"THE ACTION UKRAINE REPORT - AUR"
An International Newsletter
The Latest, Up-To-Date
In-Depth Ukrainian News, Analysis, and Commentary

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

INDEPENDENCE DAY TOMORROW IN UKRAINE!
Wednesday, August 24, 2005
14th Anniversary of the Restoration of Ukrainian Independence in 1991
Ukraine first declared Independence on January 22, 1918

"THE ACTION UKRAINE REPORT - AUR" - Number 545
AUR published in Kyiv, Ukraine, TUESDAY, August 23, 2005

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

1. PRESIDENT YUSHCHENKO ADDRESSES UKRAINIAN DIPLOMATS
By Natalya Kostina, Yana Lemeshenko
Ukrinform, Kyiv, Ukraine, Mon, Aug 22, 2005

2. UKRAINIAN PRESIDENT PLEDGES [ONCE AGAIN] TO CREATE
ATTRACTIVE CLIMATE FOR INTERNATIONAL BUSINESS
AP Worldstream, Kiev, Ukraine, Monday, Aug 22, 2005

3. "BORN IN THE USA: THE FIRST LADY OF UKRAINE"
INTERVIEW with Kateryna Yushchenko
By Tatiana Sorokko, Harper's Bazaar magazine
New York, New York, Saturday, August 20, 2005

4. INDEPENDENCE DAY CELEBRATIONS
Press office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Wednesday, August 24, 2005

5. SECRETARIAT DECIDES TO HOLD RECEPTION FOR PRESIDENT
ON OCCASION OF INDEPENDENCE DAY IN SOFIA KYIVSKA
Ukrainian News Agency, Kyiv, Ukraine, Monday, August 22, 2005

6. UKRAINE'S CENTRAL BANK ACCUSES BANKS WITH FOREIGN
CAPITAL OF ATTACKS ON THE HRYVNIA CURRENCY
REUTERS, Kiev, Ukraine, Tuesday August 23, 2005

7. MOODY'S UNVEILS NEW BANKING SYSTEM OUTLOOK ON UKRAINE
Interfax-Ukraine, Kyiv, Ukraine, Monday, August 22, 2005

8. PRESIDENT SAYS UKRAINE WILL JOIN TRADING BLOCK WITH
RUSSIA, BELARUS AND KAZAKHSTAN
AFX Europe (Focus), Moscow, Russia, Monday, Aug 22, 2005

9. UKRAINIAN EU INTEGRATION MINISTER HOPES FOR MARKET
ECONOMY STATUS BY DECEMBER
Interfax-Ukraine news agency, Kiev, in Russian 1242 gmt 22 Aug 05
BBC Monitoring Service, UK, in English, Mon, Aug 22, 2005

10. RUSSIA AND UKRAINE STILL SPLIT ON GAS SUPPLY TERMS
ITAR-TASS news agency, Moscow, in Russian 0429 gmt 23 Aug 05
BBC Monitoring Service, UK, in English, Tue, Aug 23, 2005

11. GERMAN INSURANCE GROUP PLANNING TO EXPAND INTO
UKRAINE, SEES MARKET POTENTIAL THERE
Suddeutsche Zeitung, Germany, Mon, Aug 22, 2005

12. DUTCH INVESTMENT FUND BUYS STAKES IN TWO
UKRAINIAN CEMENT COMPANIES
IntelliNews-Ukraine Today, Kyiv, Ukraine, Mon, August 22, 2005

13. UKRTELECOM PRIVATIZATION:
DOUBTFUL BENEFITS OF MOBILE LICENSE
ANALYSIS AND COMMENTARY: Roman Bryl, Ukraine Analyst
Andrew Afanasiev, CIS Senior Analyst
IntelliNews - Ukraine This Week, Kyiv, Ukraine, Mon, Aug 22, 2005

14. UKRAINE/RUSSIAN INVESTORS BEAT WEST ON ITS HOME TURF
By Conor Humphries, Staff Writer, Moscow Times
Moscow, Russia, Tuesday, August 23, 2005

15. KHARKIV TRACTOR PLANT TO OPEN REPRESENTATIVE OFFICE
TO PROMOTE BUSINESS ONTO EUROPEAN AND ASIAN MARKETS
Interfax-Ukraine, Kyiv, Ukraine, Monday, August 22, 2004

16. SOFTLINE SOFTWARE COMPANY UPGRADES UKRAINE'S
INTERNAL AFFAIRS MINISTRY'S WEBSITE
Ukrainian News Agency, Kyiv, Ukraine, Thu, August 18, 2005

17. AES RIVNEENERHO POWER DISTRIBUTION COMPANY DECIDES
TO INCREASE STATUTORY FUND TO UAH 21.3 MILLION
Ukrainian News Agency, Kyiv, Ukraine, Fri, August 19, 2005

18. LARGE WINERY UNDER CONSTRUCTION IN CRIMEA
By Alexei Voskresensky The Ukrainian Times
Kyiv, Ukraine, Thursday, August 18, 2005

19. UKRAINE APPROVES USD 100 MILLION ROAD CONSTRUCTION
LOAN FROM GERMANY'S DEUTSCHE BANK
New Europe, Athens, Greece, Mon, August 22, 2005

20. MEETINGS IN CRIMEA, GRUMBLING IN RUSSIA
Ukrainian President Victor Yushchenko, Lithuanian President
Valdas Adamkus, Polish President Aleksander Kwasniewski,
and Georgian President Mikheil Saakashvili
By Christina Tashkevich, The Messenger
Georgia's English Language Daily
Tbilisi, Georgia, Monday, August 22, 2005, #156 (0930)

21. "MURKY SEAS"
Vision put forth by Yushchenko and Saakashvili
Turkey's Swing Towards Russia
COMMENTARY: by Transitions Online (TOL)
Prague, Czech Republic, Mon, 22 August 2005

22. UKRAINIAN PRESIDENT VISITS PRIVATE FARM AGROEKOLOGIA
Rich harvests of ecologically pure products
Press Office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Wednesday, August, 17, 2005

23 UKRAINIAN PRESIDENT VICTOR YUSHCHENKO VISITS
NATIONAL MUSEUM AND SCHOOL OF POTTERY IN OPISHNYA
Press Office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Wednesday, 17 August 2005

24. AUSTRALIA'S UKRAINIAN COMMUNITY HAIL UKRAINIAN GRECO-
CATHOLIC CHURCH'S MOVE TO HAVE SEAT IN CAPITAL, KYIV
Ukrinform, Kyiv, Ukraine, Monday, August 22, 2005
=============================================================
1. PRESIDENT YUSHCHENKO ADDRESSES UKRAINIAN DIPLOMATS

Natalya Kostina, Yana Lemeshenko
Ukrinform, Kyiv, Ukraine, Mon, Aug 22, 2005

KYIV - Speaking in the 7th deliberations of Ukrainian ambassadors to
foreign countries on Monday, President Viktor Yushchenko said he has
signed a decree on the Foreign Ministry's coordinating role in pursuing
the Ukrainian State's foreign policies.

The new authority views the Ministry of Foreign Affairs as the State's only
authorized institute in charge of pursuing foreign policies. According to
the President, he signed the said decree on Monday, August 22. As
President Yushchenko noted, the document's details will be polished in
a couple of hours. The announcement was hailed by the diplomats, who
applauded the President.

President Yushchenko called upon the diplomats to pursue assertive and
pro-active policies in informing both authorities and business circles in
countries of their accreditation about Ukraine's opportunities and
capability. President Yushchenko stated Ukrainian diplomacy's chief
task as promoting Ukraine's opportunities abroad.

According to the Head of State, Ukraine's foreign political course is
undergoing serious changes, including changes in Ukraine's trade-economic
relations with other countries. These changes necessitate personnel rotation
within the diplomatic corps, which must be perceived matter-of-factly,
President Viktor Yushchenko noted.

Sizing up his visits abroad and top-level meetings there, President
Yushchenko said these had testified to Ukraine's unique opportunities, yet,
as he felt, these new opportunities have not yet been duly capitalized upon.

Besides, Viktor Yushchenko noted, there has been a shortage of adequate
initiatives on the part of Ukraine. As the Head of State reminded the
diplomats, the new Ukrainian authority has certain attainments to its
credit. In particular, the amount of investments has increased fourfold.

In September several major projects will be launched in Europe, some of
which involve investments in Ukraine's dwelling sector, public utilities.
Besides, procedures to allot non-agricultural lands are being changed.

President Yushchenko specifically dwelt on Ukraine's policies in
privatization of strategic state-owned enterprises. As the President assured
the audience, these policies will be public, transparent and orderly.

Special rules will be drawn out with regard to such entities' privatization,
President Yushchenko noted, which will be enterprise-specific.

As the President told the audience, the Ukrainian State's fiscal policies
will be changed and relations between the State Tax Administration and
businesses will be simplified.

At the same time President Yushchenko stressed that today's economic
situation in Ukraine is favorable, major macroeconomic gains have been
preserved, there is no budgetary deficit, pricing policies are stable, same
as the hryvnia's exchange rate versus major foreign currencies.

Viktor Yushchenko stated the new Ukrainian authority's further goal as
formalizing Ukraine's attainments in Ukraine's market economy status and
WTO membership this year, as well as launching talks with the EU toward
creating a free trade zone.

As President Yushchenko stressed, attractive projects, which allow Ukraine
to get engaged in a serious dialogue, same as relevant analytical materials
and feasibility studies must always be present on the ambassadors' desks.

As often there are no such materials the outer world remains largely
ignorant about Ukraine's capability and opportunities, the Head of State
noted.

As Viktor Yushchenko specifically accentuated, nobody has denied the
diplomats' right to initiative. There are nations, he said, with which
Ukraine has established diplomatic relations, but in which no seminars, no
exchanges of delegations have occurred, and in which bipartite mixed
commissions have not met for the past three to five years.

In this connection the President called upon the ambassadors to step up
their work toward facilitating such workshops, conferences, toward
promoting cultural, humanitarian and other contacts between Ukraine and
the countries of their accreditation. -30- [Action Ukraine Report]
=============================================================
2. UKRAINIAN PRESIDENT PLEDGES [ONCE AGAIN] TO CREATE
ATTRACTIVE CLIMATE FOR INTERNATIONAL BUSINESS

AP Worldstream, Kiev, Ukraine, Monday, Aug 22, 2005

KIEV - Ukraine will simplify tax and fiscal policies in order to attract
more international investment, President Viktor Yushchenko pledged on
Monday.

At an annual meeting with Ukrainian diplomats posted abroad, Yushchenko
said simplified fiscal policy and tax regulations would help bring badly
need investment and capital to the former Soviet republic. "Our task is to
create such a plan that would attract foreign business," he added.

The Ukrainian leader also said that a lack of knowledge about Ukraine
broad remains a problem and he urged diplomats to do more to advertise
business opportunities.

Ukraine is trying to revamp laws and regulations to meet Western standards
and eradicate the corruption, nepotism and red tape that flourished under
the administration of former President Leonid Kuchma.

Earlier this year, the parliament passed legislation aimed at cracking down
on piracy of CDs and DVDs and other protections for intellectual property
rights. The legislation was intended to help advance the government's goal
of joining the World Trade Organization.

Yushchenko, who came to power following last year's Orange Revolution, has
set WTO and EU membership as strategic goals, along with joining NATO.

He said that Western countries should respond to Ukraine's efforts to
attract foreign investors by recognizing the country as a market economy,
accepting it into the WTO and starting free trade zone talks with the EU.

Yushchenko also announced the dismissal of four ambassadors in several
former Soviet republics who had been appointed Kuchma. -30-
=============================================================
3. "BORN IN THE USA: THE FIRST LADY OF UKRAINE"

INTERVIEW with Kateryna Yushchenko
By Tatiana Sorokko, Harper's Bazaar magazine
New York, New York, Saturday, August 20, 2005

Raised in Chicago by her Ukrainian émigré family, Kateryna Yushchenko
always cherished her heritage. Here, the wife of Ukraine's President talks
candidly about the dangers her family faces in a fledging democracy.

When Kateryna Yushchenko's parents migrated to the United States in 1956,
it was because of war and famine, not desire. As a result, they always kept
their homeland in their family's heart.

So it was no surprise to anyone when, in 1992, the 29-year old economist
relocated to Kiev; nor, perhaps, that she gravitated toward her future
husband, Viktor Yushchenko, when she met him in 1993. (She was a manger
for an international accounting firm; he was head of the National Bank of
Ukraine.) Five years later they married and now have three young children of
their own: Sophia, six, Chrystyna, four, and Taras, one.

Last year the Yushchenkos made international headlines when Viktor ran for
president and narrowly lost the election to a Russian-backed candidate. When
evidence of massive electoral fraud surfaced, Ukrainians all over the world
rallied for him in what has become known as the Orange Revolution.

While campaigning, Viktor had become violently ill with what later diagnosed
as dioxin poisoning - allegedly administered by his opposition. He survived
the attack and won the revote in December, though he is still recovering his
health and appearance. (One effect of the toxin is skin disfiguration.)

Mr. Yushchenko's political and personal struggles have raised the profile of
Ukraine in all venues, even fashion: This season, Jean Paul Gaultier
announced that his couture line was inspired by Ukraine, and Mrs. Yushchenko
was a guest of honor at his show. Indisputably, at 44, Kateryna Yushchenko
is hitting her stride and helping her husband rewrite history.

Harper's Bazaar: Can you tell us what really happened to your husband's
poisoning?

Kateryna Yushchenko: They're still investigating. I personally feared
something would happen because the change that Viktor and his team
represented was too threatening to the old regime. Many people would write
us letters saying, "Be careful. Something can happen to him." I believe it
was very much God's will and the prayers of millions of people that kept him
from dying.

Luckily, his health is steadily improving, he's getting back his old
strength, his old looks, and we have great optimism that within a year or
two he will be as handsome as he ever was.. My husband's father survived
Auschwitz and several other concentration camps. I think one of the reasons
Viktor survived is that he comes from a family of survivors.

HB: Was it love at first sight for you and your husband?

KY: He now says it was. But I think it was great admiration at first sight
that grew over time into great love.. I remember being very impressed with
how much he knew about economics and the world financial system. But
what also impressed me was his willingness to learn, his willingness to ask
questions. He was young, dynamic and very patriotic.

HB: Was it difficult to settle in Ukraine?

KY: No, because I grew up with a foot in both worlds. My parents were very
grateful to the United States for accepting them, but they still kept their
traditions. At home, spoke Ukrainian. I grew up thinking that someday I
would go back there.

HB: How do you feel Ukrainians and Americans differ?

KY: Mostly in that Ukrainians tend to be more traditional, formal. A
Ukrainian woman will get more dressed up to go to the store, to take a walk
in the park. She'll wear high heels; she'll put on makeup. More attention is
given to clothes. At first I may have resisted that, but with time you adapt
to the country in which you live, and I began thinking about my clothes more
and more.

Also, the United States is multicultural; you adopt the food and music from
different countries. Ukraine has its own history, its own culture, its own
food, its own music. When Ukrainians get together, it's not unusual for them
to spend two hours singing songs everyone knows.

HB: Have you taught your children American traditions?

KY: We often celebrate holidays - Christmas, Thanksgiving - in the way I
remember celebrating them at home. I've always liked the idea of having a
day when everyone gathers around the table and thanks God for what they
have.

HB: How will your children's childhoods differ from yours?

KY: I, for example, never traveled - I didn't see the ocean until I was 19.
We never went to restaurants: we stayed home a great deal. My children, on
the other hand, have opportunities to travel everywhere, to meet new people,
to learn many languages.

HB: What is the one thing you miss about America?

KY: The freedom to just get into a car and go anywhere. When I visit the
U.S., the first thing I do is rent a car, turn on the radio and drive - for
hours. I'm nervous about driving in Ukraine or anywhere in Europe. Maybe
I'm just not used to the style of driving. And now, in our new position, we
have drivers.

HB: What's a typical day as first lady like?

KY: When we are not doing official things, I am running the foundation my
husband started [Ukraine 3000] to promote Ukrainian art, culture and
history. We want to find partners abroad such as hospitals and universities
that can work with us to improve our medical system. We also want to create
partnerships in which businesses, church groups and youth groups work
together to promote social welfare of Ukraine.

HB: How do you juggle being first lady with motherhood?

KY: I'm always up first thing in the morning to get my daughters dressed and
take them to school, and I spend some time with my son. On evenings and
weekends my husband and I try to always spend time with the children. If we
have official duties, we try to have them involved.

HB: What kinds of preparations, beauty and fashionwise, do you make for
state events?

KY: When my Husband won the election, I met with many Ukrainian designers
whom I had already known, I'd attended Ukrainian fashion shows for years,
and I asked each designer to make me different things, evening gowns and
suits. Gathering a new wardrobe was exciting; it was a duty but a pleasure.

Interestingly, last May, I met Jean Paul Gaultier in Kiev. He captured the
Ukrainian spirit in his latest couture collection and demonstrated to the
world the richness of the Ukrainian culture and tradition. I can see myself
wearing three or four of the collection's outfits.

When deciding what to wear for an event, I think about the country and the
people we're going to be receiving. If I'm wearing an outfit that's not by a
Ukrainian designer, I always try to add something Ukrainian: a pin made by
local artist, something historical or at least a touch of orange [the color
of the revolution.] Additionally, I have someone help me do hair and makeup.

When we have foreign guests or when we go abroad, I also spend a lot of
time thinking about gifts. My husband and I feel very strongly that we have
to present gifts that will help the people better understand our culture.

HB: What do you think will be your husband's legacy?

KY: That he taught the people that they could stand up for their rights,
which they did, and to have hope for their future. You could say it took
1000 years for this to happen. -30-
[The Action Ukraine Report (AUR) Monitoring Service]
=============================================================
4. INDEPENDENCE DAY CELEBRATIONS

Press office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Wednesday, August 24, 2005

This year's Independence Day will be celebrated in a new way. Its major
spiritual and humanitarian concept will considerably differ from
traditionally pompous military ceremonies. The holiday is based on the
idea of mutual understanding, reconciliation, and unity of the nation.

In the morning, the President will attend a mass that will be said by
patriarchs of major religious confessions to demonstrate Ukrainians' unity.
This prayer is meant to stress the role religion plays in our system of
values. The ceremony will be symbolically held at the St. Sophia Cathedral,
which is one of the most remarkable sacred monuments of Ukraine's history
and culture.

President Victor Yushchenko, Speaker of the Rada Volodymyr Lytvyn, and
Prime Minister Yulia Tymoshenko will traditionally lay wreaths on monuments
to St. Volodymyr the Great, Taras Shevchenko, and Mykhailo Grushevsky.

At 12:00, the President will address the nation on the Maidan, which should
fully reflect the new spirit of society. Yushchenko has been communicating
with people in such a public way for quite a long time to show transparency
of the new government.

At the Mariinsky Palace, the President will present prominent Ukrainians
with state rewards for their outstanding contributions.

Later, he will hold an official reception at the St. Sophia National
Reserve. The Kyiv Kamerata Chamber Orchestra and the Kyiv Chamber
Choir will perform that night. At 22:00, residents and guests of the capital
will enjoy festive fireworks on the Maidan.

The UT-1 National Television Channel will broadcast all these occasions.
=============================================================
5. SECRETARIAT DECIDES TO HOLD RECEPTION FOR PRESIDENT
ON OCCASION OF INDEPENDENCE DAY IN SOFIA KYIVSKA

Ukrainian News Agency, Kyiv, Ukraine, Monday, August 22, 2005

KYIV - The Secretariat of the President has decided to hold a grand
reception on behalf of President Viktor Yuschenko on the occasion of
Independence Day on the territory of the Sofia Kyivska national reserve.

Deputy State Secretary Markian Lubkivskyi disclosed this to journalists.
In his words, with this the Secretariat decided to turn away from the
traditional receptions in the Ukraina Palace.

Press secretary Iryna Heraschenko disclosed that during the reception
Yuschenko will lift a toast with a glass of champagne to those present and
will afterward begin to meet them informally. The territory will be
decorated with art works of Ukrainian artists.

Ukrainian guests as well as representatives of foreign states will be among
those invited. Invitations have also been sent to former Ukrainian
Presidents Leonid Kravchuk and Leonid Kuchma to attend this reception.

Responding to the question of Ukrainian News, Lubkivskyi said that the place
where the reception will be held has been coordinated with the management
of the reserve and the management had given the go-ahead for this event.

As Ukrainian News earlier reported, Yuschenko will deliver a speech at the
Maidan Nezalezhnosti on August 24 to mark the 14th Independent anniversary
of Ukraine. Ukraine was proclaimed an independent state on August 24, 1991.
=============================================================
6. UKRAINE'S CENTRAL BANK ACCUSES BANKS WITH FOREIGN
CAPITAL OF ATTACKS ON THE HRYVNIA CURRENCY

REUTERS, Kiev, Ukraine, Tuesday August 23, 2005

KIEV - Ukraine's Central Bank on Tuesday accused a number of banks with
foreign capital of launching speculative attacks on the hryvnia currency and
threatened to exclude them from the market unless they stopped.

A central bank statement accused the banks of hatching a "plot" to
destabilise the market by trying to sell unreasonable amounts of foreign
currency on the market it tightly controls. But dealers dismissed the
statement as groundless. Some suggested it amounted to little more than
bluster.

"An analysis of events in recent months on the currency market shows that
specific banks have been trying to conduct improper operations by offering
to sell large amounts of foreign currency which they did not have
available," the central bank said in the statement on its website
www.bank.gov.ua.

"Unfortunately, such actions are mainly carried out by specific Ukrainian
banks with foreign capital, in agreement with foreign banks," the central
bank added. It did not name any banks. "This can be seen as a plot aimed
not so much at benefitting from speculation but rather at driving the
foreign currency market into instability and fuelling inflation."

The central bank said it viewed these actions as "speculative attacks with
the aim of deliberately destabilising the rate of the national currency".
Out of an overall total of 163 banks in Ukraine, 22 have foreign capital
including 9 with 100 percent.

The Ukrainian central bank keeps a tight hold on the foreign currency market
and has tried in recent months to prevent sharp upward movements of the
hryvnia.

"This is a particularly heavy-handed way of verbally intervening," said
Sonal Desai, analyst at Dresdner Kleinwort Wasserstein in Milan. "There's
an escalation in rhetoric, which is trying to prevent the inflows from
occurring."

DEALERS CRITICAL
Some dealers at banks in Ukraine with foreign capital were even more vocal
in criticism. "What sort of crime is this?" said one. "Every investor wants
to sell dear and buy cheap." "These words are absolutely senseless," said
another. "We are breaking no regulations. Perhaps it's aimed at intimidating
someone or other."

The central bank engineered a one-day three percent rise in the hryvnia in
late April, sapping confidence in the market and has since intervened nearly
every day to keep it steady.

In its latest intervention on Monday, it bought dollars at 5.00 hryvnias.
And the bank has since last week adopted a practice of announcing early in
the session parameters for possible intervention.

Some dealers said attempts to keep the hryvnia within certain limits would
run up against a growing supply of dollars, particularly a probable influx
of currency in response to plans to stage new privatisations of big
industrial sites.

The central bank has failed to make good on promises to liberalise market
operations despite appeals from President Viktor Yushchenko, dealers and
the International Monetary Fund.

A government minister welcomed the resignation last week of a top bank
official who wanted to maintain tight restrictions -- including a ban on
buying and selling currency in the same day. (Additional reporting by Meg
Clothier in Moscow) -30-
---------------------------------------------------------------------------------------------------------
TEXT-STATEMENT BY UKRAINE'S CENTRAL BANK
Translated from Ukrainian by Reuters (Aug 23, 2005)

REUTERS: Following is the text of the statement Ukraine's central bank
issued on Tuesday on the activity of banks in the foreign currency market.

"An analysis of events in recent months on the currency market shows that
specific banks have been trying to conduct improper operations by offering
to sell large amounts of foreign currency which they did not have available.

At the same time, the real sums of money available to them in their
correspondent accounts did not permit them to conduct such operations at
trading sessions.

The central bank considers that such actions amount to speculative attacks
with the aim of deliberately destabilising the rate of the national
currency.

The central bank consistently pursues a policy aimed at liberalising the
foreign exchange market and is taking measures to halt inflationary
processes.

Unfortunately, such actions are mainly carried out by specific Ukrainian
banks with foreign capital, in agreement with foreign banks. This can be
seen as a plot aimed not so much at benefiting from speculation but rather
at driving the foreign currency market into instability and fuelling
inflation.

The central bank hereby warns that should any such attempts be carried out
in future by specific banks it will take measures against those banks to
suspend their currency operations on the interbank market by withdrawing
their permission to conduct such operations.

The central bank hereby states that it will coordinate, along with the
state's economic institutions, policies to underpin the country's financial
foundation as well as the stability of economic growth and living standards
in as much as they are linked to the stability of the national currency."
-------------------------------------------------------------------------------------------------------
FOOTNOTE: Many Ukrainian experts do not consider the National
Bank of Ukraine to be very international investor/business friendly these
days. The NBU has undertaken, in their analysis, a variety of unnecessary
actions during the past twelve months that have made it very complicated,
difficult, expensive and frustrating for international investors/businesses
to bring their investment/business funds into Ukraine. Editor
=============================================================
7. MOODY'S UNVEILS NEW BANKING SYSTEM OUTLOOK ON UKRAINE

Interfax-Ukraine, Kyiv, Ukraine, Monday, August 22, 2005

KYIV - The stable rating outlook for Ukraine's rated banks reflects the
growing importance of the country's banking sector to the economy,
together with benign economic conditions that are driving the growth in
financial intermediation, says Moody's Investors Service in a new Banking
System Outlook on Ukraine.

However, the average E+ Financial Strength Rating (FSR) remains
constrained by the country's still volatile operating environment in an
undiversified economy, the complex political situation, poor corporate
governance and the weaknesses in financial fundamentals plaguing most
of the financial institutions.

At the same time, given that the local currency ratings of some of the
largest Ukrainian banks significantly exceed the country's foreign currency
deposit ceiling (mainly based on the assumption of partial government
support), some of the banks' foreign currency deposit ratings, currently all
at the B2 level, might be raised if the ceiling were to be upgraded in the
future.

"The degree of banking system penetration has been steadily growing
over the past few years, as reflected in a significant deposit and credit
expansion.

However, compared to other Central and Eastern European (CEE)
countries, Ukraine's banking system still plays a very limited role in the
national economy, with banking assets representing only 39% of GDP",
says Dmitry Polyakov, a Moody's AVP/Analyst and author of the new
report.

The system continues to be fragmented, with about 160 registered banks,
while a significant proportion of assets are concentrated in the Top 10
banks. "Despite improving macroeconomic fundamentals, profitability
remains low due to operational inefficiencies and high provisioning
expenses," the analyst adds.

In the final two months of 2004, Ukraine experienced a political crisis
during the presidential elections, which severely undermined consumer
confidence, causing a liquidity drain from the banks.

To prevent bank failures, the National Bank of Ukraine (NBU) made a
timely intervention, introducing withdrawal and lending restrictions as
well as granting stabilisation loans totalling UAH1 billion. The political
turmoil subsided after the second round of the elections, when the
opposition candidate, Victor Yuschenko, was elected president.

Moody's notes that by mid-January 2005, all the restrictions had been
lifted and consumer confidence revived, leading to a net inflow of
customer deposits.

Liquidity recovered, allowing the banks to repay their stabilisation loans
before their due dates. Such events have demonstrated the volatility
inherent in Ukraine's operating environment and the fragility of the banking
system, which is captured by the system's average ratings of B2/E+.

Overall, Moody's views Ukrainian banks' ratings as generally offering an
increased upside potential. However, ratings of the frailer institutions
would be at risk of downgrade in the event that these banks become
insolvent as a result of the challenges outlined in the Banking System
Outlook. -30- [The Action Ukraine Report Monitoring Service]
=============================================================
8. PRESIDENT SAYS UKRAINE WILL JOIN TRADING BLOCK WITH
RUSSIA, BELARUS AND KAZAKHSTAN

AFX Europe (Focus), Moscow, Russia, Monday, Aug 22, 2005

MOSCOW - Ukraine will join the planned four country trading bloc that it
and Russia intend to form along with Belarus and Kazakhstan, said
President Viktor Yushchenko. "We will participate," he told the
Interfax-Ukraine news agency.

Hours earlier local newspapers quoted Economy Minister Sergei Teryokhin
as saying Ukraine will leave the proposed union to create a new pro-Western
structure instead, allowing it to transport its oil from the Caspian Sea
without having to pass through Russia.

Yushchenko added that both Russia and the EU are "important" for Ukraine.
=============================================================
9. UKRAINIAN EU INTEGRATION MINISTER HOPES FOR MARKET
ECONOMY STATUS BY DECEMBER

Interfax-Ukraine news agency, Kiev, in Russian 1242 gmt 22 Aug 05
BBC Monitoring Service, UK, in English, Mon, Aug 22, 2005

KIEV - Ukraine will get the status of a market economy before the Ukraine-
EU summit, which will be held in Kiev in December this year, Deputy Prime
Minister for European Integration Oleh Rybachuk has said. "I am convinced
that we will get market-economy status before the summit or no later than
the summit. We could have received it back in June," Rybachuk told
journalists in Kiev today.

The deputy prime minister recalled that the Ukraine-EU summit would be held
in Kiev on 1 December. There was a discussion on where to hold the summit.
Brussels and London were proposed, but Ukrainian diplomats managed to
persuade Europeans to hold the summit in Kiev. "The summit is a key event
in relations between Ukraine and the EU since the new authorities came to
power," he said.

Rybachuk also said that the UK is the presiding country in the EU and,
according to protocol, the summit will be held at the level of Ukrainian
President Viktor Yushchenko and British Prime Minister Tony Blair.

Asked if Ukraine will insist more resolutely on entering the EU at the
summit, Rybachuk recalled that the Ukraine-EU action plan envisages three
years to carry it out and "it is very important for Ukraine to show that it
is implementing the action plan".

"I expect that some achievements will be shown at the summit", Rybachuk
said. A monitoring of Ukraine's implementation of the Ukraine-EU action
plan will be held in the middle of next year. -30-
=============================================================
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10. RUSSIA AND UKRAINE STILL SPLIT ON GAS SUPPLY TERMS

ITAR-TASS news agency, Moscow, in Russian 0429 gmt 23 Aug 05
BBC Monitoring Service, UK, in English, Tue, Aug 23, 2005

Moscow - Russia has stated its readiness to increase volumes of Russian
gas transit across Ukraine and of Central Asian gas transported to Ukraine
under the existing Ukrainian-Turkmen contract in 2006.

Gazprom is also ready to supply additional volumes of gas to meet the
country's [Ukraine's] demand in full, Gazprom told Prime-TASS. The
possibility of exporting up to 6bn cubic metres of natural gas via Ukraine
to Europe is being considered.

The Russian side has submitted its proposals on the basic terms and
conditions for gas supply and transit in 2006, Gazprom said. These
conditions are in line with the earlier agreements on a switch to cash
payments for gas transit and supplies at prices and tariffs in effect in
Europe.

Ukraine suggests that nothing should be changed and that the terms for
Russian gas supply and transit in 2006 should remain the same as for last
year.

A decision has been made to set up a working group comprising experts
from Gazprom and [Ukraine's state oil and gas company] Naftohaz Ukrayiny.
By 10 September, the group should approve the main provisions of a
protocol on transit and supply of gas in 2006 at corporate level. -30-
=============================================================
11. GERMAN INSURANCE GROUP PLANNING TO EXPAND INTO
UKRAINE, SEES MARKET POTENTIAL THERE

Suddeutsche Zeitung, Germany, Mon, Aug 22, 2005

GERMANY - Allianz, the German insurance group, is planning to expand
into Ukraine, and, above all, perceives it as a potential market for pension
funds and life assurance. Business could begin soon, as Rosno, the
group's Russian subsidiary, already holds licences for Ukraine, according
to management.

Allianz reports a share of 13 per cent of the market in central and eastern
Europe, where, according to company sources, it represents the largest
foreign insurer. For the first half of the current year, premium income in
this region amounted to almost 1.4bn euros, representing a 17 per cent
increase in a year-on-year comparison. A post-tax profit of 135m euros is
reported in the region for the period under review. -30-
=============================================================
12. DUTCH INVESTMENT FUND BUYS STAKES IN TWO
UKRAINIAN CEMENT COMPANIES

IntelliNews-Ukraine Today, Kyiv, Ukraine, Mon, August 22, 2005

KYIV - Dutch Investment Fund buys stakes in 2 cement producers in Donetsk
region. According to a trustworthy source Kyiv Golden Gate Business LLC
sold 18% stake of Doncement and 100% stake of Cement Donbassa to the
fund, Interfax news agency informed on August 19.

The State Commission for Securities and Stock Market (SCSSM) said that
previously the shares of Cement Donbassa belonged to German Cimera
Beteiligungen GmbH (25%) and Canisia Beteiligungen GmbH (24%) and to
Dutch Grendahl Investments B.V. (24%).

The companies sold did not comment the with regard to the change of
ownership. Also the cost of the deal was not revealed. Both companies
produced 641,500 tons of cement in Jan-Jul 2005. The net profit of
Doncement amounted to USD 1.53mn in 2004. -30-
=============================================================
13. UKRTELECOM PRIVATIZATION:
DOUBTFUL BENEFITS OF MOBILE LICENSE
Government makes final decision to sell telecom monopoly
Ukrtelecom by end-2005

ANALYSIS AND COMMENTARY: Roman Bryl, Ukraine Analyst
Andrew Afanasiev, CIS Senior Analyst
IntelliNews-Ukraine This Week, Kyiv, Ukraine, Mon, Aug 22, 2005

The government has started active preparations for privatization of national
telecommunication monopolist Ukrtelecom. The state owns 92.86% in
Ukrtelecom. Authorities plan to sell off 42.86%. The investor will be
allowed to control an extra 25% stake. It is planed that by the end of Aug
2005 Ukrtelecom will receive a license for providing mobile services.

According to government's plan, this would significantly increase the
company's market capitalization. The privatization itself will take place by
the end of the year. Ukrtelecom is the biggest Ukrainian company in terms
of market capitalization.

Ukrtelecom to get mobile license by end-August that will
increase its market value, government supposes

The most vivid signal that government really intends to sell Ukrtelecom this
year was an order released on Aug 9. The order stated the deadline for
Ukrtelecom to get a mobile operator license (Aug 31). According to the
timeframe of Ukrtelecom privatization, the company should start to provide
mobile services at the end of 2005.

PM Yulia Timoshenko declared during a regular governmental meeting that
pre-privatization preparation of Ukrtelecom is underway. The entity should
receive all needed approvals very quickly, she said. Besides, government
has set a task of finding a scheme how to write off all debts of Ukrtelecom.

Government takes all necessary steps to speed up major sale

Government officials underline that a mobile operator license is the main
trump of Ukrtelecom privatization. But we must remind you that National
Committee on Communication Regulation (NCCR) for a long time opposed
granting Ukrtelecom this license. The main argument of NCCR was that at
present there are no available frequencies for a new mobile operator.
Besides, it was not planned to make a reapportion of frequencies in 2005.

But government did not take into consideration these arguments. Moreover, it
obliged NCCR by the mentioned order to grant a mobile license to Ukrtelecom.
According to NCCR chairman Volodymyr Oliynyk, the committee had no choice
but to start talks with ministry of defense to find new frequencies. It is
supposed that by mid-October the frequencies would be found.

Taking into consideration the pressure government put on NCCR, ministry of
defense and communication ministry, they can be found even sooner. Last
week information appeared that government planned to organize a joint
meeting of these ministerial bodies in the next 10-15 days to deal away with
the frequency issue by mid-September.

To avoid any possible friction, government assigned USD 130,000 to finance
reapportion of frequencies. We should note that since 2002 government paid
nothing for this need.

At present there are no available frequencies that allow
Ukrtelecom to provide mobile services

But in this case, money alone cannot solve all problems around obtaining the
license. According to legislation, NCCR has a right to give such kind of
license only after approving the national register of frequency band
reapportion. This register, that is developed by NCCR, ministry of defense
and communication ministry, should have been approved in May 2005.

But ministry of defense took a very strict stand, arguing that only 7% of
the frequency band may be used for commercial purposes. Communication
experts say that following the ministry's logic, authorities might even have
to switch off quite a few TV channels.

We should note that then the ministry's uncompromising position could be
explained by its desire to use blackmail to receive larger amounts for its
needs during state budget approval. Nevertheless, after the new state budget
was approved, discussion of the national register of frequency band
reapportion did not continue because of a very funny reason. Authorized
individuals that took part in the talks started one after the other to leave
for their vacations. Only at the end of August, the necessary quorum will be
gathered to continue the discussion.

Ukrtelecom's management lost its chance on mobile market
long before government declared plans to sell company

By trying to push through a mobile operator license by any means and in the
shortest possible time, government tries to correct errors made earlier by
Ukrtelecom's management. To remind you, for a considerable period of time
Ukrtelecom owned a large stake in mobile operator UMC, thus it had
possibilities to do well on the local market.

But Ukrtelecom's management made a decision not to provide mobile
services and sold its UMC stake. Besides, Ukrtelecom is one of the
founders of Telesystems of Ukraine Company that has a license for
providing mobile services in CDMA standard. If Ukrtelecom really wanted
to gain a large market share on the mobile market, by now it could have
done so easily.

Thus, we can see the company never seriously planned to provide mobile
services until authorities decided to sell the company, first raising its
market value. On one hand, we do not doubt that government will find a way
to grant Ukrtelecom a mobile operator license. On the other, we cannot be
sure the license will boost market capitalization.

Experts: mobile operator license not to increase
significantly Ukrtelecom's capitalization

According to deputy chairman of state property fund Alexander
Bondar, the license itself will bring little advantages to Ukrtelecom. Its
capitalization will be increased only by the cost of the license. NCCR also
considers Ukrtelecom's privatization price will rise by just USD 28,000,
i.e. by cost of the mobile license. In its turn, government estimates that
the license increases Ukrtelecom's value by USD 200mn.

In our view, the latter scenario is hardly possible, due to significant
spending Ukrtelecom must undertake to install all necessary equipment for
mobile service provision. As it is planned, Ukrtelecom will provide mobile
services based on the 3rd generation communication networks. Just one
station of this standard costs about USD 500,000-600,000. The company
needs 300 stations to grab a decent share on the local mobile market. It is
a question whether the operator is able to cover such expenses.

Ukrtelecom plans to spend USD 250-300mn to develop
mobile services in 2006-2008

However, last week Ukrtelecom's head Georgy Dzekon stated the company
will spend USD 250-300mn in the next 3 years on solving technical issues.
This would help Ukrtelecom to attract 1-1.5mn subscribers by 2008, he said.

But instead of technical issues, the company should carry out an aggressive
marketing policy because 3rd generation services are not present in Ukraine
now. Moreover, Ukrtelecom will have to struggle to win over consumers,
because the company has a reputation for providing low quality services.

Plus, the company has no high-class experts with experience in the mobile
sector. At present in Ukraine there is a disastrous lack of professionals of
such kind, and Ukrtelecom should hire new staff abroad. In general, the
company needs at least USD 500mn investments to develop its mobile
services. This lowers the market value of the company rather than raising
it, as government hopes.

Liberalization of communication market destroys last
competitive advantages of Ukrtelecom

Nevertheless the company has some advantages compared to other
mobile operators in Ukraine. First, it can provide services at lower cost
due to its monopolistic position in communications.

Second, we cannot deny that government can indirectly favor Ukrtelecom,
because it will keep a sizable stake in the company after privatization.

But selling Ukrtelecom would mean the start of liberalization of the local
telecom market. In a free market, Ukrtelecom will easily lose its
competitive advantages owed to government's support.

All this makes us think government would not get as much as it hopes from
Ukrtelecom's sale. That is, besides a little extra money and the positive
signal of possible liberalization of a key market. With a market
capitalization of USD 2.7bn, a 42% stake in Ukrtelecom would cost around
USD 1.1-1.2bn depending on market development from now till year-end.

There might be a slight discount in the company's present form, due to the
fact it is not a controlling stake. The mechanism of control over an extra
25% stake should be outlined more clearly. A purchase option should be
provided, plus guarantees from government that it would not change its
mind. It is not yet clear how thrilled the market would be about the mobile
service license.

Investors can view it either as a need for substantial additional
investments or as a future revenue booster if detailed plans to this effect
are provided by Ukrtelecom's management and state authorities. Our
prediction so far is the former would outweigh the latter for potential
buyers, due to tough competition on the local mobile market.

It would be possible to make more accurate conclusions after privatization
of other large state enterprises is completed. The forthcoming re-sale of
steel major Kryvorizhstal opens the door for large-scale repartition of
property in the country. (To be continued next week). -30-
=============================================================
14. UKRAINE/RUSSIAN INVESTORS BEAT WEST ON ITS HOME TURF

By Conor Humphries, Staff Writer, Moscow Times
Moscow, Russia, Tuesday, August 23, 2005

Many Western real estate investors are finding themselves
outmaneuvered and outbid in Ukraine by local and Russian rivals in
a rush sparked by the Orange Revolution.

Pent-up Western demand kept on ice during last year's political
instability has led to a wave of foreigners scouring the market for
investment-grade projects. But the few developments and sites that are
on the market are being snapped up by more flexible Russian and
Ukrainian investors, investors say.

"In the last six months, there has been phenomenal interest," said
Jonathan Jackson, managing director of Czech-based real estate
investment company Lordship. "I'd say it's already too late --
everything has been sold."

Jackson was repeatedly frustrated by quick-moving Russian and
Ukrainian investors. In one case, he had preliminary agreement for an
$8 million development. "We had all the funds and everything agreed,
and then someone came in and bought it for $12 million and literally
did it overnight."

Ukrainian investor Alexander Shkarupa said that when he was bidding
against a foreign buyer for a site, he knew he would always win.

"Not because of transparency, but because I'm more flexible," he said.
"We can accept many defects that foreigners cannot accept, and then
we improve them later, during development."

Shkarupa's company, Alacor, initiates real estate projects with the
aim of selling them on to institutional investors.

Although investors say they have not seen much in terms of real reform
from the new government, many said the change in power was seen as
a signal to finally go ahead and invest in a country whose economy has
grown at a rate of over 9 percent for three of the past four years.

Matthew Cartisser of QES Investment Limited, who has been involved in
Ukraine since the late 1990s, said the difficult reputation of the
regime of former President Leonid Kuchma led to a sudden expenditure
of stored-up demand when the Western-leaning Viktor Yushchenko took
power last January.

"After the [2004] elections, those decisions have been made and
investments are being made," he said. "Before, Ukraine wasn't on the
radar screen. Now, it is on the radar and there are a lot of investors
coming in."

But many are finding it hard to locate investment-grade properties
offering a high-enough return to justify the risk. Cartisser said his
company gave up on the idea of a Ukrainian investment fund due to the
lack of suitable developments.

Steve Cheshire, of Ukrainian equity broker Concorde Capital, said the
opportunities were there but that it was just a matter of the right
local contacts.

"What is really important is getting connected in with business groups
here," he said. "You have to meet locals because 80 percent of the
transactions occur off-market."

Concorde is looking to raise $100 million in equity for a Ukrainian
real estate fund jointly managed with real estate firm Colliers, and
Cheshire said the fund already had offers of projects with returns
that more than justified the risk of investing in Ukraine. -30-
--------------------------------------------------------------------------------------------------------
LINK: http://www.moscowtimes.ru/stories/2005/08/23/045.html
=============================================================
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============================================================
15. KHARKIV TRACTOR PLANT TO OPEN REPRESENTATIVE OFFICE
TO PROMOTE BUSINESS ONTO EUROPEAN AND ASIAN MARKETS

Interfax-Ukraine, Kyiv, Ukraine, Monday, August 22, 2004

KYIV - Kharkiv tractor plant, also known as KhTZ, is invigorating its
activity on foreign markets and is about to open its own European and
Asian representative office in a European country.

The seat of the representative office could be Bulgaria or Macedonia,
Oleksandr Kryvokon, the plant's director general, told reporters.
"It will cover Macedonia, Bulgaria, Serbia, partly Poland, Hungary, Turkey,
Iran and Iraq," he said. In his opinion, the plant's tractors may be in
demand on those markets mainly due to its competitive price.

Kryvokon also added that the plant is working hard over the quality of its
equipment. "Due to the fact that we've stabilized production, there is no
haste and the quality of commodities is improving," he said.

The company has recently opened a representative office in Kazakhstan,
he added. It will be engaged in servicing of KhTZ caterpillar tractors.
After the creation of such a service center, Kazakhstan will consider
further purchases of Kharkiv-made tractors, Kryvokon sand. In addition,
the plant will pursue an active policy on the Russian, Uzbek, and Tadjik
markets. -30- [The Action Ukraine Report (AUR) Monitoring Service]
=============================================================
16. SOFTLINE SOFTWARE COMPANY UPGRADES UKRAINE'S
INTERNAL AFFAIRS MINISTRY'S WEBSITE

Ukrainian News Agency, Kyiv, Ukraine, Thu, August 18, 2005

KYIV - Softline, a Kyiv-based software manufacturer, has upgraded the
website of the Ministry of Internal Affairs (http://www.mfa.gov.ua).
Ukrainian News has obtained a copy of the company's statement with
this information.

"The new official web portal of the Ministry of Internal Affairs of Ukraine
was introduced on August 15, 2005," the report says.

The new site has been developed by Softline specialists on the basis of
the Portal Management System, a website resource and website design
technologies. Old portal data were transferred to the new platform in
August.

The company said that despite the domain address of the portal, it is a
physical sub-portal of the data center of the image portal of the ministry
(http://ukraineinfo.gov.ua).

The data center also includes the Ukraine-NATO Commonwealth portal
and websites of diplomatic missions of Ukraine. The content of all center
portals comes from the database of the Ministry of Internal Affairs.

The Portal Management System enables ministry officials to fill the site,
manage services, and administer web resources online.

The system also provides users with an opportunity to manage web
resources without changing a portal program code and without assistance
of program developers.

As Ukrainian News earlier reported, Softline upgraded the website of the
Ministry of Labor and Social Policy (http://www.mlsp.gov.ua) in March.
Founded in 1995, Softline is a business automation software designer and
systems integrator. The SigmaBleyzer international investment company
[through the Ukrainian Growth Private Equity Funds (UGF)] controls Softline.
=============================================================
17. AES RIVNEENERHO POWER DISTRIBUTION COMPANY DECIDES
TO INCREASE STATUTORY FUND TO UAH 21.3 MILLION

Ukrainian News Agency, Kyiv, Ukraine, Fri, August 19, 2005

KYIV - The shareholders of the AES Rivneenerho power distribution company
on their August 17 meeting decided to increase statutory fund by UAH 0.5
million to UAH 21.327 million, via additional issue of shares. The company's
press service disclosed this to Ukrainian News.

According to the press service, the company intends to issue UAH 2 million
of simple registered shares in the documentary form. The nominal value of
one share comprises UAH 0.25. The company intends to increase the
statutory fund with the aim of replenishment of the circulating assets.

As Ukrainian News earlier reported, AES Rivneenerho finished 2004 with a
net profit of UAH 27.588 million. AES Washington Holdings B.V., which is an
affiliate of AES Silk Road Inc. (United States), acquired a 75% stake plus 1
share in the Rivneenerho regional power distribution company in 2001 and
renamed it AES Rivneenerho.

The AES Corporation operates 113 power generating facilities and 17 power
distribution companies in 27 countries. AES Silk Road is one of the world's
largest producers and suppliers of electricity. -30-
----------------------------------------------------------------------------------------------------------
FOOTNOTE: The AES Corporation, Arlington, Virginia, is a long-time
member of the Ukraine-U.S. Business Council in Washington, D.C. Editor
=============================================================
18. LARGE WINERY UNDER CONSTRUCTION IN CRIMEA

By Alexei Voskresensky The Ukrainian Times
Kyiv, Ukraine, Thursday, August 18, 2005

KYIV - The company Alef-Vinal has started building a new winery in the
Crimean village of Pochtovoye. According to representatives of the
company, the brandy shop will be the first to make products in February
2006.

The winery is expected to become a powerful enterprise with a capacity
of some six million bottles of Crimean wine per month.

Construction of the new winery in the Crimea will enable the creation of
400 jobs and 6-8 million hryvnias worth of the monthly revenues of a local
budget at the expense of an excise duty. -30-
=============================================================
19. UKRAINE APPROVES USD 100 MILLION ROAD CONSTRUCTION
LOAN FROM GERMANY'S DEUTSCHE BANK

New Europe, Athens, Greece, Mon, August 22, 2005

Ukraine's government approved a 10-year USD 100 million road loan from
Germany's Deutsche Bank, according to a last Wednesday report from the
Dragon Capital investment house. The low-interest credit will go towards the
completion of a modern "autobahn"-style highway connecting the Ukrainian
capital Kiev and Black Sea port city Odessa.

The money is a follow-on to a USD 480 million Deutsche Bank loan advanced
one year ago for the same project. The decision to accept the German credit
came after extensive reports in the Ukrainian media of shoddy work, and
probable graft, on the highway so far.

The 420-kilometre stretch of road will cost almost twice prevailing rates
for modern highway construction in countries like Germany and the US,
despite the use of cheap Ukrainian labour and construction materials, the
Ukrainska Pravda magazine reported two weeks ago.

Ukraine Transport Minister Evhen Chervonenko was cited in the Ukrainska
Pravda report as saying the highway could not be completed "unless we
find some more money."

Deutsche Bank is one of the most active foreign players in Ukraine's
financial markets. Kiev has named the German firm as co-manager for a
Ukrainian Eurobond release worth some USD 720 million planned later
this year.

Ukraine's foreign debt as of July's end was equivalent to USD 11.4 billion,
according to ministry of finance data. -30-
=============================================================
20. MEETINGS IN CRIMEA, GRUMBLING IN RUSSIA
Ukrainian President Victor Yushchenko, Lithuanian President
Valdas Adamkus, Polish President Aleksander Kwasniewski,
and Georgian President Mikheil Saakashvili

By Christina Tashkevich, The Messenger
Georgia's English Language Daily
Tbilisi, Georgia, Monday, August 22, 2005, #156 (0930)

Despite the little information and no official agreements from an informal
meeting of the presidents of Georgia, Ukraine, Lithuania and Poland on
Friday to discuss the initiative of a new regional coalition, Russian
political commentators quickly labeled their meeting in Crimea
as an anti-Russian step.

The presidents gathered on Thursday, August 18, for the celebration of the
80th anniversary of the children's camp Artek. Donning neckerchiefs and
casual clothes, the presidents dined at the camp's canteen and played
games with children. On Friday, they met at Ukrainian President Victor
Yushchenko's Crimea residence for informal talks.

On Thursday Yushchenko met with the presidents of Poland and Lithuania
and held a group meeting when President Saakashvili arrived later in the
day. Topics discussed included the creation of a new regional alliance
and the situation in Belarus.

Last Friday Saakashvili and Yushchenko announced their intention to create
an alliance uniting democracies of Baltic, Black and Caspian Sea countries
called the Community of Democratic Choice.

Saakashvili, who returned to Georgia early Saturday, has yet to comment on
the meeting and left soon after arriving in Georgia to meet with Armenian
President Robert Kocharaian at Lake Sevan.

According to leading Russian political scientists the meeting of the leaders
in Crimea was a demonstration that Presidents Saakashvili and Yushchenko
are following a pro-Western policy and wish to separate from the Common-
wealth of Independent States (CIS).

The director of private Institute of CIS Countries, Konstantin Zatulin, told
Interfax Friday, "They want to be liked by the West and demonstrate first of
all to Russia that they left the borders of the CIS." "Their goal is to
receive [money] transfers from the U.S.A. and EU to use them in the
interests of asserting power and personal enrichment"

He stated that Russia should not make any concessions to these countries
in the future such as speeding up the process of the withdrawal of Russian
bases from Georgia.

The president of 'Politics' foundation Viacheslav Nikonov agreed that the
meeting in Crimea was a step of Georgia and Ukraine in founding an
anti-Russian coalition. "Such an alliance can lead to the isolation of
Russia from its largest trade partner - the EU," he told Interfax.

The Director of Russian Institute of Political Studies Sergey Markov
believes that the United States will be more interested in the 'Democratic
Choice' project than Western Europe. "Their goal is to receive [money]
transfers from the U.S.A. and EU to use them in the interests of asserting
power and personal enrichment," he told Russian media.

A column in Kommersant by Natalia Gevorkian was critical of Russia for
making others fear it. "President Putin was able to achieve his 'high
goal' - people are scared of Russia. But it is not fear of a dangerous and
strong adversary. It is fear of a weak and inferiority complex overridden,"
she writes, adding:

"The new politicians in neighboring countries do not want to lie under
Moscow anymore. They want to change the situation. Moscow still would
have to sell its natural resources, but its market might shrink if the
neighbors, and Europe as well, have more choices. All roads to the West
would lead through this corridor, which was discussed in the Artek summit."

Ukrainian Foreign Minister Boris Tarasiuk commented on Thursday that this
new alliance would not be, however, an "alternative for the CIS" and is
currently only a concept.

However, Tarasiuk is not surprised that CIS countries have tried to find
other organizations during the last 14 years as the effectiveness of CIS was
low. "Not Ukraine and Georgia caused the crisis within CIS, but the
inability to respond to key issues which concern the CIS countries," he said
at a briefing in Kiev.

After Presidents Saakashvili and Yushchenko announced the alliance idea in
the Borjomi Declaration on Friday, August 12, President of Lithuania Valdas
Adamkus was the first to respond and welcomed the creation of a coalition of
Baltic-Black Sea region countries.

In a statement on his official web site Adamkus addressed Saakashvili and
Yushchenko saying, "Cooperation of countries of the region has a large
prospects." He said the initiative would be "a strong stimulus to
demolishing separating lines in this region, settle out-of-date conflicts,
block the way to violations of human rights and open opportunities to new
era of democracy, safety, stability and long-term peace."

The president of Lithuania hoped that the leaders of other Baltic states
would support the initiative as well. -30- [The Action Ukraine Report]
==============================================================
http://www.messenger.com.ge/issues/0930_august_22_2005/news_0930_1.htm
=============================================================
21. "MURKY SEAS"
Vision put forth by Yushchenko and Saakashvili
Turkey's Swing Towards Russia

COMMENTARY: by Transitions Online (TOL)
Prague, Czech Republic, Monday, 22 August 2005

Could a new vision for the Black Sea area yield new ideas about how to
promote democracy on Russia's fringes?

So it seems that Europe may soon have a new organization to become used
to, an alliance of democracies stretching from the Baltic to the Black and
the Caspian seas intent on acting as "a strong tool to free our region from
all remaining dividing lines, from violations of human rights, from any
spirit of confrontation, from frozen conflicts."

That, at least, is the vision for a "Community for Democratic Choice" put
forward by Ukraine's President Viktor Yushchenko and Georgia's President
Mikheil Saakashvili on 12 August.

That is of course an appealing vision, but it will be competing with others,
particularly in the Black Sea region. Since 1992, Turkey - historically the
greatest power in the Black Sea, arguably the region's greatest power at
present, and now also a pipeline hub - has promoted its own notion of a
peaceful and prosperous Black Sea through the Black Sea Economic
Cooperation (BSEC) group, an association of Black Sea countries and
their immediate neighbors.

Since the end of the Cold War, others in the West have formed their own
vision of a secure Black Sea, with Turkey as a cornerstone. From an outpost
of NATO, Turkey has come to be seen as a key to the security of the Black
Sea and a stabilizing force in the Middle East. That is a concept that
underpins the United States' - and others' - support for Turkey's membership
of the European Union. In the grander variant of the current U.S.
administration, Turkey could even become part of an arc of democratic
Muslim states stretching from Iraq's Gulf shores to the Bosphorus.

TURKEY'S SWING TOWARDS RUSSIA
George Bush's grand vision is currently being mauled by the instability in
Iraq. It may also be being undermined by Turkey itself because, judged by
recent developments, Turkey may have a different idea of who its key
partners are in the Black Sea - and what changes are desirable.

FIRST, in May in a development noted perhaps only by The Economist, the
United States was refused observer status by the BSEC. The decision
relegated the United States below such Black Sea heavyweights as Slovakia,
a country that enjoys observer status. Russia is thought to have blocked its
application, a veto that angered eight post-communist Black Sea states who
publicly said the United States should be allowed to attend their meetings.

Turkey remained silent - not perhaps the type of support that Ankara might
have been expected to give to a country that has been a great agitator for
its admission to the EU. Given that the BSEC was its brainchild, surely
Turkey could have insisted on opening the doors to the United States.

Turkey's silence gains in significance when seen against the backdrop of
Turkey's rapid and dramatic upswing in relations with Russia. The signs
include the first visit to Ankara by a Russian head of state (in December
2004), four meetings between Russia's President Vladimir Putin and Turkey's
Prime Minister Recep Tayyip Erdogan in seven months, a huge rise in trade,
a hefty increase in the flow of gas through a pipeline leading from Russia
to Turkey through the Black Sea, and talk of more pipelines as well as
supplies of electricity from Russia.

The SECOND development is the evidence that Russia and Turkey are not
simply improving their relationship; they seem to have found a new and
surprising congruence of interests. At a meeting with Putin in July, Erdogan
told the world that "our views totally coincide with regard to the situation
in the region as well as to the issues concerning the preservation of
stability in the world."

If he meant it, Erdogan was saying something disturbing, because Russia's
idea of stability is deeply antithetical towards the West and had no qualms
about the Uzbek government's killing of hundreds (possibly a thousand)
protestors in Andijan this May. Indeed, Erdogan's phrase could have been
taken straight from meetings between Putin and the presidents of Central
Asia. Could that be possible?

Turkish analysts believe it is and their answer seems plausible: apart from
asking Uzbekistan to remove Turkish flags from jeeps used by Uzbek forces,
Ankara has been very reticent in making any criticism of Uzbekistan's
President Islam Karimov.

All of this suggests a major shift in the position of two regional powers
who have usually competed rather than coincided in their interests. Both
seem keen to work more closely still. In January, Turkey expressed an
interest ("unexpectedly," said Putin) in joining the Shanghai Cooperation
Organization, a Central Asian grouping comprising Russia, China,
Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.

Though a competitor with Russia for influence in Georgia, Turkey is now
apparently angling for a role as a mediator in the dispute over Abkhazia.
Erdogan and Putin have, it seems, decided that their countries are not
playing a zero-sum game either in the Black Sea or in Central Asia.

So, what should be made of Ankara's new friendship with Moscow? Not
too much is one answer.

FIRSTLY, the relationship between Russia and Turkey may be warming up,
but there is little doubt that at present its relationship with the EU is
far more important to Turkey than its ties with Russia. Ankara may take a
more positive view of Moscow than Brussels does at present, but it is
always going to follow an independent Russia policy.

And, in any case, Europe's largest countries - France, Germany, and
Britain - all have relationships with Russia that are also very cozy and
differ from the increasingly skeptical position of the European Commission.
(Where this all leaves Ankara's relationship with Washington is another
matter, but it is primarily through the EU that Turkey can be tied more
closely to the West.)

SECONDLY, Turkey may be more interested in maintaining stability than in
promoting democracy in Central Asia but in that respect it is behaving like
the United States, which responded with woefully weak words to the events
in Andijan.

And, in any case, there are reasons to welcome the impact on the region of a
better relationship between the two countries. A rapprochement between the
main supporter of Armenia - Russia - and the main backer of Azerbaijan -
Turkey - could push the issue of Nagorno-Karabakh towards a settlement and
help push Armenia and Turkey towards opening up an economic relationship.

An improvement on either front would help everyone (as well as promoting
Turkey's case for EU membership). And if Turkey could deliver a solution to
the Georgian-Abkhazian conflict, it would (of course) have achieved what no
one else has proved able to do.

PROMOTING DEMOCRACY
Still, the contrast between Turkey's call for stability and Yushchenko's and
Saakashvili's implicit call for democratic change does highlight some of the
weaknesses in assuming that Turkey might be a force for positive change in
the Black Sea and Caspian Sea regions.

For one, the contrast underlines that Turkey has its own, long-standing
interests in the Caucasus and Central Asia and - as the thorny, even
neuralgic relationship with Armenia indicates - Turkey is perfectly capable
of helping to maintain instability and retard progress in the Caucasus in
defense of those interests.

There may have some positive recent moves in relations between Turkey and
Armenia, but the collapse of a joint historical commission and the
imprisonment in Armenia of a Turkish historian indicate that a breakthrough
in their relations is still a distant prospect.

Second, achieving breakthroughs may be beyond Turkey. A summit between
the Azeri and Armenian presidents on 26 August should again demonstrate
how hard it will be for anyone to broker a settlement over Nagorno-Karabakh.
In any case, all countries in the region, including Georgia and Azerbaijan,
will be wary of the motivations of two powerful neighbors suddenly working
together.

And third, whatever the virtues of having a democratic Turkey embedded in
the EU, Turkey is not yet an active promoter of the democratic changes that
it itself is now embracing. Indeed, analysts believe that Turkey is very
wary, for example, about potential upheaval after parliamentary elections in
Azerbaijan this November.

If key supporters of Turkey's membership of the EU - Britain and the United
States - anticipate that Turkey would be active in promoting change in the
region, they may well be wrong. At least for now, it looks likely that
Turkey's contribution to political progress in the region will be passive,
as an example that internal change is possible.

Which brings to the fore the point that Yushchenko and Saakashvili
implicitly highlighted: that current policies to promote democracy in the
region are inadequate. Turkey seems interested in the status quo, not
change. The EU's approach - demonstrated again in the spat between
Belarus and Poland - is out of touch.

With Belarus, its policy is based on reciprocity, a "step-by-step" approach
under which the EU will respond to overtures made by Minsk. That is a
passive position that relies on the EU's magnetic appeal to its neighbors.
That may be fine when its neighbors - like countries in the western
Balkans - are attracted to the EU, but clearly leads merely to disengagement
with neighbors - like Belarus - who have no interest in the EU.

If the EU wants to help promote political development in Central Asia or in
the Caucasus, it needs something better than that - and also something
better than its muted response to events in Andijan.

The U.S. approach to the promotion of democracy also fails to provide a
convincing model. In Turkey's neighborhood, it has used three approaches.

Faced with an election-stealing government in Eduard Shevardnadze's
Georgia and the "soft authoritarianism" of Ukraine's Leonid Kuchma and
Kyrgyzstan's Askar Akaev, it deployed soft power, mainly by supporting
civil society groups.

Faced with "hard authoritarianism" in Iraq, it opted for violent overthrow,
with uncertain long-term results. In Uzbekistan, it plumped for a few quiet
and reluctant words of concern about the Andijan killings, a lily-livered
policy that did nothing to save its troops from being ordered out of the
country.

What practical form the Community for Democratic Choice might take
remains shadowy (all that is known is that a conference should be held in
the autumn), but the Yushchenko-Saakashvili initiative - backed already by
Poland and Lithuania - at least heralds the prospect of some new thinking
about how to promote democracy. Given the inadequacies of the "models"
provided by the big powers - the EU, Turkey, and the United States - some
competition of ideas would be welcome. -30-
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22. UKRAINIAN PRESIDENT VISITS PRIVATE FARM AGROEKOLOGIA
Rich harvests of ecologically pure products

Press Office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Wednesday, August, 17, 2005

KYIV - President Yushchenko visited fields of the private Agroekologia farm
and spoke with its head Semen Antonets. The Agroekologia is known for its
steadily rich harvests of ecologically pure products that are uniquely grown
without mineral fertilizers.

Yushchenko discussed several agrarian issues with Antonets. The latter told
the President he believed the state should support its agriculture and
create conditions to make farming profitable. Yushchenko also asked the
farmer what productivity of beetroot they expected this year, and Antonets
assured the Head of State the yield should be satisfactory.

In his turn, Agrarian Minister Olexandr Baranivsky, who accompanied the
President, promised that his ministry would spare no effort to stabilize the
sugar market. He said farmers expected rather a good harvest of beetroot
this year, which will make it possible to produce 1.850 million tons of
sugar to completely satisfy needs of Ukrainians in this product. -30-
------------------------------------------------------------------------------------------------------
FOOTNOTE: The Ukrainian private farm Agroekologia is located in
the Poltava Oblast. Editor
=============================================================
23. UKRAINIAN PRESIDENT VICTOR YUSHCHENKO VISITS
NATIONAL MUSEUM AND SCHOOL OF POTTERY IN OPISHNYA

Press Office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Wednesday, 17 August 2005

KYIV - President Yushchenko visited the National Museum of Ukrainian
Pottery in the village of Opishnya in the Poltava Oblast to see items
produced by craftsmen and ancient museum exhibits. He also visited the
pottery school that works at the museum.

"Ukrainian pottery has deep roots. This is a unique tradition which must be
preserved," said the President. He stressed that regional officials should
spare no effort to support the museum and its pottery school.

"Craftsmen should have all necessary conditions to impart their knowledge
and skills to their students. This profession must not disappear," he said.
-------------------------------------------------------------------------------------------------------
FOOTNOTE: I have been to Opishnya several times. It is important
for Ukrainian pottery art to make a real comeback. It is very sad and
disheartening to see the way master pottery artists have to live today
in Opishnya because the state-run factory shut down and there was
no retirement program.

I urge all of you to go to Opishnya and support the artists with your
purchases. The Museum and school can be supported with your
donations and purchases of their books and other materials. Editor
=============================================================
24. AUSTRALIA'S UKRAINIAN COMMUNITY HAIL UKRAINIAN GRECO-
CATHOLIC CHURCH'S MOVE TO HAVE SEAT IN CAPITAL, KYIV

Ukrinform, Kyiv, Ukraine, Monday, August 22, 2005

KYIV - Speaking on behalf of Australia's Ukrainian community, Stefan
Romaniv, chairman of the Union of Ukrainian Organisations in Australia,
hailed the Ukrainian Greco-Catholic Church's decision to move its seat
from Lviv to Kyiv.

This way, he said, Ukraine is gathering together all the elements, which
make up the Ukrainian society and which make the nation really Ukraine.

Mr Romaniv happened to be among those who attended the Sunday
ceremony and the liturgy, conducted by Cardinal Liubomyr Huzar, the
Ukrainian Greco-Catholic Church's Supreme Hieratch. Stefan Romaniv
congratulated the Greco-Roman believers on that occasion on behalf of
those 24 Ukrainian organisations which are members of the Union.

Stefan Romaniv criticized representatives of the Ukrainian Orthodox
Church /Moscow Patriarchate for infringing on other believers' right to
pray differently. -30- [The Action Ukraine Report Monitoring Service]
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