the linkage and has
stressed the importance of increasing foreign investment. Left and
right-wing populists are interested in maintaining state control over large
'strategic' enterprises if they are re-privatised; Yushchenko supports their
submission to new, transparent tenders or asking the current owners to pay
the market price.

One area of economic policy that the coalition has not disagreed on is a
socially oriented budget. Pensions and state salaries were increased ahead
of the 2004 elections by then Prime Minister and presidential candidate
Viktor Yanukovych. The new government had to continue these commitments,
but has added new spending of its own (see UKRAINE: New authorities are
making good progress - May 3, 2005). Higher pensions and state salaries
risk higher inflation and slower growth.

Nevertheless, they are supported by both strands in the coalition, partly to
reduce the need for corruption by making state salaries sufficient to permit
a reasonable standard of living for state officials, but also to increase
support for the coalition in the 2006 parliamentary elections, especially in
eastern and southern Ukraine.

TYMOSHENKO'S FUTURE. Other divisions in the coalition are personal - the
product of competition for top jobs after the 2004 elections. For example,
the broad remit given to Petro Poroshenko, who had hoped to become prime
minister, as head of the National Security Council creates the potential for
'turf wars' with Tymoshenko, and friction between the two is likely to
persist.

However, Tymoshenko is likely to remain as prime minister at least until
parliamentary elections in March 2006. Leaving the coalition at this stage
would threaten her political future, and she is protected from votes of no
confidence by a period of 18-months' grace after assuming office, which
extends to the elections in 2006. Her more populist impulses will continue
to jar with Yushchenko's more cautious approach, but Yushchenko has reined
her in over the oil crisis and re-privatisation.

ELECTION COALITIONS. Government politics is also strongly influenced by
the need to build coalitions for the 2006 parliamentary elections. Our
Ukraine is being transformed into a new mega-party, People's Union-Our
Ukraine.

However, polls suggest that the new party will obtain just one-third of the
vote in the 2006 elections, up 10% on Our Ukraine's total in 2002.
Yushchenko is therefore being forced to compromise to ensure the creation
of a pro-presidential parliamentary majority.

A three party coalition is being prepared for the 2006 elections. This will
consist of People's Union-Our Ukraine, BYT and parliamentary Speaker
Volodymyr Lytvyn's People's Party, which unites moderates from the Kuchma
camp who did not support Viktor Yanukovych's candidacy in the 2004
presidential elections.

Kinakh's PIE and Yuri Kostenko's Ukrainian People's Party will not formally
be included in this coalition, but they will be allies in the elections.
This alliance could obtain around 60% of the vote. The SPU's left-wing
ideology means that there is no place for it in the planned coalition.

WEAK OPPOSITION. Divisions within the governing coalition will not be
capitalised upon by the former pro-Leonid Kuchma camp. As former parties
of power, these centrists are finding it difficult to adjust to acting as a
united and coherent opposition (see UKRAINE: Kolesnykov case presages
further prosecutions - April 20, 2005). Their weakness reduces the pressure
for the government camp to hold together.

CONCLUSION: Divisions in Yushchenko's broad coalition are only really
pronounced on economic policy, between populist backing for state
intervention and liberal, free-market supporters. They create some
uncertainty over policy that is damaging for Ukraine's image with investors.
However, they are unlikely to prevent the survival of the Tymoshenko
government until the 2006 parliamentary elections. -30-
===============================================================
6. FIVE PRESIDENTS TO ATTEND UKRAINE'S MINI-DAVOS

Interfax-Ukraine news agency, Kiev, in Russian, 1 Jun 05
BBC Monitoring Service, UK, in English, Wed, Jun 01, 2005

KIEV - The presidents of five countries - Ukraine's Viktor Yushchenko,
Poland's Aleksander Kwasniewski, Georgia's Mikheil Saakashvili, Lithuania's
Valdas Adamkus and Estonia's Arnold Ruutel - and representatives of the
European Commission will take part in the round table on Ukraine organized
by the World Economic Forum in Kiev 16-17 June.

The World Economic Forum's director for European countries, Felix Howald,
told a news conference in Kiev on 1 June that the total number of
participants in the round table would be 250, including politicians and
academics as well as business representatives, since the forum programme
is broader than discussing Ukraine's business prospects.

"This is not just a meeting of investors. It is a meeting of people
interested in discussing the problems Ukraine faces and the ways to overcome
them," Howald said. He said the round table programme included issues such
as Ukraine's relations with the EU, WTO, USA and Russia, and discussion of
the main obstacles to investment in Ukraine.

Howald said that separate sessions would be devoted to the main sectors
of the economy - mining and metallurgy, agriculture, high tech, finance and
machine-building. It is planned that all the country's main ministers headed
by Prime Minister Yuliya Tymoshenko will take part in the round table,
Howald said.

Among the foreign companies accredited at the Kiev Mini-Davos, he
mentioned Nestle, Microsoft, [SigmaBleyzer], Oracle and Ernst&Young. In
addition, 50-60 Ukrainian companies including Naftohaz Ukrayiny, Kvazar-
Micro and Interpipe will take part.

The agreement to hold the World Economic Forum round table on Ukraine in
Kiev was reached while Yushchenko was attending the annual Davos forum in
January 2005. -30- [Action Ukraine Report Monitoring Service]
===============================================================
7. UKRAINE OFFERS SETTLEMENT TO JOURNALIST GONGADZE'S WIDOW

Inter TV, Kiev, in Ukrainian 1700 gmt 1 Jun 05
BBC Monitoring Service, UK, in English, Wed, Jun 01, 2005

KIEV - The widow of murdered Ukrainian journalist Heorhiy Gongadze
Myroslava will receive 100,000 euros, or about 620,000 hryvnyas, from
Ukraine's state budget as a pledge of a friendly [out of court] settlement
of the case on the inappropriate investigation of circumstances of her
husband's disappearance, which has been heard at the European Court.

This is stated in a special declaration which the Ukrainian cabinet's
plenipotentiary representative for observing the European Convention on
Protection of Human Rights and Fundamental Freedoms has been ordered
to sign.

If the deal is signed, I quote, Myroslava Gongadze will lose the right to
file any complaints against Ukraine regarding the facts mentioned in her
complaint [upheld by the European Court]. -30-
===============================================================
8. PRESIDENT VIKTOR YUSCHENKO DISCUSSES WITH THREE U.S.
SENATORS HOW TO BOOST UKRAINE-U.S. RELATIONS

Interfax-Ukraine, Kyiv, Ukraine, Wed, June 1, 2005

KYIV - Ukrainian President Viktor Yuschenko discussed with U.S. Senators
Mitch McConnell, Jim DeMint, and Mike Crapo how to boost Ukraine-U.S.
relations and trade in Kyiv on Wednesday, the presidential press service
reported. The Ukrainian president pointed out the importance of strategic
cooperation between Ukraine and the United State. He said all industries in
Ukraine need "deep reforming."

"Our goal is to make Ukraine's economy competitive and to improve the life
of Ukrainians. This is the main goal of cooperation with any country,
including the United States," Yuschenko said.

The sides discussed the possible growth in U.S. aid to Ukraine. Having
marked that the United States had increased technical aid to Ukraine by $60
million this year, the U.S. senators said their country is prepared to
consider increasing technical aid to Ukraine.

Senator McConnell said he highly valued Ukraine's efforts in its fight for
democracy and higher standards of life and said the United States would help
it in achieving the goals. The sides also discussed Ukraine's possible entry
in the WTO and the granting of market economy status to Ukraine.
===============================================================
9. VIKTOR YUSCHENKO, GEORGE SOROS DISCUSS UKRAINE'S
COOPERATION WITH RENAISSANCE FOUNDATION

Interfax-Ukraine, Kyiv, Ukraine, Wed, June 1, 2005

KYIV - Ukrainian President Viktor Yuschenko met in Kyiv Wednesday with US
businessman, founder of the international Renaissance foundation George
Soros to discuss technical aid to the Ukrainian state. This was announced on
the official website of the Ukrainian president.

Yuschenko emphasized that today any sphere of the state needs consultative
assistance, know-how and skills of other countries. Yuschenko and Soros
discussed prospects for exchange of experience and training experts in some
or other sphere, drawing international consultants into debating social and
economic programs in Ukraine. -30-
===============================================================
10. UKRAINE PARLIAMENT PREPARED TO RETURN TO DRAFT ON
INTELLECTUAL PROPERTY RIGHTS, SAYS LYTVYN

Interfax-Ukraine, Kyiv, Ukraine, Wed, June 1, 2005

KYIV - The Verkhovna Rada of Ukraine is prepared to resume consideration
of a draft law on the protection of intellectual property rights.

Verkhovna Rada Chairman Volodymyr Lytvyn made this statement at a
meeting with a delegation of the U.S. Senate, Ihor Storozhuk, the press
secretary for the Ukrainian parliament speaker, told the press on Tuesday.

Senator Mitch McConnell from Kentucky, the head of the U.S. delegation,
voiced U.S. concerns over the Rada's rejection of the draft law on Tuesday.
He described the draft as an important one for Ukraine's entry in the World
Trade Organization.

Lytvyn confirmed the preparedness of the Ukrainian parliament to return to
considering the draft law, which he also described as an important one, on
the condition that parliamentary procedure on repeat consideration of draft
laws is observed. The sides also discussed current Ukrainian-U.S. relations.

The sides discussed prospects for cancellation of the Jackson-Vanik
amendment toward Ukraine and Ukraine's market economy status.
The U.S. senator said that there was every reason to believe that the issue
of the Jackson-Vanik amendment would be settled soon. As for Ukraine's
entry in the WTO, Ukraine has yet to implement certain reforms [needed for
accession], he said. -30- (Action Ukraine Report Monitoring Service)
==============================================================
11. CANADA TO INCREASE ASSISTANCE TO UKRAINE, SAYS
CANADIAN AMBASSADOR ROBINSON

Interfax-Ukraine, Kyiv, Ukraine, Wed, June 1, 2005

KYIV - Canada is planning to increase assistance to Ukraine in carrying out
administrative reform and improving the manageability of social and economic
processes in the country. Canadian Ambassador to Ukraine Andrew Robinson
announced this at a meeting with Ukrainian Justice Minister Roman Zvarych on
Monday, the Justice Ministry's press service reported.

Two months ago, the Canadian government passed a strategy of foreign and
defense policy, which pays great attention to the development of bilateral
cooperation between Canada and other states, Robinson said. Although this
document cuts the number of Canada's bilateral priorities to 25, Ukraine is
the only country of its region that remains on the list of important
partners in foreign policy. According to the ambassador, this will mean that
Canadian assistance to Ukraine will grow.

In particular, Ottawa will focus on assistance in pursuing administrative
reform and making social and economic processes in Ukraine more
manageable, the ambassador said. He said Canada believes that
introducing the supremacy of law is the necessary precondition for the
Ukrainian authorities.

According to Robinson, the Canadian government regularly provides Ukraine
with assistance in reforming the justice system, mainly the judicial system.
In particular, the ambassador said that he had lately visited Ivano-
Frankivsk where a Canadian project is being implemented to create a model
court. The best international experience is engaged in the implementation of
the project.

Zvarych thanked the Canadian government for the support of the democratic
revolution in Ukraine. The minister also outlined priority directions of the
Justice Ministry in implementing democratic reforms, building a law-governed
society in Ukraine, in particular, in carrying out court reform and the
reform of the State Executive Service, in war on corruption and ensuring a
transparent system of justice. -30- (AUR Monitoring Service)
===============================================================
12. "OUR MAN AMONG THEM"
Ukrainian National Security & Defence Council Secretary Poroshenko

Interview with Petro Poroshenko by Roman Kulchynskyy
Kontrakty, Kiev, Ukraine, in Ukrainian 30 May 05; p 16-19
BBC Monitoring Service, UK, in English, Wed, Jun 01, 2005

The secretary of the Ukrainian National Security and Defence Council, Petro
Poroshenko, has once again denied conflict with Prime Minister Yuliya
Tymoshenko in a newspaper interview. However, he reiterated previous
criticisms of the cabinet's administrative methods of regulating the oil
market.

He also denied a rift with Tymoshenko over reprivatization, but insisted
that the list of privatization deals subject to review did exist. He added
he did not think it should be published. Poroshenko also played down his
reported influence on the president, saying that Viktor Yushchenko is very
much his own man and takes all decisions himself.

The following is the text of the interview with Poroshenko by Roman
Kulchynskyy, entitled "Our man among them" and published in the Ukrainian
newspaper Kontrakty on 30 May, subheadings inserted editorially:

A former member of the United Social Democratic Party of Ukraine [USPDU]
and the secretary of the National Security and Defence Council [NSDC], Petro
Poroshenko entered the ranks of the former opposition not long ago - on the
eve of parliamentary elections in 2002. Up to that time, he had been close
to becoming known as an "oligarch", but political fighting did not allow him
to get this "status".

In the ranks of the new authorities, Petro Oleksiyovych [Poroshenko] was
counting on becoming the prime minister, but he was outrun by Yuliya
Tymoshenko. Since then, people have been of the opinion that there is a
behind-the-scenes war going on between them.

PETROL CRISIS -----

[Kulchynskyy] Before and after the election, the authorities were talking
about the demonopolization of the oil products market. Is that realistic and
how much time is needed for it?
[Poroshenko] I would not like for this to sound like polemics on the
subject: "who will be victor over whom" - we over the Russians companies, or
they over us. The Russians are our partners, and so I ask you to treat them
like partners. And then we will have the right to demand they treat us like
partners. Right now, one can bring in oil products to Ukraine from abroad -
this is an additional instrument for influencing the market. Also, an
agreement on increasing the quotas for the transit of Russian oil for export
through Ukraine is in the works. I do not rule out that creating a reserve
of oil in Ukraine will be a demand for this. We should have reserves at
plants and at filling stations. And not at the expense of the budget.
At the last meeting between the leadership of Ukraine and the leaders of
Russian oil companies, the latter gave assurances that spring and autumn
field work would not influence their pricing policies and that because of
this, there would not be any lack of oil products for agricultural work. And
we promised that prices would not be regulated by administrative means. On
the contrary, a clear link will be introduced between the price of petrol at
the pump and world prices for oil. No-one will get to have a monopoly on
super-high profits. That was also agreed with the Russian operators.

[Kulchynskyy] Before the peak of the petrol crisis, the price for a litre of
A-95 petrol was 2.99 hryvnyas; after regulation the price came to 3.20
hryvnyas. Was the stumbling block in negotiations between the Russians and
the Ukrainian authorities the difference of 21 kopecks or something else?
[Poroshenko] Don't simplify the situation. There are really a lot of
underlying factors. Some of them formed six to eight years ago, when the
state lost its ability to influence the oil products market. At the same
time, when it is not advantageous for businesses to import oil to Ukraine,
for example, in Hungary it could be sold for more, market laws operate and
goods go where they pay more for them.
Administrative regulation of prices carries a certain threat. It is
effective when the supplier has no alternative and is forced to sell for
fixed prices. Until 1996, Russia was in such a position, when it could not
transit oil to the West without sending it through our territory. Since
then, the Russians have worked seriously on their transit abilities. And so
we need to quite seriously calculate the repercussions of any limiting
decisions that we take.
The problem is not in 21 kopecks. It's simply that the administrative method
of regulating prices is categorically unacceptable. When a deficit was
created on the market, there were instances of filling stations selling A-95
petrol for 3.70 hryvnyas, of course, without posting the prices.
In fact, there are enough civilized means of influencing the situation. One
can hold an anti-monopoly investigation, in which it can be proved in court
that there was a conspiracy by a cartel. This concerns other goods as well,
besides petrol.
The production cost of goods in the east and west of Ukraine is different,
and so a conspiracy is easy to prove. Now the oil products market is
regulated. The president has initiated work on an energy security programme,
which envisages reconstructing plants in the west of the country and in
Kremenchuk, working out transit capabilities, diversifying sources of oil
supplies, demonopolizing the filling station market and establishing a
reserve of oil products.

NO RIFT WITH PREMIER -----

[Kulchynskyy] It seems there is a lack of unity in the government with
regard to carrying out the president's decisions. Prime Minister Yuliya
Tymoshenko states a new oil refinery needs to be built near Odessa. But the
director of Naftohaz [national oil and gas company], Oleksiy Ivchenko, says
a new plant is not needed. What do you think?
[Poroshenko] I did not hear either Tymoshenko's or Ivchenko's statements. I
think this is an issue for the leader of the government and for the person
who answers for this sector. Let's look at the facts, no decision on
building has been taken. And it is normal that there are different views on
this issue before a decision has been made, because there needs to be
discussion.
In my opinion, the state is the worst owner. We don't need to build plants
and factories at taxpayers' expense and then privatize it all for suspect
prices. The state needs to create conditions that are encouraging for
investors. If there is a need for such a plant, then people can always be
found who will want to build it for their own money.

For example, how full are existing plants? They are 40 to 50 per cent full.
We probably need to work on this. How deep is the refining at these plants?
It is 50 to 60 per cent. Probably, it would be worth investing money in
increasing this. I do not rule out that this can be done at new factories,
too.

[Kulchynskyy] Still, over the past while, people have been talking about a
confrontation between you and Tymoshenko. What is the reason this time?
[Poroshenko] I personally have no confrontation with Ms Tymoshenko. So here
is a question: why do they talk about it? I think it is just advantageous
for journalists, not because they want to get us into a fight, but because
the press always needs a "tasty fact", a conflict. Freedom of speech now
rules in our country, and I ask you not to twist my position or the
positions of other people, but to provide objective information.

[Kulchynskyy] Information on Tymoshenko's statement, in which she accused
"the other half of the authorities" of the petrol crisis, is that also
considered twisting?
[Kulchynskyy] Unfortunately, that is emotions. I hope the prime minister
doesn't really think that, because she knows that it isn't so. We have a
fairly unique situation, where the high level of trust the people have in
the authorities and their political support for them remains stable. And we
need to use this support to carry out necessary reforms, and not to create
quarrels in the team. If reforms do not change the country, we will ruin
support within the country and beyond its borders.

[Kulchynskyy] And how much time do the authorities need to carry out
reforms, while at the same time not losing the support of the people?
[Poroshenko] I think 10 years is enough.

PRIVATIZATION REVIEW -----

[Kulchynskyy] How are decisions made by the highest leaders of the country
and why do the members of one team voice different views? A good example
is the strengthening of the hryvnya and the list of enterprises which
allegedly are to be reprivatized.
[Poroshenko] All decisions are made according to procedures taken from
legislation. The actions which you named were commented upon by people
who had nothing to do with adopting the decisions. The syndrome of being in
opposition has not yet been overcome. When you are in opposition, you can
comment on whatever you want. But when you are in power, you should only
comment on that part for which you bear direct responsibility.

[Kulchynskyy] Where did the list of privatized enterprises which you just
commented on come from - in which there are enterprises that are candidates
for additional payment?
[Poroshenko] I have not seen that list. At an open meeting of the government
and in the presence of television cameras, the president instructed the
first deputy prime minister and leader of the responsible committee,
Anatoliy Kinakh, who was appointed at the prime minister's suggestion, to
complete a list of enterprises whose privatization was suspicious. I would
rather not comment on the procedure of reviewing or nor reviewing this list
before the document was given to the president.
I am categorically against it becoming public. It should have been said that
there are 29 such enterprises and then review the legality of how they were
privatized and how they were carrying out their investment obligations. And
going to court after the review. But I am not convinced the list which was
made public is the same list prepared by Kinakh.

[Kulchynskyy] Do we need a law which would regulate the method of making
an additional payment for enterprises with problems in privatization?
[Poroshenko] I do not know a mechanism of making an additional payment.
Maybe it will be voluntary. For example, someone wakes up in the morning
and thinks "I bought that plant for cheap. Maybe I'll go and pay the state
some more." And he goes and pays. How much and how - no-one knows.
There needs to be a procedure which everyone understands, maybe it will
be a peace agreement between the government and the investor, maybe
some kind of tender to pay more. Until the government works out some kind
of procedure and proposes it publicly, there is nothing to comment on.

[Kulchynskyy] Interior Affairs Minister Yuriy Lutsenko has stated that his
ministry is preparing a bill which envisages fines instead of imprisonment
for financial crimes. How much should [former administrator of presidential
affairs Ihor] Bakay pay for example?
[Poroshenko] I don't think Bakay will have enough money and he will have to
take criminal responsibility. They same for [former governor of Sumy Region
Volodymyr] Shcherban. Overall, I support that initiative, because a person
does not come out of prison any better.
If someone broke the law, but not by actions which were a threat to state
interests, then in compensating the expenditures of the state and paying a
fine after signing an agreement with the court, the investigator and the
accused, the latter can remain free.

[Kulchynskyy] Just what sum of theft will make such an agreement possible?
[Poroshenko] As a citizen, I have my own opinion on that, but as secretary
of the NSDC, I cannot make it public, so the repeat offenders will not have
the right to such an agreement. It is too early for the authorities to talk
about this idea in terms of forming an initiative, but the approach itself
is correct, I think. I think the bill will be worked out in a month.

PRESIDENT AN INDEPENDENT DECISION MAKER -----

[Kulchynskyy] The NSDC is called the filter of the new authorities. Is that
so?
[Poroshenko] No. I am the personnel filter only within the NSDC. Of all the
newly-appointed leadership, we have rejected only four candidates. They
still had criminal cases opened against them. Neither we nor the Security
Service of Ukraine [SBU] can give a person with an open criminal case
access to state secrets or secret documents.
We really did inform the president that such a bureaucrat could not be given
access to state secrets and asked that this be considered in making a
decision. The NSDC had no relation to any other appointments.

[Kulchynskyy] But you have been accused of causing the dismissal of SBU
chief Oleksandr Turchynov's deputy without his knowing about it.
[Poroshenko] The president is a very independent person. Everyone who
thinks the president can be influenced is deeply mistaken.

[Kulchynskyy] Have you tried to influence him?
[Poroshenko] It's not a question of whether someone is wanting or trying to
influence him. Every bureaucrat on a certain level prepares proposals for
the president. He analyses them thoroughly and makes an independent decision
based on information from various sources. Today, no-one has the possibility
to influence the president. I cannot comment on what guided the president in
the examples you've cited, but I can assure you that the position of the
first deputy chief of the SBU is very important and in order to appoint or
dismiss him, one must have serious grounds. The president had them.

FORMER OFFICIALS IN NEW GOVERNMENT -----

[Kulchynskyy] They say you brought acting Prime Minister Mykola Azarov to
Independence Square where he put on an orange scarf. Is that true?
[Poroshenko] First, Azarov was not wearing an orange scarf. When I went up
to the stage, he and Kiev mayor Oleksandr Omelchenko were already there, but
he had no orange scarf, tie or shirt. Mr Omelchenko, came to the podium on
the square to greet the city's residents and, speaking on behalf of the city
authorities, invited Azarov along.
No-one wanted to suck up to anyone. Omelchenko did not know that the
president himself was coming to the square at that very time. There was no
double game: Azarov was not there then, and everything about me in this
story was made up by journalists.

[Kulchynskyy] Of all the former leadership, only Prosecutor-General
Svyatoslav Piskun is left. Why?
[Poroshenko] He is not the only one left. The chairman of the Antimonopoly
Committee, Oleksiy Kostusyev is left, and so are the chairman of the State
Committee for Information Policy, Ivan Chyzh, and the head of the securities
commission, Viktor Suslov. Many people have remained in place.
Piskun went to court and proved that the president cannot dismiss him.
Moreover, the president thinks, and that is his right, that there are no
grounds to not trust Svyatoslav Piskun. Do you know the difference between
Chyzh and Kostusyev and Piskun? That neither Chyzh nor Kostusyev can be
dismissed by parliament without the sanction of the president. But
parliament can remove Piskun independently without a request from the
president.

FUGITIVE FORMER OFFICIALS -----

[Kulchynskyy] Bakay, Shcherban and [former Odessa city mayor Ruslan]
Bodelan got across the borders quite easily. Did the new authorities
consciously let them flee?
[Poroshenko] If it were necessary, I'd become a border guard to catch them.
But there is a legal procedure, regulations on when and who can be detained.
In contrast to the former authorities, our actions must strictly adhere to
the law. Without the sanction of the prosecutors, a policeman has no right
to detain anyone. A border guard can also only detain someone on condition
that he has a document properly filled out. When Shcherban, Bakay and
Bodelan left, the border guards did not have such a document.

[Kulchynskyy] What kept Piskun and his subordinates from writing up such a
document?
[Poroshenko] At the moment the suspects left, there was no data that they
could commit a crime.
These are very important things. You cannot be cavalier about detainments,
arrests or searches, saying "everyone knows he is a criminal". I went
through such an experience. One rotten fellow spoke on television and said
Poroshenko is a criminal, and my mother had a heart attack. One must be
guided by the well-known principle - it is better to let 10 guilty people go
than convict one innocent person. If the prosecutors believe someone is a
criminal, then they have to take that to court.
I see no tragedy in the fact that Shcherban and Bakay fled. Sooner or later
they'll get turned in.

DEFENCE INDUSTRY -----

[Kulchynskyy] Discussions on the new structure of the military-industrial
complex is growing. To whom should plants that produce military goods be
subordinate?
[Poroshenko] The government needs to write a programme to protect the
state's military complex. Since we are talking about the defence
capabilities of the state, this issue has to be reviewed by the NSDC. To
whom such enterprises should be subordinate - the Industrial Policy
Ministry, the Economics Ministry, the State Property Fund and the National
Space Agency, the Defence Ministry or Ukrspetseksport [state arms
exporter] - is an element in the concept. If the plant's output is
2-per-cent military, then why should it be under the Defence Ministry?
Let it be managed by the Industrial Policy Ministry, or even better, sell
it. If there is 90 per cent military production, and the enterprise has
strategic significance, then why not turn it over to Ukrspetseksport if,
according to the concept of its functions, Ukrspetseksport includes military
output, and also scientific research and development and manufacturing. I
think the industrial defence potential of the state should be concentrated
in one place.

NO-ONE IMMUNE FROM PROSECUTION -----

[Kulchynskyy] Why have you not given up your MP mandate?
[Poroshenko] Because the decree on my appointment is at the Constitutional
Court.

[Kulchynskyy] The president has tasked you with getting to the bottom of how
land was parcelled out in Crimea. But there is probably not a single
bureaucrat of a certain level who has not privatized land on the southern
shore of Crimea. How do you get out of this situation?
[Poroshenko] I give myself certain realistic tasks. Like freedom of speech.
It will never be absolute. But the biggest crimes in land issues in Crimea -
organizationally, procedurally, those which led to the most serious social
conflict - absolutely must be removed.

[Kulchynskyy] They say the former Crimean prime minister and Yushchenko
aide, Serhiy Kunitsyn, privatized a lot of land.
[Poroshenko] No position with the new authorities, be it aide, minister,
prime minister or secretary of the NSDC, will protect a person from
responsibility for committing a crime. At the last meeting of the NSDC, the
president clearly stated that no-one had the right to make a telephone call
to ask anything of the prosecutor, the minister of internal affairs or the
head of the Supreme Court or head of other courts.

[Kulchynskyy] Has someone tried?
[Poroshenko] No, but the president pointed it out just in case, so there was
no temptation. -30- [The Action Ukraine Report -AUR- Monitoring Service]
===============================================================
13. PROSECUTOR GENERAL AROUND $1BN ILLEGALLY TRANSFERRED
OUTSIDE UKRAINE DURING ORANGE REVOLUTION

Interfax-Ukraine, Kyiv, Ukraine, Wed, June 1, 2005

KYIV - In November-December 2004 around $1 billion was illegally transferred
out of Ukraine, Anna Tsyhanenko, the head of the Prosecutor General's
Office's money laundering oversight department, said during a Wednesday
briefing in Kyiv.

"Around $1 billion was transferred outside Ukraine's territory during the
last two months of 2004 through banking and other financial establishments,"
Tsyhanenko said. She said well-known persons were among those involved in
the capital outflow from Ukraine. She said the matter concerned budgetary
and private funds.

At present the Prosecutor General's Office has opened six criminal cases
connected with the illegal transfer of capital. Tsyhanenko does not rule out
that more criminal cases may be opened in future, since checks are
continuing. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
14. IFC INVESTS USD 20 MILLION IN AND OPENS USD 60 MILLION CREDIT
LINE FOR UKRAINE'S LARGEST PRODUCER OF POULTRY MEAT

Ukrainian News Agency, Kyiv, Ukraine, Wed, June 1, 2005

KYIV - The International Finance Corporation (IFC) has opened a credit line
worth USD 60 million for the Myronivskyi Khliboprodukt group of companies
(Kyiv). The IFC disclosed this in a statement. Myronivskyi Khilboprodukt is
the largest producer of poultry meat, and it owns three factories and
controls nearly 40% of the market for broiler meat

According to the statement, the funding is aimed at supporting the
enterprise's plans to double output capacity by 2008 and to develop new
types of products. IFC did not disclose details of the loan. Besides, IFC
invested USD 20 million in the joint stock capital of Myronivskyi
Khliboprodukt.

According to IFC, the total amount of Myronivskyi Khliboprodukt's project
with respect to expanding output capacities and introducing new types of
products will be USD 260 million. IFC had already previously given a loan to
the Myronivskyi Plant in the amount of USD 30 million.

As Ukrainian News reported previously, the International Finance
Corporation, which is a member of the World Bank Group, stimulates the
attraction of steady investments in the private sector of transition economy
countries. IFC has been operating in Ukraine since 1993. This organization's
direct investments in Ukrainian enterprises totaled nearly USD 200 million.

The Myronivskyi Khliboprodukt group of companies in Kyiv plans to boost its
capacity for producing poultry meat by 154% or 194,000 tons, from 126,000
tons to 320,000 tons a year for the period spanning 2005-2010. .

According to the information of the Agency for Development of the Stock
Market Infrastructure of Ukraine for March 2004, the Merkaba company (Kyiv)
owns 84.61% of the shares in closed joint stock Myronivskyi Khliboprodukt
===============================================================
15. "EUROPE SYMBOLIZED IN SONG"
The renowned Ukrainian director Vasyl Vovkun

Kyiv Weekly, Kyiv, Ukraine, Friday, May 27, 2005

KYIV - The renowned Ukrainian director Vasyl Vovkun was involved in
organizing Ukraine - the Heart of Europe. A carefully developed concept for
the staging was based on the theme of blossoming nature. The first spring
thunderstorm and shower, flowers and heat of the sun were the main features
of a genuine Kyiv spring that took on symbolic forms and found their
reflection in performances by choreographic ensembles.

The final stage of the Eurovision Song Contest was echoed in songs by such
bands as Daleko, NeDilya, Mandry, Motor'Rolla, Mad Heads, Talita Kum,
Tartak and Shchastya.

Meanwhile, the appearance of last year's winner of the Eurovision contest
Ruslana raised the level of emotions among the enthusiastic crowd of
Ukrainians and foreigners visiting Kyiv for the show. Ruslana performed her
new song, In the Rhythm of the Heart, together with children, who together
became a musical symbol of Eurovision 2005.

The "Pride of Ukraine" accompanied by a crowd of children lit up the
symbolic heart of Europe, symbolizing the unity of Ukrainians with all
European nations. In the meantime, a fantastic firework show lit up the sky
over Maidan Nezalezhnosti.

Incidentally, thanks to a large-scale communications promotional event, also
entitled Ukraine - the Heart of Europe by Kyivstar, similar shows were held
on the central squares of five other Ukrainian cities, including Kharkiv,
Lviv, Odesa, Donetsk and Dnipropetrovsk.

Expert's commentary Head of the Corporate Relations Department of Kyivstar
Zhanna Revnova: "By implementing the program, Ukraine - the Heart of Europe,
Kyivstar wanted to give all Ukrainians the festive atmosphere of the
Eurovision Song Contest. The main event of this program was a grand art and
music show in Kyiv and major cities across Ukraine. Concerts, surprises,
presents and fireworks combined to give every Ukrainian a unique opportunity
to take part in this European music festival." -30-
------------------------------------------------------------------------------------------------------------
FOOTNOTE: The Black Tie and Orange Inaugural Ball held in honor of
the inauguration of the President of Ukraine Viktor Yushchenko at the
Ukrainian House in Kyiv on Sunday, January 23, 2005 was a Vasyl
Vovkun Production. The Ball was the first privately sponsored such
event ever held in Ukraine and was attended by approximately 2,000
persons. The Inaugural Ball was a celebration of a new era.

The Vasyl Vovkun production "Live In An Orange Instant," supported by
private businesses recreated the spirit of Maidan during the Orange
Revolution, featured authentic elements of the tent city and Independence
Square, a unique photo exhibition, historical videos, an Orange Carnival,
and performances by Okean Elzy, Mandry, Tartak, Apex-Dixieland-Band,
Oleksandr Ponomaryov, Taras Petrynenkio, Tetyana Gorobets, the
Revolution Orchestra and ARS NOVA drum band.

Some of the individuals who represented the private businesses and
organizations who sponsored the Ball and were on the Organizing
Committee included Andriy Myroshnichenko, Ukraine-3000 Foundation;
Sergey Boyko, Volia Group; Michael Sarkesian, Estron Corporation;
Michael Bleyzer, SigmaBleyzer; Oleksandr Cherevatiy, Sevastopol
Shipyard; David and Tamara Sweere, Kiev-Atlantic, Ukraine-Atlantic Farms;
Victor Gekker, The Bleyzer Foundation; Anton Marrero, Softline; Valeriy
Plaksiy, Poltava Confectionary; Yury Sivitsky, Association "IT Ukraine";
Mykolay Padalkin, Zaporizhya Meat Processing; Ivan Adamchuk, NBM TV
and Radio Company, (Channel 5); Leonid Kozachenko, Ukrainian
Agrarian Confederation; Volodymyr Kosterin, Transbank; Mykola
Kompanets, Ukrainian Grain Association; Ambassador Anton Buteiko
and Ambassador Yury Shcherbak, both who served terms as Ukraine's
Ambassador to the United States. [EDITOR]
===============================================================
16. RESCUING THE "VALLEY OF THE DAFFODILS"
Valley located in the Khust region of the Zakarpattya oblast

A Wonder of Nature: By Vasyl Khudytskiy
Kyiv Weekly (KW), Issue #20 (160)
Business & Socio-Political Weekly
Kyiv, Ukraine, Friday, May 27 - June 3, 2005

KYIV - Several decades ago, Ukraine could have lost the valley of daffodils
located in the Khust region of the Zakarpattya oblast. Local authorities
wanted to expand the area of plough-lands at the expense of this territory.
The inclusion of the territory in the Carpathian Biosphere Reserve, rescued
this unique valley, on which rare narrow-leaved daffodils grow that
scientists claim survived the Ice Age.

Today, this valley of daffodils is a place of pilgrimage for Ukrainian and
foreign tourists wanting to see with their own eyes this unique natural
phenomenon. Indeed, this valley is considered one of the only places in the
world, where such ancient plants have been preserved. This species of
daffodils also can be found in the Alps, Romania and in certain Balkan
countries, but the greatest number grows in Ukraine's Zakarpattya region.

Several hotels and holiday homes have been built near this valley especially
for tourists, who come to see this miracle of nature. But, as one of the
employees of the reserve who requested anonymity shared with our special
KW correspondent, in the years after the rules for visiting the valley were
made stricter and the pasturing of domestic cattle was prohibited, the
population of the daffodils began gradually falling.

The employee emphasized that the creation of "greenhouse" conditions
for the flowers, which are used to surviving in a natural environment, most
likely had a certain effect. Today, scientists are trying to answer this
question and until the solution is found, they must artificially sow the
valley with this flower's seeds in order to preserve the unique territory in
its original form for future generations.

KW Background Info: The Valley of Daffodils is a unique botanical area,
totaling 257 hectares, located in the ancient riverbed of the Tysa River.
The average annual temperature is +8.5 C and the average annual rainfall
is 850 mm. -30- [The Action Ukraine Report Monitoring Service]
------------------------------------------------------------------------------------------------------
LINK: http://www.kyivweekly.com/english/article/?674
===============================================================
17. A MAN INCAPABLE OF ADAPTING TO INJUSTICE
One year has passed since the untimely death of Dr. James Mace

By Klara Gudzyk, The Day
The Day Weekly Digest in English, #18
Kyiv, Ukraine, Tuesday, May 31, 2005

One year has passed since the untimely death of Dr. James Mace, human
rights champion, American scholar, professor, and researcher of the
Ukrainian Holodomor. Starting off as a researcher of Ukraine's past, James
Mace came to be a citizen of Ukraine: he was pained to see Ukraine
experiencing failures on its way to genuine democracy and sincerely rejoiced
over its successes.

Journalists at The Day feel privileged to have worked alongside this
extraordinary American, who was both their colleague and a like-minded
person always open to sharing opinions.

James Mace began researching Ukraine's contemporary history when the
Soviet Union still seemed unshakable, and nobody suspected that the "kingdom
has been numbered, weighed, and divided" (the Biblical warning "Mene, Mene,
Tekel, Upharsin"). The main results of his research was a four-volume
report: one volume of documentary evidence from Soviet archives that had
been shipped to Germany during World War II (Soviet archives were closed to
researchers at the time), and three volumes of chilling eyewitness accounts
from famine survivors. Speaking at a James Mace jubilee, one Holodomor
witness said that this American man wept while listening to accounts of
Ukrainian sufferings.

A characteristic trait of Dr. Mace was his inability to adapt to injustice,
no matter where it occurred: in the US, Ukraine, or any other place on
earth. This made him markedly different from many of us - people who either
become accustomed to the horrible order of things or crusade for justice
selectively, depending on the circumstances, nationality, and time. James
always maintained his lofty moral standards, which appealed to people.

As the writer, scholar, public figure, and former prisoner of conscience,
Yevhen Sverstiuk, rightly noted, "To do good to Ukraine, one doesn't
necessarily have to be a Ukrainian. One simply has to be a human."
Unfortunately, the opposite is also true.

Think of all those Ukrainians who only do harm to their fatherland. They are
either indifferent people or the kind that prefer to forget the tragic pages
of our history, thereby cancelling out not only these pages but Ukraine
itself. These are people who still live in the suffocating fog of nostalgia
for the old regime, which to them is a veritable heaven on earth.

Didn't their ancestors, the Cossack rebels, create and live under a system
of collegial (now known as democratic) self-governance as far back as the
middle ages? The Ukrainian Cossacks preferred to be killed in action rather
then surrender to oppressors.

James Mace began researching the problems and tragedies of the Soviet
Union during his university studies. His doctoral dissertation, "Communism
and the Dilemmas of National Liberation: National Communism in Soviet
Ukraine, 1919-33," was published by Harvard University Press. When Dr.
Mace began studying the problems of the artificial famine of the 1930s in
Ukraine, he had absolutely no access to the main sources of information,
i.e., authentic Soviet documents, which were classified.

Thus, the young scholar embarked on what later turned into large-scale
research and investigations that lasted his whole life. In 1986 he was
appointed staff director of the US Congress Commission on the Ukraine
Famine. That was when he was spotted by the Soviet press, which quickly
branded him as "a fabricator of history," "a liar," and "a false friend of
the Ukrainians," etc. In the eyes of honest individuals these accusations
were a badge of honor. Meanwhile, his works were being published in many
languages in several Western countries.

When he was allowed to come to Ukraine in the new era, James Mace
supplemented his research with several volumes of accounts by eyewitnesses
and victims of the Ukrainian Holodomor. The outpouring of grief at his
untimely death is not surprising. His widow, the well-known Ukrainian writer
Natalia Dziubenko, received hundreds of telegrams of condolences from
every continent.

Below are a few excerpts from James Mace's column in The Day.

"Ukraine still lacks a market economy because of the formal and especially
informal (shadow) role of state structures, monopolization (legal and
illegal), along with the lack of any legal security for market transactions
(supremacy of telephone law). An investor coming to this country from what
used to be called the Free World simply does not know what he is buying,
and if he thinks he can take control of it, he can be unceremoniously thrown
out, handed back his usually devalued hryvnias, and bidden a fond farewell.

Of course, in a competitive world, nobody with serious money is going to put
it into such an environment. They will put it where they know what they are
buying and that, once owners, they can change the management for those
they think can do a better job. Until that is the case in the former Soviet
Union, one can forget about serious Western investment. All one can do is
wait to see how much others from the same environment can buy, bribe, and
then take over well out of the public eye."

"While I might be less than optimistic about the likely result, because I
consider the society that will produce it somewhat less than healthy, I
appreciate the effort. Ukraine has serious and deep-seated problems, but
at least in this election campaign I see some effort to address them."

"After six years in Ukraine I can't help noticing that life here follows
different laws than those of America or Western Europe. I can't help
noticing the changes and realize that not all of them are for the better. My
goal as an instructor of American political science at the Kyiv-Mohyla
Academy is not to prove the excellence of the American system, which is
far from perfect. We must recognize, however, that so far it has been quite
a successful system, its weaknesses notwithstanding."

"It is necessary, indeed crucial, to judge the Ukrainian reality by the
standards of the civilized Western world. Because, whether it is fair or
not, this world dominates our planet. And if the people of the new
independent state want to live decently on this planet, they must adapt to
the successful experiments of mankind."

"I am a historian, and I am drawn to where the winds of history are blowing.
A strong and turbulent wind of history is raging over Ukraine. Much is being
decided here: not only the future of a newly formed country but also
Europe's future, or perhaps - and I am certain beyond any doubt - the future
of the international community as well. It is not just about opening a new
market or a new political division or new orientation. It is primarily about
opening Ukraine's lofty spiritual heights to the world. And this will be at
least partial compensation for the talented and industrious nation for the
paths of suffering it has traversed throughout the centuries. This is my
dream and hope."

"I am proud that after World War II America could play a modest role in
Germany's return to itself as the land of Goethe, Beethoven, and Mozart
away from the nightmare of blood the Nazis led it to."

"I long ago came to the conclusion that whether we address our God as
Jehovah, Allah, or whatever else some prophet might come up, with is no
reason to fight or kill each other. Trained as a historian, I know how a
thousand years ago, when they took Jerusalem, the Crusaders waded up
to their knees in blood and wrote how it was right and just because it was,
after all, the blood of infidels. But that was a thousand years ago. One
hopes that in that time not only technology but human morality, public and
political morality, has changed."

"Yet, things always change. With time, will, and some friendly guidance from
the EU members themselves, this country has a chance for membership at
some point in the future. This is why a number of EU member states are
unwilling to shut the door as firmly as this Euro-bureaucrat would. Yet this
is not the point."

"I respect The Day for the civic courage to speak the truth, no matter how
bitter it might be; for its analytical mind; for covering problems of
science, culture, economics, and politics while remaining fully geared
toward its readers; for being a small, but not solitary, brave island of
truth and freethinking at a critical and fateful moment for Ukrainians. Our
readers are with us." -30- [Action Ukraine Report Monitoring Service]
-----------------------------------------------------------------------------------------------------
LINK: http://www.day.kiev.ua/137955
===============================================================
18. MAY DAYS IN CRIMEA!

SPRING GETAWAY: by Volodymyr Pimonenko
Kyiv Weekly, Volume #15, (155)
Kyiv, Ukraine, Friday, April 22-27, 2005

The Russian imperial family and aristocracy discovered the beauty of the
Crimean coast back in the beginning of the 19th century and traveled every
year to the peninsula to relax at their villas.

Despite the famous resorts of Nice and St. Tropez on the Cote d'Azur (the
southern coast of France), Tsar Nicholas II preferred his residence at
Livadia Palace on the coast of Crimea.

Crimea was also a popular resort for leaders of the former Soviet Union.
Among them were Nikita Khrushchov, Leonid Brezhnev and Mikhail
Gorbachev. Over the course of two centuries Crimea was built up with
palaces, bread-and-breakfasts, sanatoriums, hotels and holiday centers
such that it became the main health resort in the country.

This was all created on the background of picturesque nature, a nearly
sub-tropical climate and a countless number of different sights from
antiquity, the Middle Ages and more recent times. In short, Crimea is a
wonderful place for a comfortable vacation and good relaxation during the
May holidays.

CREME DE LA CRIMEA -----

This year, a popular trend in recent years, specifically elite tourism for
improving one's health, will receive an even greater impetus for
development. And this should come as no surprise since the curative alpine
and maritime air of Crimea, together with treatment, gives a double effect
and is literally rejuvenating.

Today, the Sanus per Aqua (SPA) system, which from Latin means "health
through water" and implies the combination of elements of healing practice
and applied aesthetics, prevails at Crimean resorts.

The city of Yalta boasts the richest variety of places, where a tourist can
try out the SPA system based on the healing properties of water and "dry"
procedures (different forms of massage). There are a full set of services
available. This includes thalassotherapy, which combines aromatherapy
and chromotherapy with balneal and other healing procedures.

The list of SPA services also includes "whirlpool" and "pearl" baths, a
Jacuzzi, rooms for aromatherapy, inhalations, cosmetology and massages.
But Yalta is not the SPA monopolist in Crimea. Indeed, one can find similar
treatment in the resort towns of Alushta and Partenit.

CLOSER TO THE EARTH -----

Many people consider rural "green" to be a new form of tourism, giving
people a way to relax in rustic areas of the country with their families in
private cottages, in nature, in the woods, or by a sea or lake.

If one wants to get the feeling of living in the countryside in a "tourist
village", you are offered the chance to go horseback riding, learn how to
milk a cow or churn butter. Tourists will also be treated to outdoor
concerts and picnics to acquaint them with national culture and local
cuisine.

The most interesting places for "green tourists" are concentrated in the
district of Bakhchisarai, where Tatars live, and also in the small town of
Stariy Krym (Old Crimea). This place preserved wonderful Armenian
medieval architecture and national traditions of the Caucasus. Meanwhile,
in the village of Chernopolye you can run into Greeks, descendents of
colonists from the ancient Peleponesia.

THE GRAPES OF PATH -----

The contours of the Crimean peninsula resemble a green grape leaf floating
on the surface of the sea. Tasty sorts of grapes are cultivated practically
in every region of Crimea.

Many have gained worldwide recognition. Among the best known sorts are
Massandra, Noviy Svit, Koktebel, Solnechnaya Dolina and Inkerman. You
can choose a specific wine tailored to your preferred taste.

You can start your "taste-testing tour" in Sevastopol, where you will be
able to try the wines of Inkerman, then visit the vineyards in Alupka and
Massandra with their outstanding wine-tasting halls, then go on to Noviy
Svit, where the famous bubbly invented by Count Golitsyn will dance on your
tongue, and then end up in Koktebel to "catch the cognac". Uncharted
waters... Tours for yachtsmen are offered mainly along the southern coast of
Crimea. Admirers of a cool sea breeze and romance sail from Balaklava to
Lastochkino Hnizdo (Swallow's Nest), Yalta and Sudak to Feodosiya and then
back.

Every year those who chart out sea routes try to find some new interesting
destinations. For example, an isolated beach and the beautiful cliffs of the
Blue Lagoon near Ai-Ya Cape will definitely leave some wonderful and
indelible impressions on cruisers. Meanwhile, at Cape Ai-Todor one can
discover the remains of a fortress of Roman legionnaires.

DIVING FOR UNDERWATER TREASURES -----

Crimea is famous not only for its unique nature, mild climate and exciting
sights. Indeed, the underwater world of the Black Sea is truly amazing. The
scuba diving season opens at the beginning of May.

As a rule, scuba divers go for new impressions to Cape Tarkhankut, which is
the most western cape on the peninsula. Here a diversity of marine creatures
lives in the crystal clear waters of mysterious grottos and caves with
stalagmites. Scuba divers also pay particular attention to Balaklava, near
which an English ship called the Black Prince sank during the Crimean War.

Fairly recently underwater archeologists discovered the remains of an
antique vessel in the vicinity of Noviy Svit, which hence became a diving
pilgrimage.

If you are a novice, you must pass a preliminary training course with a
qualified instructor in order to earn a special certificate for scuba
diving. There are special diving centers that are licensed to offer such
certificates located in Yalta, Sevastopol, Sudak and Alushta.

CRIMEAN SAFARI -----

Crimea also offers great opportunities for lovers of extreme racing sports.
The main attraction is a jeep safari on the picturesque plateau of Ai-Petri.
Here you can drive a jeep through mountain and forest reserves, ruins of
ancient villages and past impressive waterfalls.

Among the novelties of the season are programs entitled In the Arms of
Roman Kosh, Rally on Dimerdzhi Mountain, Through the Cave Towns of
Crimea and Through Holy Places.

All of them are very rich with destinations and impressions. For example,
the route through the Crimean state reserve includes a visit to Greater
Yalta with a tour of a trout farm, Alushta, Izobilne, the Kosmo-Domianovskiy
Monastery, Nikitskiy Pass and Krasniy Kamen (Red Rock). Besides that,
travel companies offer individual tours according to the tourist's request
and financial wherewithal.

TOURISM PAINTED INH KHAKI -----

The peninsula of Crimea always was and remains a strategic base. Ports
of the Black Sea Navy and military airfields are host to international
military training. Recently, Crimean travel agencies began to offer special
military tours for people interested in military hardware. Despite the fact
that this is the most expensive form of tourism, many people are interested.

Tourists are given the thrill of shooting from such types of weapons as a
sniper's rifle, an SKS machine gun, an AK-47 machine gun, an NSV
machine gun, a TT pistol and a Nagan revolver.

In addition to that, tourists are taught how to drive a tank and other
combat vehicles. You can play your own war game mainly at Angarskiy
Military Training Ground (not far from Simferopol), where instructors
acquaint tourists with safety measures and then with the art of war. As in
real training, those making special achievements are presented with
diplomas and prizes.

Meanwhile, those fond of the friendly skies and everything related to
aviation can enjoy flying on fighter planes, such as the SU-27UB, MiG-29UB,
L-39 and MI-8 helicopters from the airfields of the Ministry of Defense of
Ukraine.

Expert's commentary Minister of Holiday Resorts and Tourism of Crimea,
Oleksandr Taryanik:

"I recommend for the May holidays to come and see the beauty of the
mountains in Crimea. Although it is early to swim in the sea, you can still
take in the fresh air and enjoy the wonderful view of nature awakening. In
May, Crimea is particularly beautiful. The sun is still mild, rather than
scorching and the plants are still green and fresh. The color of emeralds
predominates everywhere. In my opinion, horseback rides and hiking on
foot are also of great interest.

Besides that, around 80 Crimean health resorts will be functioning in the
month of May. They offer wonderful parks, swimming pools and all the
necessary accommodation services. I would like to note that the painstaking
problem of water supply has practically been resolved. Today, almost every
health resort is equipped with diesel power stations and huge water
reservoirs, so in case of emergency they will be able to operate
independently for several days on end.

As minister, I don't consider it proper to point to one particular holiday
resort, sanatorium or hotel, but as an ordinary holidaymaker I naturally
have my favorite places.

For example, Prival tourist center. It is extraordinarily quiet there and
there is a marvelous juniper grove registered in the Book of Extinction. If
I need to restore my health, then I prefer the Primorye sanatorium (Seaside)
in Yevpatoriya. When I go to the mountains, I stay at the Orlyne Hnizdo
Tourism Center in Bakhchisarai. -30-
-------------------------------------------------------------------------------------------------------
LINK: http://www.kyivweekly.com/english/article/?574
===============================================================
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LINK: http://www.sigmableyzer.com/index.php?action=downloads
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"THE ACTION UKRAINE REPORT- AUR" - SPONSORS
"Working to Secure & Enhance Ukraine's Democratic Future"

1. THE BLEYZER FOUNDATION, Dr. Edilberto Segura, Chairman;
Victor Gekker, Executive Director, Kyiv, Ukraine; Washington, D.C.,
http://www.bleyzerfoundation.com.
2. Law firm UKRAINIAN LEGAL GROUP, Irina Paliashvili,
President; Kiev and Washington, general@rulg.com, www.rulg.com.
3. ESTRON CORPORATION, Grain Export Terminal Facility &
Oilseed Crushing Plant, Ilvichevsk, Ukraine
4. BAHRIANY FOUNDATION, INC., Dr. Anatol Lysyj, Chairman,
Minneapolis, Minnesota
5. KIEV-ATLANTIC GROUP, David and Tamara Sweere, Daniel
Sweere, Kyiv and Myronivka, Ukraine, 380 44 298 7275 in Kyiv,
kau@ukrnet.net
6. VOLIA SOFTWARE, Software to Fit Your Business, Source your
IT work in Ukraine. Contact: Yuriy Sivitsky, Vice President, Marketing,
Kyiv, Ukraine, yuriy.sivitsky@softline.kiev.ua; Volia Software website:
http://www.volia-software.com/ or Bill Hunter, CEO Volia Software,
Houston, TX 77024; bill.hunter@volia-software.com.
7. ODUM- Association of American Youth of Ukrainian Descent,
Minnesota Chapter, Natalia Yarr, Chairperson
8. UKRAINIAN FEDERATION OF AMERICA (UFA),
Zenia Chernyk, Chairperson; Vera M. Andryczyk, President;
Huntingdon Valley, Pennsylvania
9. UKRAINE-U.S. BUSINESS COUNCIL, Washington, D.C., Van
Yeutter, Cargill Inc., Interim President; Jack Reed, ADM, Interim
Vice President; Morgan Williams, SigmaBleyzer, Interim Secretary-
Treasurer
10. UKRAINIAN AMERICAN COORDINATING COUNCIL,
(UACC), Ihor Gawdiak, President, Washington, D.C., New York, NY
11. U.S.-UKRAINE FOUNDATION (USUF), Nadia Komarnyckyj
McConnell, President; John Kun, Vice President/COO, Washington,
D.C.; Markian Bilynskyj, VP/Director of Field Operations; Kyiv,
Ukraine. Web: http://www.USUkraine.org
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"WELCOME TO UKRAINE" & "NARODNE MYSTETSTVO" MAGAZINES
UKRAINIAN MAGAZINES: For information on how to subscribe to the
"Welcome to Ukraine" magazine in English, published four times a year
and/or to the Ukrainian Folk Art magazine "Narodne Mystetstvo" in
Ukrainian, published two times a year, please send an e-mail to:
ArtUkraine.com@starpower.net.
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"THE ACTION UKRAINE REPORT - AUR" is an in-depth, private, non-
profit news and analysis international newsletter, produced as a free
public service by the non-profit www.ArtUkraine.com Information Service
(ARTUIS) and The Action Ukraine Report Monitoring Service The
report is distributed in the public's interesting around the world FREE
of charge using the e-mail address: ArtUkraine.com@starpower.net.
Additional readers are always welcome.

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PUBLISHER AND EDITOR - AUR
Mr. E. Morgan Williams, Director, Government Affairs
Washington Office, SigmaBleyzer Private Equity Investment Group
P.O. Box 2607, Washington, D.C. 20013, Tel: 202 437 4707
mwilliams@SigmaBleyzer.com; www.SigmaBleyzer.com
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Director, Ukrainian Federation of America (UFA)
Coordinator, Action Ukraine Coalition (AUC)
Senior Advisor, U.S.-Ukraine Foundation (USUF)
Interim Secretary-Treasurer, Ukraine-U.S. Business Council
Publisher, Ukraine Information Website, www.ArtUkraine.com
& www.ArtUkraine Information Service (ARTUIS)
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