"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"

POLICY OF THE GOVERNMENT OF YULIYA TYMOSHENKO

"I am convinced that this policy will sooner or later end with a large-scale
economic crisis in Ukraine, from which millions of Ukrainians will suffer.
And I cannot lie or be hypocritical in this situation.

When prices are being regulated and a petrol crisis is being provoked,
when there is constant talk about redistribution of property, when the
investment climate is worsening and when economic growth is slowing
down, an adviser to the president of Ukraine has to adopt a position of
principle, which is what I do." [article one]

"THE ACTION UKRAINE REPORT - AUR" - Number 498
E. Morgan Williams, Publisher and Editor
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, MONDAY, June 6, 2005

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

1. ADVISER TO UKRAINIAN PRESIDENT STICKS TO CRITICISM OF PM
Russian advisor says Prime Ministers policies will sooner
or later end with a large-scale economic crisis in Ukraine
for which millions of Ukrainians will suffer.
NTV Mir, Moscow, Russia, in Russian 0900 gmt 3 Jun 05
BBC Monitoring Service, UK, in English, Fri, Jun 03, 2005

2. RUSSIAN ADVISER TO UKRAINIAN PRESIDENT SAYS UKRAINE WILL
ONLY BENEFIT FROM JOINING SINGLE ECONOMIC SPACE (SEC)
Interview with Boris Nemtsov, Adviser for foreign investment
One Plus One TV, Kiev, in Ukrainian 1630 gmt 5 Jun 05
BBC Monitoring Service, UK, in English, Sun, June 05, 2005

3. UKRAINIAN PARLIAMENT SEEKS NEMTSOV'S OUSTER
The Associated Press, Kyiv, Ukraine, Fri, June 3, 2005

4. RELATIONS WITH RUSSIA: CHALLENGE OF FINDING THE
PEACEFUL PATH BEYOND A TROUBLED HISTORY
By Tom Warner, Financial Times, World Reports - Ukraine 2005
London, United Kingdom, Tuesday, May 31 2005

5. UKRAINIAN PRESIDENT YUSHCHENKO SAYS WAY ZAPORIZHZHYA
LIVES IS DEGRADING, TWO OR THREE FAMILIES RUN TERRITORY,
THEY ARE STEALING, THE BUDGET IS WEAK
Ukrayina TV, Donetsk, in Russian 1800 gmt 4 Jun 05
BBC Monitoring Service, UK, in English, Saturday, Jun 04, 2005

6. UKRAINIAN PRIME MINISTER SAYS CONTROVERSIAL STEELWORKS
SHOULD BE RESOLD, ONLY A NEW TENDER, NOTHING ELSE
Ukrayinska Pravda web site, Kiev, in Ukrainian 3 Jun 05
BBC Monitoring Service, UK, in English, Fri, Jun 03, 2005

7. UKRAINIAN BUSINESS TYCOON SEEKS STEEL MILL COMPROMISE
By Natasha Lisova, Associated Press Writer
AP, Kiev, Ukraine, Thu, June 2, 2005

8. UKRAINE RETHINKS PLAN TO REVERSE SELL-OFFS
By Tom Warner in Kiev, Financial Times, London, UK, Sat, June 4 2005

9. PRIVATISATION: INVESTORS FEAR ASSETS COULD BE RESOLD
AT AUCTION TO NEW BUYERS
By Tom Warner, Financial Times, World Reports / Ukraine 2005
London, United Kingdom, Tuesday, May 31 2005

10. UKRAINE METALS: VITAL INDUSTRY FACES UP TO TRYING TIMES
By Tom Warner, Financial Times, World Reports / Ukraine 2005
London, United Kingdom, Tuesday, May 31 2005

11. ECONOMY: HOPE OF SUSTAINABLE GROWTH CHEERS BANKERS
By Tom Warner, Financial Times, World Reports - Ukraine 2005
London, United Kingdom, Tuesday, May 31 2005

12. HEALER OR KILLER? WILL UKRAINIAN CARMAKER AVTOZAZ GET
POLAND'S DEFUNCT CAR MANUFACTURER FSO OUT OF TROUBLES
Polish News Bulletin, Warsaw, Poland, Friday, Jun 03, 2005

13. UKRAINIAN GOVERNMENT DIVIDED OVER SIMPLIFIED TAX SYSTEM
One Plus One TV, Kiev, in Ukrainian 1630 gmt 4 Jun 05
BBC Monitoring Service, UK, in English, Sat, Jun 04, 2005

14. UKRAINIAN OPPOSITION LEADERS MEET WITH US SENATORS
MITCH MCCONNELL, MICHAEL CRAPO, JIM DEMINT
Yanukovych, Kravchuk, Kryuchkov, Boyko and others
Kravchuk assumed that the American side feels it is responsible for what
is going on in Ukraine. "They have done everything they could to make
sure that the new authorities come to power...."
Interfax-Ukraine news agency, Kiev, in Russian 1247 gmt 2 Jun 05
BBC Monitoring Service, UK, in English, Thu, Jun 02, 2005

15. UKRAINIAN SPEAKER TELLS U.S. SENATOR HAGEL YUSHCHENKO
SHOULD NOT HEAD PARTY FOR PARLIAMENTARY ELECTIONS
One Plus One TV, Kiev, in Ukrainian 1630 gmt 4 Jun 05
BBC Monitoring Service, UK, in English, Sat, Jun 04, 2005

16. COSSACKS PLEDGE ALLEGIANCE TO UKRAINIAN PRESIDENT
ICTV television, Kiev, in Ukrainian 1545 gmt 4 Jun 05
BBC Monitoring Service, UK, in English, Sat, Jun 04, 2005

17. UKRAINE: A DAY AT ROCKET DESIGN CENTRE
India and Ukraine can cooperate in space research: India's Pres Kalam
By K. V. Prasad, The Hindu
Online edition of India's National Newspaper
Madras, India, Saturday, Jun 04, 2005

18. UKRAINIAN PRESIDENT SPOILT BY EXCESSIVE PRAISE, JOURNALIST
The new authorities have made too many promises and mistakes and they
apparently lack a clear strategy and a systematic approach to state affairs.
ANALYSIS & COMMENTARY: By Serhky Rakhmanin, "Mine and Ours"
Zerkalo Nedeli, Mirror-Weekly, International Social Political Weekly
Kiev, Ukraine, in Russian, Saturday, 28 May 05; p 1, 2
BBC Monitoring Service, UK, in English, Tuesday, May 31, 2005
===============================================================
1. ADVISER TO UKRAINIAN PRESIDENT STICKS TO CRITICISM OF PM
Russian advisor says Prime Ministers policies will sooner
or later end with a large-scale economic crisis in
Ukraine for which millions of Ukrainians will suffer.

NTV Mir, Moscow, Russia, in Russian 0900 gmt 3 Jun 05
BBC Monitoring Service, UK, in English, Fri, Jun 03, 2005

MOSCOW - [Presenter] A scandal in Kiev: The Supreme Council [parliament]
today demanded from the head of state that he dismiss Russian politician
Boris Nemtsov from the post of adviser to the president of Ukraine. The
request to [Viktor] Yushchenko was submitted by 250 deputies. They believe
that with his statements Nemtsov compromises the Ukrainian authorities and
interferes in the affairs of a sovereign state.

Earlier Nemtsov quite harshly spoke out against the policy carried out by
Prime Minister [Yuliya] Tymoshenko. He said that her command methods in the
economy sharply reduced the number of potential investors. Nemtsov admitted
that he had advised Yushchenko to dismiss Tymoshenko from the post of prime
minister. These statements by Nemtsov today caused the anger of Ukrainian
deputies.

Boris Nemtsov told NTV in a telephone interview that he would not back down
on his words and is prepared to accept any decision by President Yushchenko.

[Nemtsov] I have respect for the deputies of the Supreme Council. The only
problem is that a decision about my appointment and my dismissal can be
taken by President Yushchenko and it is up to him to decide. I do, indeed,
criticize the government of Yuliya Tymoshenko for the policy it is carrying
out - and they want to dismiss me for this.

I am convinced that this policy will sooner or later end with a large-scale
economic crisis in Ukraine, from which millions of Ukrainians will suffer.
And I cannot lie or be hypocritical in this situation.

When prices are being regulated and a petrol crisis is being provoked, when
there is constant talk about redistribution of property, when the investment
climate is worsening and when economic growth is slowing down, an adviser
to the president of Ukraine has to adopt a position of principle, which is
what I do. -30- [Action Ukraine Report Monitoring Service]
===============================================================
2. RUSSIAN ADVISER TO UKRAINIAN PRESIDENT SAYS UKRAINE WILL
ONLY BENEFIT FROM JOINING SINGLE ECONOMIC SPACE (SEC)

Interview with Boris Nemtsov, Adviser for foreign investment
One Plus One TV, Kiev, in Ukrainian 1630 gmt 5 Jun 05
BBC Monitoring Service, UK, in English, Sun, June 05, 2005

The Ukrainian presidential adviser for foreign investment, Russian
politician Boris Nemtsov, has said that Ukraine will only benefit from
joining the Single Economic Space, a proposed common market of Russia,
Ukraine, Belarus and Kazakhstan. Ukraine will have cheaper oil and gas and
free access to the Russian market, he said. The customs union will not
hamper Ukraine's European integration, Nemtsov said.

The following is an excerpt from Nemtsov's live interview during a link-up
with Moscow broadcast by Ukrainian One Plus One TV on 5 June:

[Presenter] Our guest today is the Ukrainian president's adviser Boris
Nemtsov also was on Independence Square in Kiev [during the Orange
Revolution] and completely supported Ukraine's European choice. Mr
Nemtsov, are you disappointed or inspired by the recent statement of your
boss, President Yushchenko, regarding the Single Economic Space [SES]?

[Nemtsov] You know, I don't understand what the discussion is about. I
completely support President Yushchenko's idea of Ukraine's European
choice. This does not mean at all that Ukraine should emotionally argue with
neighbouring countries, Russia for instance, or give up benefits, obvious
benefits for Ukraine. So I think that Viktor Andriyovych [Yushchenko] is
absolutely rightly and pragmatically, acting as a Ukrainian patriot, took a
stance he described in Astana.

His position is as follows: a free-trade zone is beneficial for Ukraine
because the big Russian market will be opened for Ukraine, because
Ukraine will get energy resources from Russia, including oil and gas, at
lower prices than now. This is beneficial for Ukraine. So, if this is
beneficial and does not contradict Ukraine's movement towards Europe
then why should any other stance be taken?

People are talking about a supranational body. This does not mean anything.
What important for millions of Ukrainians is whether petrol is more
expensive or cheaper if there is a common market and a free-trade zone. The
answer is petrol will be cheaper. Will gas be more expensive or cheaper? It
will be cheaper. Will public utility rates be higher or lower? They will be
lower. Does it hamper our European integration? The answer is no, it
doesn't. I don't understand what the discussion is about.

The SES is a complex organization. As far as I understand, the president has
a fairly clear and pragmatic position. He talks about a free-trade zone. He
says that there should be no barriers for trade, that prices should be the
same in all countries and that there should be no quotas restricting trade.

This is beneficial for Ukrainian steel plant employees, Ukrainian miners and
Ukrainian consumers of Russian oil and gas, in other words, for all the
Ukrainians and others living on its territory. It is another matter that the
movement towards a common trade and economic space is a complicated
process. It will take time.

If you think that everybody in Russia is interested in a common market or a
free-trade zone then you are completely wrong. Of course, the Russian
leadership understands perfectly well that a free-trade zone means no duties
on oil and gas exports, which we are collecting now and which amount to over
3bn dollars a year.

So, this is a fairly complicated process. The fact that the Ukrainian
president has taken this - I think absolutely right - stance does not mean
that the decision will be taken soon.

[Presenter] Will Russia agree to this version of the SES, which doesn't
envisage a common market or supranational bodies.

[Nemtsov] You know, it is not the matter of supranational bodies. The
question is whether our goods move freely, whether our customs collect
duties on imports and exports or not. I think that if comprehensive
agreements on this are signed then we don't really need these supranational
bodies. Moreover, as far as I understood from the discussion, there will be
legal collisions and the Ukrainian constitution will be violated. Who needs
this?

By the way, this will violate the Russian constitution too. So I think we
should come to a fundamental agreement whether we have a common market
or not. The EU, by the way, became united after a common market was set up
there. At first they had a large trading ground without any restrictions and
only then supranational bodies appeared.

I think we should not begin with bureaucracy in the SES. We should begin
with people's interests. If we cancel duties this will benefit everyone.
Competition will increase and prices will go down. Ukrainian and Russian
companies will have to work more efficiently. Labour productivity will
increase and economic growth will go up.

It is also beneficial for Ukraine because the Russian market is bigger than
the Ukrainian. Russia is three times as large as Ukraine in terms of
population and it is a large country. So the opening of the Russian market
is extremely profitable for Ukrainian producers. I will help Viktor
Yushchenko in any way to have his concept implemented. As regards
bureaucracy, of course it always defends its interests and it wants to set
up supranational bodies. But this is not what we should begin with.

We should begin with cancelling quotas, licenses, import and export duties.
If we begin from there people will support this rather than fear that
Yushchenko has betrayed the ideas of the Orange Revolution. [Passage
omitted: Nemtsov opposes large-scale reprivatization in Ukraine.]
===============================================================
3. UKRAINIAN PARLIMENT SEEKS NEMTSOV'S OUSTER

The Associated Press, Kyiv, Ukraine, Fri, June 3, 2005

KIEV -- Ukraine's parliament on Friday called on President Viktor
Yushchenko to sack his Russian adviser, Boris Nemtsov, after Nemtsov
harshly criticized Ukrainian Cabinet decisions.

Calling Nemtsov "a disciple of the Russian liberal empire's anti-
Ukrainian ideas," the resolution proposed by ultranationalist
party legislator Oleh Tyahnybok accused him of "unprecedented
interference in Ukraine's internal affairs."

It was endorsed by 250 lawmakers -- far more than the 150 needed.
The request, however, was nonbinding and likely to be ignored.

Yushchenko, who had Nemtsov's strong support during last year's
Orange Revolution protests, named him to the unpaid advisory position
in February, one month after taking office. He has repeatedly defended
his decision.

Nemtsov was charged with helping to boost business ties between
Ukraine and its main trading partner, Russia.

Nemtsov has criticized the Ukrainian leadership in recent weeks,
saying that recent economic decisions made by Prime Minister Yulia
Tymoshenko were hurting Ukraine's chances of attracting foreign
investment. Nemtsov defended his criticism last week, saying, "I am
not Yulia Tymoshenko's defense lawyer; I am an ally of Viktor Yushchenko."

But in a sign that Yushchenko was not entirely pleased, Yushchenko's
spokeswoman reminded journalists that Nemtsov's job was not a staff
position. "In any case, a person who is an adviser of the president of
Ukraine should be more correct in his statements," she said. -30-
===============================================================
4. RELATIONS WITH RUSSIA: CHALLENGE OF FINDING THE
PEACEFUL PATH BEYOND A TROUBLED HISTORY

By Tom Warner, Financial Times, World Reports - Ukraine 2005
London, United Kingdom, Tuesday, May 31 2005

One of the toughest challenges for Viktor Yushchenko will be to find a path
somewhere between the two extremes that have characterised Ukraine's
relationship with Russia.

The first is represented by one of Kiev's most prominent monuments, a
hulking pair of Ukrainian and Russian lads leaning against each other under
a stainless steel arch, each with one arm holding up a Soviet symbol,
celebrating the unbreakable unity of two brother Slav nations.

A hint of the second extreme bubbled to the surface during last winter's
Orange Revolution when Ukrainian protesters vented anger at their country's
former imperial master after Vladimir Putin, Russia's president, strongly
backed Mr Yushchenko's election opponent.

Since, Mr Yushchenko and Mr Putin have sought to mend fences by exchanging
visits and sweetening their rhetoric, describing their relationship with
phrases such as "eternal neighbours and strategic partners". In an important
gesture to Mr Putin, Mr Yushchenko has agreed to go ahead with the previous
government's plans to create a free trade zone with Russia, Belarus and
Kazakhstan, which Mr Putin has grandly titled the United Economic Space.

While setting his sights primarily on the European Union, Mr Yushchenko is
also keen to maintain the positive trend in trade with Russia. After falling
for many years, Russia's share of Ukraine's exports has started growing,
reaching 18.1 per cent in the first quarter of this year.

Ukraine's exports to Russia grew by 34 per cent over the first quarter of
last year, twice as fast as exports overall. At the same time, however, top
people in both administrations express deep suspicions about the other
sides' motives and both men are making important shifts in their countries'
regional strategies.

In Russia, Mr Yushchenko is suspected of co-operating with western
governments in a geopolitical strategy to contain Russia. That view has been
expressed most strongly by Mr Putin's domestic security chief, Nikolai
Patrushev, who told the Russian parliament last month: "Our opponents are
steadily and persistently trying to weaken Russian influence in the
Commonwealth of Independent States and the international arena as a whole.
The latest events in Georgia, Ukraine and Kyrgyzstan unambiguously confirm
this."

In Ukraine, Russia is suspected of using its vast oil and gas output, as
well as the gas pipelines that allow Ukraine to import gas from central
Asia, as levers of influence over Ukrainian politics. When Mr Putin inked a
contract with BASF in March to move forward on a long planned gas pipeline
under the Baltic Sea, it was understood by Ukraine as a strategic move by
Russia to increase its leverage.

Ukraine's gas pipelines carry more than 80 per cent of Russia's gas exports
to Europe, which gives Ukraine an important bargaining chip. The petrol
shortage that emerged last month in Ukraine demonstrated what can happen
when suspicions dominate.

Yulia Tymoshenko, Ukraine's prime minister, capped petrol prices in response
to what she argued was a Russian attempt to sabotage Ukraine's fuel market.
When the shortage appeared, she claimed it was because "nobody can accept
that Viktor Yushchenko won the presidential elections".

While Mr Yushchenko intervened to calm the crisis by ordering the price caps
lifted, he made clear his long-term strategy would nonetheless be to
diversify oil supplies away from Russia.

The government is floating a wide range of ideas for diversification
projects. One of the more unusual is to invest state money into oil and gas
production in other countries such as Turkmenistan, Libya and the United
Arab Emirates.

Oleksy Ivchenko, new head of the state oil and gas company, Naftogaz, said
the government may propose a gas pipeline from Central Asia across the
Caspian Sea, the Caucasus and the Black Sea.

While some of the ideas are far fetched, the broad parameters of Mr
Yushchenko's vision are supported by the US government, keen to open
access to central Asia's oil and gas, currently exported almost exclusively
through Russia.

Mr Yushchenko has also shifted the dynamics of politics within the former
Soviet Union as other, smaller countries that have also been re-orientating
away from Moscow have started to look to Kiev for regional leadership. Mr
Yushchenko's foreign minister has proposed renaming an old regional alliance
known as Guuam, standing for Georgia, Ukraine, Uzbekistan, Azerbaijan and
Moldova into the "Commonwealth for Democracy and Development".

Uzbekistan, the most authoritarian member, has quit. The first serious test
of this regional leadership will be Mr Yushchenko's attempt to resolve
Moldova's conflict with its Transdnestr region. -30-
===============================================================
5. UKRAINIAN PRESIDENT YUSHCHENKO SAYS WAY ZAPORIZHZHYA
LIVES IS DEGRADING, TWO OR THREE FAMILIES RUN TERRITORY,
THEY ARE STEALING, THE BUDGET IS WEAK

Ukrayina TV, Donetsk, in Russian 1800 gmt 4 Jun 05
BBC Monitoring Service, UK, in English, Saturday, Jun 04, 2005

KIEV - [Presenter] Ukrainian President [Viktor Yushchenko] has severely
criticized the work of Zaporizhzhya mayor Yevhen Kartashov. He gave the
regional prosecutor's office 30 days to sort out the abuses by the local
authorities in their work with businessmen. Yushchenko gave this assessment
of the mayor's activities after he talked to businessmen working in the
regional centre.

The president is interested to see the separatism case [on separatist calls
made in eastern and southern Ukraine during the Orange Revolution] passed
to a court as soon as possible. Six people figure in this, Viktor Yushchenko
told a news conference in Zaporizhzhya.

[Yushchenko, in Ukrainian] I would like to wake you up now, so you don't
have arrogant faces, like what else is he going to say now? I want you to
get your adrenaline going. I am convinced that the way Zaporizhzhya lives is
also degrading to you. Two or three families are running the territory as
they see fit. They are stealing. The budget is weak.

The cripple, the orphan, the physician and the education worker are left
without care while everyone is pointing the finger at Kiev. While the
stealing is happening here. That is why I am saying - you are not going to
live like that any more. We won't let you. I am talking to the leaders who
are involved in this - for years. -30-
===============================================================
6. UKRAINIAN PRIME MINISTER SAYS CONTROVERSIAL STEELWORKS
SHOULD BE RESOLD, ONLY A NEW TENDER, NOTHING ELSE

Ukrayinska Pravda web site, Kiev, in Ukrainian 3 Jun 05
BBC Monitoring Service, UK, in English, Fri, Jun 03, 2005

KIEV - Prime Minister Yuliya Tymoshenko believes that a new tender to sell
Kryvorizhstal [Ukraine's largest steelworks] is the only possible variant of
an amicable agreement for the holding of [tycoons Viktor] Pinchuk and
[Rinat] Akhmetov [which controls Kryvorizhstal].

"In accordance with a court ruling, Kryvorizhstal has to be put up for an
absolutely new privatization competition, and all qualified participants,
investors from around the world, should be allowed to participate,"
Tymoshenko said in an interview with Ukrayinska Pravda in Tbilisi.
"If an amicable agreement is on this, it may take place," Tymoshenko added.

As is known, [Ukrainian President Viktor] Yushchenko and State Secretary
[Oleksandr] Zinchenko said yesterday that it would be possible to discuss an
amicable agreement on Kryvorizhstal in accordance with a lawsuit, which
Pinchuk and Akhmetov lost. They did not provide any detail.

Asked whether a proposal for Pinchuk and Akhmetov to pay more for
Kryvorizhstal may be such an amicable agreement, Tymoshenko said, "Only
a new tender, nothing else!"

"As soon as we abandon transparent privatization mechanisms, which are
understandable for society, society may begin to ask questions. Only a
tender, only an open auction with participation of all professional
companies of the world can give an answer about the real price of the
facility," Tymoshenko said.

Asked how much higher a new price for Kryvorizhstal may be compared to
the one for which the holding of Pinchuk and Akhmetov bought the plant,
Tymoshenko said: "I as premier would want to forecast that it will be
increased threefold. Perhaps an auction may bring us something more
optimistic." Asked who may become the new owner of Kryvorizhstal,
Tymoshenko said, "Who wins, wins." -30-
===============================================================
7. UKRAINIAN BUSINESS TYCOON SEEKS STEEL MILL COMPROMISE

By Natasha Lisova, Associated Press Writer
AP, Kiev, Ukraine, Thu, June 2, 2005

KIEV - A Ukrainian tycoon asked the country's new government on Thursday
to avoid Russia's strong-arm approach to settling conflicts with big
business, casting his struggle to hold onto a massive steel mill in the same
light as Russian oil giant Yukos and its demise at Kremlin hands.

Viktor Pinchuk, who has already butted heads with President Viktor
Yushchenko's government and its anti-corruption mind-set, said he proposed
a compromise that would allow him to keep control over Kryvorizhstal,
Ukraine's biggest steel mill, which many say was privatized illegally. But
Pinchuk, who is the son-in-law of former leader Leonid Kuchma, told
reporters that he hasn't received any government response.

He refused to provide any details of his proposals. Ukrainian media reported
he has offered to settle out of court, paying additional money and holding
onto the lucrative mill.

Kryvorizhstal was sold last year to Pinchuk and another tycoon, Rinat
Akhmetov, for US$800 million (euro665 million). The sale went through
despite reportedly higher offers from bidders in the United States and
Russia, and sparked outrage in Ukraine and abroad. Yushchenko, who
was elected in January, has called the mill's privatization theft and
pledged that his government would return it to the state "at any cost."

Pinchuk drew a comparison between the efforts to take back Kryvorizhstal
and the government onslaught against Yukos in neighboring Russia, which
has hurt that country's reputation.

On Tuesday, a Russian court sentenced former Yukos CEO Mikhail
Khodorkovsky to nine years in prison after a trial widely viewed as punish-
ment for challenging President Vladimir Putin. Yukos' main production unit
was sold to the state to satisfy back tax claims.

"Now it is a very convenient situation for the Ukrainian government to show
that it acts in another way and that it is European," Pinchuk said. "For the
sake of Ukraine, we must reach a compromise."

Kiev's Court of Appeals on Thursday rejected an appeal from Pinchuk and
Akhmetov against a lower court's ruling that the privatization of
Kryvorizhstal was illegal. The court also froze the mill's shares and banned
Pinchuk and Akhmetov's consortium from all dealings involving
Kryvorizhstal's property.

Pinchuk's lawyer Serhiy Vlasenko told The Associated Press the mill owners
will appeal to the High Economic Court of Ukraine and "pursue our compromise
proposal." A compromise would reassure foreign investors about the business
climate in the ex-Soviet republic, Pinchuk said.

Yushchenko's government has made clear that it plans to challenge past
privatizations, but mixed messages about how many it would question and
repeated delays in making public which companies will come under fire has
spooked investors.

Yushchenko has suggested that authorities would challenge only several dozen
companies and Deputy Prime Minister Anatoliy Kinakh put the number at 29.
But on Thursday, state property fund chief Valentyna Semenyuk called that
"far-fetched" and said 194 companies will be targeted. -30-
===============================================================
8. UKRAINE RETHINKS PLAN TO REVERSE SELL-OFFS

By Tom Warner in Kiev, Financial Times, London, UK, Sat, June 4 2005

Viktor Yushchenko, Ukraine's president, may drop plans to renationalise and
auction dozens of companies that he believes were sold too cheaply by the
former government, according to one of his advisers.

Faced with mounting concerns over the re-auction plan among foreign
investors, and the prospect that his government would become bogged down
in years of court battles, Mr Yushchenko is weighing alternative proposals
that would seek to forge "voluntary" settlements, according to Olexander
Paskhaver, a liberal economist who is advising the president on the issue.

The compromise plan, still being drafted, faces strong resistance from
people close to the president, according to Mr Paskhaver. But it comes amid
an outbreak of peacemaking gestures from both Mr Yushchenko's
administration and the "oligarchs" who dominated privatisation under his
predecessor, Leonid Kuchma.

Mr Paskhaver said he believed Mr Yushchenko was looking for a way to
scale down his plans without dropping them altogether. "I'm actively against
compulsory revision, which I think would decrease confidence in property
rights and cause long-term damage to Ukraine's image," Mr Paskhaver said.

Yulia Tymoshenko, prime minister, said yesterday she saw room for a "peace
agreement" over the largest disputed privatisation - last year's $800m (Euro
655m, £442m) sale of the Kryvorizhstal steel mill - but only if the buyers
allowed the government to re-auction the mill in an unrestricted tender. Mr
Yushchenko made similar comments on Thursday.

The two main business groups involved in the consortium that bought
Kryvorizhstal said they welcomed the offer to start talks. Both System
Capital Management (SCM), controlled by industrialist Rinat Akhmetov, and
Interpipe, controlled by Mr Kuchma's son-in-law, Viktor Pinchuk, are worried
that other companies they acquired separately through privatisation could be
taken away if the re-auction plan goes forward.

Mr Paskhaver said Kryvorizhstal was being treated separately from the other
sales, since a court challenge to the Kryvorizhstal sale was already under
way before Mr Yushchenko came to power.

On Thursday Kiev's Economic Appeals Court upheld a lower court ruling that
declared the sale illegal. SCM and Interpipe said they would appeal to the
Supreme Court. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
9. PRIVATISATION: INVESTORS FEAR ASSETS COULD BE RESOLD
AT AUCTION TO NEW BUYERS

By Tom Warner, Financial Times, World Reports / Ukraine 2005
London, United Kingdom, Tuesday, May 31 2005

With a more liberal government in charge, investors cannot wait for
Ukraine's privatisation programme. But it is no ordinary programme. Some
investors are interested in buying, some are worried that assets they
already bought from the state could be sold off to new buyers, and others
are just trying to understand how such an unusual plan will affect the
overall economy.

President Viktor Yushchenko intends to revise up to 29 privatisation sales
carried out by the former government, by holding new auctions with new
bidders then giving current owners the chance to match the highest bid. A
special law is being prepared to regulate the process. "I think the business
world will be in solidarity with Ukraine about this," Mr Yushchenko told the
Financial Times.

"The revaluation of particular properties that were given away by the former
authorities has to be accepted as a normal process," he said.
He pointed to last year's sale of Kryvorizhstal, the country's largest steel
mill. He said it was "stolen, and I think the whole world knows about this."
He also mentioned Ukrrudprom, a state ore mining company that sold its
stakes in ore mines and other steel industry suppliers to buyers selected by
the former government.

Mr Yushchenko said the official list would be published in the "near days"
and would represent the final word on the issue.

He has promised that once the list is published, no additional sales will be
re-examined. But the plan has hit snags, making it far from clear whether
the process will work in the way Mr Yushchenko describes, if at all.

Passing the law will be difficult, as Mr Yushchenko does not have a
parliamentary majority. He could be forced to turn to the Communist party
for support, which favours merely reversing sales and then keeping the
companies in state hands. Yulia Tymoshenko, the prime minister, and some
cabinet ministers have spoken in favour of that, at least as a first step,
but Mr Yushchenko has ruled it out.

Ms Tymoshenko is also strongly against Mr Yushchenko's idea of publishing
a list of sales the government intends to revise. She has said the courts
should decide which deals should be revised. Other ministers have said that
publishing the list could make it impossible to pass a law through
parliament because every business group that sees its company on the list
would lobby against the law.

John Suggitt, of Concorde Capital, a Kiev based brokerage, says he believes
the government is merely threatening the former regime's oligarchs in order
to secure their loyalty and will not actually revise any sales. "It's in
their best interests to have a bunch of friends rather than enemies," he
says.

On the other hand, there is nothing to stop private parties from launching
challenges to privatisation sales, and nothing to stop judges, if they are
convinced a procedure was illegal, from ruling that sales should be
reversed. Valentina Semenyuk, chairwoman of the State Property Fund, which
handles privatisation, last month asked the Supreme Court to explain how to
enforce a court order to revise the sale in 2000 of the Zaporizhya Aluminum
Plant to the Russian company AvtoVaz-Invest, which has since been bought
by Russia's Sual group.

The court had ordered the State Property Fund to take back the plant and
sell it instead to a Ukrainian company, which claimed its bid was illegally
excluded from the 2000 tender.

Another Ukrainian company excluded from the 2003 privatisation of the
Nikopol Ferroalloy Plant last month wrote to Ms Semenyuk saying it had
obtained a court ruling reversing that sale, and invited her to send a
representative to an emergency board meeting it had called, as a leading
minority shareholder, to sack the plant's management.

She refused, but the incident nonetheless made clear how private groups
are aggressively lobbying their interests as the government works out its
revision plans. Kommersant, a Russian newspaper, last month published
what it said was Mr Yushchenko's list of 29 revision targets.

Mr Yushchenko admitted the list was real but said it was a draft.
Kryvorizhstal and eight companies spun off from Ukrrudprom topped the list.
Another six were in the metals sector and most of the rest in chemicals.

If Kommersant's list proves accurate, the businessmen who stand to lose the
most from the revision are Rinat Akhmetov, owner of the System Capital
Management group, and Viktor Pinchuk, owner of Interpipe and son-in-law of
Ukraine's former president, Leonid Kuchma.

Mr Pinchuk owns three of the companies on the leaked list, Mr Akhmetov owns
six, and they jointly own Kryvorizhstal. Mr Suggitt said one of the reasons
he thinks the government will not reopen the sales is that Russian companies
would likely lead the bidding, particularly for iron ore mines, which could
threaten Ukrainian producers' supplies.

The one exception could be Kryvorizhstal which, because of its scale, is
sought after by world steel majors. A 93 per cent stake was sold for $800m
last June, while shares distributed to employees are trading at prices that
value the company at about $1.75bn.

Mittal Steel, US Steel and Russia's Severstal, which had their bids thrown
out of last year's tender, have each said they would try again, while
Arcelor and Russia's Evrazholding are also interested. -30-
===============================================================
10. UKRAINE METALS: VITAL INDUSTRY FACES UP TO TRYING TIMES

By Tom Warner, Financial Times
World Reports / Ukraine 2005
London, United Kingdom, Tuesday, May 31 2005

After years of easy growth Ukraine's metals industry is facing trying times
and that spells trouble for the economy.

Accounting for 40 per cent of last year's exports and 27 per cent of
industrial output, metals are as important to Ukraine as oil is to Russia.
In three years the sector has increased its output by roughly 150 per cent
in dollar terms, from $6.5bn in 2001 to $16.3bn last year.

Most of that growth owed to surging world prices, as the output volume of
steel, the main metal produced in Ukraine, increased by only 15 per cent,
from 33m tonnes to 38m tonnes.

This year the industry is facing one setback after another. China and India,
both big steel importers, have aggressively ramped up their own production,
causing a drop in demand that has softened prices from the peaks hit last
autumn.

Other steel producing nations have had to trim output to avoid pushing
prices downward. Ukraine's steelmakers cut output volume in the first
quarter by 1.1 per cent from the corresponding period last year.

Ukraine's government has increased industrial rail tariffs by 50 per cent.
The new central bank chairman has raised the currency peg, which had been
kept low to stimulate exports, by 5 per cent. Natural gas supplies from
Turkmenistan have become more expensive.

Viktor Yushchenko, Ukraine's president, accuses steel owners of having
exploited personal ties to the former government to acquire assets from the
state worth billions at knock down prices. Out of 29 privatisation deals he
wants revised, according to a leaked preliminary list, 13 are in the steel
industry.

Nonetheless, steel industry owners are sticking to aggressive expansion and
renovation plans - at least verbally - and some are even coming up with new
ones. The trends are to look for new profits through efficiency, by getting
more leverage out of Ukraine's huge iron ore reserves and by reorienting
from Russia and Asia towards the EU.

Mike Locker, a New York based global steel industry analyst, says he expects
the Chinese economy to continue growing quickly enough to hold up demand,
and Ukraine's and Russia's industries to become much more of a threat to the
EU and US steel industries after they join the World Trade Organisation.

EU trade barriers limit Ukraine's steel exports to the union to under 1m
tonnes a year. The European Commission plans to ease its quota only slightly
this year but is encouraging Kiev to join the WTO, which would oblige the EU
to drop most of its restrictions.

"SCM counts itself the world's 12th largest steel producer, producing 15.4m
tonnes a year"

Eduard Shifrin, a London based Ukrainian who co-owns Ukraine's Zaporizhstal
and smaller mills in Russia and Montenegro, says the EU's limits are unfair
because they encourage Ukraine to export raw iron ore rather than finished
steel. Another Ukrainian steelmaker, the Industrial Union of the Donbass
(IUD), has tailored its strategy to work with the current level of EU
protectionism.

IUD plans to remake its Alchevsk mill from one of Ukraine's oldest and
sloppiest full cycle steel plants into an efficient and modern producer of
steel slabs, which are not subject to EU import restrictions.

The heart of the project is two continuous casters with a combined annual
capacity of 5m tonnes made by Austria's Voest-Alpine. Last month IUD
announced a $250m financing deal with ABN Amro, BNP Paribas and Societe
Generale, mainly to fund the Alchevsk project.

Sergey Taruta, IUD's chairman and co-owner, sees a future in which proximity
to ore, coke and cheap energy will be a decisive economic advantage for
Ukraine's and Russia's steelmakers.

In the long run, European Union steelmakers have two options: to import
slabs from Ukraine or Russia and make finished products, or shut down, he
says. IUD has allied with Swiss metals producer and trader Duferco, which
will turn the slabs into finished products at its US and west European
plants.

Duferco and IUD are meanwhile pursuing a rapid expansion in central Europe:
last year they bought Hungary's 1.5m tonne Dunaferr and the bankrupt Dam
Steel, where they plan to build another 1.5m tonne mill. IUD and Duferco are
in talks on buying Poland's Huta Czestochowa mill, and IUD has partnered
with a local steelmaker to bid in the privatisation of Czech mill Vitkovice.

Similar strategies are being pursued by Russia's Evrazholding and Severstal
and lately by Ukraine's biggest steel group, System Capital Management
(SCM), owned by Rinat Akhmetov.

SCM counts itself the world's 12th-largest steel producer, producing 15.4m
tonnes a year, after leading the consortium that paid $800m for Ukraine's 7m
tonne Kryvorizhstal mill last year. However, that mill tops Mr Yushchenko's
list of privatisation review targets and is expected to be re-auctioned with
a price of about $3bn.

Mr Taruta told an investment conference in February that IUD planned to
invest $1.8bn by 2010, while SCM provided the Financial Times with a
strategy document that describes how it would invest $2.5bn.

Mr Locker, however, says investment announcements by Ukrainian and
Russian steelmakers should be treated cautiously. "Their plans tend to be
very difficult to finance." -30- [Action Ukraine Report Monitoring Service]
===============================================================
11. ECONOMY: HOPE OF SUSTAINABLE GROWTH CHEERS BANKERS

By Tom Warner, Financial Times, World Reports - Ukraine 2005
London, United Kingdom, Tuesday, May 31 2005

You know something truly remarkable has happened when bankers are
happy about a rapidly decelerating economy.

After hitting the extraordinary 14 per cent in the third quarter of last
year, Ukraine's gross domestic product growth has slowed with a vengeance
to 8.5 per cent in the fourth quarter, 5.4 per cent in the first quarter of
this year and 3.9 per cent in April (compared with the same period in the
previous year, in common with growth figures elsewhere in this report).

Yet "Ukraine is in a much better place than it was a year ago," says Rory
Macfarquhar, an economist at Goldman Sachs who covers Ukraine. Unlike
last year's growth, this year's growth looks "sustainable".

Even though he thinks the slowdown might continue before growth picks back
up, "I'm very happy to sacrifice one year of growth in return for an overall
policy outlook that is very much better," he says.

The primary factor behind the slowdown is inflation, which erupted after the
former government doubled the minimum pension in September, just before
presidential elections. The quarterly inflation rate was 6.2 per cent in the
fourth quarter of last year and was still running hot at 4.4 per cent in the
first quarter of this year.

Some of the new government's inflation fighting techniques, such as
temporary caps on petrol prices in April and May, arguably caused more
problems than they solved. Not wanting to appear miserly, the new government
increased social spending further and gave state employees wage increases
of up to 57 per cent.

Exports, which account for a quarter of the economy, have been hit by a 5
per cent appreciation of the hryvnya currency. The central bank raised its
peg against the dollar in April to help tame inflation and cool speculative
demand for hryvnya denominated government debt.

"The economy has been gradually diversifying from its traditional dependence
on heavy industry and agriculture"

However, Serhy Teryokhin, economy minister, says the April monthly inflation
rate of 0.7 per cent shows the problem is being tackled. He says a
traditional drop in prices in late summer would help keep annual inflation
below 10 per cent. Viktor Pinzenyk, the finance minister, says the high
budget targets are being met, with total central budget revenues up 45 per
cent in January through mid-May over the same period last year.

However, other factors besides inflation are behind the slowdown.
Construction was down 5.9 per cent in the January to April period as both
government and big business held back from capital investments. The
government has had to slash capital projects to free up funds for the
pension increase while private owners are paying more taxes and worrying
about how the government's plans will affect their businesses.

General tax rates have not been raised and customs duties on some products
have even been cut. The extra revenues are coming from more even collection
and a cancellation of exemptions previously granted to special economic
zones and small businesses.

The metallurgy industry, which accounts for 40 per cent of exports and had
been one of the main engines of growth in 2003-2004, only barely increased
its output in the January to April period by 0.5 per cent. Sharp output
increases by China and India have other steel producers slightly trimming
output in hopes of averting a price collapse.

In 2003-2004, strong global demand for steel meant Ukraine's producers
could ramp up output while selling at prices that were growing much faster
than the domestic inflation rate. This year, there is a danger that both
output volume and prices could drop while inflation and currency
appreciation combine to further cut the industry's effective income.

The economy has been gradually diversifying from its traditional dependence
on heavy industry and agriculture. The latest data for different sectors'
share of GDP is from 2003, when industry accounted for 30 per cent of GDP
(down one point from 2001); agriculture for 12 per cent (down four points);
transport and communications for 15 per cent (up one point); trade for 13
per cent (up one point); and "other", a catch-all that includes most
services, for 18 per cent (up two points).

Government statistics are not the only things that have fallen behind the
times. Many plants continue the Soviet practice of compensating for outdated
technology and low labour productivity with cheap energy and low wages. That
is getting less easy to do: the average monthly wage, just $60 in January
2002, reached $134 in March and was expected to pass the $150 mark after
April's currency appreciation. But the fact that industry in 2003 accounted
for 48 per cent of total output and only 30 per cent of GDP (which counts
only the value added) demonstrates how much inefficiency still remains.

This is where foreign investors come in to the government's plans. Oleh
Rybachuk, deputy prime minister for European integration, is preparing for a
World Economic Forum event in Kiev on June 16-17, where he is aiming to
draw up to 250 international executives.

Mr Rybachuk acknowledges that the government wrong-footed many foreign
investors with the petrol price caps and the sudden elimination of special
economic zones. "We have to solve all these issues before the summit," he
says.

He said the short term goals of entering the World Trade Organisation and
getting market economy status from the European Union would bring focus
to economic policy this year, while the long term goal of joining the EU
would guide policy for the duration of Mr Yushchenko's presidency.

"We are going to be predictable because we are going to be integrating," Mr
Rybachuk said. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
12. HEALER OR KILLER? WILL UKRAINIAN CARMAKER AVTOZAZ GET
POLAND'S DEFUNCT CAR MANUFACTURER FSO OUT OF TROUBLES

Polish News Bulletin, Warsaw, Poland, Friday, Jun 03, 2005

WARSAW - A number of potential investors have been interested in the Polish
defunct car manufacturer FSO, but none have decided to get the company out
of trouble. Today, the FSO has only one prospective purchaser, Ukrainian
AvtoZAZ, which pledges not only to save the company from bankruptcy, but
also to guarantee its future development. The president of the Polish car
maker Janusz Wozniak believes that the plan will succeed.

The Ministry of Economy, which is involved in saving FSO, appears to be
overcome by a mystic faith that the company will survive. However, it is
hard to make anybody speak concretely about negotiations, writes the author
of an article in Polityka weekly. "Bankruptcy and liquidation would be much
more costly to the budget," says Tomasz Bryzek of the Economy Ministry.

Long-lasting talks with the Ukrainian investors are coming to an end. "The
agreement will be signed soon," the Treasury Ministry stated at the end of
May. AvtoZAZ will purchase a 20-percent stake in FSO from the Treasury and
will take control of the Warsaw-based company. The remaining 80-percent
stake belongs to Korean insolvent auto maker DaewooMotor. These are the
so-called mute shares, which do not entitle the Koreans to control the
company. The agreement with the Korean receiver states that the Polish
government will point to an investor with whom the receiver would negotiate
the sale of the shares.

The price settled for FSO remains a secret but in the ministry they say it
is not much. If someone sells a bankrupt entity, they should not dream of a
profit. What really matters is the protection of jobs. As an incentive the
investor will be granted Treasury guarantees for any loans it takes out to
realise the investment. The quantity of the guarantees also remains a
secret, but they are certainly lower than those that British Rover had
demanded for taking on FSO.

However, there is an obstacle. State guarantees are a form of state aid and
therefore have to be approved by the European Commission (EC). Those
who are close to the talks believe a solution will be found. Recently, the
EC agreed on ZL53m budget support for FSO. The money was spend on
severance payments for laid-off employees and on the company's current
activity.

Though AvtoZAZ has not entered FSO yet, in reality it already is its owner.
Months ago the Ukrainian company purchased nearly ZL600m of FSO's debts
from Polish banks. Even if the purchase of the 20-percent stake fell
through, 90 percent of FSO production property belongs to AvtoZAZ. The
Ukrainians have been resuscitating the Polish auto maker for quite a while,
protecting it from insolvency. FSO produces cars mainly for export to
Ukraine and only thanks to pre-payments.

Moreover, AvtoZAZ said that FSO will remain a car producer in "the long-term
perspective," whereas starting 2007 the company will manufacture a new
model. Tariel Vasadze, the president of UkrAvto, the chairman of AvtoZAZ's
supervisory board and the chief negotiator with Poland, claims he knows a
cure for FSO's problems because his company used to struggle with similar
problems and made it through.

Currently, it is one of the fastest developing companies in Ukraine.
Unfortunately, although much can be said for the Ukrainian business, it is
not particularly transparent. Therefore, finding out who will in fact be
FSO's owner when the transaction is finalised will be a challenge. Vasadze,
who belongs to a group of Ukraine oligarchs, is considered to be the main
shareholder of UkrAvto. However, according to some sources UkrAvto and
AvtoZAZ are reported to belong to a group controlled by Petro Porochenko,
a politician and oligarch.

At present, the business plan for healing the Polish auto maker remains a
secret. Though the representatives of the Polish government claim that the
agreement includes a detailed schedule and clear obligations, it still
sounds as if it lacks strong foundations. Whether or not it is a solid
enterprise needs to be worked out by the government. Tax payers too.
Otherwise, they will have to pay from their pockets again. -30-
===============================================================
13. UKRAINIAN GOVERNMENT DIVIDED OVER SIMPLIFIED TAX SYSTEM

One Plus One TV, Kiev, in Ukrainian 1630 gmt 4 Jun 05
BBC Monitoring Service, UK, in English, Sat, Jun 04, 2005

KIEV - The Ukrainian finance and economics ministers, Viktor Pynzenyk
and Serhiy Teryokhin, have criticized parliament for restoring
simplified-taxation benefits for many economic agents, Ukrainian television
has reported. Pynzenyk said he would ask the president to veto the law,
which he believes opens up loopholes for tax evasion and threatens this
year's budget revenue.

Meanwhile, First Deputy Prime Minister Anatoliy Kinakh has welcomed the
move as friendly towards Ukraine's nascent middle class. The following is
the text of a report by Ukrainian One Plus One TV on 4 June:

[Presenter] Having returned together with Prime Minister [Yuliya Tymoshenko]
from Georgia, the government has run into another problem - the Supreme
Council's [parliament's] decision adopted yesterday to restore simplified
taxation benefits to many of those who had had the privileges before.

Parliament was primarily responding to protests from small- and medium-sized
businesses, but Finance Minister Pynzenyk believes that this has opened up
loopholes for many economic sectors which are not entitled to take advantage
of the simplified taxation system. He will ask the president to veto the law
on simplified taxation and also on the law on counting the [lost] deposits
of the Soviet Union's Savings Bank as Ukraine's state debt. The laws would
worsen the prospects for meeting the 2005 state budget targets, Minister
Viktor Pynzenyk says.

However, First Deputy Prime Minister [Anatoliy Kinakh] believes that the
president will sign the law on the simplified tax system regardless. Inna
Koval has been listening to the tax debates.

[Correspondent] Representatives of small- and medium-sized business are
hopeful about the return of the simplified taxation system. The MPs revived
the system yesterday. Even though the adoption of the law violated the
provision in the budget code banning any change to tax laws within less than
six months, the first deputy prime minister promised that the president
would sign the law shortly because this is a promise made during the Orange
Revolution.

[Kinakh] We received letters from businessmen, where they began by making
very reasonable proposals to streamline all the regulators and finished by
saying that we are getting the impression you have betrayed us. This is
unacceptable. It is the middle class.

[Correspondent] However, the same Kinakh admitted that the return of the
simplified taxation system without dialogue or consent from the government's
economic bloc is a tremendous risk for society and the economy. Permission
for law and audit firms, estate agencies, medicine sellers, huge shopping
centres, which sell fur and gold, to take advantage of the system had caused
the dissatisfaction of Economics Minister Serhiy Teryokhin even before the
bill was put to the vote in parliament.

[Teryokhin] Why did we introduce a simplified system in Ukraine? There is a
family business, there is a person who has found his place in life, earning
his leaving and not queuing up for the dole. He has no proclivity to
book-keeping. He has no money to hire an accountant or a lawyer. Right, the
simplified system is exactly for such people. But please tell me -
hypermarkets, jewellers - what have they got to do with it?

[Correspondent] Finance Minister Viktor Pynzenyk has already said that he
will recommend that the president veto the law. The law, he says, has opened
loopholes for many economic sectors which are not entitled to use the
simplified taxation system. In addition, this would lead to state budget
losses. If the president fails to veto the law, he is likely to make his
amendments to the law.

Then the law will go back to the Supreme Council, and the members of
parliament will face a moral ethical choice, which a representative of the
presidential secretariat talked about today. He cited the example of Koncha
Zaspa [posh suburb of Kiev] where the owners of mansions with land plots
the size of up to 500,000 sq.m. are paying the same rates for gas and
electricity as ordinary villagers. None has proposed bringing the rates into
line with market standards.

[Borys Sobolev, deputy state secretary] Under such circumstances, it is very
hard to hope that even the political elite is capable of initiating some
progress or bringing the standards of social justice into line with the
standards of economic expediency.

[Correspondent] The deputy head of the parliamentary budget committee,
Lyudmyla Suprun, said that the committee decided to recommend parliament
not to pass any bills increasing taxes for business. But then the deputies
will have to find irrefutable arguments as to why a person repairing boots
and a person selling penthouses in central Kiev should pay the same
taxes. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
14. UKRAINIAN OPPOSITION LEADERS MEET WITH US SENATORS
MITCH MCCONNELL, MICHAEL CRAPO, JIM DEMINT
Yanukovych, Kravchuk, Kryuchkov, Boyko and others

Kravchuk assumed that the American side feels it is responsible for what
is going on in Ukraine. "They have done everything they could to make
sure that the new authorities come to power...."

Interfax-Ukraine news agency, Kiev, in Russian 1247 gmt 2 Jun 05
BBC Monitoring Service, UK, in English, Thu, Jun 02, 2005

KIEV - Representatives of the opposition - the leader of the Party of
Regions, [former Prime Minister] Viktor Yanukovych; one of the leaders of
the USDPU [United Social Democratic Party of Ukraine], [MP] Leonid
Kravchuk, and others - have shared their views on the current events in
Ukraine with the US senators Mitch McConnell [R-KY], Michael Crapo
[R-ID] and Jim DeMint [R-SC].

One of the participants in the meeting with the US senators which took place
at the US ambassador John Herbst's residence in Kiev on 31 May, Leonid
Kravchuk, told Interfax-Ukraine: "They (the senators) wanted to hear the
other side's story from the people that are of a different opinion."

"It was a very interesting conversation. Everyone had a chance to speak up.
Smeshko (Ihor Smeshko, the former head of the Security Service of Ukraine)
made an interesting speech. He said he was not a professional politician,
but still could see that the rule of law has not become a norm of life and
legal nihilism has been acquiring scary forms.

Kryuchkov (Heorhiy Kryuchkov, one of the leaders of the Communist Party)
came up with facts to prove this. I spoke up twice, and so did Yanukovych.
Boyko (Yuriy Boyko, the former head of the state-owned Naftohaz Ukrayiny
[Oil and Gas of Ukraine] company) talked about inadmissibility of resorting
to administrative methods. Everyone talked about what is going on in the
country having facts in hand. No-one spoke with hatred." Kravchuk said.

Kravchuk assumed that the American side feels it is responsible for what is
going on in Ukraine. "They have done everything they could to make sure that
the new authorities come to power. They understand that if the authorities
fail to deliver (and such problem does exist), then Ukrainian people will
hold those who helped them come to power responsible too. They would not
want people to start talking about human rights, democracy and political
persecution - the issues that were raised at the meeting," he said.

Kravchuk also said the issue of fighting corruption was also discussed at
the meeting. "Even the US ambassador said that he is aware of large-scale
corruption," he said.

The US senators also met the country's leadership during their visit to
Ukraine. -30- [The Actin Ukraine Report Monitoring Service]
===============================================================
15. UKRAINIAN SPEAKER TELLS U.S. SENATOR HAGEL YUSHCHENKO
SHOULD NOT HEAD PARTY FOR PARLIAMENTARY ELECTIONS

One Plus One TV, Kiev, in Ukrainian 1630 gmt 4 Jun 05
BBC Monitoring Service, UK, in English, Sat, Jun 04, 2005

[Presenter] The president has also been given advice on party formation.
Viktor Yushchenko should give up plans to set up a pro-presidential party.
Otherwise this will lead to an opposite result, parliament speaker Volodymyr
Lytvyn said during a meeting with US Senator Chuck Hagel and Deputy
Commander of the US Forces in Europe Gen Charles Walt [Lytvyn, Yushchenko
and Prime Minister Yuliya Tymoshenko agreed to run for parliament together].

The president should act as an arbiter, consolidate society and be above
politics, the parliamentary press service quoted Lytvyn as saying. The 2006
[parliamentary] election will mean as much for Ukraine as the past
presidential election. Lytvyn described the formation of an election
coalition as an attempt by the politicians to be friends and meanwhile
decrease each other's ratings.

Volodymyr Lytvyn is not satisfied with the level of cooperation between
parliament and the presidential secretariat too.

[Lytvyn] Practically no letters sent from parliament to the presidential
administration are getting through to President Yushchenko. At best they are
answered by a deputy [state secretary]. I came to a conclusion that he does
not answer them. At least in [former President] Leonid Kuchma administration
they put his signature for him. Now they can't even put a signature.
===============================================================
16. COSSACKS PLEDGE ALLEGIANCE TO UKRAINIAN PRESIDENT

ICTV television, Kiev, in Ukrainian 1545 gmt 4 Jun 05
BBC Monitoring Service, UK, in English, Sat, Jun 04, 2005

KIEV - [Presenter] Ukrainian President Viktor Yushchenko, along with cabinet
ministers and other top officials, is on a visit to Zaporizhzhya. His first
stop is Khortytsya Island [on the Dnieper], the cradle of Ukrainian
Cossacks. The president checked the progress of renovation [Khortytsya is
a Cossack memorial], signed a decree setting up the council of Ukrainian
Cossacks and took charge of the council.

Five years ago the Ukrainian president joined Ukrainian Cossacks but before
the presidential election he was expelled for systematic failure to pay
membership dues. This time, Viktor Yushchenko received a horse as a gift,
while [Prime Minister Yuliya Tymoshenko] was called the female symbol of
Ukraine.

[Correspondent] Yushchenko took children and cabinet ministers on his
Zaporizhzhya trip. Most of the day the guests were familiarizing themselves
with Cossack customs and checking the progress of the Zaporizhzhya Sich
[Cossack stronghold] restoration. Until recently, specialists have argued
how the memorial should look, should it be an exact replica of some specific
Sich or a compilation of all of them. The restoration project has finally
been agreed by all agencies.

[Culture Minister Oksana Bilozir] The review of the project is over, all
fine points have been agreed. Today we can see where they will be and how
beautiful they will look like. So everything looks fine.

[Correspondent] The president greeted Cossack leaders, who gathered today,
with his youngest son Taras in his hands. Cossacks from across Ukraine
pledged loyalty to Yushchenko and recognized him as their hetman.

[Yushchenko, wearing a Ukrainian ethnic shirt with his son in his hands]
Today I have signed a decree setting up the council of Ukrainian Cossacks,
consisting of representatives of Cossack organizations, and appointing a
presidential adviser for Cossack issues. I want their work to become a
bridge linking Cossacks with the authorities and public organizations. Do
you agree with this, Cossacks and commanders?

[Cossacks shouting: Yes! Yes! Yes!]

[Correspondent] Yushchenko's attention to the history of Cossacks has not
just a patriotic but also purely personal background. The president says
that dozens of his predecessors were Cossacks of the Kostyantyniv Hundred,
Lubny Regiment. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
17. UKRAINE: A DAY AT ROCKET DESIGN CENTRE
India, Ukraine can cooperate in space research: India's Pres Kalam

By K. V. Prasad, The Hindu
Online edition of India's National Newspaper
Madras, India, Saturday, Jun 04, 2005

DNEPROPETROVSK (UKRAINE): For a person who gained fame as the
missile man, President A.P.J. Abdul Kalam on Friday paid a visit to the
Yuzhnoye design office here that played a role in the development of a
missile based on new technologies and use of a self-contained guidance
and control system.

Considered a repository of rocket and satellite technology, Mr. Kalam was
given a presentation by its general director Stanislav Konyukhov on the
achievements of the firm and its association with India since the launch its
first satellite, Aryabhatta, in 1975.

The President, accompanied by senior scientists, flew in from Kyiv to the
city, 500 km south of the Ukrainian capital on the penultimate day of his
four-day visit here.

The design office which was earlier known as the special design bureau
was established in 1954 and with the attainment of Independence and
denuclearised status of the country, a new programme of missile develop-
ment began taking into account the missile technology control regime and
Wassenaar agreement that includes deployment of anti-aircraft missile
defence systems.

OFFER OF COOPERATION
Mr. Konyukhov, who described the President as "father of Indian rockets"
put forward a set of proposals on which the firm was willing to cooperate
with India. The technical discussions would be conducted here by the Indian
Space Research Organisation team headed by its chairman G. Madhavan
Nair in the next two days.

Yuzhnoye has been one of the first companies in aerospace industry to set
up the Telemetry Data Processing Centre in order to facilitate a solution of
important problems while carrying out the flight tests of strategic missiles
and launch vehicles.

The machine building plant here makes serial production of missiles, space
launch vehicles, satellites and rocket engines. The plant participated in
projects of ballistic missiles R-1 (SS-1) serial production and others in
the serious including intercontinental ballistic missiles till the break up
of former Soviet Union.

The firm currently has taken up projects like Okean-O oceanographic
satellite; Koronas-F solar observation satellite; Zenit - 3SL three-stage
launcher for sea launch project and Dnpere launch vehicle, the converted
ss-18 intercontinental ballistic missiles.

Over 50,000 scientists and experts are employed in the firm whose plant
has production branches of rocket and space articles; of engines and civil
products; of testing and utilisation; trolley cars and mechanical and
preparatory production.

Earlier, during his meeting with the teaching staff and students of the Kyiv
National T. Shevchenko University, the President suggested synergy between
Indian Universities and Kyiv through cooperative programmes and establish a
school of societal transformation to transform both countries into knowledge
society.

Mr. Kalam said both countries could work together in space research, nano
science, mathematical science and information technology. "The product
which we choose should become a pioneering product within the next few
years. This will enable marketing of the product with in the shelf life of
the product globally," he said. -30-
------------------------------------------------------------------------------------------------------------
http://www.hindu.com/2005/06/04/stories/2005060411631400.htm
===============================================================
18. UKRAINIAN PRESIDENT SPOILT BY EXCESSIVE PRAISE, JOURNALIST

The new authorities have made too many promises and mistakes and they
apparently lack a clear strategy and a systematic approach to state affairs.

ANALYSIS & COMMENTARY: By Serhky Rakhmanin, "Mine and Ours"
Zerkalo Nedeli, Mirror-Weekly, International Social Political Weekly
Kiev, Ukraine, in Russian, Saturday, 28 May 05; p 1, 2
BBC Monitoring Service, UK, in English, Tuesday, May 31, 2005

President Viktor Yushchenko is in danger of having his head turned by being
praised as a messiah, an independent Ukrainian weekly has said. In a notably
critical article, journalist Serhiy Rakhmanin said Yushchenko had become a
slave of his own populist slogans, showing himself as a "talented demagogue"
and starting to resemble his predecessor Leonid Kuchma.

The new authorities have made too many promises and mistakes and they
apparently lack a clear strategy and a systematic approach to state affairs,
Rakhmanin added. To make things worse, the president and the government
have shown little receptiveness to criticism over their numerous foul-ups
and infighting.

The following is the text of the article by Serhiy Rakhmanin entitled "Mine
and ours" and published in the Zerkalo Nedeli newspaper on 28 May;
subheadings are as published:

The habit of journalists and political analysts to sum up the preliminary
results of the authorities' actions after the first 100 days looks somewhat
artificial. Why after 100 days rather than seven, 40 or 365? It would have
been more logical to make a diagnosis and wait for the disease or recovery
to become manifest. Then it could be joyfully claimed that the nervous
trembling, feverish flush and suspicious brightness of the eyes are remnants
of a former, disappearing illness. Or, on the contrary, it could be stated
sadly that the symptoms indicated are the essence of the result of a
serious, ongoing ailment.

"And let's call my behaviour observation"

If you are not a political hypocrite and not a political romantic, you could
make yourself evaluate the first steps of the placemen of the Maydan [Kiev's
Independence Square, heart of the Orange Revolution] without excessive
prejudice. It was stupid to reckon that the newcomers to power would
immediately provide themselves with wings and haloes.

It was naive to hope that in six months or so we would wake up as happy
inhabitants of a European, civilized, democratic, rich, law-based, socially-
oriented (it seems I haven't left anything out) state. It was dishonest to
deprive [President Viktor] Yushchenko and [Prime Minister Yuliya]
Tymoshenko and others of that ilk of the right to make mistakes.

But I personally was not surprised by the blunders made by the new elite.
And not even by their number. Although many biased experts considered that
as early as in the first couple of months the authorities had exceeded the
conventional limit of stupidity granted to it for a couple of years. It was
something else that surprised me. The stubbornness with which the celestial
beings chronically failed to notice their own blunders. The arrogance with
which they tried to present wrong as right. The unceremonious way in which
they replaced legality with expediency.

The chronicle of the acts of the knights of the "orange order" is spattered
with dubious stories. In them the acts of the powers that be did not always
look unambiguous and their words not always sincere.

Dubious personnel appointments and mutually exclusive regulations. The
nature of reprivatization and specifics of the investigation into the
[murdered journalist Heorhiy] Gongadze case. The specific nature of the
formation of the new "party of the authorities" and the sad chronicle of the
repeat elections to the capital's city council. Budget nuances and price
rises. The dispute over Dynamo Kiev [Football Club] and the fight for the
seat of the mayor of Odessa. The scandal surrounding Hryndzholy [band
controversially representing Ukraine at Eurovision song contest] and the
petrol crisis.

The mysteries of administrative reform and secrets of the foreign policy
course. The story of [Justice Minister Roman] Zvarych and Tymoshenko's
indicative "flogging". Anyone is free to add to the list as they see fit.
From the multi-coloured and multi-calibre fragments everyone is capable of
compiling a mosaic picture according to his taste. But try as you may, an
icon will not come out of it.

It would be unfair not to note insistent attempts by individual personages
to achieve small victories in their sector of work. And at the same time, it
would be dishonest not to admit the obvious: the successes achieved are
not systemic, while the mistakes committed are systematic. The new
administration from the very outset did not give the impression of being a
single team united by a common purpose. It does not seem a smooth
mechanism being used according to its designation. The multiple intrigues
and numerous contradictions are discernible to any observant citizen.

The people elects the lesser of two evils, gradually forgetting that
yesterday it had chosen the personification of future good. Nobody wants to
believe that the stormy Maydan of faith is slowly but surely turning into a
quiet graveyard of hopes. It is a general misfortune - for the
administration, its opponents and hence for society and the country as a
whole - that today's oppositionists are not entirely genuine. It seems to me
that the overwhelming majority of the people that are against the regime are
on the other side of the barricades only because they are not allowed on to
this side.

Practically all of them are bigger or lesser conformists by nature, and
would have been happy to serve the residents of Olympus if they had been
allowed to. But there is simply no need for them. Many of yesterday's
oppositionists obviously find the move into power painful. Many of
yesterday's powers that be find it just as difficult to move into
opposition. This means that domestic politics is not yet ready for life
according to democratic rules.

Otherwise the residents of Olympus would not have tried to do everything in
their power to prevent (God forbid!) a real, healthy, sober-minded
opposition appearing in the country that could replace the present one -
artificial, picturesque and inert. We have the specifics of the formation of
the Our Ukraine People's Union [OUPU] and problems with the registration
of Pora, permanent flirtation with [parliament speaker Volodymyr] Lytvyn and
Yushchenko's endeavour to tie Tymoshenko to him.

It is a question of various phenomena and subordinates, but a single
purpose. It is formulated simply: to exclude the very possibility of the
appearance of any tangible political alternative. According to the
administration's scheme, the ranks of the dissatisfied should be headed by
people for whom the majority of the population have not lost their hatred or
at least hostility.

How could the strength of yesterday's opposition be partly explained? It
evoked special sympathy if only because the authorities were so
unattractive. The task of today's Bankova [Street where the presidential
secretariat is located] is to present their opponents as being antipathetic
to the maximum. If only "yesterday's people" are in the ranks of the
opponents of the regime, they are already half-way there. Comparative faith
will be contrasted with absolute lack of faith.

Yushchenko and his comrades-in-arms seem to have studied the mistakes of
[former President Leonid] Kuchma and his entourage. But the task that Viktor
Andriyovych has posed looks no different from the aim that Leonid Danylovych
never hid - keeping power at any cost. Every new day of the new
administration provides new confirmation of this hypothesis.

Are we being too early and strict to judge? Well, we are not judging, we
don't have the right. We are simply fulfilling our civic duty by sharing our
concerns. Aloud. For freedom of speech is probably for now the only
indisputable achievement of the new era. One would like to believe that it
will long continue.

"I see no river, I see no bridge. Well, so be it?"

Although there are problems here as well. And a huge amount of them. There
is the self-censorship that has been absorbed into the blood and has eaten
into the flesh. There is also the frank inability of some people to live
without temnyky [coverage instructions sent to the media by the previous
administration]. And there is the absolutely inexplicable but completely
obvious servility of others.

One can endlessly lament the unwillingness of many journalists (editors,
publishers) to make use of the benefits of freedom. The unreadiness of many
readers (viewers, listeners) to make use of its fruits. However, these are
objective misfortunes and hence treatable. Another ill is far more
dreadful - the administration's non-receptivity to a different viewpoint and
the simple-minded outrage with which many of the new political Olympians
react to criticism.

A difficult time of testing has come for those whom it was accepted to
consider the democratic press and those whom it was accepted to call
political democrats. The former administration for many of us was
characterized by the somewhat remote pronoun "they". Our attitude to many
representatives of the present administration is subconsciously defined by
the deeply personal "we".

It is difficult and painful to criticize people with whom you yesterday
shared plans and worries. People with whom you froze in tents and sang on
the Maydan. People whom you protected as best you could from the regime or
from whom you yourself sought protection. People whose sincere adherence
to ideals you did not doubt. Or at least you did not allow yourself to
doubt.

Everyone connected with political journalism knows how easily yesterday's
democratic oppositionist takes on the proprietary habits of the snobbish
powers that be. How difficult it is to get used to the fact that he
successfully cuts himself off from yesterday's comrades-in-arms (who have
not changed their status and not changed their principles) by massive doors,
trained assistants and general phrases. This is a given.

But today this given is perceived in an extremely complicated way. It is
extremely difficult to choose the words and find the right tone. You know
all too well that it is especially painful to criticize "your own people".
You understand all too well that criticism emanating from "your own people"
is received especially painfully.

It is a hard test that neither side has yet passed, even with an "adequate"
pass mark. The people who have now become the country's ruling elite find
it hard to accept the logic that they can be tongue-lashed or at least
reproached for the same things as their predecessors. Meanwhile, by their
pained attitude to criticism virtually all the new leaders recall the old
ones. And not only because of this.

Bitter though it is to state, by their statements, actions and even manners,
gestures and poses, they resemble more often than one would like those
whom they so thoroughly criticized and whose places they so passionately
wanted to take. With amazement and horror we hear intonations in the voices
of yesterday's Maydan orators that we are painfully sick of hearing. The
intonations of Leonid Danylovych [Kuchma], [former Prime Minister] Pavlo
Ivanovych [Lazarenko], [Kuchma's chief of staff] Viktor Volodymyrovych
[Medvedchuk], [former Prime Minister] Viktor Fedorovych [Yanukovych], etc.

Yesterday one could be quietly pleased that the present first person in the
country at least publicly reacts to criticism more appropriately than the
previous one. But today the time has come to ask oneself: maybe it is time
to complain out loud that Viktor Andriyovych has already in some way
outdone Leonid Danylovych?

Each of us has his own list of demands to the people whom we elect. Probably
it is simpler for people who believe in a good tsar. And who are prepared to
write off his future sins to the machinations of malicious courtiers.

It was harder for me personally. I have never hidden that I don't care what
the new president is called. For me it is fundamentally important that he
does not turn into a version of the previous one. I have never hidden that I
would do everything within my modest means to prevent a victory for
[defeated presidential candidate Viktor] Yanukovych, whom I perceived as a
symbol of unbelief. I have never hidden that I would ruthlessly criticize
Yushchenko if he failed to be true to the principles that he declared and
that I share.

What did the ordinary voter Rakhmanin want from the new president? Not a
lot. I did not believe that he was a messiah and omnipotent. I wanted to see
as head of state someone who would not be a lout, would respect the laws,
would be predictable and consistent, would establish a clear link between
words and deeds and who would be a real defender of the country's national
interests.

Unlike many personal sympathizers with Yushchenko and Tymoshenko, I
viewed the historic role of the new administration somewhat differently. It
was meant to be a transitional regime ready and able to clear the field for
political heirs. The triumphal winners of the revolution should have taken
on the cross that their predecessors were unable or unwilling to bear for a
good decade.

What was I expecting from the new administration? Nothing supernatural:

- definition of a clear geopolitical line;
- creation of the shelved institution of state management that assumed a
rejection of "hands-on management", the practice of duplication of functions
and the use of administrative resources;
- formation of a normal legislative basis;
- launch of effective market mechanisms capable finally of creating a
genuine middle class in the country;
- establishment of the principle of universal accountability to the law.

This seemed far more important than answers to these questions:

- will [former election commission chief Serhiy] Kivalov and Medvedchuk
end up behind bars;
- who will own [controversially privatized steel giant] Kryvorizhstal or
Dynamo Kiev;
- how soon we will join the EU;
- where will the president's residence be;
- does Zvarych have a degree or not;
- are there enough monuments erected in honour of the numerous national
heroes?

The guarantor of the constitution [president] was to have laid the
foundation of a full-fledged democracy, and the central executive body - the
foundation of a full-fledged market economy. Awareness of this simple truth
would have guarded against illusions. It would have got rid of the need to
issue countless promises that make the ears ring and which undermine belief
in the ability of the administration to implement even a small part of what
had been thought up. For the strong and responsible person convinces people
"not by words but by deeds". For however much you say "don't steal, don't go
hunting and go to the bath-house", an official will not become more honest,
more peaceable and cleaner.

The impression is being created that most of the country's new leaders
cannot at all rid themselves of a sort of psychological dependence. Some, it
seems, cannot grasp at all that the revolution has already been accomplished
and that from now on their destiny is not to overthrow, but to create.
Others consciously (or unconsciously) are copying the former high-ranking
bureaucrats. The thankless role of "sappers", it seems, does not fit in with
the ambitions of a considerable number of our leaders.

Some of them are vainly striving if not to be, at least to pass for miracle
workers. And they are genuinely outraged when they are timidly but
reasonably reminded that the painstaking work of an official has nothing in
common with the romantic art of the magician.

Others are today cold-bloodedly and methodically increasing their powers
that tomorrow will guarantee a multiplication of capital. They are just as
genuinely perplexed as to why people around do not consider such an
occupation pleasing to God. Why yesterday's membership of the opposition
is not an indulgence for them, guaranteeing the remission of sins.

We have to appraise these or those political masters and probationers not
by who they were yesterday, but by what they are doing today. If this
(laughably obvious) idea does not promptly get through to everyone - the
administration, the opposition, the press and society - the country faces
depression. Political, economic and psychological. It would be sad if the
idea of the Maydan is reduced to the erection of a stage for kids diluted
with full-grown predators. Where populations of the hopeless romantics
and miserable cynics that we described will coexist.

Such an experiment will make some absolutely rich and some absolutely
happy. But the country was hoping for the coming of uncompromising
pragmatists capable of making their country at least comparatively rich and
happy. That was not at all the aim of the people that turned the opposition
into the authorities.

Not to change the signboard on Bankova. Not to enrich [Russian businessman
Konstantin] Grigorishin [who is in a struggle to gain control of Dynamo] or
to impoverish [tycoon MP Viktor] Pinchuk [who bought Kryvorizhstal]. Not to
replace Medvedchuk by [presidential chief of staff Oleksandr] Zinchenko or
[Yevhen] Kushnaryov by [Arsen] Avakov [as governor of Kharkiv Region]. The
aim was to change the rules of the game. But some things are not yet fitting
in place.

What do we have?

It is not clear where we are moving. "The consistent geopolitical course"
named after Viktor Yushchenko differs little, it seems to me, from the
multi-vector policy named after Leonid Kuchma. Of course, there is a certain
difference. For this we owe a separate restrained thank-you to the West,
which was tired of the inconsistent Kuchma and cautiously believed in
Yushchenko. But we are not talking of tactical victories now, but of
strategic plans. Are we for the SES [Single Economic Space linking Ukraine,
Russia, Belarus and Kazakhstan] or against? Why "for" and why "against"? Is
the answer clear to you? Not to me. What and with whom are we signing,
"synchronizing" and "harmonizing"?

Is the administration for political reform or against? If against, then what
in particular? If for, then for what sort of reform? During the elections we
guessed that Yushchenko's team did not have a clear plan for conducting
reform of the system of governance. There are many of them now, and it is a
mystery which system of administration we intend to build.

Is Yushchenko in favour of strict observance of legislation and the
constitution? Of equal responsibility of all to the letter of the law? Then
why is it that there is a rush to put some gangsters behind bars, while
there is a rush to put others into seats of the administration? Why is a
good half of the regulations evidence either of crude ignorance of the laws
or even cruder ignoring of them? Are the first people in the country in
favour of unity of aims and actions of the administration? Of getting rid of
administrative methods and duplication of functions? Of clear observance
of established rules of governance and raising its effectiveness?

In that case, why is it that:

- the head of the president's chancellery allows himself to tick off a
governor;
- the secretary of the security council [Petro Poroshenko] is free to foist
his viewpoint on the government;
- the first aide is able to monitor the prime minister's actions;
- a governor can be in charge of the formation of a local party cell?

Why does the prime minister not have the right to defend her viewpoint in
dialogue with the president? And does the prime minister really have the
right to yield to another person (even if a senior official) the right to
lead the government, a right that he does not have? And why does the
president give instructions to people to whom he has no right to give any
instructions? And demands in those instructions what he has no right to
demand?

Why does the country have at least three centres of administration
influence competing with each other? Why are the laws not being produced
so rapidly and insistently, without which the country is suffocating and
whose adoption was so much urged before, during and immediately after
the revolution?

Rather a lot of "why's"? But after all, the list of the most important
questions for the country is far longer. Did the administration provide
normal conditions of existence for small and medium business, paying it
back for sincere support during the Orange Revolution? Or did it place it
on the brink of destruction? Is the wretched flirtation with Russia an acute
geopolitical necessity? Or the realization of someone's commercial
interests?

Already now it is obvious that the administration had no concrete action
plan. Although, when it was in opposition, it issued too many concrete
promises. Relying on such credit of the population's confidence, it could
have afforded to go for shock therapy. But the chance was missed.

Yushchenko is the captive of his own populist slogans and has deprived
himself of the possibility of economic manoeuvre. Yushchenko and his team
are the prisoners of numerous agreements and have deprived themselves
of the possibility of personnel manoeuvres.

Is it all really that bad? Are there really no tangible positive aspects?
There are, and in principle a fair number. But in every specific case one
has to speak of the details. There is no systematic approach and logic, no
strategy and rationalism in the actions of the disconnected, disorganized
administration.

Once upon a time there lived in Rome the Emperor Vespasian, who spent
considerable amounts on eliminating the consequences of high mortality and
fires, on distributing bread, organizing spectacles and public works.
Historians write that Vespasian was counting on remaining in the memory
of his descendants as someone who had done a lot for the public good.

A few years ago I read on the Internet that an opinion poll had been carried
out among the residents of the Italian capital, Rome, trying to find out
what people knew about the ancient Roman emperors. To the question about
Vespasian, most people answered: "He built the first public toilets." They
said something different about Caesar: "He built a strong empire".

Build not a graven idol to thyself

Most unfortunately, little has yet really changed for the better in the
country. Even oaths (as before not apparently sincere) our politicians
prefer to issue on the bones of Taras [Shevchenko, national poet at whose
grave the president, prime minister and speaker declared their intention to
form a bloc for the next parliamentary elections]. The first persons are
still predisposed to demagogy and the second ones to lackeyism. I don't
recall exactly who rightly noted that the personality cult is a
characteristic of a country rather than of a leader.

For myself, I will add a couple of observations. My sufficiently modest but
fairly long experience of conversing with politicians gives me the right to
share some observations. I know many high-ranking representatives of that
glorious shop floor who do not delight in excessive reverence of rank. I am
familiar with a certain number of people who tactically reprimand their
subordinates for showing excessive ecstasy regarding the boss's talents.
But I don't remember anyone who would fight against his own personality
cult.

That is why one wants to appeal not so much to the "servants of the people"
as to their nominal bosses. Politicians will not change unless we make them
change. Otherwise the most starry-eyed of them will, as before, consider
journalists as attendants, subordinates - lackeys, the population - an
electorate and the people - a herd.

The theory of big numbers is wonderful if little people are seen behind it.
And concern for little people is shown not in words. The presidential
concern for citizens should be manifested not in outrage over the fact that
disabled people in administrative buildings do not know "which toilet to pee
in". If Yushchenko is concerned about prestige rather than popularity, he
should engage in building not toilets but a legislative basis. Otherwise it
is not even the glory of Vespasian that awaits him, but the laurels of
Kuchma.

Many people doubted the administrative abilities of Mr Yushchenko,
but his unceremonious treatment of the laws and increasingly frequent lack
of tact has been unexpected for many people. One can read the signs of the
chosen one on his brow, and this is an alarming symptom. Because the
majority elected a manager rather than a tsar. And it is doubly alarming
that the signs of the chosen one seem to be an infectious disease that has
affected many people in his retinue.

It means that the disease of messianism will be ever so hard to treat. And
that means that the constantly repeated expressions, "my people", "my
country", "my government" and "my administration" may turn out to be not
harmless slips of the tongue, but convictions. Dangerous convictions.

Yushchenko's demagogy differs from Kuchma's demagogy because the
previous one was a talentless demagogue, while the second so far looks like
a talented demagogue. His passion for posing frightens me. But even more
frightening is the fact that his posing causes tender feelings.

Not only could I not share it, but could not even understand the delight
that took hold of many people after the well-known telephone conversation
between the president and Nastya Ovchar [six-year old girl badly burnt
rescuing her little sister from a fire]. Because in my view the last thing
that the burnt little girl (for whom every movement meant unbearable pain)
needed was to pick up the receiver to hear the concerned voice of the head
of state. What she needed most of all was the anti-burns bed that the
authorities altogether (while getting good PR) were unable to provide.

I don't understand the joy of those who applauded the president when he
turned up to award the gold pectoral to a mediocre Greek singer [winner of
the Eurovision song contest]. I don't understand what he was doing there at
all. I do understand the bitterness of those who counted up how much the
useless toy cost and what could have been bought with that money. For
children's homes where there are no toys. For maternity homes where there
is no hot water and nappies.

I don't understand why constant meetings with numerous demonstrators,
complainers, petitioners and litigants are a manifestation of openness and
democracy. In my opinion, such a waste of time for the head of state is a
crime. And the effectiveness of the authorities should be precisely to
ensure that the president at that time is doing his job: doing everything to
ensure that there are no crowds of people gathering outside his window.

I don't understand why one and the same thing must be promised so often.
Why so many oaths need to be sworn if you cannot manage to fulfil even
one of them.

There is much that I cannot understand. And probably I never will. Because I
understand belief as a mystery rather than a public act under the limelight.
Because this country and this people have always been for me "ours" rather
than "mine". -30- [Action Ukraine Report Monitoring Service]
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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.

If you would like to read "THE ACTION UKRAINE REPORT- AUR"
please send your name, country of residence, and e-mail contact
information to morganw@patriot.net. Additional names are welcome. If
you do not wish to read "THE ACTION UKRAINE REPORT" around five
times per week, let us know by e-mail to morganw@patriot.net. If you
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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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