"THE ACTION UKRAINE REPORT - AUR"
An International Newsletter
The Latest, Up-To-Date
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"

UKRAINIAN DEPUTY PREMIER SETS OUT STRONG ARGUMENTS FOR
MORE POWER TO LOCAL SELF-GOVERNMENTS AS PEOPLE
THROUGH THEIR COMMUNITIES SHOULD CONTROL KEY DECISIONS

"You should understand that we must determine the priorities: the European
Charter of Local Self-Government and the Declaration of Human Rights, or
certain internal convictions that we have.

Pay attention: we have ratified the "self-government" charter and the
declaration of rights without reservations. So, what is the problem, why not
implement the provisions of these international agreements? It means that
it should be done. This is why we have to find arguments and persuade...

If Ukrainian peasants worked for their landlords not more than two days a
week, they also worked for landlords in Soviet times, though for seven days.

This is the system which developed our people's inclination to
sadomasochism and to serfdom. This "tradition" should be broken."

"THE ACTION UKRAINE REPORT - AUR" - Number 536
Mr. E. Morgan Williams, Publisher and Editor
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, THURSDAY, August 4, 2005

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

1. UKRAINIAN DEPUTY PREMIER SETS OUT STRONG ARGUMENTS FOR
MORE POWER TO LOCAL SELF-GOVERNMENTS AS PEOPLE
THROUGH THEIR COMMUNITIES SHOULD CONTROL KEY DECISIONS
Interview with Deputy Prime Minister Roman Bezsmertny
By Volodymy Semkiv, Ukrayina Moloda newspaper
Kiev, Ukraine, in Ukrainian 29 Jul 05, p 4-5
BBC Monitoring Service, UK, in English, Tue, Aug 02, 2005

2. UKRAINIANS INCREASINGLY VULNERABLE TO HUMAN TRAFFICKING
For sexual exploitation and forced labor
By Natasha Lisova, AP Worldstream
AP, Kiev, Ukraine, Tuesday, Aug 02, 2005

3. "UKRAINE LEADS RUSSIA INTO EU"
Ukraine And Russia Will Be In The EU Within The Next 15 Years,
Argue Peter Schwartz And Chris Coldewey, With Ukraine In Pole Position
VIEWPOINT: Peter Schwartz and Chris Coldewey
The Banker, Financial Times Business Publication
London, United Kingdom, Monday, Aug 01, 2005

4. UKRAINIAN GOVN'T SEEKS TO NATIONALIZE TWO LARGE PLANTS
Interfax-Ukraine news agency, Kiev, in Russian, 3 Aug 05
BBC Monitoring Service, UK, in English, Wed, Aug 03, 2005

5. UKRAINE TO ISSUE EUROBONDS WORTH 600M EUROS
UNIAN news agency, Kiev, in Ukrainian 1128 gmt 3 Aug 05
BBC Monitoring Service,UK, in English, Wednesday, Aug 03, 2005

6. CZECH CAR MANUFACTURER SKODA AUTO IS COUNTRY'S
LARGEST AND MOST PROFITABLE EXPORTER
Has An Assembly Plant in Ukraine
AP Worldstream, Prague, Czech Republic, Tue, Aug 02, 2005

7. POLISH INSURANCE COMPANIES MAKE FOREIGN INVESTMENTS
Large investments made in Ukrainian companies
Polish News Bulletin, Warsaw, Poland, Wed, Aug 03, 2005

8. INDIAN PIONEER OF OUTSOURCING TCS TO EXPAND IN HUNGARY
Indian software groups considering sites in Ukraine, Romania, Russia
By Stefan Wagstyl, East Europe Editor
Financial Times, London, UK, Wed, August 3 2005

9. ISN'T THE ECONOMY ON THE GOVERNMENT'S PRIORITY LIST?
By Vitaliy Kniazhansky, The Day
The Day Weekly Digest in English, #25
Kyiv, Ukraine, Tuesday, July 26, 2005

10. NEW UKRAINIAN AVIATION CONSORTIUM 'UKRAINIAN EMBRAER"
SAID TO BE AIMING TO COMPETE WITH EUROPEANS
INTERVIEW: With Pavlo Naumenko, Director-General
Kharkiv State Aviation Company
By Olha Kalynovska, Narodna Armiya, Kiev, in Ukrainian 20 Jul 05; p 1, 4
BBC Monitoring Service, UK, in English, Wed, Aug 03, 2005

11. PRESIDENT YUSHCHENKO CALLS JOURNALIST WHO
WROTE ARTICLE ABOUT HIS SON
Ukrayinska Pravda web site, Kiev, in Ukrainian 29 Jul 05
BBC Monitoring Service, UK, in English, Fri, July 29, 2005

12. DESIGNER OF YUSHCHENKO'S POLITICAL BRANDS: PRESIDENT
WAS ABSOLUTELY RIGHT TO PASS ORANGE REVOLUTION
BRANDS TO HIS SON
UNIAN, Kyiv, Ukraine, Wednesday, 3 August 2005

13. UKRAINE LEADER'S SON IN NEW CONTROVERSY
Agence France Presse (AFP), Kiev, Ukraine, Wed Aug 3, 2005

14. SON CASHES IN ON ORANGE REVOLUTION
Nick Paton Walsh in Moscow, The Guardian
London, United Kingdom, Wed, Aug 03, 2005

15. OPEN LETTER TO THE JOURNALIST COMMUNITY OF UKRAINE
President of Ukraine and questions regarding his son
FROM: Martin Nunn, Journalist, Public Relations Consultant
Kyiv, Ukraine, Tuesday, August 2, 2005
Published By The Action Ukraine Report (AUR), Number 536
Washington, D.C., Thursday, Aug 4, 2005

16. YUSHCHENKO'S FAMILY PROBLEMS
ANALYSIS: By Walter Prochorenko, PhD.
Paramus, New Jersey, Thursday, July 28, 2005
Published by The Action Ukraine Report (AUR), Number 536
Washington, D.C., Thursday, August 4, 2005

17. FIRST SATELLITE TV CHANNEL AIMED AT SPREADING ORTHODOX
FAITH IN RUSSIA 'SPAS' IS LAUNCHED, WANTS TO DEVELOP
NETWORK OF CABLE CHANNELS ACROSS UKRAINE
EDITORIAL ANALYSIS: By Len Walker
BBC Monitoring Media Services
BBC Monitoring Research, UK, Mon, Aug 01, 2005

18. UKRAINIAN PARLIAMENTARY SPEAKER TO BE
PROGRESSIVELY MARGINALIZED
Tymoshenko refuses election alliance with Lytvyn
ANALYSIS AND COMMENTARY: By Taras Kuzio
Eurasia Daily Monitor, Volume 2, Issue 151
The Jamestown Foundation
Washington, D.C., Wednesday, August 3, 2005
=============================================================
1. UKRAINIAN DEPUTY PREMIER SETS OUT STRONG ARGUMENTS FOR
MORE POWER TO LOCAL SELF-GOVERNMENTS AS PEOPLE
THROUGH THEIR COMMUNITIES SHOULD CONTROL KEY DECISIONS

"Roman Bezsmertnyy: We shall be able to win a duel on parliament's turf.
Deputy prime minister on the new stage in administrative reform, the need
to implement it by spring 2006, obstacles on this path, Stolypin's
traditions and serfdom."

Interview with Deputy Prime Minister Roman Bezsmertny
By Volodymy Semkiv, Ukrayina Moloda newspaper
Kiev, Ukraine, in Ukrainian 29 Jul 05, p 4-5
BBC Monitoring Service, UK, in English, Tue, Aug 02, 2005

Administrative-territorial reform in Ukraine is needed as some problems can
only be solved by local people, Deputy Prime Minister Roman Bezsmertny
has said. Speaking in an interview with a propresidential paper, Bezsmertnyy
said that the authorities are open to dialogue and that his arguments show
that reform will benefit the people.

Bezsmertnyy urged reform, arguing that local people and officials should
make decisions on local services as they are in a better position to do so
than distant bureaucrats.

The following is the text of the interview with Bezmertnyy conducted by
Volodymyr Semkiv, entitled "Roman Bezsmertnyy: We shall be able to win
a duel on parliament's turf. Deputy prime minister on the new stage in
administrative reform, the need to implement it by spring 2006, obstacles
on this path, Stolypin's traditions and serfdom", published in the Ukrainian
newspaper Ukrayina Moloda on 29 July; subheadings are as published:

We began our conversation with Roman Bezsmertnyy in the plane flying to
Kharkiv where public hearings on administrative-territorial reform were due
to be held. The administrative reform was "suspended" somewhere in
between, the same way as a small Yak [aircraft] was flying between the
present and the former capitals [Kiev and Kharkiv, respectively], almost
between Makariv [Bezsmertnyy's native town in Kiev Region] where Mr
Bezsmertnyy was on the verge of resigning, and Kharkiv.

This spell of time proved to be very important, indeed. The district town in
Kiev Region gave an important lesson (especially with regard to public
perception of the reform), and Kharkiv gave an opportunity to understand
that the reform was far from having no prospects as it seemed to be
one-and-a-half weeks ago.

Thus, it is not surprising that Roman Bezsmertnyy speaks a great deal on
the results with Ukrayina Moloda's correspondent. He tries to outline
theoretical lines: the one which has been passed and the one which should
be achieved. He begins the discussion with an explanation of a new
approach which is worth applying at the new stage of propagating the
reform.

"WE NEED NEW ARGUMENTS FOR IMPLEMENTS THE REFORM"

[Bezsmertnyy] The time has come for more profound work on financial and
taxation parts of the administrative-territorial reform. While working on
the reform, we got a lot of facts and documents which prove the high level
of misbalance in budgetary distribution and absolutely erroneous structure
of the taxes which exist now. I have a feeling that we put too little
emphasis on the financial part of the reform.

As the result, we are lacking arguments. If we were putting more emphasis
on the imperfection of the existing financial basis of local self-
government, our society would have understood the need for quicker
implementation of the reform. This is why I want to concentrate attention
on the financial basis of local self-government, as it seems to me that the
stage which we had already passed has been completed quite successfully.

[Semkiv] While speaking about this stage, do you imply work on drafting
laws?

[Bezsmertnyy] Yes, until now criticism has been aimed mainly at territorial
correlation and at the system. But people supported redistribution of powers
and their decentralization. At the same time, they were obviously lacking
another argument with regard to financial provisions and the theme of
supporting the powers to be passed to local level with resources.

Now it is high time to announce these things. Analysis of the 2004 [local]
budgets shows that only communities with a population over 3,500 people
were able to prepare budgets which envisaged at least minimal development.

Thus, they were able to allocate certain funds for construction,
improvements and something else. It was a minimal start which enabled
them to develop under the existing taxation system.

Then, analysis of the budgets has demonstrated that one can talk about
stable community development and its self-sufficiency only when it has more
than 8,000 residents.

Thus, it is now necessary to study more profoundly the outcome of changing
the taxation basis in case it is shifted. It means allocation of certain
taxes not to the national budget, but to a local one, to the level of these
communities: for example, land tax or profit tax for individuals. They are
now concentrated at the regional level. Let us suppose that we change the
status of some taxes.

The following task emerges: we have to sit down and to calculate the
population of a community and the level of its residents' incomes that
would enable them to pay sufficient taxes for maintaining the rural
infrastructure. There are regions where several tens per cent of the
population have privileges in all kinds of taxes.

Probably, then we shall see that, instead of introducing targeted aid, we
introduced privileges and thus formed the depressive system ourselves.
Then, probably, a new approach to the vision of the reform will emerge.

There are many things of this kind to which attention should be paid. We
previously worked at the level of the key ideology administrative-
territorial one. And now these things are becoming important. Why?

The point is that, after resolving the issues concerning passage of powers,
let us say, in healthcare, other elements emerge: reform within the
healthcare system, as the structure of the Ukrainian healthcare system is
among the largest in Europe from the point of view of the number of beds
per 10,000 of population.

Then why is this infrastructure unable to provide normal aid to people? The
answer is simple: we are supporting institutions without taking care of
health. The same situation is in educational institutions and in
kindergartens.

"THERE ARE PROBLEMS WHICH CANNOT BE RESOLVED BY
THE STATE, BUT CAN BE RESOLVED BY A COMMUNITY"

[Semkiv] Let us speak in more detail about healthcare and education. For
example, where does speculation on liquidation of schools and hospitals
after the reform come from?

[Bezsmertnyy] First, nobody will liquidate them. According to
administrative-territorial reform, issues of this kind will belong to the
remit of local authorities. The community itself will decide on what it
should do with schools and hospitals and what funds should be allocated for
their financing.

Concerning healthcare and education, these spheres are currently within the
competence of the central authorities. It means that financing for medical
and educational institutions is envisaged from central budgets. Local
authorities actually have no relationship to these institutions.

It is "fixed" in legislation. Instead of establishing standards in education
and supervising their observance, the state is too preoccupied with small
things: provision of heating, major repairs, etc. The central authorities
assumed these powers and funds and are trying to support these institutions
in this or that way. But how are they supported? At the minimal level!

What should be done? The powers regarding pre-school educational
institutions, institutions for provision of primary medical aid and general
secondary educational institutions should be passed directly to communities.
Then funds for maintaining them should be passed from central budgets to the
local level. Let a community take care of these issues. It knows better than
officials from Kiev do.

Let us tackle the following theme: introduction of school buses has begun.
We "push" it through the central budget in a centralized way. But excuse me,
who in the Ministry of Education is now aware of the people and places to
which they are transported? Where do these buses drive in reality? Nobody
is responsible for it.

But the state is unable to resolve problems of this kind. It is far from
them, it does not understand the peculiarities of each inhibited locality,
it is not aware of the instruments with which it should approach resolution
of these problems. If the state wants to resolve them, it should pass the
relevant rights and powers to local administrations, in particular, to
communities.

Why do I put emphasis on communities all the time? The fact of the matter is
that Ukraine does not have a primary administrative segment. It turns out
that some problems can be resolved in a city but not in a village. Cities
are able to resolve them due to their large population, which means
opportunities, resources and financing. A village will never resolve these
problems.

This is why the problem can be resolved the following way: we must decide
on what should be regarded as a primary segment. As soon as we answer
this question, powers and resources should be passed there immediately.
We propose that a community, as an administrative-territorial entity with a
population of about 5,000, should be made this segment.

"WE DID NOT SAY: 'IT WILL BE THE WAY WE SAY, AND THAT IS IT''

[Semkiv] Mr Bezsmertnyy, you say that there are things on which it is worth
working more, you speak about a large layer of problems in local
self-government and you insist on their broader discussion. Does it mean
that the administrative-territorial reform is not yet mature?

[Bezsmertnyy] It seems to me that it is the difference in approaches. We did
not say: "It will be the way we say, and that is it!" We approached people
with our proposals and urged them to discuss all these issues. The thing
that surprised me in Makariv was the fact that people think: "If the
government says so, it means that everything has been decided".

No, the reform is just being developed. We approach people, and we want
to listen to their reaction and their views. The more this discussion is
rich in content, the better we shall succeed in implementing the reform.

[Semkiv] In this case, can one say that you will manage to implement
administrative-territorial reform by 2006?

[Bezsmertnyy] I stick to the position that the "admin-terr"
[administrative-territorial reform] should be implemented before next year's
[parliamentary] election. I saw some brand-new approaches to the reform in
Kharkiv (this part of our discussion with Bezsmertnyy took place on our way
beck from Kharkiv to Kiev author's note), along with new demonstrative
materials which we were afraid to use until now.

For example, a map of the possible territorial structure of Kharkiv Region
was presented. It was developed on the basis of an integral index by 32
parameters. It means that its authors had to analyse each inhabited locality
according to the determined demographic, social and economic indices, and
then they developed their map. During our previous discussions, I considered
this integral index to be unnecessary.

I did not see "purity" in it: if we analyse all the facts, we shall anyway
come to the conclusion that the population is decisive during the formation
of the new territorial body. But these 32 parameters are useful as an
argument. They make quite a serious impact on the "opponents", and this is
an additional argument in public work.

[Semkiv] Can it be concluded from your statement that explanatory work is
the most difficult in the reform?

[Bezsmertnyy] There is one problem to which one should pay attention. For
example, one should work with the importers' council on issues of customs
tariff policies, but there is no general institution reflecting people's
interests with regard to administrative-territorial reform. If one wants to
do something with tariffs, he consults with investors. But what is the
authority for discussing the reform?

We can admit that they the highest state institutions, as they represent
people this or that way. But appealing to them means going against the
normal logic of communication with people, with society, with public
organizations, etc.

This is why it seems to me that we should start discussing reform with
parliamentary factions and political parties in autumn. It is worth coming
here with these ideas, as this is a political issue in reality, a profoundly
political one. One needs political will to resolve it.

"I HAVE ARGUMENTS TO PERSUADE
KOSTENKO AND MOROZ THAT REFORM IS NECESSARY"

[Semkiv] But can one expect that the parliament will support the reform? For
example, the Ukrainian People's Party and the Socialists, not to mention the
opposition, have already spoken against the reform.

[Beszmertnyy] The discussion in Kharkiv proves that it is possible to find
arguments to persuade, let us say, 226 MPs. One can win this duel on the
Supreme Council's [parliament] turf. I do not see any problem in it. The
same way, I do not see any obstacles in communication with [Ukrainian
People's Party leader] Yuriy Kostenko and [Socialist Party leader] Oleksandr
Moroz. I feel that there are arguments which can break their position.

[Semkiv] It might be possible to persuade 226 MPs. But will you succeed in
getting the constitutional majority of 300 votes to amend the Fundamental
Law [Constitution of Ukraine]? Generally speaking, is it worth amending the
constitution to implement the reform?

[Bezsmertnyy] The Fundamental Law should be amended in the section in it
on the territorial system and local self-government system. As of today,
many provisions of the constitution have "exhausted" themselves. I say this
as someone who was directly involved in writing the constitution. Our
current knowledge and situation enable us to drastically resolve the
problems of these provisions in a positive direction.

[Semkiv] But amending the constitution will take the whole year. Then what
should be done with implementing reform before March 2006?

[Bezsmertnyy] First, it is not a year, but two parliamentary sessions.
Second, I do not see any problems in it. You should understand that we must
determine the priorities: the European Charter of Local Self-Government and
the Declaration of Human Rights, or certain internal convictions that we
have.

Pay attention: we have ratified the "self-government" charter and the
declaration of rights without reservations. So, what is the problem, why not
implement the provisions of these international agreements? It means that it
should be done. This is why we have to find arguments and persuade.

The pace of implementation of reform might depend on its discussion. We
are continuing with our work. When the reform is considered at the National
Council for Local Self-Government supervised by the president of Ukraine
(this meeting is scheduled for mid-August author's note), all issues will be
considered and will most likely be adopted as final decisions.

IMPLEMENTATION OF REFORM IS HINDERED BY
FACT THAT PEOPLE HAVE NOT GROWN OUT OF SERFDOM

[Semkiv] You have mentioned that implementation of the administrative
reform is being hindered, in particular, by the absence of political will.
From whose side is it?

[Bezsmertnyy] ... [ellipsis as published] In principle, it depends on the
extent to which this theme of the reform will become a theme of the
electoral campaign.

[Semkiv] It seems to have become.

[Bezsmertnyy] This is what I wanted to say.

[Semkiv] Why does the problem lie exactly in the elections?

[Bezsmertnyy] I do not want the reform to kill people's confidence in the
new authorities, of the government, etc. I do not want to be a problem for
the party (OUPU [Our Ukraine People's Union] Author's note), for the
[electoral] bloc and for the president with my ideas.

I do not want anyone to say that Roman Bezsmertnyy, being the bearer of
this reform, is a member of that party, and therefore, the party supports
the idea which is not accepted by the people. Moreover, the election is
approaching. By the way, it forced me to make a statement on resignation
in Makariv.

Concerning work: the bigger that work is, the more interesting and better it
becomes. It is necessary to answer all questions which exist and which
emerge during work on the reform.

You know, everything is clear with it: small communities mean a centralized
state, while powerful communities mean domination of local self-government.
These are axioms. They have been proved by the experience of other
countries. There are a lot of examples.

There are so many materials that I can write a candidate's or doctor's study
on administrative reform (laughs author's note). It is good material for
research, and the whole concept of forming administrative models can be
based on it.

[Semkiv] Then what is the problem? Might it lie in the fact that this
knowledge cannot be brought to the population, or is the problem that people
have not been sufficiently informed?

[Bezsmertnyy] It is partially so. But there is also a tradition. Why was
[prime minister of the Russian Empire who initiated reforms in early 20th
century Pyotr] Stolypin killed? He lusted after the "holiest of holies"
serfdom.

If someone thinks that people easily supported the novelties introduced by
[Russian Tsar] Alexander II when he proclaimed freedom [in 1861], he is
mistaken. It was like this until Stolypin's reform was implemented. Serfdom
remained by law and by tradition.

We are once again lusting after the " holiest of holies". We offer powers
and resources to people, but they resist. Unfortunately, we still have the
system of serfdom. In general, this is a very profound philosophical issue.

If Ukrainian peasants worked for their landlords not more than two days a
week, they also worked for landlords in Soviet times, though for seven days.

This is the system which developed our people's inclination to
sadomasochism and to serfdom. This "tradition" should be broken.
-30- [The Action Ukraine Report (AUR) Monitoring Service]
=============================================================
2. UKRAINIANS INCREASINGLY VULNERABLE TO HUMAN TRAFFICKING
For sexual exploitation and forced labor

By Natasha Lisova, AP Worldstream
Kiev, Ukraine, Tuesday, Aug 02, 2005

KIEV - Hoping to earn money to pay for college, Yuli accepted an offer to
work as a nightclub dancer in Moscow, but her new employer beat her, stole
her passport and forced her to work as a prostitute.

The 24-year-old's ordeal is increasingly common among citizens of Ukraine,
whose country was cited in a recent U.S. State Department report as one of
the prime sources of men, women, and children trafficked for sexual
exploitation and forced labor.

The report sharply criticized Ukraine's previous government for failing to
take decisive action against the problem. The issue could impede new
President Viktor Yushchenko's drive to get Ukraine into the European Union.

The Interior Ministry this year put combating human trafficking and
commercial sexual exploitation of children on its list of key priorities,
forming a unit dedicated to the task and beefing up border checks. The
country's new government also plans to create a National Bureau to Combat
Human Trafficking.

But the low salaries and unemployment that force thousands of Ukrainians to
seek employment abroad persist, continuing their vulnerability to
exploitation.

Yulia told The Associated Press that she left her hometown of Donestk four
years ago for a job in one of Moscow's luxurious night clubs that she heard
about through acquaintances, planning to earn money to pay her way through
college. But once in Moscow, Yulia's new employer seized her passport and
beat her for several days before sending her out to work the Russian
capital's streets as a prostitute.

"Now I understand that I could have conducted myself in another way at some
points," said Yulia, who spoke on condition that her last name not be used.
"But then a terrible fear paralyzed my will and deprived me of any
opportunity to resist."

Most Ukrainian victims of trafficking end up in Turkey and Russia.
Prostitutes working in Turkey are commonly called known as "Natashas"
whatever their country of origin.

Youth and Sport Minister Yuriy Pavlenko said that about seven million
Ukrainians live abroad and "many of them are a target for human
traffickers." The real number of trafficking victims is unknown as the
majority of victims don't want friends and family to know what happened to
them, said Mikhaylo Andrienko, the chief of the Interior Ministry
human-trafficking unit.

The International Organization for Migration says it has helped more than
2,100 Ukrainian trafficking victims since 2000 _ but estimates that number
is only a small portion of the victims.

The Interior Ministry registered 42 cases of human trafficking in 2000
compared with 269 last year and 148 during the first five months of this
year. Ministry officials said the increase is due to the new attention being
paid to the problem.

But the court system still hasn't caught up _ last year, traffickers were
convicted in only 67 cases. Under Ukrainian law, traffickers face sentences
of between three to 15 years imprisonment and seizure of their property,
Andrienko said.

"This punishment is rather low," said Helga Konrad, the Organization for
Security and Cooperation in Europe's Special Representative on
Combating Human Trafficking during a visit in June.

Most Ukrainian officials, however, believe the solution lies not in severe
punishment but in preventive measures, including improving awareness
this nation of 48 million. "Each time I talk to victims I am surprised by
their trustfulness toward almost unknown people," Andrienko said. The
government is also scrambling to raise living standards and create 5
million new jobs.

A 41-year-old man named Zenoviy, said he left his village last year for
Macedonia to earn money doing construction work to support his three
children. He expected hard work - but not the conditions of near slavery
that he experienced.

"We had to work about 20 hours a day and received for it only $30 a month,"
said Zenoviy, speaking on condition that his last name not be used. His
health suffered and he couldn't even afford the return ticket home. "But I
went there because I had no chances to feed a family in my native country,"
he said.

U.S. Health and Human Services Secretary Michael Leavitt met with victims
of trafficking during his visit to Ukraine last month and said he was
shocked. He told of meeting a 13-year-old child who was sold and taken to
an unidentified country, where he was forced to beg.

The child's two other siblings were also sold into slavery. "Their stories
were compelling and motivated me to multiply my efforts," Leavitt said.

Yulia says there is hope for victims who make it back home. She is now a
businesswoman, running her own hair salon. But Yulia keeps her past a
secret - even from her parents who don't know what happened during the
months she spent in Moscow before escaping.

Wendy Lu McGill, spokeswoman for the Ukrainian office of the IOM, said:
"People are looking for a better life, but what they find in reality is
totally different." -30- [The Action Ukraine Report Monitoring Service]
=============================================================
3. "UKRAINE LEADS RUSSIA INTO EU"
Ukraine And Russia Will Be In The EU Within The Next 15 Years,
Argue Peter Schwartz And Chris Coldewey, With Ukraine In Pole Position

VIEWPOINT: Peter Schwartz and Chris Coldewey
The Banker, Financial Times Business Publication
London, United Kingdom, Monday, Aug 01, 2005

Europe is in the throes of disruptive change that will significantly alter
the balance of power between the European Union and Russia over the
next 10 years, with Ukraine at the heart of the transformation. As a former
member of the Soviet Union with ties to Russia that go back centuries,
Ukraine's peaceful transition to democracy and aspirations to the EU
present a significant challenge to Russia.

If Ukraine joins the EU, it will not only signal that Russia's grip on it
has finally loosened, but will prompt a reappraisal of Russia's own
relationship with Europe and lay the groundwork for Russia itself to join
the EU within 15 years.

At the World Economic Forum in Davos this year, the Ukrainian president,
Victor Yushchenko, gave an inspiring speech that spoke directly to his
country's ambitions. Mr Yushchenko had just swept to power in the tumult of
the 'Orange Revolution' and had been inaugurated as president earlier that
week.

"Ukraine has manifested its European values and belongs to the civilisation
of European nations. We are no longer at the crossroads or at its margin,"
he said. Mr Yushchenko's vision for Ukraine is clear.

He is positioning it for EU membership without waiting for formal notice
from Brussels. But the implications of Ukraine's stance toward Europe could
have far-reaching effects beyond a bid for EU membership - setting wheels
in motion for another, more unlikely EU entrant: Russia.

UKRAINE'S PROSPECTS

Ukraine wants to join the EU for the same reasons as other countries -
greater prosperity and access to markets. Its 50 million citizens have seen
their neighbours' success, and the country sees its economic future in
joining with them.

However, there is also a psychological dimension: a desire for an
acceptance as part of Europe and European society, an affirmation that
Ukraine is European - not part of a Russian empire or Central Asia.

Ukraine was a member of the USSR. This aspect of the country's character
means that potential admission to the EU is qualitatively different than all
other candidates, and raises the stakes for all parties involved. Admission
to the EU would present a significant challenge to Russia, driving home a
message that the old empire is truly dead, and that Ukraine is joining
another powerful union.

Ukraine will have an ally in the US, which has a stake in seeing a peaceful
and prosperous democracy emerge from a former-Soviet state. Ukraine has
sought the good graces of Europe and the US through the peaceful Orange
Revolution political transition, but also through its giving up of nuclear
capabilities in 1994. In addition, both the EU and US will seek access to
Ukraine to secure its strategic position as a trade partner to the East.

The joint statement issued in April 2005 by the US president, George W.
Bush, and Mr Yushchenko make clear the US support of Ukraine's aspirations
towards the EU, the World Trade Organization (WTO) and NATO.

"As Ukraine undertakes far-reaching reform at home, it can count on the US
for support. We applaud Ukraine's commitment to curb corruption, promote the
rule of law and improve the business climate. Progress on reforms will allow
Ukraine to realise its aspirations to move closer to, and ultimately join
European, Euro-Atlantic and international institutions."

Beyond approaching world leaders, Mr Yushchenko is making strong progress
in the difficult work of reform that will help Ukraine in its efforts to be
considered for EU candidacy. Economic reforms are under way, investment in
creating a free market environment is thriving, the WTO admission process is
on track, and Ukraine's growing GDP, low labour costs and high level of
education make the country an inviting location for industry investment.

WHERE UKRAINE GOES, RUSSIA GOES

Both the EU and Ukraine must manage their relationships with Russia in order
for Ukraine's EU entry to become a reality. The EU has conflicting feelings
towards Russia that will have to be resolved for the prospect of accession
to be extended to Ukraine. France, among others, does not want to interfere
in a region with such close ties to a key ally, while the Baltic and central
European states are less concerned.

Ukraine and Russia are intimately tied both politically and economically and
have been for centuries, and Ukraine will not want to disrupt its strong
trade relationship with Russia. However, if Ukraine proceeds on track with
reforms, is offered EU membership, and joins, it will provide an example of
post-Soviet development that will be watched intently by Russia.

While Russia has a distrustful view of Ukraine's European aspirations, this
success may change Russia's relationship with the Ukraine and soften its
own stance toward the EU.

RUSSIA AND THE EU

While Ukraine's accession to the EU will provide a model for Russia, there
are stronger forces driving Russia and the EU together. Though Russia
spans Europe and Asia, and has been a world power, it is conceivable that
it would give up partial sovereignty for membership in the EU.

Russia is no longer the world power it once was. It is plagued by critical
problems - a demographic collapse due to ageing and AIDS, a crumbling
military and a failing economy. In time, these weaknesses will cripple
Russia and its geopolitical significance will fade unless it can ally itself
with a strong partner.

The only options for allies are a rising China to the east and the EU to the
west. China is a trading partner for Russia but an unlikely ally, given the
vast cultural differences between the two countries. Ultimately, Russia's
cultural orientation is towards Europe, making the EU a better fit and a
better market for Russia than China would be. Russia would also be
strategically more valuable to the EU than to China for several reasons.

FIRST is the issue of energy and resources. The EU needs a secure supply
of cheap energy, and Russia is a major European supplier of natural gas.
The two have come into conflict over pipeline access and pricing disputes.

It will be to the EU's advantage to bring Russia's vast natural gas reserves
inside the EU marketplace and mollify its use of energy as a political
weapon rather than to proceed into an uncertain future with unstable pricing
and access disputes.

SECOND is the question of access to markets. Beyond Russia's energy
resources, its primary advantage is its vast, well-educated population -
despite its demographic difficulties. It will be mutually beneficial for the
EU to gain access to Russia as both a market and source of human capital.

Politically, a closely allied Russia and EU would solidify Russia's
commitment to the rule of law and to business, and prevent a slide toward
authoritarianism. Socially, any aid the EU could offer Russia in the realms
of public health, education and intellectual property rights management
would be worth the investment, considering the proximity of their borders.

[THIRD] Another key issue is that of military capability. Russia's ageing
military is struggling for funding and maintenance, but its military
stockpiles would be incredibly advantageous to the EU. The EU is not, and
never will be, a military rival to the US - it is a post-military power that
lags developing China in military capability.

With Russia's 8000 nuclear warheads suddenly under an EU banner, the EU
would gain superpower military capability and could play as an equal against
the US.

THE ROAD AHEAD

With the current constitutional crisis in the EU, it is clear that Europe's
priorities reside with issues of internal governance and its new members.
But the failed constitutional referendums in France and the Netherlands may
signal a new possibility for Russia's entrance, as it forces a resolution of
key integration issues.

It is conceivable that a tiered system of EU membership may emerge from this
debate, with limited Schengen immigration accord status, economic access
and benefits - clarifying roles within the current EU and smoothing the path
for further EU enlargement.

With a defined western European core, this more loosely organised 25-state
EU might open the possibilities for the entrance of more politically,
economically and culturally different entrants, significantly Russia.

While these developments could fail for many reasons, the past 10 years
have been full of disruptive events for greater Europe, and the next 15
years promise no less. -30- [Action Ukraine Report Monitoring Service]
----------------------------------------------------------------------------------------------------------------
Peter Schwartz is a co-founder and chairman of GBN Global Business Network,
as well as former head of scenario planning at Royal Dutch/Shell. Chris
Coldewey is a practice associate at GBN
=============================================================
4. UKRAINIAN GOVN'T SEEKS TO NATIONALIZE TWO LARGE PLANTS

Interfax-Ukraine news agency, Kiev, in Russian, 3 Aug 05
BBC Monitoring Service, UK, in English, Wed, Aug 03, 2005

KIEV - The Cabinet of Ministers of Ukraine adopted a number of documents
today, which seek to nationalize the open joint stock company Nikopol
Southern Pipe Plant and a 25-per-cent stake in the open joint stock company
Azovmash, the head of the State Property Fund, Valentyna Semenyuk, told
journalists today.

Semenyuk said the cabinet passed a resolution which revoked the
government's previous decision to create the open joint-stock company
Nikopol Southern Pipe Plant. "The resolution adopted today paves the way
for the nationalization of the plant," she said.

[The Nikopol Southern Pipe Plant, one of Europe's largest steel pipe
producers, is a leading company in Interpipe Group controlled by former
President Kuchma's son-in-law, influential MP and steel magnate Viktor
Pinchuk.]

Semenyuk added, however, that the case has to be tried in court. "We will
simply appeal to the Prosecutor-General's Office [PGO] so they support the
government's claim seeking to nationalize the plant," Semenyuk said.

She said that during the process of privatization, the Nikopol Southern Pipe
Plant was divided into seven subsidiaries and 16 closed joint-stock
companies. "In other words, the state-owned 96.97-per-cent stake, which
was transferred to the Nikopol Southern Pipe Plant, was simply diluted,"
Semenyuk said.

She said the cabinet adopted "a similar resolution regarding Azovmash" [one
of Ukraine's largest machinery plants], which reversed the previous decision
[taken in 2003 by the cabinet of former Prime Minister Viktor Yanukovych] to
hand over the state-owned 25-per-cent stake in the open joint-stock company
Azovmash to the closed joint-stock Ukrainian Industrial Transport Company
[reportedly controlled by Yanukovych's close ally Donetsk tycoon Rinat
Akhmetov] for management. -30- [The Action Ukraine Report]
=============================================================
5. UKRAINE TO ISSUE EUROBONDS WORTH 600M EUROS

UNIAN news agency, Kiev, in Ukrainian 1128 gmt 3 Aug 05
BBC Monitoring Service,UK, in English, Wednesday, Aug 03, 2005

KIEV - On 2 August the Finance Ministry announced a tender among 20
largest Western financial institutions in order to choose lead managers for
the issue of Ukrainian state foreign loan bonds of 2005 worth 600m euros
maturing in 10 years' time, UNIAN has learned from the Finance Ministry's
press service.

The deadline for tender proposals is 15 August, the Finance Ministry said.
The bonds will be issued in order to fill the state budget, in accordance
with the law of Ukraine "On the state budget of Ukraine for 2005". -30-
=============================================================
6. CZECH CAR MANUFACTURER SKODA AUTO IS COUNTRY'S
LARGEST AND MOST PROFITABLE EXPORTER
Has An Assembly Plant in Ukraine

AP Worldstream, Prague, Czech Republic, Tue, Aug 02, 2005

PRAGUE - Czech car manufacturer Skoda Auto increased its sales in the
first half of 2005 by 7.3 percent from the same period in the previous year,
the company said in a statement. Skoda sold 244,569 cars from January to
June 2005, up from 227,911 in the first half of 2004, the company said.

Skoda exported its three models, Fabia, Octavia and Superb, to almost 90
countries in that period, it said. Skoda also has created 1,050 new jobs
since last year, the statement said. Skoda Auto is owned by German
manufacturer Volkswagen AG.

The company is the country's largest and most profitable exporter. Apart
from its three plants in the Czech Republic, the company also has assembly
plants in Ukraine, India and Bosnia-Herzegovina and plans to start
assembling its cars in Kazakhstan in September. The company also plans to
start producing its Octavia model in China in 2007. On the Net: Skoda Auto:
http://www.skoda-auto.com -30- [The Action Ukraine Report]
=============================================================
7. POLISH INSURANCE COMPANIES MAKE FOREIGN INVESTMENTS
Large investments made in Ukrainian companies

Polish News Bulletin, Warsaw, Poland, Wed, Aug 03, 2005

WARSAW - Investment in foreign subsidiaries made by Polish insurance
companies will reach at least ZL200m by the end of 2005. It seems that
insurance companies find the Polish market a little too narrow.

Interest in both European and eastern markets is significantly growing:
65-percent growth of investment in foreign subsidiaries. The largest
investments were made by PZU, which bought four companies in Lithuania
and two in Ukraine.

Commercial Union Polska created a company in Lithuania from scratch.
The value of investments is expected to rise even more in the future. PZU is
planning to invest around ZL80m in Ukrainian companies.

Other companies, such as Amplico Life (Polish company owned by the
American giant AIG), Cardif (owned by a French group) and CitiInsurance
are also intending to expand eastwards. Amplico Life wants to invest in
Latvia, Lithuania and Estonia, Cardif in Latvia, and CitiInsurance in
Hungary and the Czech Republic. -30- [The Action Ukraine Report]
=============================================================
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=============================================================
8. INDIAN PIONEER OF OUTSOURCING TCS TO EXPAND IN HUNGARY
Indian software groups considering sites in Ukraine, Romania, Russia

By Stefan Wagstyl, East Europe Editor
Financial Times, London, UK, Wed, August 3 2005

TCS [Tata Consultancy Services], India's largest software developer, is
investing in Hungary in a sign of the increasing complexity of the global
outsourcing business and of the growing sophistication of India's software
industry. Other big Indian software groups may follow suit in investing in
eastern Europe, notably Wipro, which says it is considering sites in
Hungary, Romania, Russia and Ukraine.

TCS first opened a software centre in Hungary in 2001 and is planning to
transform the site by hiring about 700 new workers over the next three years
to take the total staff to more than 1,000. SV Mani, head of TCS's Hungarian
operations, says the group was already serving clients all over the world,
with 52 per cent of its turnover in the US and 25 per cent in Europe. But it
is now building a global delivery network so that projects can be completed
closer to the customer where necessary, he says.

In Europe, British companies have no difficulties in the outsourcing of
business processes to India. But for continental European companies, India
seemed remote, says Mr Mani. TCS chose Hungary because, as well as
English, many Hungarians can speak other European languages, including
German, French and Italian. "We want to provide a European front end [point
of contact] for our European customers," he says.

TCS preferred eastern Europe over western Europe because it was much
cheaper. Hungary had been chosen over Poland, the Czech Republic and
Romania because it offered a good infrastructure, a firm currency, a stable
political environment and highly skilled workers.

The group, which employs 6,500 of its 40,000 staff in Europe, is now looking
to establish at least one more development centre in eastern Europe - in
Poland, Russia or Romania - probably employing more than 500 people.
"We have identified eastern Europe as a thrust area for 2005," says Mr Mani.

TCS's move highlights the growing importance of eastern Europe in the
global business process outsourcing industry, especially for centres serving
continental western Europe.

Outsourcing specialists with east European business service operations
include Accenture, IBM and Cap Gemini. Companies that have established
service centres for in-house requirements include Citigroup, the US bank,
Lufthansa, the German airline, Ahold, the Dutch retailer, and General
Electric, the American industrial group.

Everest Partners, a US-based consultancy, said in a recent report that while
India remained the global leader in the outsourcing of business processes,
the "real competition" was just beginning. The key drivers of expansion
included lower costs, language skills, and geographical and cultural
affinities, said the report.

"Ten years ago, India didn't register a blink on the radar of western
companies. Eastern Europe today is where India was a decade ago."
PwC, the consultancy, says Indian costs are much lower than eastern
Europe's. It estimates that if the cost of running a financial services
centre is about 200 in the UK or Ireland, it is 100 in Poland and just 37 in
India.

However, Rafal Krasnodebski, from the central and east European operations
of PwC, says that as well as language and technical skills, the region has
an advantage in the minimal time difference between western and eastern
Europe. Offshore financial centres generally operate 24 hours a day, but
their managers usually work only local office hours.

"This has proved to be a major problem with centres in India and east Asia,"
Mr Krasnodebski says. "A customer's credit line can stay blocked or an
invoice left unpaid for several days because decision makers on different
sides of the globe can't find each other." -30-
=============================================================
9. ISN"T THE ECONOMY ON THE GOVERNMENT'S PRIORITY LIST?

By Vitaliy Kniazhansky, The Day
The Day Weekly Digest in English, #25
Kyiv, Ukraine, Tuesday, July 26, 2005

Before and immediately after the Orange Revolution Ukraine's current
president, Viktor Yushchenko, was known as a talented economist, who
consistently and tenaciously adhered to the principles of market economy. It
will be also recalled that Mr. Yushchenko made a name for himself as an
economist and a politician by combating inflation and working for a stable
hryvnia.

We have no grounds at all to claim that the president has betrayed his
principles. But it looks as though priorities have changed somewhat.

Last Tuesday the Ministry of Economy hosted a high-profile conference
called "The Analysis of Performance in the First Six Months of 2005 and the
Ministry's Long-Term Plans." The ministry press service announced shortly
before that President Yushchenko would take part in the conference and hear
reports by Minister Serhiy Teriokhin, his deputies, departmental heads, and
representatives of subordinated organizations (the State Price Control
Inspection and the State Committee for Material Reserves).

Instead, the president chose to attend a meeting of the Security Service's
(SBU) top executives. According to SBU spokesperson Maryna Ostapenko,
he did not express any serious criticism of this service. He merely
emphasized the need to replace staff and discontinue illegal telephone
eavesdropping, creating the impression that unknown persons, rather than
the SBU, are engaged in this objectionable practice (without a court's
sanction).

No doubt, the SBU has a lot to do in this country, and the president is
obliged to demand that it work effectively and in strict compliance with the
law. It would be better still if as few people as possible turned to this
service (for we have neither terrorism nor class war here) and the latter
kept a low profile and did its business efficiently, without distracting the
president (his press service reports that the SBU conference lasted for
about five hours).

Meanwhile, the president could have devoted his skills as a top-notch
economist and financier not to the placement of traffic policemen
(undoubtedly a very important matter that ensures the support of the
motorized electorate, but somewhat beneath the president's dignity) but to
genuine debates about the economy, especially since the latter sector,
unarmed as it is, is more important for the nation than traffic policemen
with itchy palms, who have to take bribes because of their inadequate
salaries, which are in turn caused by an equally inadequate economy.

All that the president has to do to ensure that the economy is a
top-priority item is to look at the graph charting the growth of the gross
domestic product and inflation. If we imagine that the forecast projected by
the Ministry of Economy is more or less a straight lateral line, the GDP
will plunge and inflation will soar.

If the two continue moving in the same direction, the economy will be facing
serious trouble in the fall, according to The Day's experts. In June the GDP
growth rate closely approached the zero mark and then stopped at 1.1%,
perhaps because of statisticians' efforts, while during the same period last
year the GDP grew by 19.9%.

(Explaining this glaring difference, the Cabinet of Ministers, and later the
SBU, alleged that last year's statistics were largely doctored. But it would
be better if these agencies looked forward, not backward - they would see
another figure that shows a decline in output: in the first six months of
this year Ukraine's transport facilities reduced transportation of goods by
1.7% compared to the same period in 2004.)

At the same time, inflation, which quickly offsets all social payments to
the poorest strata of the population, reached 6.4% in only six months, while
the economy ministry's outlook was 9.8% for the entire year.

Today, even the friends of the government and the president are shouting
this from the rooftops. "When is the government going to come to grips with
the real economy and develop and set in motion an efficient mechanism of
fast economic growth based on our well-known competitive advantages?"
asks Viktor Lysytsky, ex-governmental secretary in Yushchenko's cabinet in
a letter to The Day. "The answer is silence," he concludes.

This is what the president should have discussed last Tuesday at the
Ministry of Economy. He should have taken to task those in charge of the
economy for the three consecutive commodity crises in the last six months,
which have cut the ground from under the feet of entrepreneurs, who have
been unable to plan the manufacturing process, as well as for many other
things that are now modestly called "technical errors."

Moreover, a proficient economist would have asked these questions not only
of the government but himself. -30- [Action Ukraine Report Monitoring]
==============================================================
10. NEW UKRAINIAN AVIATION CONSORTIUM 'UKRAINIAN EMBRAER"
SAID TO BE AIMINIG TO COMPETE WITH EUROPEANS

INTERVIEW: With Pavlo Naumenko, Director-General
Kharkiv State Aviation Company
By Olha Kalynovska, Narodna Armiya, Kiev, in Ukrainian 20 Jul 05; p 1, 4
BBC Monitoring Service, UK, in English, Wed, Aug 03, 2005

The newly established Ukrainian vertically-integrated company, which will
incorporate the three largest aviation companies, aims to compete with
European producers, the director-general of the Kharkiv state aviation
company, Pavlo Naumenko, has said. Speaking in an interview with a military
daily, he said that the consortium, in which his company figures, has not
been created yet in practical terms.

According to him, the An-70 project has good prospects if large investments
are made, and Eastern Europe remains a market with good prospects if
Ukrainian aircraft comply with European standards.

The following is the text of the interview with Naumenko conducted by Olha
Kalynovska entitled "Ukrainian Embraer," published in the Ukrainian
newspaper Narodna Armiya on 20 July; subheadings have been inserted
editorially:

The president of Ukraine [Viktor Yushchenko] issued a decree on
establishment of the Antonov research and production association [RPA]
on 27 May of this year, and this event became the beginning of integration
processes for three enterprises: the Antonov design bureau, Kiev state
aviation plant (KSAP) Aviant and the Kharkiv state aircraft building
enterprise (KSABE).

From now on, Ukrainian aircraft building industry will be represented on
the world market by a single entity - Antonov RPA, or as it is also called,
Ukrainian Embraer.

Pavlo Naumenko, director-general of the Kharkiv state aircraft building
enterprise and one of the major initiators of integration, shares his vision
of further development of Ukrainian aircraft building industry within the
framework of a single organization.

LEGISLATIVE BASIS

[Kalynovska] Mr Naumenko, you not only initiated establishment of a single
entity on the basis of three Ukrainian aircraft building enterprises, but
you also supported a concrete form of association - consortium. The
presidential decree mentions a research and production association. To
what extent is transition from RPA to consortium a matter of principle?

[Naumenko] It is not a matter of principle at all. A consortium is a legal
form of a newly established entity. In this case, the major task is to
implement the decree of the president of Ukraine in practice. It means
actual establishment of a research and production association in Ukraine
which would be able to operate as a single entity.

One should not forget that any association has stages of development. I
would never mix them up: this is the way to be passed through by any
integration entity. As of today, this sequence of stages, or "road map",
looks as follows way: first, presidential decree on establishment of the
Antonov association, and it already exists; the next stage should be a
directive from the Ukrainian government which should be adopted in the
near future. It will be possible to speak about practical stages of
developing the association only after development of the legislative
basis for it.

THREE PRIORITY DIRECTIONS

[Kalynovska] Have the priority directions for developing the aircraft
building industry within the framework of the association been determined?

[Naumenko] KSABE has developed a number of proposals, and they have
been announced by Ukrainian President Viktor Yushchenko. We propose
to divide all Ukrainian aircraft building programmes into three groups.

The FIRST group should consist of projects in which Ukraine acts as a
self-sufficient aircraft building country and which it will be able to
develop on its own. These programmes include the creation of the new
An-148 regional passenger plane, the An-140 turboprop passenger plane,
the converted An-74 and many others.

The SECOND group consists of international projects, in particular,
manufacturing the super-dimensional An-124 Ruslan plane. We actively
support the need to renew production of this plane. Ruslan is a diamond
inherited by us, and it is insufficient just to operate these planes. The
world market demands development of this project, taking into account
new requirements. I think that this programme might have a very serious
continuation within the framework of cooperation with the world's leading
countries.

The THIRD group consists of investment projects which have a technical
interest, but as it is said, success has not smiled upon them yet. The
project for developing a military cargo plane An-70 is among them.

MILITARY AIRCRAFT PRODUCTION

[Kalynovska] What, in your opinion, might be the future of the An-70?

[Naumenko] In my opinion, this project can have very good prospects, if
serious and realistic investments are involved in it. The most important
point is that proposals on its funding have been coming and continue to
come, and there are parties interested in developing this programme.

But the approaches to implementation of the An-70 programme which
existed before have demonstrated their complete inefficiency. Not a single
serial specimen of a military cargo plane was produced in the course of
15 years, while the experimental version of the machine is still fulfilling
an experimental trials programme.

All this proves that we should drastically change our approaches towards
promotion of this project.

[Kalynovska] What place will implementation of military air programmes
have within the framework of the association?

[Naumenko] The military aircraft construction sector should develop in two
directions. First, we should understand that actual needs of the Ukrainian
Ministry of Defence. Purchases of new air equipment for Ukrainian Ministry
of Defence are known have been equal to zero in the course of many years.
This tendency should be changed.

The second direction to be developed is the creation of military hardware
for which there is demand on the world market. These can be multi-purpose
aircraft, for example, An-74T-200A or military aircraft of An-72P class for
which there is still not high demand on the demand, but we plant to "heat"
it. The whole world takes military orders, and we should join this struggle.

There is no need to design new planes "from zero level" for this purpose
because, if any plane - either An-140, or An-32, or An-74 - is equipped with
special devices which will enable the conducting of intelligence, it will be
possible to use this machine for military purposes.
Investment policy

[Kalynovska] How will the policy of attracting investments be carried out in
the newly established association?

[Naumenko] We have already fulfilled the first obligatory condition
necessary for beginning discussions with investors, and that was formation
of an integrated entity. It is something of the kind of saying "hello" when
you meet somebody. Then the work begins. But this process should not be
idealized: as soon as we establish an integrated entity, investors with bags
of money will immediately come to us the next day.

It is not like this. Only the first phase for an initial discussion has been
fulfilled, and then the rest will depend on management of the aircraft
building industry and on its ability to ensure a favourable investment
climate in this sphere.

As to KSABE itself, we have held a number of very serious talks with
representatives of the world's largest banks and powerful financial and
investment companies on attracting "long-term and inexpensive funds" for
specific aircraft construction programmes. The possibility of investing in
the Ukrainian aircraft construction industry with the help of special funds
is being considered, and very serious and wealthy countries should be their
donors.

As a rule, the only requirement brought forward to us during these talks
was: everybody wants to deal with a transparent entity which is well aware
of international business and bears 100 per cent responsibility for
manufactured output, and which is, as foreigners say, "right people" - the
right company with the right staff.

One should not forget another thing: we are talking about the association as
a state-owned organization. It has its pluses, as the state is an active
player in this sphere. But it is a drawback for some private investment
companies, as they can find their interest only in a certain part of a
project, but not, for example, in a property share involvement or in share
capital.

INTERNATIONAL COOPERATION

[Kalynovska] How realistic can be cooperation between Ukrainian aircraft
building industry and the European consortium EADS?

[Naumenko] This cooperation is possible. Relevant talks have been conducted
at the governmental level within the framework of the Paris International
Air Show. But I have told you that it is just a beginning of the discussion.

I think this discussion will become more substantial and professional after
establishment of the Antonov RPA, as in this case one integrated association
will communicate with another raising completely professional themes. I
personally see possibilities for cooperation between the Antonov RPA and
EADS in two directions: supporting each other on the markets of third
countries, along with technical, scientific and technological cooperation.

FINANCIAL POLICY

[Kalynovska] What position, in your opinion, can the Antonov Airlines
company gain in the future association? Should it be separated from the
design bureau as an entity having a different specialization?

[Naumenko] I think this company should remain within the structure of the
Antonov design bureau, as Antonov Airlines is a sponsor for carrying out
different research works in the bureau. Antonov Airlines should finance
research works in aviation sphere both now and in the future. This is the
major objective of their existence.

[Kalynovska] You say that the enterprises which are due to join the
associations during formation of the Antonov RPA will retain their financial
flows, along with their assets and liabilities, and the legal status of
plants will not change. Does it mean that only marketing departments will
actually be united?

[Naumenko] Do not confuse two notions: financial planning of activities and
"sitting on top of accounts" in its direct meaning. First and foremost, I
mean centralized financial planning of the three enterprises' activities. As
to financial flows of individual enterprises, each plant will obviously get
its own profit resulting from its activities.

Nobody is going to merge assets and liabilities of the Antonov RPA, KSAP
Aviant and KSABE: there is no need to do so. If someone does not want to
integrate, saying that KSABE has debts and their redemption will result in
decreased profitability of other plants, I can answer that everything is
absolutely different. Judging from the last court decision, it is not known
who owes who.

PROMOTION IN EUROPE

[Kalynovska] Is Europe interested in the production of the Ukrainian
aircraft building industry, and, what, namely?

[Naumenko] Of course, it is interested. But the absence of relevant
certification still hinders promotion of our production on the European
market. We are unable to resolve this issue without the Antonov design
bureau which develops machinery. This is why we welcome the presidential
decree and the statement by the Ukrainian government on the establishment
of a state corporation and its further transformation into a consortium in
order to integrate Ukrainian enterprises dealing with the development,
production and promotion of Ukrainian machinery on the world aviation
market.

However, we cannot count on the Western European market, as it was divided
between competitors long ago. On the other hand, new EU members - Eastern
European countries - need machinery similar to ours, and this is the area in
which we see realistic prospects.

[Kalynovska] To what extent is Ukrainian aircraft building produce
competitive (in comparison with European analogues)?

[Naumenko] Planes produced by us can be attributed to a new generation of
machinery. For example, the regional turboprop plane An-140-100 is the most
up-to-date development among the machines of this class. A new modification
of the An-74 plane - An-74T-200-A - does not have direct competitors on the
market at all; it is the only light transportation aircraft of its class
with short take-off and landing distance which is equipped with turbojet
engines; European analogues are inferior to it in terms of their technical
characteristics.

Perfection of the machinery produced at the plant is supported by the most
up-to-date equipment, high-quality interior and comprehensive technical
support system. This is why I can assure you that our production is
sufficiently competitive.

[Kalynovska] To what extent, in your opinion, is Ukrainian aircraft building
industry, and KSABE in particular, ready for integration into European
bodies?

[Naumenko] The integration of Ukrainian enterprises into the bodies of the
European aircraft building sector requires time and effort. Restructuring
the sector and internal increase of its competitiveness are the first
necessary priorities. This is a kind of self-protection mechanism. In
conditions whereby it is fragmented, the Ukrainian aircraft building
industry will not sustain competition from the site of powerful European
producers.

Vigorous and competitive production complying with western standards and
industrial association complying with world requirements in the areas of
quality, management, unified reporting and transparency of its work can be
created only on the basis of profound integration of Ukrainian designers and
manufacturers of technology.

National standards and regulations which regulate the operation of the
aircraft construction industry should be harmonized with European standards
at the second stage. This process will develop much easier in joint
management conditions. The transition to a qualitatively new level of
cooperation with European aircraft building organizations is possible only
after this. -30- [The Action Ukraine Report (AUR) Monitoring Service]
=============================================================
11. PRESIDENT YUSHCHENKO CALLS JOURNALIST WHO WROTE
ARTICLE ABOUT HIS SON

Ukrayinska Pravda web site, Kiev, in Ukrainian 29 Jul 05
BBC Monitoring Service, UK, in English, Fri, July 29, 2005

KYIV - Ukrainian President Viktor Yushchenko has admitted that his answer
to a question about his son at a news conference earlier this week was "too
emotional" and said that this was "a lesson to him". Yushchenko called the
journalist whom he offended at the 25 July news conference, Serhiy
Leshchenko, and suggested shaking hands.

At the news conference, Leshchenko asked him to comment on rumours that
his son lives beyond his means, but Yushchenko called him "a hitman" and
said the he "lied" in his articles.

Leshchenko authored a series of articles on the Ukrainian web site
Ukrayinska Pravda exposing the reportedly lavish lifestyle of Yushchenko Jr.
The following is the text of a report by Leshchenko posted on Ukrayinska
Pravda on 29 July:

Yushchenko's press secretary Iryna Herashchenko called Ukrayinska Pravda
today. She asked me not to switch off the phone, as the president would call
in two minutes' time. And so it happened.

Viktor Yushchenko spoke in a quiet voice, though one could feel that the
conversation was not an easy one for him. We discussed the recent
developments triggered by the publication about Andriy Yushchenko and the
harsh answers by the head of state during the press conference on 25 July.

Viktor Yushchenko said at the beginning that this case had several aspects
to it. As to his son, he said that he had a tough talk with him. Andriy
Yushchenko made conclusions and the main thing now is that he should take
time to understand what he has been through.

"In order to [help him] live through this, I want to support Andriy as much
as I can and have him near me," Yushchenko Senior said.

He also said that his answer to my question on 25 July "was emotional" and
that "this was a lesson" to him. It was clear from his voice that it was not
easy for the president to say those words. I said that I understand him and
bear no grudge.

Yushchenko suggested extending hands to each other and "turning the leaf
in this conflict", which was started during the press conference.
Making use of Yushchenko's own expression, I said that his hand would not
hang in the air. We shook each other's hands on the line.

Yushchenko added that the consequences of this story may be used to
destabilize the situation in the country. To that, I answered that this
definitely was not the aim we pursued with our articles.

Yushchenko suggested a meeting during my trip to Crimea tomorrow with
a journalist team covering the Cabinet of Ministers' regional meeting. I
replied that it is not worth troubling him when he is with his family.

I also assured the president that the article in Ukrayinska Pravda was not
ordered or paid for by anybody. He sounded as if he accepted my
arguments. At the end of our conversation, Yushchenko said, "See you".
=============================================================
Send in a letter-to-the-editor today. Let us hear from you.
=============================================================
12. DESIGNER OF YUSHCHENKO'S POLITICAL BRANDS: PRESIDENT
WAS ABSOLUTELY RIGHT TO PASS ORANGE REVOLUTION
BRANDS TO HIS SON

UNIAN, Kyiv, Ukraine, Wednesday, 3 August 2005

KYIV - Yaroslav Lesiuk, who was the deputy chief of the Victor Yushchenko's
Central HQ during the presidential election and developed the style and
concept of the political advertising during the election campaign, is
convinced that the President had right to pass the brands of the Orange
Revolution to his son Andriy.

According to the press-service of the People's Union Our Ukraine, Ya.Lesiuk
claimed this, commenting on the information about the author's right of the
President's son on the symbols of the election campaign.

"From the point of view of justice, only Victor Yushchenko has the right to
use the "Orange" brands. They were developed for him and through him. If
there was another candidate, there would have been another symbols, there
would not have been any Yushchenko, any horseshoe, anything else. And
Yushchenko had an absolute right to register these brands on his son or his
daughter", believes Ya.Lesiuk.

"Mykola Katerynchuk, as deputy HQ chief for legal issues, was a temporary
"technical" owner of the brands - it was more convenient. However, after the
election, the author's right , without any doubt, was due to be returned to
Yushchenko. Victor Andriyovych did not register it on himself, but gave it
to his son, and it is absolutely normal", stressed Ya.Lesiuk.

According to Guardian, Mykola Katerynchuk, a former legal adviser to the
Yushchenko campaign and now a senior tax official, said he had personally
transferred the copyright to Andriy Yushchenko, the president's 19-year-old
son, after the third and final round of elections in December.

Questions are now being asked as to how much money these highly popular
logos have generated for the Yushchenko family.

Mr Katerynchuk told the Guardian: "These logos were designed by Viktor
Yushchenko. I personally gave the right to use the signs to Andriy
Yushchenko."

He said the logos were hugely popular abroad as well as in Ukraine. "I can't
say that they have made Andriy wealthy, but he is an enterprising young guy.
We'll see when he makes his tax declaration."

President Yushchenko's press service said that the family of Mr Yushchenko
had been given the legal rights to the symbols before the 2002 parliamentary
elections to "protect them from inappropriate use". A spokesman would not
say why Andriy was chosen as the beneficiary or if he had made any money
from them. -30- [The Action Ukraine Report Monitoring Service]
=============================================================
13. UKRAINE LEADER'S SON IN NEW CONTROVERSY

Agence France Presse (AFP), Kiev, Ukraine, Wed Aug 3, 2005

KIEV - Controversy has enveloped the son of Ukraine President Viktor
Yushchenko for a second time in a week, amid reports that the 19-year-old
owned the copyright to the lucrative trademarks of last year's "orange
revolution."

The new scandal erupted as the legal chief of Yushchenko's campaign tried
to put to rest a controversy that flared last week, after local media
reported that Yushchenko's eldest son, Andriy, appeared to be living beyond
his declared means.

"Andriy Yushchenko has author's rights to all political brands that were
used during the 'orange revolution,'" Mykola Katerynchuk was quoted as
saying during an Internet conference. "That's for those who are trying to
count up the revenues of Andriy Yushchenko's budget," he said.

But his remarks unleashed a new furor, as observers wondered why proceeds
from sales of paraphernalia from a peaceful "people's revolution" would go
toward funding expensive cars and hefty restaurant bills of its leader's
son.

"On what basis does Andriy Yushchenko own the author's rights on the
'orange revolution's' political brands," Iryna Bekeshkina, a respected
sociologist, wrote in the muck-raking Internet newspaper Ukrainska
Pravda (Ukraine's Truth), which supported Yushchenko's presidential bid.

The cheerful symbol of Yushchenko's campaign -- the word "Tak!" (Yes!)
written across a horseshoe on an orange background -- was ubiquitous
during the "orange revolution" that held the world's headlines for weeks
last year as hundreds of thousands of protestors massed in Kiev to protest
fraud during a presidential election.

Ever since, it has also driven a lively commercial trade -- including
T-shirts, coffee mugs, even cans purported to contain air from Kiev's
Independence Square that was the revolution's epicenter. Although no exact
figures are available on the size of such sales, experts say they could
reach millions of dollars.

"The market is estimated to be in the millions of dollars," the Kommersant
daily quoted Andriy Burlayenko, an analyst from a Ukrainian consulting
company, as saying, with several others echoing the view.

Yushchenko's spokeswoman denied that the president's family had received
any revenues from the brisk sales of "orange revolution" paraphernalia. "All
of the trademarks were registered by the family with the goal of protecting
them" from misuse during the election campaign, Yushchenko's spokeswoman,
Iryna Gerashchenko, told AFP. "I emphasize that there was never any intent
to use them commercially and the family has never received any revenues"
from the sales, she said.

But information that Andriy Yushchenko was the owner of the revolutionary
trademarks touched a sore nerve in Ukraine after last week's revelations
that the university student drives a BMW reportedly worth well over 100,000
euros, talks on a cell phone that's said to cost at least 4,000 euros, and
frequents posh restaurants and clubs where he spends hundreds of dollars
a night.

"Nobody wants another scandal and interminable discussions," Bekeshkina
wrote. "But any revenue from such 'privatization of author's rights' is too
brazen."

Said Nestor Shufrich, an opposition parliament deputy: "The authorities have
already made a mockery of the idea of the 'orange revolution.'... Now we see
the conversion of this idea into cash."

It was not clear why Yushchenko chose his son to hold the coveted
copyrights -- Yushchenko's spokeswoman did not provide a reason and
Katerynchuk's spokesman shrugged off the topic. "What's the big deal,"
Serhiy Bibik told AFP. "Parents always help their children." -30-
-------------------------------------------------------------------------------------------------------
FOOTNOTE: It was very surprising to many Ukrainian experts to see
the Agence France Presse (AFP) news service call Ukrainska Pravda
(Ukraine's Truth), a "muck-raking Internet newspaper." These experts
feel this is not professional behavior on the part of AFP and also is
not accurate at all. Ukrainska Pravda has performed as a gutsy,
innovative, honorable member of the news media in Ukraine. EDITOR
=============================================================
14. SON CASHES IN ON ORANGE REVOLUTION

Nick Paton Walsh in Moscow, The Guardian
London, United Kingdom, Wed, Aug 03, 2005

The symbols of Ukraine's orange revolution last year have been registered
as profitable trademarks in the name of the eldest son of the revolution's
leader, Viktor Yushchenko.

Crowds protesting over the fraudulent presidential elections of November
last year were decorated with a series of opposition logos, including the
Tak! logo (Yes! in Ukrainian) and a downward-facing horseshoe. The logos
were predominantly on backgrounds of orange - the colour of the opposition.

Mykola Katerinchuk, a former legal adviser to the Yushchenko campaign and
now a senior tax official, said he had personally transferred the copyright
to Andriy Yushchenko, the president's 19-year-old son, after the third and
final round of elections in December. Questions are now being asked as to
how much money these highly popular logos have generated for the
Yushchenko family.

Andriy has recently been the focus of media scrutiny because of his lavish
lifestyle. The student claims he has a consultancy job that enables him to
rent a BMW from a friend, afford a personal bodyguard, pay restaurant bills
with large rolls of cash, and carry a platinum mobile phone worth up to
pounds 20,000.

The Ukrainskaya Pravda newspaper, which first reported Andriy's lavish
lifestyle, carried news of the logos' ownership under the headline: "The
privatisation of revolution by Yushchenko's son?" The claim may foment
dissatisfaction with the fledgling administration, whose critics say they
are repeating the nepotism and corruption of their ousted predecessors.

Mr Katerinchuk told the Guardian: "These logos were designed by Viktor
Yushchenko. I personally gave the right to use the signs to Andriy
Yushchenko." He said the logos were hugely popular abroad as well as in
Ukraine.

"I can't say that they have made Andriy wealthy, but he is an enterprising
young guy. We'll see when he makes his tax declaration." He added that the
Tak! brand of vodka was also very popular during the election and that he
had been suspected of profiting from its production.

"But the symbol was illegally used [on the vodka]," he said, "and I had
nothing to do with it." Mr Katerinchuk added he would resign from his post
at the tax service tomorrow because he did not agree with the
administration's decision to "preserve the old tax system".

President Yushchenko's press service said that the family of Mr Yushchenko
had been given the legal rights to the symbols before the 2002 parliamentary
elections to "protect them from inappropriate use". A spokesman would not
say why Andriy was chosen as the beneficiary or if he had made any money
from them. (www.guardian.co.uk/ukraine) -30-
=============================================================
15. OPEN LETTER TO THE JOURNALIST COMMUNITY OF UKRAINE
President of Ukraine and questions regarding his son

FROM: Martin Nunn, Journalist, Public Relations Consultant
Kyiv, Ukraine, Tuesday, August 2, 2005
Published By The Action Ukraine Report (AUR), Number 536
Washington, D.C., Thursday, Aug 4, 2005

Dear Morgan

Please find attached my letter to the journalistic community of Ukraine
regarding the current conflict between Ukraina Pravda and the President
so widely reported in the media and in your excellent Action Report.

Best regards and keep up the good work. Martin
-------------------------------------------------------------------------------------------------------------
OPEN LETTER TO THE JOURNALIST COMMUNITY OF UKRAINE

Dear Colleagues:

Over the past week I have followed with dismay the gathering storm between
certain factions of our noble profession and the President of Ukraine over
his reaction to questions regarding his son, thus, with the greatest of
respect, I ask you to spare a moment to consider the following.

All of us who have teenage children, particularly boys, will know well that
they are capable of spectacularly thoughtless acts. It is a part of growing
up. However I submit that it is not for society to admonish any young man,
that is the role of his parents and in this case I am sure that his ears are
still ringing to this day.

As journalists we might well question how a 19 year old comes to be driving
a $120,000 sports car and the wisdom of allowing such an inexperienced
driver to handle such power, but that is all. In my opinion the question
posed to the President in what was a serious press conference to discuss
national issues was unprofessional, untimely and opportunistic.

Should we really be surprised if a father already acutely embarrassed and
under considerable pressure should act so out of character? As a father I
too would be rightly indignant. In this case the President spent
considerable time in answering the question and even wrote to the
publication concerning his irritated attitude. What more, good colleagues,
do you want?

I ask you to consider that the only reason such a question is possible in
Ukraine today is because of the freedom enshrined so deeply in the
democratic process that we all fought for in Maidan late last year. Now
think back, where were the howls of journalistic protest to wanton rape of
the nation by the former regime and their family members for over the
previous decade.

Perhaps we should also pause to remember here our colleague Gregory
Gongadza who paid with his life for asking overly inquisitive questions not
three years ago. Yet now some seek pillory the President because he
became irritated with a journalists! Are your memories so short?

Before we seek to demand respect from the President perhaps it is we who
should first demonstrate our respect. In most countries of the world the
Head of State or government is addressed as 'Mr. President' or 'Mr Prime
Minister'. I have yet to hear our US colleagues address President Bush as
'George' or our British colleagues address the Prime Minister as 'Tony'.

Thus I ask why Ukrainian journalists feel it is acceptable to address the
President of Ukraine by his Christian name and patronymic? The address
'Mr. President' is not specifically showing respect to the person but to the
office of President of the nation; the highest democratically elected office
in the land.

If we cannot show due respect the office of the President what does it say
of our respect for the country and its people? Freedom of the press does
not mean freedom to behave badly and in this case the journalist in question
stepped well over the line.

Finally; before we as journalists sign petitions demanding apologies from
the President we should first put our own house in order. Last year
according to official statistics $40 million was spent in our own newspapers
on what is euphemistically called 'PR articles'. These articles were
actually corporate and political propaganda disguised as journalism.

Propaganda specifically designed to mislead and deceive the public. To
put this in perspective it is equal to over 200 articles a day. In any
other civilized democratic nation journalists would be up in arms against
their editors and publishers for so openly supporting such erosion of
democratic values and mass public fraud, yet in Ukraine we are silent.

I ask you, respected colleagues 'Let he is without guilt cast the first
stone', for we have more important issues at hand and I, as one journalist,
offer to the President of this great nation my apology on behalf of all my
colleagues for their uncharacteristic behaviour. Journalism is a noble
profession that has earned its place in free society through the sacrifices
of our colleagues. Let us not deface their legacy with such irrelevant
egotism.

Yours sincerely

Martin Nunn MCIPR
Journalist and Chief Executive
Whites International Public Relations
Kyiv, Ukraine
---------------------------------------------------------------------------------------------------------
Martin Nunn is a British journalist and public relations consultant who has
been resident in Ukraine for 13 years. If you would like to add your support
or comment to his views please respond to martin.nunn@wipr.com.ua.
=============================================================
16. YUSHCHENKO'S FAMILY PROBLEMS

ANALYSIS: By Walter Prochorenko, PhD.
Paramus, New Jersey, Thursday, July 28, 2005
Published by The Action Ukraine Report (AUR), Number 536
Washington, D.C., Thursday, August 4, 2005

Anyone who has ever been to Kyiv and sat at one of the outdoor café's or
restaurants in Kyiv's tiny "Passage" will certainly understand the saying
that appears at the end of each of The Action Ukraine Reports: "Power
Corrupts and Absolute Power Corrupts Absolutely".

"Passage" is where one sees the offspring of Ukraine's power elite racing
up and down this 100 meter street past elderly strollers and baby carriages
at reckless speeds with little regard for life or property. Sadly this is a
reflection of the quickly accumulated money and power that these brats
flaunt in the face of Ukraine's poorer public.

It is therefore no surprise that Andriy Yushchenko, the son of the
President, may have gotten caught up in the "peer pressure" world of
Ukraine's "kruty". Rather than setting an example for the rest of the
country as do many (but obviously not all) of the current world leader's
children, it appears that Andriy may have chosen the path of least
resistance.

This is very sad for the simple reason that it may undo many of the
exemplary and heroic action of his father. Yesterday's heroes can very
easily become today's scapegoats as it is far easier for people to delve
in scandals than to remember good deeds.

All of us are entitled to our mistakes, but leadership in democratic
societies, as in the case of former President Clinton, require formal and
public apology and openness with the public. Fighting the media, especially
the one which supported Yushchenko during the Orange Revolution (such as
the Internet newspaper Ukrayinska Pravda) is a no-win situation.

The result can be disastrous for Ukraine's reform agenda and for the
public's confidence that Ukraine's present administration will maintain
policies of openness and promote media independence. Already the
protests from the media have started.

Far be it for me to preach what President Yushchenko should do, but
Ukraine is at a crucial crossroad in its transition process to a true
democracy and economic reform. If Ukraine's present leaders are
committed to this process, they must strive to reign in and perhaps
discipline their family members to ensure that a proper example is set
for the country.

Leadership can be rewarding but it is also a harsh burden that requires the
commitment and cooperation of all the members of the leader's family.
Otherwise the perception will be that if such a leader cannot control his
own family, then how can he rule and govern a large and difficult country
like Ukraine. -30- [The Action Ukraine Report]
-----------------------------------------------------------------------------------------------------
Walter Prochorenko is a businessman who spent over 8 year in Ukraine
in private enterprise which included consulting, real estate development,
business appraisals for banking interests, and construction. He has just
finished a doctorate in International Business with his main area of
research: business in Ukraine. E-Mail: prowalt@yahoo.com
=============================================================
17. FIRST SATELLITE TV CHANNEL AIMED AT SPREADING ORTHODOX
FAITH IN RUSSIA 'SPAS' IS LAUNCHED, WANTS TO DEVELOP
NETWORK OF CABLE CHANNELS ACROSS UKRAINE

EDITORIAL ANALYSIS: By Len Walker
BBC Monitoring Media Services
BBC Monitoring Research, UK, Mon, Aug 01, 2005

The first satellite television channel aimed at spreading the Orthodox faith
in Russia, Spas (Saviour) television, launched on 28 July. The main genres
of the channel will be news, current affairs, talk shows, documentaries and
educational programmes.

The station's editor-in-chief, Ivan Demidov, has stated that 40 per cent of
airtime will be devoted to Russian Orthodox topics, while the remaining 60
per cent will emphasize "public" broadcasting.

Initially broadcasting daily for 12 hours via the Gazprom-owned satellite
company NTV Plus, and cable channels, Spas has a potential audience of
1,200,000. The channel plans to increase its broadcasting hours and develop
a network of cable channels across Russia and Ukraine.

Quoted by ITAR-TASS news agency, Demidov has said that Spas's initial
funding, from unnamed private investors, meant that it is too early to speak
of the channel as federal in scope.

While Demidov has said commercials should cover the initial operating costs,
advertising will be Russo-centric. Media observers comment that Spas's
opaque funding must be secure if the channel can afford to exclude
commercials it deems inappropriate, such as for beer. The cost of satellite
transmission alone is 250,000 dollars a year and the audience for Spas
television is likely to be small, reported Nezavisimaya Gazeta.

Programme presenter Alexander Dugin has been reported as saying the
channel will fill a gap in Russia's media, aiming to rebuild the country's
identity. Aleksandr Krutov, deputy chairman of the State Duma Committee
for Information Policy, believes Spas is an alternative to state and private
television channels.

An article in the Washington Times described the Russian Orthodox Church as
"a vanguard of Russian influence in Ukraine". While the Ukrainian church has
split into three factions, President Yushchenko, driven by political
concerns, has called for an independent, united, national Orthodox church.

Spas has received the blessing of the Patriarch of Moscow and All Russia,
Aleksiy II, who has regular meetings with President Putin. The negotiations
for Spas to broadcast via cable channels in Ukraine will, if successful,
give the Russian Orthodox church a platform to express its values.

THEMATIC CHANNELS

The launch of Spas is part of a new trend of thematic TV stations launching
in Russia. Earlier in 2005, a new TV channel, Zvezda (Star), was launched to
promote the Russian army. Zvezda is a commercial channel founded by the
Defence Ministry and offering a mix of news, entertainment and
military-themed programming aimed at promoting patriotic values.

Stations such as Spas and Zvezda are promoted from the heart of the
Russian government, broadcasting a mix of programmes to encourage a
"nation-building" ethos. In July 2005, the Moscow Times reported Prime
Minister Fradkov's approval of a tripling of government spending for
"patriotic education" to some 17m US dollars between 2006-2010.

This is to encourage media sources (including television and newspapers) to
carry programming that promotes nation-building. Minister of Culture Sokolov
has spoken about the need for an Orthodox Church channel, and Minister of
Defence Ivanov, while lamenting the general vulgarity of Russian television,
has called for more patriotic programmes to be broadcast.

The president's adviser to the media, Mikhail Lesin, has called for a
dedicated news channel broadcast on the frequencies currently occupied by
Centre TV. The creation of a 24-hour global TV news channel to improve
Russia's image abroad, under the auspices of the All-Russia State TV
Company (VGTRK), is also under way.

Russia Today is due to launch later this year and is being described by
organizers as "a new Russian CNN", although some analysts dismiss the
venture as little more than Kremlin propaganda.

As Russia prepares for parliamentary elections due to be held in 2007, the
Kremlin's drive for new patriotism in the media could see more such channels
launching in the months to come. -30- [The Action Ukraine Report (AUR)]
=============================================================
18. UKRAINIAN PARLIAMENTARY SPEAKER TO BE
PROGRESSIVELY MARGINALIZED
Tymoshenko refuses election alliance with Lytvyn

ANALYSIS AND COMMENTARY: By Taras Kuzio
Eurasia Daily Monitor, Volume 2, Issue 151
The Jamestown Foundation
Washington, D.C., Wednesday, August 3, 2005

While President Viktor Yushchenko remains outwardly confident that his Our
Ukraine party, Prime Minister Yulia Tymoshenko's bloc, and parliamentary
speaker Volodymyr Lytvyn's People's Party (NPU) will enter the 2006
parliamentary elections as a coalition, this scenario is now unlikely
(Ukrayinska pravda, July 25).

As a condition of joining Yushchenko in the 2006 election, Tymoshenko has
demanded that Lytvyn be excluded. Lytvyn's unwillingness to support the
adoption of WTO legislation was the straw that broke the camel's back for
her. Tymoshenko accused Lytvyn of playing the opposition against the
authorities and of advising factions not to vote for the WTO legislation as
a single package.

During a recent joint meeting Yushchenko, Tymoshenko, and Lytvyn discussed
the need for the "harmonization of parliamentary processes" (Ukrayinska
pravda, July 25). This is a reference to not repeating the problems found in
parliament in June and July, when it discussed the WTO-required legislation.

After parliament failed to adopt a large proportion of the bills, the
government issued a resolution condemning parliament and Lytvyn in
particular (Ukrayinska pravda, July 13; Zerkalo Nedeli/Tyzhnia, July 16).

The government statement accused Lytvyn of being in league with "destructive
political forces in parliament" (kmu.gov.ua, July 13). First Deputy Prime
Minister Mykola Tomenko accused Lytvyn of working with former president
Leonid Kuchma to destabilize parliament and discredit the new authorities
(ERA TV, July 14).

Tymoshenko's dislike for Lytvyn is magnified by her equal dislike for Petro
Poroshenko, secretary of the National Security and Defense Council, who acts
as Lytvyn's lobbyist within the Yushchenko camp. Their enmity has only grown
since the release of an audiotape secretly made in Kuchma's office by former
presidential guard Mykola Melnychenko.

Poroshenko denied the authenticity of the tape and, in his usual fashion
(see EDM, July 27), claimed it was part of a "konspiratsiya" by former
Russian oligarch Boris Berezovsky, who funded the transcription of the
Melnychenko tapes. Poroshenko claimed that Berezovsky is working with
Kuchma to divide the Yushchenko coalition (Ukrayinska pravda, July 7 and
21).

The tape recorded a conversation between Poroshenko and Kuchma on July
7, 2000, and contains two unpleasant moments. First, Poroshenko swears
his loyalty to Kuchma: "I am a member of your team! I will obey any of your
orders!" Poroshenko declares. "I have made a choice once in my life and
there will be no change" (Ukrayinska pravda, July 6).

Second, and far worse for Poroshenko, the recording also provides details of
Poroshenko and Kuchma's discussion on how to undermine then First Deputy
Prime Minister Tymoshenko (in Yushchenko's government) and her
parliamentary faction. After criminal charges were filed against her,
Tymoshenko was arrested and imprisoned briefly in February 2001.

It is not coincidental that very soon after the tape became public, Security
Service (SBU) Chief Oleksandr Tyrchynov, Tymoshenko's right-hand man in
her Fatherland Party, disclosed that the SBU was authenticating the
Melnychenko tapes. This is the first occasion that the tapes have been
officially examined in Ukraine.

Melnychenko told EDM that he believes Poroshenko is blocking the
authentication of his tapes because he fears further details will emerge
regarding his, and Lytvyn's, dealings with Kuchma in the 1990s. This, in
turn, is holding up progress in the investigation into the murder of
journalist Heorhiy Gongadze in fall 2000.

Copies of Melnychenko's tapes were obtained from Hryhoriy Omelchenko,
head of the parliamentary commission to investigate the Gongadze case.
Omelchenko is himself a member of Tymoshenko's Fatherland Party.

Lytvyn has already predicted, and Melnychenko has privately confirmed to
EDM, that further disclosures of Lytvyn's abuse of office under Kuchma will
be made public this fall. These will include excerpts dealing with the
alleged involvement of Lytvyn, who was then head of the presidential
administration, in the murder of Gongadze.

The final nail in the coffin of the alliance with Lytvyn will be the
annulment of constitutional reforms agreed in December 2004 as part of a
"compromise package" during the disputed presidential elections. These
constitutional reforms would transfer some executive power to parliament, a
move Lytvyn supports. Tomenko advised Lytvyn to remember that Ukraine
had only one president, Yushchenko, and not himself (UNIAN, July 14).

In the fall the Yushchenko-Tymoshenko coalition is likely to file an appeal
with the Supreme and Constitutional Courts to annul the constitutional
reforms. They will argue that the adoption of the reforms was undertaken
unconstitutionally in only one parliamentary session. Changes in the
constitution are required to be adopted over two parliamentary sessions, the
first time with a minimum of 225 votes and the second with 300 votes.

The annulment of the constitutional reforms would lead to a rift between the
Socialist Party (SPU) and Lytvyn's People's Party of Ukraine, which support
reforms and Our Ukraine, Tymoshenko, and First Deputy Prime Minister
Anatoliy Kinakh's Party Industrialists and Entrepreneurs (PPU), who oppose
them. Poroshenko is therefore becoming increasingly isolated within Our
Ukraine by continuing to support the constitutional reforms and an alliance
with Lytvyn.

Hostility to working with Lytvyn in the 2006 election runs deep among local
branches of Our Ukraine, which accuse Lytvyn's NPU of becoming a haven for
former Kuchma officials afraid of being charged with criminal offenses. This
opposition to working with Lytvyn and members of the former Kuchma camp
has also pushed national democratic parties who were members of the Our
Ukraine bloc in the 2002 election closer to Tymoshenko.

A break with Lytvyn over constitutional reforms, coupled with Tymoshenko's
refusal to countenance entering a 2006 election coalition with him, will
prove to be a crisis for both Lytvyn and Poroshenko, his main lobbyist in
Our Ukraine. -30- [The Action Ukraine Report Monitoring Service]
\============================================================
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"THE ACTION UKRAINE REPORT - AUR"
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"THE ACTION UKRAINE REPORT - AUR" is an in-depth, private, non-
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Additional readers are always welcome.

The text and spelling found in the articles is that which was distributed by
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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
----------------------------------------------------------------------------------------
Director, Ukrainian Federation of America (UFA)
Coordinator, Action Ukraine Coalition (AUC)
Senior Advisor, U.S.-Ukraine Foundation (USUF)
Chairman, Executive Committee, Ukraine-U.S. Business Council
Publisher, Ukraine Information Website, www.ArtUkraine.com
& www.ArtUkraine Information Service (ARTUIS)
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Power Corrupts and Absolute Power Corrupts Absolutely.
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