"THE ACTION UKRAINE REPORT - AUR"
An International Newsletter
In-Depth Ukrainian News, Analysis, and Commentary

"The Art of Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World"

"THE ACTION UKRAINE REPORT - AUR" - Number 521
Mr. E. Morgan Williams, Publisher and Editor
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, TUESDAY, July 12, 2005

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

1. RECOMMENDATIONS FOR IMPROVING THE CONDITIONS FOR
DOING BUSINESS AND INVESTING IN UKRAINE
Draft law on the permits system developed, should be implemented
CONCLUSIONS: OECD Workshop on a Legal Framework for
Business Operations in Ukraine: Latest Developments and Next Steps,
Organization for Economic Co-operation and Development (OECD)
and EU/TACIS; Kiev, Ukraine, Tuesday, 26 April 2005

2. WORLD BANK SUPPORTS UKRAINE'S BID TO JOIN WTO
Associated Press, Kiev, Ukraine, Monday, July 11, 2005

3. UKRAINIAN WTO MANIA
This article is an attempt to analyze the latest
legislative achievements and failures in the economic sphere.
ANALYSIS: By Yuriy Moiseenko
Zerkalo Nedeli (ZN), Mirror-Weekly, No. 26 (554)
International Social Political Weekly
Kyiv, Ukraine, Saturday 9-15 July, 2005

4. UKRAINE LIFTS MAJOR BANS ON FOREIGN BANK'S ACTIVITIES
Parliament allows foreign banks to provide all types
of banking services in Ukraine
IntelliNews - Ukraine This Week
Kyiv, Ukraine, Monday, July 11, 2005

5. UKRAINIAN DEPUTY PRIME MINISTER OLEH RYBACHUK
IN HOSPITAL WITH SERIOUS KIDNEY PROBLEM
Interfax-Ukraine news agency, Kiev, in Russian, 11 Jul 05
BBC Monitoring Service, UK, in English, Mon, Jul 11, 2005

6. UKRAINIAN ECONOMICS MINISTER TERYOKHIN WANTS SOCIALIST
AGRICULTURE MINISTER FIRED FOR NON-MARKET VIEWS
Socialist party failed to support bills needed for Ukraine's WTO entry
Ukrayinska Pravda website, Kiev, in Ukrainian 11 Jul 05
BBC Monitoring Service, UK, in English, Mon, Jul 11, 2005

7. UKRAINIAN PROPERTY FUND CHIEF SEMENYUK WANTS STATE
OWNERSHIP FOR KRYVORIZHSTL STEEL PLANT
State should be represented in various companies and sectors
so it can regulate prices
TV 5 Kanal, Kiev, in Ukrainian 1740 gmt 7 Jun 05
BBC Monitoring Service, UK, in English, June 7, 2005

8. UKRAINIAN STATE PROPERTY CHIEF SEMENYUK SAYS STATE
SHOULD NOT SELL MAJOR STEELWORKS AGAIN
"One shouldn't kill the goose that lays the golden eggs"
UNIAN news agency, Kiev, in Ukrainian 1044 gmt 1 Jul 05
BBC Monitoring Service, UK, in English, Friday, July 1, 2005

9. PROFILE: UKRAINIAN PRIVATIZATION CHIEF VALENTYNA SEMENYUK
As a representative of leftist [Socialist]
ideology, Semenyuk prefers state property to private ownership.
BBC Monitoring research in English 18 May 05
BBC Monitoring Service, May 18, 2005

10. UKRAINIAN PROPERTY CHIEF SEMENYUK SAYS SHE HAS BEEN
SUBJECTED TO PRESSURE BY PRESIDENTIAL SECRETARIAT
TV 5 Kanal, Kiev, in Ukrainian 1800 gmt 5 Jul 05
BBC Monitoring Service, UK, in English, July 5, 2005

11. NEW NATIONAL BANK OF UKRAINE ANTI-INVESTMENT RESOLUTION?
Inside Ukraine Newsletter, Kyiv, Ukraine, Tuesday, July 12, 2005

12. MINISTERS APPROVE DRAFT RESOLUTION BY PRESIDENT ON
CONSTRUCTION OF PRIVATE OIL REFINERY FOR LIGHT OIL PROCESSING
IN ODESA REGION AND BRANCH NETWORK OF FILING STATIONS
Oleksandr Khorolsky, Ukrinform, Kyiv, Ukraine, Mon, July 11, 2005

13. UKRAINIAN PM DENIES UKRAINE STEALS RUSSIAN GAS
AFX Europe, Kiev, Ukraine, Mon, Jul 11, 2005

14. UKRAINE-CANADA ICC TO BUILD PLANT FOR PRODUCTION OF
WOODEN BUILDING CONSTRUCTS FOR HOUSING & OTHER FACILITIES
Interfax-Ukraine, Kyiv, Ukraine, Monday, July 11, 2005

15. UKRAINE'S EX-SECURITY SERVICE CHIEF IHOR SMESHNKO
DENIES AGENTS POISONED PRESIDENT YUSHCHENKO
TV 5 Kanal, Kiev, in Ukrainian 1735 gmt 11 Jul 05
BBC Monitoring Service, UK, in English, Mon, Jul 11, 2005

16. DONETSK REGION PROSECUTORS OPEN CASE INTO FORGERY
OF DOCUMENTS CANCELING CRIMINAL RECORD OF YANUKOVYCH
Ukrainian News Agency, Kyiv, Ukraine, Mon, July 11, 2005

17. THE HOLODOMOR MEMORIAL IN KYIV MUST BE BUILT YESTERDAY
LETTER-TO-THE-EDITOR: By Yaroslav Bilinsky
Professor Emeritus of Political Science and
International Relations, University of Delaware
Published by The Action Ukraine Report (AUR), Number 521
Washington, D.C., Tuesday, July 12, 2005

18. UKRAINIAN, POLISH DANCERS PARTICIPATED IN 18TH FESTIVAL
OF UKRAINIAN CULTURE HELD IN SOPOT, POLAND
Polish dancers members of the Assn of Ukrainians in Poland
Ukrinform, Kyiv, Ukraine, Monday, July 11, 2005

19. YUSHCHENKO CONFERS POSTHUMOUS HERO OF UKRAINE
TITLE ON NBU EX-GOVERNOR VADYM HETMAN
Hetman was murdered in April 1998
Ukrainian News Agency, Kyiv, Ukraine, Mon, July 11, 2005

20. THE CRISIS OF AUTHORITY
Now we are beginning to doubt if there is power at all in Ukraine
-- a concerted, effective, and authoritative leadership.
COMMENTARY AND ANALYSIS: By Serhii Rakhmanin
Zerkalo Nedeli, Mirror-Weekly, No. 26 (554)
International Social Political Weekly
Kyiv, Ukraine, Saturday 9-15 July, 2005
==============================================================
1. RECOMMENDATIONS FOR IMPROVING THE CONDITIONS FOR
DOING BUSINESS AND INVESTING IN UKRAINE
Draft law on the permits system developed, should be considered

CONCLUSIONS: Project on "Improving the Conditions for
Enterprise Development and the Investment Climate for
Domestic and International Investors in Ukraine",
OECD Workshop on a Legal Framework for Business
Operations in Ukraine: Latest Developments and Next Steps,
Organization for Economic Co-operation and Development
(OECD) and EU/TACIS; Kiev, Ukraine, Tuesday, 26 April 2005

Ukraine is in the midst of a continuing, long-term effort to improve its
investment climate, an effort that has seen the Ukrainian Government and
the OECD working in close cooperation to improve Ukraine's legislative
environment and make the country more attractive to domestic and foreign
investors alike.

The purpose of these CONCLUSIONS is to contribute to the ongoing
dialogue with the new Government based on the OECD's recommendations
concerning the legal environment for business activities and investment.

As part of a project funded by the European Union, the OECD is engaged in
discussions with the public and private sector in Ukraine on the improvement
of the legal environment for doing business and attracting foreign
investment.

A first workshop held in May 2004 resulted in the set of recommendations
subsequently incorporated into a publication of the OECD Report on
Improving the Conditions for Enterprise Development and the Investment
Climate for Domestic and International Investors in Ukraine: Legal Issues
With Regard to Business Operations and Investment (October 2004).

A second workshop was organized on 26 April 2005 in Kiev to review
progress achieved and to discuss remaining gaps.

The following CONCLUSIONS emerged from the discussions.

(1) CIVIL AND COMMERCIAL LAW: considerably improve the Civil Code
and abolish the Commercial Code.

(2) ANTIMONOPOLY LEGISLATION: Transactions, that do not significantly
affect competition in the Ukrainian market, should not be subject to prior
approval by the Antimonopoly Committee. The monetary level of the
thresholds for mandatory receipt of prior approval must be increased
considerably.

(3) CORPORATE LAW: a modern Law on Joint Stock Companies and a
Law on Limited Liability Companies should be adopted in the near future.
Legal regulation of other corporate forms (e.g., special partnership,
general partnership; additional liability company, etc.) should be
fundamentally improved. The legislation on securities and stock exchange
should be modernized.

(4) MISCELLANEOUS HIDDEN CHARGES AND UNNECESSARY
OBSTACLES: the Government, together with the business community,
should systematically review, from a cost/benefit perspective, hidden
charges and obstacles to business activities. Unnecessary burdens and
costs should be removed including in particular:

a) notarization requirements for most of the transactions between legal
entities (including lease of space exceeding one year) thus eliminating
the 1% notary fee;

(b) the "90 days rule", which imposes severe fines and sanctions when a
Ukrainian business fails to receive hard currency proceeds from sales,
or delivery of imported goods.

(5) PERMITS SYSTEM IN THE SPHERE OF BUSINESS: the permit
system of Ukraine should be substantially liberalized, with all permits and
approvals, which do not clearly serve a public interest being abolished.
The system should be clear, simple and based solely on legislation (rather
than on subordinate regulations).

The OECD, after consultation with the State Committee for Regulatory
Policy and Entrepreneurship, the private sector as well as bilateral and
multilateral advisory programs, has prepared a draft Law "On the
Fundamentals of the Permits System in the Sphere of Economic Activity",
which provides key principles for a clear and equitable administration of
a modern permits system.

This draft Law, after due consideration, should be incorporated into
legislative proposals of the Government that are to be submitted to
Parliament for adoption.

(6) GENERAL IMPROVEMENT OF THE LEGAL REGIME FOR
BUSINESS AND INVESTMENT:

a. more predictability is needed, especially in the tax area

b. budgetary measures aimed at closing loopholes should be targeting
abuse, rather than penalizing legitimate business

c. stabilize and simplify budget and tax laws and adopt a modern tax code

d. isolated ad hoc measures and proposals to be replaced by a
comprehensive legal and judicial reform strategy setting priorities and
clear targets for adoption and implementation

e. key reform legislation should be introduced as a package to ensure
coherence

f. essential laws should be harmonized and made consistent, including
the Civil Code (provided that the Commercial Code is abolished),
company laws, permits system, investment laws, tax and currency laws -
these laws should be in the first essential package for improving
investment climate and building investor confidence

g. regular and effective public-private sector dialogue should be
established

h. more systematic approach needed towards private sector input into the
legislative process, including timely publication of draft laws with the
timeframe for their discussion and adoption

i. reactivation of Foreign Investment Council with operational working
groups

j. use the tool of inter-ministerial working groups reporting directly to
the Prime Minister to provide for a coherent approach to legal and
institutional reform

k. capital movements should be liberalized to promote the development
of efficient capital markets and to remove obstacles to investment.

OECD will hold another workshop with government and private sector
representatives before the end of 2005 to review progress in implementing
the above recommendations. (Program carried out with funding by the
European Union) (Edited by The Action Ukraine Report Monitoring Service)
--------------------------------------------------------------------------------------------------------
NOTE: This material is published by The Action Ukraine Report with the
kind permission of OECD and EU., Our thanks to Dr. Irina Paliashvili
of the Ukrainian Legal Group for her assistance in making the material
available the AUR. More information about the Workshop and other OECD
activities in Ukraine is available at http://www.rulg.com/OECD_project.asp
or http://www.oecd.org.
==============================================================
2. WORLD BANK SUPPORTS UKRAINE'S BID TO JOIN WTO

Associated Press, Kiev, Ukraine, Monday, July 11, 2005

KIEV - The World Bank supports Ukraine's aspirations to join the World
Trade Organization by the end of the year, a regional official with the bank
said Monday.

Paul Bermingham, the bank's director for Ukraine, Belarus and Moldova,
said that WTO membership would provide a boost to Ukraine's own
economy and help the former Soviet republic become an important player
in the international economy.

Accession to the WTO, the body that sets global trade rules, "will make
Ukraine an important player on the global market," Bermingham told
reporters in Kiev.

After two tumultuous session marred by brawls between lawmakers,
parliament last week adopted eight laws crucial for the country to join the
WTO, but failed to pass the entire package of 14 bills despite lobbying
from President Viktor Yushchenko and his Cabinet.

Communist and socialist lawmakers bitterly oppose WTO membership,
saying it will make Ukraine subservient to foreign economic agencies.

"Clearly, the opponents of economic and political reforms have tried to set
up a bloc to oppose the government," said Dusan Vujovic, the head of the
World Bank's office in Ukraine.

Gaining WTO membership is seen as a major short-term goal for Ukraine's
pro-Western government, which needs foreign investment to improve living
standards. Vujovic said Ukraine might gain "a great deal in the long run if
it manages to enter the markets of the world's leading economies." -30-
==============================================================
3. UKRAINIAN WTO MANIA
This article is an attempt to analyze the latest
legislative achievements and failures in the economic sphere.

ANALYSIS: By Yuriy Moiseenko
Zerkalo Nedeli (ZN), Mirror-Weekly, No. 26 (554)
International Social Political Weekly
Kyiv, Ukraine, Saturday 9-15 July, 2005

Thanks to TV and radio broadcasts of Supreme Rada sessions, even petty
vendors in the street markets have learned about the World Trade
Organization (WTO). What they still do not know, however, is that Ukraine's
accession to this powerful international organization could jeopardize many
of their small businesses.

Unlike people in the street, Ukrainian oligarchs and their proxies in
Parliament are well aware of the implications that this step could have for
them. President Viktor Yushchenko stated in the Supreme Rada that the
adoption the WTO-related legislation package would bring about a 1.9
percent GDP gain, which did not imbue optimism in the skeptical MPs.

Ukrainian enterprise owners are concerned about the potential acquisition of
their companies by multinational corporations. Meanwhile, the government's
current course of European integration that has been increased by numerous
investment and business forums only stokes those fears. Besides, many of
the "old guard" still present in the incumbent administration would not
accept the inevitability and irreversibility of the globalization processes.

Nor would they realize that any delay with our country's accession to the
WTO makes the latter ever more problematic, since the old and new WTO
members will put forward additional claims to Ukraine and continue cease-
less anti-dumping investigations against our manufacturers.

On the other hand, the president and government intend to get the World
Trade Organization to offer membership to Ukraine at the Hong Kong
Ministerial Conference on 13-18 December 2005 (such WTO conferences
take place biannually), even though the WTO General Council (convened
eight to ten times a year) is also authorized to approve the accession of
new members.

It is no wonder that the tragicomic confrontation between the above camps
at the Supreme Rada sessions last week created a lose-lose situation in
relations between the executive and legislative branches of power, and
within parliament. After the president's speech, the discussion of whether
all 14 bills relating to Ukraine's accession to the WTO should be considered
and adopted in a package (in line with the so-called "ad hoc procedure") was
suspended.

The government's representative in parliament Serhiy Sas, who is also a
member of the Supreme Rada Committee on Rules of Procedure, had earlier
presented draft resolution #7726 proposing that they should, but most MPs
were taken aback with the extent to which the resolution disrespected those
very rules of parliamentary procedure.

To give vent to their anger, the opposition, in particular the Communist
faction members, diversified their standard set of protest techniques (such
as blocking the rostrum) with turning on loud sirens in the session hall to
accompany the discussion of the WTO-connected bills.

"It was the first time that we grasped what the real political situation in
Ukraine was like. We could never expect such a fierce resistance," admitted
Kseniya Liapina, chair of the Ukrainian Entrepreneurs' Council under the
Cabinet of Ministers and an ardent advocate of the WTO accession.

According to MP Serhiy Osyka, member of the Supreme Rada Committee
for Finance and Banking Activities, the government just did not work with
the factions at the initial stage of bill preparation for the hearing:"No
one explained to us what those draft laws were about, what change they
were supposed to make.

For instance, there were several bills on export duties, but nobody told us
the duties would be reduced gradually. MPs did not pay enough attention,
and the government did not lay enough stress on it."

In the final analysis, over the last three days of its work before
adjourning for vacations, Parliament passed six out of 14 laws required for
the WTO accession in the second reading, three in the first reading, and
sent two more for revision. The rest will have to be considered in the
autumn.

This article is an attempt to analyze the latest legislative achievements
and failures in the economic sphere.

ON LASER DISKS ---------
Ukraine's potential partners, first and foremost from the USA, have been
looking forward to a proper legislative regulation in this sphere. The
"pirate disks" issue has long been a major stumbling block in our trade
negotiations with the United States, whose position with regard to Ukraine's
future WTO membership is vital.

Thus, 6 July 2005 could be viewed as a milestone of sorts: the Supreme
Rada finally passed the law "On Incorporating Amendments into Some Laws
of Ukraine Concerning the Harmonization of National Legislation with the
Requirements of Multilateral WTO Agreement on Trade-related Aspects of
Intellectual Property Rights (TRIPS)," known as the law on laser disks.
Serhiy Osyka, one of the law's drafters, commented on its main provisions
in an interview to ZN:

"To start with, it is not a law on laser disks; it's a law on intellectual
property that such disks carry. It is essential. As other transit economies,
at first we reveled in getting a chance to build up our business on somebody
else's intellectual property. The first series of legislative amendments
(the law "On Incorporating Amendments to Some Laws of Ukraine on
Intellectual Property," dated 22 May 2003) had a role to play in improving
the situation.

At the same time, everyone would agree that our black market is thriving,
which means that the existing legislation is not efficient enough. That is
why the passage of this law is a good signal not only for the US and Europe,
but also for all hi-tech manufacturing countries in the world. When a state
shows a true respect to intellectual property, it is treated with respect in
the international arena, too.

"This law introduces additional administrative sanctions, such as fines, for
manufacturing and propagating counterfeit products, for transporting,
keeping and selling them. From now on, not only the production of "pirate
disks" but their marketing as well will be prosecuted.

Bill #7032 is not directly linked to the WTO accession. By passing it, we
have met our commitments under a number of agreements ratified by
Ukraine and geared toward a closer international cooperation in eliminating
the black market of stolen goods. I insist on the 'stolen' part.

Some of our compatriots fail to understand it. If one steals 1,000 hryvnias,
people qualify it as a theft. Yet if one steals 1,000-hryvnias worth of
intellectual property, they think it's OK. Now we should make sure that
stolen software, stolen movies, stolen music, etc disappears from the
domestic market."

ON THE SERVICES SECTOR ----------
Under the national treatment rules, countries should not treat services
provided by foreign companies less preferentially than those available in
the national market. However, according to the General Treaty on Trade in
Services, this requirement applies not to all kinds of services without
exception, but only to the negotiated ones.

On 6 July 2005, the Supreme Rada amended the law "On Audit Activities" to
waive the requirement concerning the auditors' mandatory resident status.
The American side, though, is still not quite happy with the remaining
stipulation that a Ukrainian auditor should confirm a non-resident auditor's
report whenever the said report is submitted to organizations or
institutions.

An analogous requirement set to legal professionals was to be cancelled with
the passage of amendments to the law "On Lawyers' Activity and the Bar in
Ukraine" (registration #3061), which failed to get enough votes in September
last year. It is unclear, therefore, why the government ignored bill #7051
"On the Bar" tagged as urgent by the president.

The draft law "On Incorporating Amendments into the Law of Ukraine On
Banks and Banking Activities" (concerning non-resident bank branches)"
(registration # 7274) was passed in the first reading. Presumably, in the
autumn international banks will gain access to the Ukrainian markets, in
full compliance with our national legislation.

On 7 July 2005, Parliament adopted a similar law "On Incorporating
Amendments into the Law of Ukraine On Insurance" (concerning branches of
non-resident insurance companies)" (registration # 7564-1). According to it,
branches of international insurance companies will be allowed to operate in
Ukraine five years after its accession to the WTO, in spite of the national
insurers' objections.

The draft law "On Television and Radio Broadcasting" (registration #3651)
that is being revised for the second reading provides for the increase from
30 percent to 35 percent of the allowed share of foreign capital in the
authorized fund of broadcasting companies. The government must have
known nothing of it; otherwise it would not have submitted a similar draft
(registration #7426) on 25 April 2005.

Interestingly, the same requirement to a foreign share in the information
agencies' authorized fund has been in force for two years now. Yet since the
WTO negotiations are still going on, the American party requests that the
Ukrainian government raise this maximum share of foreign investments in
information agencies even further.

Americans also propose to lift the existing 30 percent limit for foreign
participation in wholesale book and magazine trading companies, and
removing all restrictions concerning express delivery services. Besides, our
strategic partners are worried with the existing requirements that (1)
hospital CEOs and managers in Ukraine should have medical educational
background and qualifications, and (2) that top managers of educational
institutions should be Ukrainian nationals.

The US stance over the access to the audio and visual services market
seems ungrounded. It is natural for Ukraine to want to introduce European
standards in this sphere. As conventions and agreements within the Council
of Europe do not provide for obligations in this respect, Ukraine has no
desire to assume such obligations as part of its WTO membership.

The United States, in their turn, argue that Ukraine is not an EU candidate;
nor is it likely to become one in the near future. That is why its plans to
live up to the commitments undertaken by the EU member-countries are a
bit premature.The discussion is ongoing.

ON AGRARIAN AND FOOD-PROCESSING SECTORS -----
The Socialist faction's resistance prevented the governmental draft of a new
version of the law "On Export Duty for Live Cattle and Hide" (registration #
7567) from being included into last week's parliamentary agenda. The draft
provides for establishing a zero export duty for live cattle (instead of the
current 50 percent to 75 percent) and a 15 percent export duty for hide from
1 January 2005, and for cutting the latter by 1 percent on an annual basis,
down to 10 percent (instead of the current 27 percent to 30 percent), with
simultaneous introduction of indicative prices.

MPs did not seem to be impressed with the Cabinet's argument that 95.8
percent of exported hide goes to Moldova and, pursuant to the Free Trade
Agreement, no export duty is levied on it anyway. Let us hope the Supreme
Rada will consider this draft in the autumn.

On 7 July, Parliament passed the law "On Export Duty for the Seeds of Some
Oil-Bearing Crops" (registration # 5200-2). Starting 1 January 2006, it
gradually decreases the export duty for sunflower and flax seeds by 1
percent, until it reaches 10 percent, with simultaneous introduction of
indicative prices.

In response to MPs' concerns over potential adverse effects this step could
have for the economy, the government explains that about 13 percent of
sunflower seeds are exported from Ukraine untaxed with the current 17
percent export duty, according to the Free Trade Agreements, and that over
the last years the profitability of sunflower seed production has grown
four-fold to 88 percent.

On 6 July, the Supreme Rada failed to pass in the first reading a technical
amendment to the law "On State Regulation of Sugar Production and Sale"
proposed by the Cabinet and providing for the elimination of the so-called
"B and C" quotas from the internal regulation mechanisms regarding the
sugar market. In fact, quotas B and C have never been used in the practice
of state regulation on that market and are, thus, redundant.

The government also proposed to delete the stipulation that all sugar
produced in Ukraine from imported raw material should be exported. Yet the
proposed amendment was rejected. Draft laws on establishing tariff quotas
for the imports of raw cane sugar in Ukraine and on canceling export
subsidies for dairy products were not even considered.

ON THE CAR-BUILDING INDUSTRY ----------
The government and Parliament seem to have reached a better under-
standing when it came to the state regulation of the car-building industry.
The Supreme Rada passed two relevant laws on 6 July 2005. One of them
(registration #7570) allows the import into Ukraine's customs territory of
automobiles, trucks, and buses that have been in operation for less that
eight years (five years, according to the previous regulations).

At the same time, starting 1 January 2006, Ukraine will introduce the UN
European Economic Commission (ECE) standards in respect to wheeled
vehicles sold or used in our territory. Thus, automobiles will not be
registered unless they meet the EURO-2 or tougher environmental
standards.

The other law (registration #7569) brings the provisions of the law "On
Developing Automobile Industry in Ukraine" in compliance with Ukraine's
agreements with the WTO and with the Partnership and Cooperation
Agreement between Ukraine and the EU. In particular, it removes the
requirement that at least half of component parts used in domestic car
production should be of Ukrainian make, and the notion of "country of
origin" is defined in compliance with the WTO rules.

ON METALLURGY ----------
The government failed to persuade MPs into putting bill #7563 to the vote.
The said draft law provides for trimming export customs duty for ferrous
metal scrap from EUR 30 down to EUR 25 per ton starting 1 January 2006,
and further down to EUR 18 per ton starting 1 January 2007. The bill will be
reconsidered in the autumn.

The draft law "On Lifting a Ban on Export of Alloyed Ferrous Metal Scrap and
Non-ferrous Metal Scrap and Semi-finished Goods Containing Them" was
passed in the first reading. It allows for the export from Ukraine's customs
territory of alloyed ferrous metal scrap, non-ferrous metal scrap, products
of initial metallurgical processing in the form of ingots, bars, pigs,
plates, etc as give-and-take materials, with 30 percent to 50 percent export
customs duty.

We have enumerated the most important outcomes of Parliament's law-
making activities over the last month. They testify that the Supreme Rada
passed many of the laws required for Ukraine's accession to the WTO.

Of course, the president and Cabinet wanted MPs to adopt the whole
package so that, during the upcoming summer recess, the WTO member-
states could assess Ukraine's ability to function within the new legislative
framework. Six laws is not a bad output, after all.

We can only hope that the US and EU leaders will support our country in its
WTO aspirations and give Ukraine a chance, despite some minor imper-
fections, to complete its negotiation process. We also hope that the Working
Group examining Ukraine's application for WTO accession will submit its
report to the Hong Kong Conference in December.

In this case, our country could become a member of this highly respected
organization by the end of 2006, as soon as the requisite protocol is
ratified and all necessary laws are adopted. It will be the end of Ukraine's
13-year-long roaming along roundabout paths and the beginning of its
taking the road of global economic development. -30-
-------------------------------------------------------------------------------------------------------
E-mail: editor@mirror-kiev.ua; Link: http://ww.mirror-weekly.com
==============================================================
4. UKRAINE LIFTS MAJOR BANS ON FOREIGN BANK'S ACTIVITIES
Parliament allows foreign banks to provide all types
of banking services in Ukraine

IntelliNews - Ukraine This Week
Kyiv, Ukraine, Monday, July 11, 2005

On July 7 Ukrainian parliament made drastic changes to the banking
legislation equating the rights of foreign banks' subsidiaries and local
banks. According to the amendments to the law on banks and banking
activities passed by Verkhovna Rada (VR) the subsidiaries of foreign
banks are included in Ukrainian banking system.

Under the previous legislation the activates of foreign banks were limited.
They could not open their branches in throughout Ukraine and provide
services to private clients. These banks were just able to open their
representative offices in the country. The new legislation removes all
restrictions on foreign banks' activities.

All foreign banks' subsidiaries to be regulated on the same
basis as Ukrainian banks with no exceptions ----------

According to the amendments passed all foreign banks' subsidiaries will be
regulated on the same basis as Ukrainian banks with no exceptions. It is
supposed that corresponding amendments will be added to the commercial
law to fortify these standings. At the same time the new legislation places
several conditions that determine the subsidiaries' activity in Ukraine.

In general, the bank should be registered in a country that is not included
in FATF blacklist and is regulated according Basel banking regulation
principles. Besides, the banks' regulative capital should not be less then
EUR 150mn and the minimal level of subsidiary's capital should amount to
EUR 5mn.

Of course, the foreign bank should apply to the Ukrainian regulatory
authorities to receive for its subsidiary the right to provide retail
services in Ukraine. At the final stage a subsidiary should be granted a
common banking license. After that national bank of Ukraine adds the
subsidiary to the list of banks that are allowed to operate in Ukraine.

It is expected 8 biggest Ukrainian banks to be sold to international
groups ----

The new legislation will step in effect since the date of its publication
(the exact date is not unveiled, but we suppose that the publication of law
will happen by the end of September).

Approval of the amendments to the banking legislation is a final step that
opens the way to the radical changes in domestic banking system.The rise
of foreign banks interest in the Ukrainian banking system influences MPs in
passing amendments to the current banking legislation.

President of Ukrsotsbank Boris Timonkin expects that of 8 out 11 biggest
local banks will be purchased by foreign banks in nearest future. Timonkin
informed that present owners of big Ukrainian banks started to make
enquiries regarding prices they can for their stakes. "Today we speak today
about the monitoring process not about real sales deals", Ukrsotsbank
president notes in his written statement on July 5.

Although we doubt that 8 biggest Ukrainian banks will be sold to
international banking groups in nearest year or so, we should underline a
current trend characterized by increased interest to big local banks from
foreign financial institutions. At present owners of 2 largest Ukrainian
banks by their net assets are negotiating with international banks the
future sale of their stakes. If the Ukrsotsbank (ranks 1st by the net
assets) still keeps in secret the name of its bidder, Aval bank (with the
2nd largest bank by its net assets volume) unveils the name of its future
buyer.

Aval bank and Ukrsotsbank are first big Ukrainian banks to be sold -----

According to the insider information (though not confirmed by the official
side) Russian Alfa-bank is stated as a potential buyer of Ukrsotsbank.
However, on June 21 Ukrsotsbank's president Boris Timonkin informed that
the bank may be sold to a Ukrainian investor. At the same time Timonking
confirmed that the sale of the bank would take place until the end of the
summer. To remind you, Ukrsotsbank's net assets amounted to USD
1.75bn, own capital totaled USD 183mn and credit portfolio made up
USD 958mn as per June 1, 2005.

Aval bank makes it clear that its future owner is Raiffeisen International
(Austria). In mid of June 2005 Raiffeisen group finished Aval bank's due
diligence. According to honorary president of Aval bank Fedor Shyg
Raiffeisen still did not make the final decision on whether to buy it or
not.

Although Shyp does not exclude that Aval can be purchased by
Raiffeisenbank-Ukraine (RBU) by the end of summer. RBU is a subsidiary
of Raiffeisen International. RBU intends to buy 88% stake in Aval. Its own
capital amounted to USD 250mn , as on Apr 1, 2005.

In beginning of 2005 Scandinavian SEB banking group
acquires Ukrainian Agio bank for USD 30mn ---------

The recent meeting of Ukrainian president Victor Yuschenko
with CEOs of Raiffeisen International that took place in Kyiv on July 6
confirms the possibility of forthcoming Aval bank sale.

It seems that Aval will become the first Ukrainian big bank to be owned by
an international banking group. The fact the sides still did not unveil the
details of the deal can be regarded as attempt to keep the purchasing
price in secret until the last minute. In fact this deal will determine the
preliminary price for big Ukrainian banks and can influence the plans of
another bidders.

To remind you it the beginning of 2005 Scandinavian SEB banking group
through its subsidiary Vilniaus Bankas bought Ukrainian Agio bank. Gitanas
Nauseda Vilniaus Bankas CEO unveiled lately to IntelliNews that the price
paid for the banks was USD 30thsd. This sum cannot be regarded as a
tentative price for big Ukrainian banks, we assure.

Polish banks increase their activities in Ukraine ----------

Interest from international banks to Ukrainian banks already formed a
trend.In mid June this year PKO Bank Polski S.A. continued acquisition of
Kredit Bank's (KB) shares. On Aug 24, 2004 PKO Bank Polski S.A. bought
KB's 66.65% stake from another Polish bank, Kredyt Bank S.A. EBRD owns
28.2% in KB. The remaining 5.1% stake is dispersed between 8thsd minority
shareholders.

PKO is interested to increase its stake in the bank to 95%-100%. Besides
PKO Bank Polski S.A. intends to give KB a USD 7mn subordinated loan for
8 years.KB (until 2001 Western-Ukrainian commercial bank) was founded in
1990 and is the largest bank in the Western part of Ukraine. KB's net
assets made up USD 300.4mn, while the credit portfolio amounted to USD
215.5mn on Apr 1, 2005. KB's net profit in Q1/05 was USD 306thsd.

Another Polish bank Pecao informed about its plans to increase activities in
Ukraine. In particular the bank intends to enlarge its credit portfolio from
EUR 30mn to EUR 100-120mn. Besides, after merger of German HVB with
Italian Uni Credit (owner of Pecao 57%), it is supposed that Ukrainian
assets of both banks would be combined.

Belgium Dexia Bank intends to enter Ukrainian market ---------

Also Belgium Dexia Bank intends to enter Ukraine market, the Association
of Ukrainian banks informed (AUB) on June 8, 2005. The exact date of its
entrance in the Ukrainian market will soon be disclosed. Dexia Bank was
founded in 1860 as Gemeentekrediet Bank of Belgium. It was aimed to
support investment activity in big cities. The bank merged with Credit
Locale de France in 1996, creating Belgium-France banking Dexia Group.

Latvian Parex Banka also plans to intensify its activities in Ukraine and
will use for this purpose a part of its issued EUR 100mn Eurobonds, Valery
Kargin, the president of the bank informed on June 6. The Eurobonds were
issued in May 2005. The organizers of the issue were JP Morgan and Credit
Suisse First Boston. The bonds have 3-year maturity and 4.75% interest
yield.

At present Parex Banka has its representative office in Kyiv and plans to
open another one in Dnepropetrovsk. Besides, affiliated with the Parex
Group asset-managing company Parex Asset Management has domestic
subsidiary, Parex Asset Management Ukraine.

S&P confirms recovery of Ukrainian banking system ----------

At last we should take into consideration the recent report of Standard &
Poor's, issued on June 23. According to it the Ukrainian banking system
recovered completely, S&P forecasts the fast growing of banks' assets
during the coming year. S&P also predicts the rise of competition the
sector.

The agency notes that National Bank's (NBU) steps taken at the end of last
year helped to avoid mass cash withdrawals (caused by political situation).

These measures supported banks' liquidity and averted mass defaults of
Ukrainian financial institutions. "Nevertheless, a number of important
factors driving the future financial stability of individual banks and the
industry as a whole still remain uncertain," S&P credit analyst Irina
Penkina comments. "These primarily include the effects of the
re-privatization process and the economic reforms of domestic corporates
and financial-industrial groups, as well as the evolution of the banks'
regulatory regime".

We expect large number of bank purchases in 2006 --------

Based on S&P's recommendations and because of the amendments to
banking legislation passed we can state that favourable conditions for
foreign banks' entrance into Ukrainian financial market were created.

Clearly it is a decision of a bank whether or not to enter Ukrainian
market. However, state authorities significantly improved the regulations
for their efficient operations in the country.

We expect large amount of bank purchases deals in the 2006. By then it
will be possible to estimate the political risks due to next year's
parliamentary elections. -30-
==============================================================
5. UKRAINIAN DEPUTY PRIME MINISTER OLEH RYBACHUK
IN HOSPITALWITH SERIOUS KIDNEY PROBLEM

Interfax-Ukraine news agency, Kiev, in Russian, 11 Jul 05
BBC Monitoring Service, UK, in English, Mon, Jul 11, 2005

KIEV - Ukrainian Deputy Prime Minister for European Integration Oleh
Rybachuk was taken to hospital last night with a recurrent case of acute
pyelonephritis (kidney inflammation). His foreign visits to Israel, Great
Britain and Germany scheduled for this week have been cancelled.

Rybachuk's press secretary Svitlana Zalishchuk said that he is undergoing
intensive treatment, and doctors are quoted as saying that his condition is
stable. Zalishchuk said that Rybachuk may have to stay in hospital for
several weeks.

Rybachuk was supposed to travel to Israel, Great Britain and Germany
between 12 and 18 July. -30-
==============================================================
6. UKRAINIAN ECONOMICS MINISTER TERYOKHIN WANTS SOCIALIST
AGRICULTURE MINISTER FIRED FOR NON-MARKET VIEWS
Socialist party failed to support bills needed for Ukraine's WTO entry

Ukrayinska Pravda website, Kiev, in Ukrainian 11 Jul 05
BBC Monitoring Service, UK, in English, Mon, Jul 11, 2005

KIEV - Ukrainian Economics Minister Serhiy Teryokhin is insisting that the
Cabinet of Ministers review the suitability of Agricultural Policy Minister
Oleksandr Baranivskyy for his post at its next meeting. This is stated in a
press release by the Economics Ministry, the Ukrayinski Novyny news
agency reports.

Teryokhin considers that Baranivskyy has non-market views which may
threaten this year's harvest. "The agricultural policy minister's non-market
views are threatening this year's harvest and jeopardize reform of the
agricultural sector," the release says.

Teryokhin also considers Baranivskyy's political views to be irreconcilable
with the interests and views of the government. Teryokhin said last week
that he would ask Prime Minister Yuliya Tymoshenko to dismiss Baranivskyy
from his post since the Socialist Party, on whose quota he was appointed to
the government, did not vote for bills essential for Ukraine's WTO entry.

Socialist Party leader Oleksandr Moroz described Teryokhin's statement on
Baranivskyy's dismissal as political blackmail. -30-
==============================================================
7. UKRAINIAN PREPERTY FUND CHIEF SEMENYUK WANTS STATE
OWNERSHIP FOR KRYVORIZHSTL STEEL PLANT
State should be represented in various companies and sectors
so it can regulate prices

TV 5 Kanal, Kiev, in Ukrainian 1740 gmt 7 Jun 05
BBC Monitoring Service, UK, in English, June 7, 2005

KIEV - The head of the Ukrainian state Property Fund, Valentyna Semenyuk,
would like to keep the Kryvorizhstal steel plant a state-owned company
rather than putting it for a repeat privatization tender. Speaking in a TV
interview, she called for strictly observing legislation when returning
Kryvorizhstal to the state. This is necessary not to scare off investors and
to prevent any attempts to have the same process repeated again.

The following is an excerpt from Semenyuk's interview broadcast by Ukrainian
television TV 5 Kanal on 7 June; subheadings have been inserted editorially:

[Presenter] The head of the State Property Fund, Valentyna Semenyuk, have
seen the previous report [on the Kryvorizhstal case] together with us. Good
evening. [Passage omitted: Semenyuk recalls use of force against her under
former President Leonid Kuchma.]

LAW MUST BE STRICTLY OBSERVED ---------
[Semenyuk] Let us stop taking revenge on each other. Maybe we should
stop sooner or later and say that it is the law that governs here rather
than force.

[Presenter] What is the manifestation of the supremacy of law?

[Semenyuk] First, speaking about holding a repeat tender, we should
prepare the legal foundation which will prevent others from beginning
another procedure to return the plant to the state. We should not answer
to lawlessness with more lawlessness. So, speaking about the return of
Kryvorizhstal, I always say the same - legal grounds. [Passage omitted:
Semenyuk recalls her earlier suits against Kryvorizhstal privatization.]

[Semenyuk] If the return is not legally flawless then the price of the plant
will drop, of course, because everyone will be afraid of buying it. They
will say that investors are offended and fooled, that everything is illegal
and unfair again. That is why we should act strictly under the law.
Kryvorizhstal should be state-owned

[Presenter] Mrs Semenyuk, excuse me for asking, but aren't you - the
government - fooling yourselves? As far as I understand the world investment
market, there isn't much free money to invest anywhere. In addition, there
are attractive markets like the USA, South-East Asia and emerging "tigers"
in Latin America. Why do you have the impression that if you observe the law
then foreign investors will run here tomorrow?

[Semenyuk] Let me ask you a counter question. Tell me please, why should
we sell Kryvorizhstal if it has 45-per-cent profitability?

[Presenter] I did not sell it. As far as understood from your words it was
sold in the office of [former State Property Fund chief, Mykhaylo]
Chechetov.

[Semenyuk] Yes, and I was fighting with him against doing this. So, I am
asking why do we have to resell it? Why did we give some private
businessmen, certain business groups the exclusive right to trade in metals
and why do we not think about other things? If we have presented a
programme of house construction then we should think how we will ensure its
implementation.

We had 80 per cent of steel consumed on the domestic market and 20 per
cent were exported. Today 80 per cent of steel is exported and 20 per cent
remains in Ukraine. Domestic consumers have to buy steel at an exorbitant
price. It increased by 950 hryvnyas [per tonne of steel] after Kryvorizhstal
was privatized. Will we be able to build houses or develop other industries
and create new jobs?

We should not use it as a one-off source of income: we sell, receive the
money to the state budget, eat them up and have nothing to finance social
programmes again. Maybe we should begin by producing goods, creating
new jobs at the companies of various type of ownership.

The state should be represented as a shareholder in various companies and
in various sectors, so that it can regulate prices. If we don't have this
then other industries will have no prospects.

WORK TO RETURN THE PLANT UNDER WAY ----------
[Semenyuk] I have made a request to the Kiev court of appeal [which upheld
the ruling on illegality of Kryvorizhstal privatization]. They promised they
would send the documents to us tomorrow or the day after, because there is
a certain procedure. We have already sent a request to the bank that keeps
the shares.

When I was going here I had not received the documents from the Cabinet of
Ministers about the procedure mentioned by Yuliya Volodymyrivna
[Tymoshenko, the prime minister]. We will analyse them and will act under
the current legislation.

[Presenter] This is too complicated for such a simple man as myself. Here is
a simpler question. What about the out-of-court settlement Mr Pinchuk [who
bought Kryvorizhstal together with Donetsk tycoon Rinat Akhmetov] proposed
the other day? What is this, an attempt to fool the government or an honest
proposal?

[Semenyuk] I think that he is simply playing for time and this is a
diversion. [Passage omitted: A lot of Semenyuk's employees attend
questioning at the law-enforcement agencies.] -30-
==============================================================
8. UKRAINIAN STATE PROPERTY CHIEF SEMENYUK SAYS STATE
SHOULD NOT SELL MAJOR STEELWORKS AGAIN
"One shouldn't kill the goose that lays the golden eggs"

UNIAN news agency, Kiev, in Ukrainian 1044 gmt 1 Jul 05
BBC Monitoring Service, UK, in English, Friday, July 1, 2005

KIEV - Auctioning off the Kryvorizhstal steelworks is not expedient, the
head of the State Property Fund, Valentyna Semenyuk, has said, according
to the fund's press service, as quoted in a report by Ukraine's UNIAN news
agency on 1 July.

"Considering that the plant's profits will pay back the cost of buying it at
privatization within two years, the question of whether to privatize
Kryvorizhstal or not is a political one," Semenyuk said. "One shouldn't kill
the goose that lays the golden eggs," Semenyuk said.

In a separate report the same day, UNIAN said Semenyuk had asked the
Justice Ministry to consider the legal implications of an appeal to the
European Court by the plant's previous owners.

The government recently took Kryvorizhstal back into state ownership after a
court ruled it had been privatized illegally. The plant was sold in 2004 to
Viktor Pinchuk and Rinat Akhmetov at what was widely held to be a fraction
of its true value. Pinchuk and Akhmetov have filed an appeal with the
European Court. Pinchuk is ex-President Leonid Kuchma's son-in-law.
Akhmetov is Ukraine's reportedly richest man. -30-
==============================================================
9. PROFILE: UKRAINIAN PRIVATIZATION CHIEF VALENTYNA SEMENYUK
As a representative of leftist [Socialist]
ideology, Semenyuk prefers state property to private ownership.

BBC Monitoring research in English 18 May 05
BBC Monitoring Service, May 18, 2005

Valentyna Semenyuk, the head of the State Property Fund, represents the
Socialist Party of Ukraine (SPU) in the government of President Viktor
Yushchenko. She is a consistent supporter of the notion that as many
companies privatized with violations as possible should be either
re-nationalized or re-privatized. As a representative of leftist ideology,
Semenyuk prefers state property to private ownership.

Semenyuk was born in a small village in the northern agricultural Zhytomyr
Region on 4 June 1957. She graduated from the Zhytomyr Agricultural
Institute in 1982, majoring in Economics. Semenyuk continued her studies in
the 1990s, and she graduated from the Yaroslav the Wise Legal Academy in
Kharkiv in 1999.

Semenyuk started her working career as a clerk at her native village's
administration at the age of 17, simultaneously heading the local drama
society. In 1982 she started off as an accountant at Ruzhyn District's
agricultural department in Zhytomyr Region and climbed the career ladder in
the local administration to the position of Ruzhyn District's chief
economist.

Semenyuk came to politics in the wake of Gorbachev's perestroika. In 1990-91
she was a secretary of the Ruzhyn District Communist Party of Ukraine (CPU)
Committee. In 1993 Semenyuk was elected first secretary of the Ruzhyn
District CPU Committee. In 1994 she was for the first time elected to
Ukraine's parliament, as a representative of the CPU. Once in parliament,
she swapped her party affiliation, joining the SPU faction. Semenyuk was
re-elected to parliament in 1998 and 2002 from the SPU's list.

During the 2000-01 mass protests against the then President Leonid Kuchma,
Semenyuk was a member of the Ukraine Without Kuchma public committee.
She was beaten in the 9 March 2001 clashes between riot police and radical
oppositionists, and spent some time in hospital.

In 1998-2002 Semenyuk worked on parliament's agricultural committee. In
2002 she was elected head of parliament's special monitoring commission
for privatization. Since then she has actively opposed the privatization of
big
companies, especially the sale of the Kryvorizhstal steelworks to a
consortium linked to the Ukrainian tycoons Rinat Akhmetov and Viktor
Pinchuk in 2004.

On 7 April 2005 parliament approved Semenyuk as Yushchenko's choice for
the post of State Property Fund head by 313 votes in the 450-seat body. In
her first interviews after the appointment, Semenyuk said that compilation
of a register of state property would be her first step in the new position.
She also spoke for passing a law on the management of state holdings in
private companies.

Semenyuk believes that "companies that are on the bottom" should be
privatized first of all, while the privatization of strategic assets, like
Ukrtelekom, should be stopped, and Kryvorizhstal should be re-nationalized.

In an interview that Semenyuk gave to the economic weekly Invest-Gazeta in
February, Semenyuk also named several ore dressing plants, Mykolayiv
Alumina Plant, Zaporizhzhya Aluminium Plant, Nikopol Ferroalloys Plant and
Black Sea Shipyards among the companies that should be re-nationalized.

Semenyuk reportedly has no private business interests. She is married, with
two daughters. -30-
==============================================================
10. UKRAINIAN PROPERTY CHIEF SEMENYUK SAYS SHE HAS BEEN
SUBJECTED TO PRESSURE BY PRESIDENTIAL SECRETARIAT

TV 5 Kanal, Kiev, in Ukrainian 1800 gmt 5 Jul 05
BBC Monitoring Service, UK, in English, July 5, 2005

KIEV - [Present] The State Property Fund has been subject to pressure. At
least that is what its head Valentyna Semenyuk thinks. She says that the
presidential secretariat has employed law by phone and made threats
against her.

[Correspondent] Work of the State Property Fund has been paralyzed. It is
being pressurized by the presidential secretariat. Semenyuk made this
scandalous statement in the semi-empty session hall of the Supreme
Council [parliament] on the government day.

Her voice clearly trembled as she read out her several-hours-long report
on peculiarities of the privatization of strategic facilities - Ukrtelekom
[telecommunications monopoly], Kryvorizhstal [steelmill], Turboatom and a
number of others.

The Kiev Appeals Court stripped Semenyuk of her MP mandate on Monday
[4 July]. Several weeks ago, seven criminal cases were opened against her
for failing to fulfil court rulings.

Semenyuk linked those events together, and linked them with phone calls
from presidential secretariat officials.

[Semenyuk, beginning of first sentence cut] Advantageous for the fund not to
work to its full capacity; second, to say afterwards that Semenyuk hasn't
managed it. As I have been working until 2 or 3 o'clock in the morning for a
month and a half, I can tell you I won't be able to continue this way for
long. This is not the president's fault. This is all being done by his
entourage, who would like the State Property Fund to be a puppet.

[Female voice] To whom is it advantageous?
[Semenyuk] To those who want to get hold of Luhanskteplovoz [Luhansk
Railway Engine Plant] through a court ruling.
[Female voice] Who is that?
[Semenyuk] Who is that? [MP Kostyantyn] Zhevaho.
[Passage omitted: Only two of Semenyuk's three deputies have been
appointed so far.] -30-
==============================================================
11. NEW NATIONAL BANK OF UKRAINE ANTI-INVESTMENT RESOLUTION?

Inside Ukraine Newsletter, Kyiv, Ukraine, Tuesday, July 12, 2005

KYIV - The Insider Ukraine Newsletter has received information from reliable
sources in Ukraine that the National Bank of Ukraine (NBU) has drawn up
what is called by knowledgeable persons in the business community as a
'new NBU anti-investment Resolution' which is reported to be a catastrophe.

One key observer of the business scene said, "These guys at the National
Bank do not give up and their new anti-investment Resolution is about to
be adopted."

The first 'infamous' anti-investment Resolution of the Board of the National
Bank of Ukraine was No. 482 “On Approval of the Regulations on the
Procedure for Making Cash Investments into Ukraine and Returning Invest-
ments to Foreign Investors, as well as Repatriation of Profit, Income, and
Other Funds Received from the Investment Activities in Ukraine" that
became effective last fall on October 14th, 2004.
October 2004.

After a major, concerted uproar from the Ukrainian business and investment
community No. 482 was canceled by Resolution No.154 of the Board of the
National Bank of Ukraine dated 29 April 2005, registered with the Ministry
of Justice of Ukraine on 11 May 2005 (reg. No. 490/10770),effective on
21 May 2005. -30-
==============================================================
12. MINISTERS APPROVE DRAFT RESOLUTION BY PRESIDENT ON
CONSTRUCTION OF PRIVATE OIL REFINERY FOR LIGHT OIL PROCESSING
IN ODESA REGION AND BRANCH NETWORK OF FILING STATIONS

Oleksandr Khorolsky, Ukrinform, Kyiv, Ukraine, Mon, July 11, 2005

KYIV, July 11 /Oleksandr Khorolsky - Ukrinform/. The Cabinet of Ministers
approved a draft resolution by the President on construction of a private
oil refinery and a branch network of filling stations, Prime Minister Yuliya
Tymoshenko told journalists Monday.

According to the Prime Minister, the Govt started forming a tender parcel
for holding competition on the refinery's construction. As she said, the
tender parcel will contain land plots all around Ukraine, which will enable
an investor to construct its own network of filling stations.

The refinery is expected to process light oil, which could be extracted in
the Caspian Sea basin or in other states. Investors, who could propose
construction plan with the depth of not less than 95 percent and offer best
friendly nature technologies, will be invited to participate in the tender.

Answering questions by the journalists, the Premier didn't object to Russian
investors' participation in the tender, but stressed that the refinery will
process light oil, which is not of the Russian origin. One of the conditions
of the tender is that an investor must provide its own oil.
==============================================================
13. UKRAINIAN PM DENIES UKRAINE STEALS RUSSIAN GAS

AFX Europe, Kiev, Ukraine, Mon, Jul 11, 2005

KIEV - Ukrainian Prime Minister Yulia Tymoshenko dismissed accusations
from Russian President Vladimir Putin that Ukraine has a habit of stealing
Russian gas transiting through its territory.

In remarks to reporters on the margins of the G8 summit meeting of the
world's eight biggest powers last week Putin said "Russia is prepared to
cooperate with Ukraine if it does not nick our gas."

"I do not accept the humiliation of Ukraine and comments that bear no
relation to reality," Tymoshenko was quoted as saying by the Interfax-
Ukraine news agency. "We have not stolen a drop of gas from anyone
and will not do," she said.

Due to a Soviet-era pipeline network, the two countries are dependent on
each other when it comes to gas -- while Russia provides Kiev with most of
its energy needs, the lion's share of Moscow's gas exports to Europe pass
through Ukraine. -30-
==============================================================
14. UKRAINE-CANADA ICC TO BUILD PLANT FOR PRODUCTION OF
WOODEN BUILDING CONSTRUCTS FOR HOUSING & OTHER FACILITIES

Interfax-Ukraine, Kyiv, Ukraine, Monday, July 11, 2005

KYIV - Ukraine-Canada International Company Ltd. (Dnipropetrovsk) has
contracted MiTek Industries spol. s r.o. (the Czech Republic) to buy [build]
a plant for production of wooden constructs for housing, production and
public facilities.

The company can make 1 house-kit of 150 square meters per shift or at least
200 houses annually, to be launched in August 2005, Ukraine-Canada ICC
told the agency.

The plant will be located on an area of 1.5 hectares in Dnipropetrovsk
district. It will employ over 40 staff. Czech experts will launch and
assemble the factory, and train personnel. The budget for the factory has
not been announced. The company is going to cooperate with timber mills
in Ukraine and Russia.

The company said it hopes for big demand for its output because the use of
wooden constructs does not increase the load on the foundation, makes it
simple to lay down the communications between the floors and decreases
the cost of extra building by 30-50% per square meter.

According to its director general Ivan Perehynets, there are 35 plants
producing wooden constructs per 10 million residents in the Czech Republic,
whereas in Ukraine this is the first plant.

"According to expert estimates, in Kyiv alone the demand for attic floors
exceeds 2 million square meters. In other towns of Ukraine, we also expect
high demand for such constructions with regard to dense urban build up and
high cost of land," he said.

He added that this purchase will speed up the company's project on
construction of the cottage mini district Zoloti Kliuchy (Golden Keys): by
the end of 2005 it is planned to build 100 houses, whereas now 30 houses
are already in development. -30-
==============================================================
15. UKRAINE'S EX-SECURITY SERVICE CHIEF IHOR SMESHNKO
DENIES AGENTS POISONED PRESIDENT YUSHCHENKO

TV 5 Kanal, Kiev, in Ukrainian 1735 gmt 11 Jul 05
BBC Monitoring Service, UK, in English, Mon, Jul 11, 2005

KIEV - The former chief of the Ukrainian Security Service (SBU), Ihor
Smeshko, has denied that SBU officers could have been involved in a plot
to poison President Viktor Yushchenko during last year's election campaign.

Smeshko, who headed the SBU under former President Leonid Kuchma, was
interviewed live on Ukraine's pro-government 5 Kanal TV, in connection with
his libel suit against Prosecutor-General Svyatoslav Piskun following
Piskun's allegations that Smeshko had been involved in arms smuggling and
blocking investigation into the murder of journalist Heorhiy Gongadze.

Smeshko told the channel's presenter, Roman Skrypin, that the charges were
untrue and that it was his staff who found key witnesses in the Gongadze
case. He accused Piskun of looking for scapegoats in a bid to cover up his
failure in high-profile investigations, such as the Gongadze murder and
Yushchenko's poisoning.

"I have reasons to believe that the poisoning is not being investigated,"
Smeshko said. "There are certain attempts on the part of top
Prosecutor-General's Office people to find scapegoats in the poisoning of
President Yushchenko. The president is being misinformed, and this can have
serious consequences because it is impossible to prove something that did
not happen."

Smeshko and his deputy, Volodymyr Satsyuk, had a private dinner meeting
with Yushchenko when he was presidential candidate for the opposition,
after which Yushchenko became ill, leading to Satsyuk becoming a suspect.
Satsyuk has gone into hiding fearing arrest.

"I can confirm again that no Security Service personnel, from the head to
ordinary operatives, including former deputy chief Satsyuk, had anything to
do with the deterioration of Viktor Yushchenko's health. I am absolutely
confident that Viktor Andriyovych knows this.

"Otherwise Viktor Andriyovych Yushchenko would not have thanked me for
the cross I had to bear during the Orange Revolution - those were his words
when he presented Mr [Oleksandr] Turchynov [the new head of SBU]."

He compared Satsyuk to the former interior minister Yuriy Kravchenko, who
is believed to have committed suicide after being summoned for questioning
over his role in the Gongadze murder. "I am inclined not to believe that he
committed suicide. The information I have at the moment poses huge
questions why the murder version was not pursued."

Asked why he did not support the Orange Revolution, Smeshko said his
main goal had been to prevent bloodshed. "During the Orange Revolution,
Security Service officials did their utmost to prevent a single drop of
blood being shed. There were forces on both sides, in both political
movements, who were prepared to pay the price of people's blood for the
end result."

He denied Security Service staff tapped phone lines during the election
campaign, adding that any illegal phone bugging was the work of private
agents. "The Security Service acted exclusively within the law, and I made
sure this was the case, as far as possible. I am not ashamed to look my
former staff and the people of Ukraine in the eye."

He expressed concern at civil servants of the former presidency losing their
jobs under the new government and called for legislation to protect civil
servants.

Asked about the possibility of opening files on Ukrainian officials who
collaborated with the KGB, Smeshko said many files had been destroyed
prior to his coming into post. -30-
==============================================================
16. DONETSK REGION PROSECUTORS OPEN CASE INTO FORGERY
OF DOCUMENTS CANCELING CRIMINAL RECORD OF YANUKOVYCH

Ukrainian News Agency, Kyiv, Ukraine, Mon, July 11, 2005

KIEV - The Donetsk regional prosecutor's office has opened a criminal case
into forgery of the documents that cancel the criminal record of the Party
of Regions leader, ex-candidate for presidency Viktor Yanukovych. Ukrainian
News learned this from the press service of the Prosecutor General's Office.

Regional prosecutors have established during a check that between 2002 and
2004 unidentified executives of Donetsk Regional Appellate Court have forged
two resolutions of the Donetsk Regional Court presidium of December 27,
1978 in order to quash the sentence Yanukovych received from the people's
court of town Yenakiieve on December 1967 under Article 141, section 2 of
the Criminal Code of the URSR (including the closure of the criminal case
proceedings), and to quash the sentence issued on July 18, 1970 under
Article 102 of the Criminal Code of the URSR (including the closure of the
criminal case proceedings).

According to the press report, the forgery is under a pretrial investigation
at the moment. As Ukrainian News earlier reported, in the course of the 2004
presidential election campaign Yanukovych accused his opponents of
speculating on his pardoned convictions.

Spokesperson for Yanukovych Hanna Herman had earlier announced the
details of Yanukovych's criminal record at a press conference.

Viktor Yanukovych when he was a teenager back in 1968 was sentenced and
served the term in the juvenile colony, and in 1970 he was found guilty for
inflicting bodily harm of medium gravity. Both convictions were overturned,
Herman said. -30-
==============================================================
17. THE HOLODOMOR MEMORIAL IN KYIV MUST BE BUILT YESTERDAY

LETTER-TO-THE-EDITOR: By Yaroslav Bilinsky
Professor Emeritus of Political Science and
International Relations, University of Delaware
Published by The Action Ukraine Report (AUR), Number 521
Washington, D.C., Tuesday, July 12, 2005

This is to add my geopolitical “two cents” to the humanly moving “Open
Letter to Ukrainian President Viktor Yushchenko; Building a Holodomor
Memorial: Museum, Library, Archives: Our Own Place,” by Peter Borisow,
President, Hollywood Trident Foundation; and Nick Mischenko, President,
Genocide-Famine Foundation, of Hollywood, CA and Chicago, IL (See
AUR # 518 July 7.) It is a matter not only of honoring the victims, but one
of national survival in 2005.

Already in February 1992, First President of Ukraine Leonid M. Kravchuk
wrote that genocide in the 1930s was the most cogent argument for real
Ukrainian independence. Why the Holodomor Memorial in a prime location
in Kyiv has not yet been built is a long story.

To cut it short: in November 2004 Putin, who has never acknowledged
responsibility for the Holodomor, tried to take over Ukraine by crook. He
failed in this narrowly. Being stubborn, he will try again this year, or at
the time of the parliamentary elections of March 2006. As of April 2005,
Taras Kuzio has confirmed, Putin is thinking of Ukraine as East Germany
to Russia’s West Germany.

As I see it, the laying of the foundations for that Holodomor Memorial is
overdue by thirteen years. It is a matter of both national and President
Yushchenko’s political survival.

I also fully agree with Borisow and Mischenko that the Holodomor Memorial
must not be watered down by references to Communist persecutions in
general. Nor should it be overstretched by inclusion of the famines of 1921
and 1947—at bottom, they were a different kettle of fish.

The Ukrainian Holodomor was a unique example of Russian Communist
genocide against the entire Ukrainian nation. It almost succeeded, but for
the outbreak of World War II and the incorporation of Western Ukraine.
Don’t let Putin finish Stalin’s job!

Yaroslav Bilinsky, Professor Emeritus of
Political Science and International Relations
University of Delaware, Newark, DE
==============================================================
18. UKRAINIAN, POLISH DANCERS PARTICIPATED IN 18TH FESTIVAL
OF UKRAINIAN CULTURE IN SOPOT, POLAND
Polish dancers members of the Assn of Ukrainians in Poland

Ukrinform, Kyiv, Ukraine, Monday, July 11, 2005

KYIV - Over a hundred Ukrainian dancers from Kyiv, Kharkiv, Lviv, other
cities participated in the 18th Festival of Ukrainian Culture in the Polish
town of Sopot, together with Polish dancers, basically members of the
Association of Ukrainians in Poland.

The Festival's participants were hailed by Polish ex-Prime Minister Jerzy
Buzek, Ukrainian Vice Minister for culture and tourism Olha Kostenko,
Ukraine's Honorary Ambassador to Poland Ihor Kharchenko, spokesman
of the Polish Prime Minister's Chancellery Jasek Kliuczkovski. -30-
==============================================================
19. YUSHCHENKO CONFERS POSTHUMOUS HERO OF UKRAINE
TITLE ON NBU EX-GOVERNOR VADYM HETMAN
Hetman was murdered in April 1998

Ukrainian News Agency, Kyiv, Ukraine, Mon, July 11, 2005

KYIV - President Viktor Yuschenko has conferred posthumously the Hero
of Ukraine title and the Order of the State on ex-Governor of the National
Bank Vadym Hetman. Ukrainian News learned this from presidential decree
No. 1072 of July 11.

The President made this decision considering Hetman's meritorious efforts
in building of the national financial system, development of the banking
business and currency exchange market, and his fruitful social and political
work.

Presidential decree No. 1112 of July 11 ordered the Cabinet of Ministers to
establish ten Hetman academic scholarships to students of economic
institutions of higher education.

Hetman headed the Ukraina Bank. In 1992, he became the chairman of
the NBU Board, and in 1993 - the head of the exchange committee of the
Ukrainian Interbank Currency Exchange. Hetman was murdered in April
1998. -30- [The Action Ukraine Report Monitoring Service]
==============================================================
20. THE CRISIS OF AUTHORITY
Now we are beginning to doubt if there is power at all in Ukraine
-- a concerted, effective, and authoritative leadership.

COMMENTARY AND ANALYSIS: By Serhii Rakhmanin
Zerkalo Nedeli, Mirror-Weekly, No. 26 (554)
International Social Political Weekly
Kyiv, Ukraine, Saturday 9-15 July, 2005

Last week, Ukraine took a test of European maturity: its Parliament debated
a package of bills required for joining the World Trade Organization (WTO).
It was a serious test for the new political leadership. The president, the
Parliament, and the government had to demonstrate their common aspirations,
ability to cooperate, and readiness for concessions for the sake of common
goals.

We believed that the power had changed. Now we are beginning to doubt if
there is power at all in Ukraine---a concerted, effective, and authoritative
leadership.

Whatever enthusiastic optimists may say, the Ukrainian leaders have flunked
this test. Commenting on the recent turbulence in the Verkhovna Rada, a
top-notch official called this Parliament "impotent". He is right, but these
lawmakers are not the only ones to deserve this name, because the entire
political leadership lacks potency and the new system of political
decision-making works too poorly.

The brutal fistfight at the rostrum, which "crowned" the violent debates on
the WTO-related bills, is but a visible part of the problem. It would be too
easy to explain it by a clash of commercial interests and political
ambitions, by the Kremlin's or [Speaker] Lytvyn's intrigues. All these
explanations are certainly correct, but we only see symptoms of the disease.

Its name is "impotence of authority". Evidently and dangerously, nobody is
looking for a remedy. But there is a more serious danger: as the entire
country has seen, this leadership is not aware that it is sick.

CHRONICLE ----------
There is no need to describe the latest events in detail: many TV channels
have kept us abreast. Let us just remember some details before commenting
on what remained off screen. The agenda of the last session [before the
summer recess] included 14 "economic" bills required for joining the WTO
(which was proclaimed as one of Ukraine's short-term strategic goals).

This was not the first attempt to make the national economic legislation
more "civilized". But, as before, the government's plans were opposed by
numerous pro-government MPs.

Experts pointed to a very important circumstance: if the bills were not
adopted now, Ukraine would lose all chances to join the WTO in the
foreseeable future. July 8 was the last day before the lawmakers went on
leave till September.

But in September, the pre-election campaign starts, and every people's
deputy knows that any unwary move is sure to subtract votes from his
political force. As to the new convocation, it is absurd to make any
forecasts with regard to its position on European integration.

A reasonable question arises: is the WTO good or bad for Ukraine? There
are serious pros and cons. The proponent side (in the person of President
Yushchenko and Prime Minister Tymoshenko) tried to convince the
lawmakers about the following benefits of Ukraine's membership in the WTO:

-- a 1.9 percent surplus in GDP growth rate;
-- a $300 million annual surplus in exports;
-- millions of euros to be earned in new markets of commodities and
services;
-- Ukraine would save $1.6 billion that it loses every year because its laws
are incongruous with those of 148 WTO member countries.

The opponent side (represented by the Communists, the [pro-Yanukovych]
Party of Regions, the United Social Democrats, and the Socialists) argued
that a rash submission to the WTO terms would result in:

-- sweeping price hikes;
-- a collapse of the national automobile-making industry (with inevitably
doubled costs of its produce);
-- a sure death of the national agricultural sector;
-- a crisis in the metallurgical industry, which accounts for 40 percent of
total exports and the lion's share of hard currency revenues;
-- serious problems for the bulk of other industries and the banking sector.

The exchange of arguments culminated in a fistfight and the speaker's broken
microphone. After several days of skirmishes, the pro-government majority
finally managed to pave the way to the WTO. On Thursday, Economy Minister
Sergey Teryokhin stated with relief, "All vital bills have been adopted."

Another pro-WTO lobbyist, Vice Prime Minister for European Integration
Oleg Rybachuk said with satisfaction, "Now we have the words for talks
with Brussels." But sharing their optimistic joy, we have to admit that the
debates in the session hall would have been more peaceful and productive if
the new political leaders had prepared the ground for them. They obviously
failed to.

PHILOSOPHY ----------
So which side is right: the president's supporters, who urge for joining the
WTO as soon as possible and at any price; the Socialists, who call for
temperance and sobriety; or the Communists, who reject the WTO as the
trademark of a "class enemy"? If we put this question to three different
economists, we would hear three different opinions. Perhaps the only
unquestionably positive prospect would be the deletion of Ukraine from
the black list of CD counterfeiters.

Now let us consider the following axioms:

-- Every country is free to choose its own way of development. The way it
chooses is right if its top leaders are unanimous and if they are supported
by the majority of the population;
-- Any country's choice does not limit the means and forms of protecting its
national interests. All tools and levers of influence can and must be
employed;
-- It is necessary to prepare and fertilize solid grounds for all strategic
decisions, and their adoption ought to be a purely formal procedure rather
than a win-or-die bout.

As to the FIRST axiom, we can see declaring new rules of market behavior
as a strategic priority, the new political leaders were in no hurry to
comply with them. There was a banner carried by Rybachuk and Teryokhin
and guarded by Yushchenko. The Tymoshenko government's contribution
was ostentatious but not very practical.

As to the SECOND axiom, the Ukrainian officials, who were authorized to
negotiate with the WTO, did not achieve much in defending the country's
national interests. Moreover, some of them displayed rather poor
professional qualifications. Of course, it would be unreasonable to expect
considerable subsidies to Ukrainian farmers like those enjoyed by French
farmers or preferential terms like those applied to Poland. Nobody doubts
the fact that the Ukrainian negotiators faced serious difficulties.

But there are other factors. Presenting the required documents on the
agricultural sector at one of the rounds of negotiations, the Ukrainian
party knocked WTO experts for a loop: the documents were based on
statistical data collected in. the 1990s. The experts were naturally
puzzled, "Do you mean that nothing has changed in your country since that
time?" The question was rhetorical.

There is one more example. Last week, Prime Minister Tymoshenko
pressed hard for her plan of so-called "food interventions". Briefly, it
consists in importing massive amounts of food products at minimal or zero
custom duty rates. The thus-accumulated reserve is meant to prevent food
crises and price hikes on the national market.

Her earnest effort deserves praise, but her concerns about possible
shortages of food can be neither proved nor disproved, because the
government still has no inventory of food reserves and it is impossible to
forecast what exactly and how much may be in short supply.

There are other examples pertaining to other sectors. Most political experts
admit that practically all divisions of the central government work as fire
brigades and their captains abuse the "manual mode". Even members of this
government admit, although unofficially and reluctantly, that the Cabinet of
Ministers as a whole and separate ministries in particular work beneath all
criticism. There is no systemic approach to drafting legal acts. There is no
mechanism of coordination with standing parliamentary committees.

The excruciating adoption of the "WTO package of bills" revealed the
problem to the bone. These bills were not just important for the president
and a number of ministers. They were crucial for the entire nation and its
European future. But instead of following the regular procedure, the
government simply imposed them on the lawmakers. The opposition was
gloatingly happy.

ECLECTICS ----------
The bills in question were also opposed by some the pro-government MPs,
members of government, and Presidential Secretariat officers. They
displayed commendable enthusiasm and zest in debates over new quotas,
tariffs, and export duties. That is quite natural as many of them still run
highly profitable sugar, sunflower, car, and other businesses. They were
conspicuously determined to fail, or at least amend the proposed bills.

Unfortunately, national interests did not prevail over private ones.
Considering the fact that those people occupy top positions, the problem
assumes a political scale rather than a moral dimension. In pursuit of
political interests, the "Trojan jackals" bit the government not less
painfully than the recognized "wolves" did. Some of them managed to find
silver threads in the stormy clouds of parliamentary clashes.

Speaker Volodymyr Lytvyn finally found a way to avoid a pre-election
alliance with Yushchenko. Insulted by the president's and the prime
minister's disrespect, he reminded both of them (a little too
demonstratively) who and what he was.

The three top leaders had never demonstrated political unity. But this time
the whole country saw that the president was of no account to the speaker.
It was more than a blow to Yushchenko's self-esteem. The clash in the
session hall revealed a deep rift within the Ukrainian political leadership.

When two vital draft bills were not included in the agenda and the members
of government demonstratively walked out of the session hall, it became
clear that this Cabinet and this Parliament would hardly ever be able to
find a common language.

However, it is not just a conflict between the president and the speaker or
between the Cabinet and the Parliament. The "WTO accession project" has
always had numerous opponents in different camps. Moscow, too, has a lot of
political and economic reasons to be against Ukraine's membership in the
WTO. Experts predict a painful impact on the Ukrainian economy (which we
have to sustain for the sake of a better life in the future).

But it will also be painful for Russia, due to very close ties between
business structures and strong bonds of mutual liabilities. Joining the WTO
sooner than Russia does, Ukraine will get many advantages in its permanent
negotiations with Russia and will be able to dictate its position while
signing the bilateral tariff protocol.

The Kremlin relied on a strong team of lobbyists in the Verkhovna Rada, the
Cabinet of Ministers, and the Presidential Secretariat. Stalling the WTO
package of bills, some of them were earning Moscow's political support in
the approaching election race. Others were working for more tangible and
immediate dividends. And there were those who simply would not let go of
their property. This bout was not open to the public eye but was no less
fierce.

Various sources indicate that the Parliament, the Cabinet, and the
Presidential Secretariat are anything but a team of like-minded supporters
of the WTO accession plan.

LOGIC ----------
This conclusion is based on both logical presumptions and evident facts. One
of the most eloquent examples is Agriculture Minister Oleksandr Baranivsky's
behavior. His squabbles with Tymoshenko during Cabinet sessions and his
strongly negative position on the "WTO package" have long become the talk
of the town. But if the Cabinet is supposed to be one team, why tolerate a
renegade? And if Tymoshenko had some reason to keep him on the staff,
why then did she jump all over him in Parliament?

The president got the worst of it. He needed and promoted this political
project as a tangible confirmation of Ukraine's adherence to democratic
ideals. He knew that Europe and the USA were already sick and tired of
hollow declarations.

If all those who Yushchenko appointed to top positions were one team, they
were supposed to be aware of this responsibility. They are no novices in big
politics, so they should have foreseen that the opposition would stop at
nothing to leave the government high and dry.

It was as plain as the noses on their faces that the opposition would strike
at the most vulnerable spot: the newly appointed officials who had not
surrendered their MP mandates, thus violating the ban on combining
representative and executive positions. It would be silly to appeal to their
"legal awareness", but they should have surrendered their mandates at least
for the sake of the president's success.

Finally and disgracefully, they were coerced by the opposition, which showed
its muscles, exposed the new leadership's poor foresight, and
demonstratively humiliated the president. So do those people have any right
to call themselves Yushchenko's team? Both Tymoshenko and Yushchenko
had repeatedly criticized their subordinates for breaking the law and
demanded that they immediately comply. They did not.

Are there grounds to assert that the president and the prime minister are of
little account to their subordinates and unable to control them? Yes, there
are. And this assertion is a real verdict on the new political leaders'
sincerity and authority.

As a last resort, the Cabinet used the biggest guns---Tymoshenko and
Yushchenko, although it was clear that the move would not work. The
president left the session hall defeated. A part of the blame rests on him
because he had failed to carry out the necessary preparatory work. Six
months had not sufficed to enlist the necessary parliamentary support for
the bills.

TECHNIQUE ----------
Yushchenko's predecessor Leonid Kuchma used rude but effective
techniques: he simply gave an order to draft a desired normative act,
include it in the agenda, and collect the necessary number of votes.
Those who refused to say yea were bribed, threatened, or blackmailed.

The new government still employs this technique, but the quality of the
documents that are drafted by the Presidential Secretariat and the Cabinet
of Ministers is considerably lower. The new government still tries to
forcibly include desired normative acts in the agenda, bypassing the
relevant standing committees and persuading MPs to vote for those
documents "at first sight".

The only tool from Kuchma's set that lies idle now is force. Yushchenko's
and Tymoshenko's men are afraid, unwilling, or unable to openly coerce
MPs. That is good. But on the other hand, most of the lawmakers see that
the former "give-and-take" methods do not work. They are not afraid of law
enforcement, seeing that nearly all criminal cases go no further than
publicity.

Therefore, the government should offer a more democratic and not less
effective form of interaction. But there are no signs of it so far and no
one seems to care. The new leadership is developing traits that make it look
like a poor caricature of the previous regime. The former authorities were
certainly hateful, but they at least aroused fear and made everyone reckon
with them.

Yesterday's oppositionists promised to cure us from fear. Well, nobody is
afraid of them, just because they have not punished those who they promised
to punish.

There is another sad question: did Kuchma ever walk out of the session hall,
without shaking hands with the speaker? The previous regime was not at all
democratic. It used more sticks than carrots. But at least it achieved
desired results.

In lieu of fear, the new government could rely on effective organization,
thorough preparatory work, logic, flawless draft bills, clear limits of
compromise, and scrupulous compliance with the obligations assumed
before the people's deputies. But.

The draft bills that the government submitted were "underdone". The normal
procedure was not observed. The speaker's and MPs' interests and
recommendations were disregarded. Experienced lobbyists and negotiators
were not invited. The smart guys from the government wanted to break the
last line of defense by a tip-and-run assault, but they only made fools of
themselves.

They had to correct their draft bills at the eleventh hour, literally on
their knees, ceding what they might as well have lent. The new rules of
trade became an object of some vulgar haggle that had nothing to do with
WTO rules.

The distinguished lawmakers displayed inexplicable and unmotivated
brutality. This skirmish was, alas, not the first in the Ukrainian
Parliament. But even much more heated debates on much more important
issues had never ended up in such an outburst of spite and rage.

This was one more sad illustration of the crisis of authority, trust,
tolerance, and mutual respect in the Ukrainian political leadership.

Helplessness and panic erupted in desperate aggression. Now the only
way to do something about it is to set clear and transparent rules of the
game on this political market. -30-
--------------------------------------------------------------------------------------------------
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