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Action Ukraine Report

"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"

"THE ACTION UKRAINE REPORT - AUR" - Number 557
Mr. E. Morgan Williams, Publisher and Editor
Washington, D.C., Kyiv, Ukraine, TUESDAY, September 13, 2005

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

1. ADDITIONAL FUNDING WILL NOT BE MADE AVAILABLE FROM THE U.S.
TO COMPLETE THE UKRAINE NUCLEAR FUEL QUANTIFICATION PROJECT
Project was developing an alternative nuclear fuel source for Ukraine.
Letter from U.S. Secretary of Energy Samuel W. Bodman
to Mr. Ivan Plachkov, Minister, Ukraine Ministry of Fuel & Energy
The Action Ukraine Report (AUR), Number 557, Article One
Washington, D.C. , Tuesday, September 13, 2005

2. U.S. GOVERNMENT WILL NOT FUND NUCLEAR FUEL CORE RELOAD
PROGRAM TO COMPLETE UKRAINE'S NUCLEAR FUEL
QUALIFICATION PROJECT (UNFQP)
Letter from Thomas C. Adams
Coordinator of Assistance to Europe and Eurasia
United States Department of State
To Morgan Williams, Washington, D.C.
The Action Ukraine Report (AUR), Number 557, Article Two
Washington, D.C., Tuesday, September 13, 2005

3. UKRAINE NUCLEAR FUEL QUALIFICATION PROGRAM (UNFQP)
Ensure a competitive marketplace for nuclear fuel in Ukraine
BACKGROUND PAPER: UNFQP
The Action Ukraine Report (AUR) Monitoring Service
Washington, D. C., Tuesday, September 13, 2005

4. UKRAINE PRESIDENT AGAIN PROMISES BETTER BUSINESS CLIMATE
Mistakes committed will be corrected
Interfax-Ukraine news agency, Kiev, in Russian 11 Sep 05
BBC Monitoring Service, UK, in English, Sun, Sep 11, 2005

5. PRESIDENT SAYS PRIVATIZATION WRANGLE FORCED UKRAINE
GOVERNMENT DISMISSAL
Agence France Presse (AFP), Kiev, Ukraine, Sun, September 11, 2005

6. GEORGE BUSH CALLS UKRAINIAN PRESIDENT YUSHCHENKO
UNIAN news agency, Kiev, in Ukrainian 1330 gmt 10 Sep 05
BBC Monitoring Service,UK, in English, Sat, Sep 10, 2005

7. UKRAINE'S LEADER PLANS NEW GOVERNMENT FOR SWIFT REFORM
By Tom Warner in Kiev, Financial Times, London, UK, Sat, Sep10 2005

8. "THE END OF THE ORANGE REVOLUTION"
This government has been an unmitigated disaster of socialist populism
COMMENTARY AND ANALYSIS: Anders Åslund
Written for the Moscow newspaper Vedomosti
Washington, D.C., Monday, September 12, 2005

9. "ORANGE REVOLUTION NOT OVER"
COMMENTARY: By Richard H. Shriver
The Washington Times, Washington, D.C.
Tuesday, September 13, 2005

10. "UKRAINE'S ORANGE REBELS SPLINTER"
The Orange Revolution is noisily eating its children
COMMENTARY: By Fred Weir, Correspondent
The Christian Science Monitor
Boston, Massachusetts, Monday, Sep 12, 2005

11. JAMES SHERR: THE MAGIC OF THE ORANGE REVOLUTION WAS
WEARING OFF LONG BEFORE THIS CRISIS
Interview with James Sherr, Senior Research Fellow
Conflict Study Center of the British Defense Academy
By Serhiy Solodky, The Day
The Day Weekly Digest in English, #27
Kyiv, Ukraine, Tuesday, Sep 13, 2005

12. UKRAINE'S "POST-ORANGE" ORDER
OPINION: By Peter Lavelle, Political Commentator
RIA NOVOSTI, Moscow, Russia, Mon, Sep 12, 2005

13. UKRAINE'S 'ORANGE' REVOLUTION STUMBLES
Ukraine Cronyism Scandal, Symbolized by Steel Plant, Divides New Government
By Guy Chazan, Staff Reporter
The Wall Street Journal Europe, Front Page
Brussels, Belgium, Mon, September 12, 2005

14. UKRAINE'S SACKED PRIME MINISTER TYMOSHENKO SAYS
"ORANGE BIRD" NEEDED TWO WINGS
Rustavi-2 TV, Tbilisi, in Georgian 1700 gmt 11 Sep 05
BBC Monitoring Service, UK, in English, Sun, Sep 11, 2005

15. CORRUPTION ALLEGATIONS ABOUND IN UKRAINE
ANALYSIS: by Roman Kupchinsky
RFE/RL Organized Crime and Terrorism Watch, Vol 5, No. 12
Radio Free Europe/Radio Liberty (RFE/RL)
Prague, Czech Republic, Tue, 13 September 2005

16. KUCHMA BACKS YUSHCHENKO IN UKRAINE TURMOIL
By Tom Warner in Kiev, Financial Times
London, UK, Sunday, September 11 2005

17. "LEGITIMIZING UKRAINE'S CORRUPTION"
COMMENTARY: by Walter Prochorenko, PhD
Paramus, New Jersey, Friday, 9 September 2005
Published by The Action Ukraine Report (AUR), Number 557, Article 16
Washington, D.C., Tuesday, Sep 13, 2005

18. UKRAINIAN PRESIDENT'S NEW CHIEF OF STAFF OLEH RYBACHUK
VOWS TO KEEP REVOLUTION PROMISES
INTERVIEW: with Oleh Rybachuk
UT1, Kiev, in Ukrainian 0900 gmt 9 Sep 05
BBC Monitoring Service, UK, in English, Mon, Sep 12, 2005

19. PRESIDENT VIKTOR YUSHCHENKO TO MAKE WORKING VISIT TO
USA ON SEPTEMBER 14 - 18
Ukrinform, Kyiv, Ukraine, Mon, Sep 12, 2005
==============================================================
1. ADDITIONAL FUNDING WILL NOT BE MADE AVAILABLE FROM THE U.S.
TO COMPLETE THE UKRAINE NUCLEAR FUEL QUANTIFICATION PROJECT
Project was developing an alternative nuclear fuel source for Ukraine

Letter from U.S. Secretary of Energy Samuel W. Bodman
to Mr. Ivan Plachkov, Minister, Ukraine Ministry of Fuel & Energy
The Action Ukraine Report (AUR), Number 557, Article One
Washington, D.C. , Tuesday, September 13, 2005

The Secretary of Energy
Washington, D.C., 20585
July 21, 2005

Mr. Ivan Plachkov, Minister
Ukraine Ministry of Fuel & Energy
30 Kreschatick Street
Kiev, Ukraine, 01611

Dear Minister Plachkov,

Thank you for your letter regarding our cooperative efforts on the Ukraine
Nuclear Fuel Quantification Projects. The collaboration that has taken
place over the past several years between the government of Ukraine
and the United States Department of Energy on this project has been
noteworthy.

Up to the present, the United States has invested more than $50 million
in assistance funds for Ukraine. However, reduced levels of funding to
the International Nuclear Safety Program recently forced the Department
of Energy to reduce the scope of its assistance work. The reduction
impacted the Ukraine Nuclear Fuel Quantification Project and funding
for the core reload is not currently available.

Due to the great strides made by Ukraine's nuclear energy sector in
recent years, both financially and technically, we are confident that
Ukraine now possesses the ability to independently pursue a
commercial agreement with Westinghouse to supply the core reload
batch of 42 nuclear fuel assemblies.

We look forward to our continued cooperation and to the enhanced
energy security and independence of Ukraine.

Sincerely,

Samuel W. Bodman
[U.S. Secretary of Energy] -30-
[The Action Ukraine Report (AUR) Monitoring Service]
=============================================================
2. U.S. GOVERNMENT WILL NOT FUND NUCLEAR FUEL CORE RELOAD
PROGRAM TO COMPLETE UKRAINE'S NUCLEAR FUEL
QUALIFICATION PROJECT (UNFQP)

Letter from Thomas C. Adams,
Coordinator of Assistance to Europe and Eurasia
United States Department of State
to Morgan Williams, Washington, D.C.
The Action Ukraine Report (AUR), Number 557, Article Two
Washington, D.C., Tuesday, September 13, 2005

United States Department of State
Washington, D.C. 20520
August 10, 2005

Mr. Morgan Williams

Dear Mr. Williams,

I am writing to clarify the U.S. Government's plans for the completion of
the Ukraine nuclear fuel qualification project (UNFQP). My staff was
centrally involved in the interagency discussions that determined Ukraine's
assistance budget under the FREEDOM Support Act (FSA), which funds
the Ukraine nuclear safety assistance implement by the Department of
Energy.

As you know, when we initiated the UNFQP, Ukraine's FSA budget was
significantly higher that it was in FY 2005 (200+ million vs. less than 79
million). Given that budget reduction and competing priorities, and working
with our Embassy in Kiev and our counterparts in the Department of Energy,
we determined that there were insufficient resources to undertake the
fuel core reload.

In addition, the economic growth and political changes in Ukraine point
towards the greater ability of that country to enter into a commercial
agreement to purchase their fuel reload.

As A/S Fried mentioned in his July 27 testimony to the House International
Relations Committee, the emergency supplemental FSA appropriations of
$60 million, which is intended primarily to help cement Ukraine's democratic
gains and advance key economic reform over the coming months, will permit
us to devote a small amount - about $5 million - to sustain DOE's nuclear
safety activities.

We intend for this to include remaining allocations to cover the lead test
assembly installation, monitoring, and testing under the UNFQP.

Unfortunately, the USG will not be able to fund the core reload. Despite
having received supplemental funds, the FSA budget for Ukraine remains
significantly less than it was when the UNFQP was agreed. In this budget
environment there are competing priorities that must be addressed.

Please do not hesitate to contact me if you have any questions.

Sincerely,

Thomas C. Adams
Coordinator of Assistance to Europe and Eurasia -30-
[The Action Ukraine Report (AUR) Monitoring Service]
============================================================
3. UKRAINE NUCLEAR FUEL QUALIFICATION PROGRAM (UNFQP)
Ensure a competitive marketplace for nuclear fuel in Ukraine

BACKGROUND PAPER: UNFQP
The Action Ukraine Report (AUR) Monitoring Service
Washington, D. C., September 13, 2005

Ukraine currently uses nuclear power for approximately 50 percent of its
electricity needs but must purchase 100 percent of its fuel from the Russian
Federation. This has led to sharp price swings and intermittent cutoffs of
fuel shipments reflecting the volatility of the bilateral relations of these
two countries.

Within the FY 1996 Foreign Operations Appropriations bill, Congress
specified that the US Agency for International Development spend “no less
than $30 million” for the design, technology transfer and testing of an
alternative source of nuclear fuel.

The intent is to ensure a competitive marketplace for nuclear fuel in
Ukraine, lowering costs to energy consumers and improving the safety and
efficiency of nuclear fuel products offered.

This program was initiated after a Nuclear Cooperation Agreement was
signed by Secretary of State Albright in Kiev on March 7 1998 following the
Ukrainian Government’s termination of a contract for the supply of a turbine
generator to the Bushehr Nuclear Power Plant in Iran at the request of the
US Government.

Although the non-nuclear sale to Iran was considered to be legal under
international law, the US Government pledged the Ukrainian Nuclear Fuel
Qualification Project (UNFQP) as compensation for the loss in revenue and
employment by the voluntary termination of Ukrainian Government support
for the project.

In December 1999, the US/Ukrainian Binational Committee issued a
statement in strong support and full commitment to the program resulting in
a US/Ukrainian Intergovernmental Agreement signed June 2000 between
then-Secretary of Energy Richardson and Ukrainian Energy Minister Tulub
during the visit of former President Clinton to Kyiv

A contract was awarded to Westinghouse Electric Company in July 2000 to
work with Ukrainian authorities in fulfilling the program goals and
immediately confronted strong Russian opposition to the project as it
threatened their monopoly supply status, illustrating the program’s
strategic need for Ukraine.

The Intergovernmental Agreement called for the development, testing and
production of fuel through both “lead test assemblies” and a “full test
reload.” The agreement also called for extensive training to allow
Ukrainian engineers to monitor nuclear fuel for the first time. These
activities are currently being conducted at the Westinghouse fuel facility
in Columbia, South Carolina.

PROJECT IMPLEMENTATION AND TERMINATION

While opposition by Russia has continued, the UNFQP has progressed also
well with approximately $50 million expended to date and an additional $15
million required for program completion. The U.S. government announced in
July a termination of the program before its completion that will ultimately
not yield to Ukraine an alternative fuel supply unless other funding sources
can be found to continue the program.

The Department of Energy has decided not to provide funding to provide the
“full test reload” as was originally called for by the Intergovernmental
Agreement which was resigned June 5, 2005. Without the testing, licensing
and examination of a reload of fuel, experts feel it will be impossible to
determine whether the first of a kind process of mixing both western and
Russian fuel together in a Soviet built reactor will result in a safe and
reliable alternative to Russian suppliers.

The decision by the U.S. government brings to an end an important
cooperative relationships between US commercial firms and Ukrainian
weapons scientists that effectively prevented Ukrainian nuclear aid to Iran.

The UNFQP provided the creation of the Center for Reactor Core Design
(CRDC) which for the first time in Ukraine’s civilian nuclear power history
will provide it with its own ability to analyze Russian-made fuel before
insertion into its own reactors to ensure safety.

Approximately 40 weapons scientists previously employed in WMD work at
the Kharkiv Institute for Physics and Technology have been trained and
reemployed to comprise an expert group with advanced western technologies
and practices that can be expanded upon through Ukrainian resources to
advance fuel safety and independence.

The Kharkiv Institute has become a focus of US non-proliferation efforts
recently has it houses one of the largest stocks of bomb-grade Highly
Enriched Uranium in the Former Soviet Union.

PROJECT CONTINUATION?

It has been reported the Ukrainian government has expressed its regret
and concern over the letter from Secretary of Energy Samuel Bodman stating
that the United States' share of the program costs will not now be made
available and that the final part of the joint efforts between the United
States and Ukraine would be subsequently stopped.

The government of Ukraine still hopes that funds will be made available
by the U.S. government to meet the continued needs of this important
program as significant efforts are still required before an alternative
nuclear fuel provider can be qualified in Ukraine. Many experts do not feel
the present program was far enough along to be commercially viable and
still needs further financial support from governments.

It is very clear to experts that Ukraine critically needs to develop the
domestic ability, or a clear alternative supplier from the west for nuclear
fuels. It will not matter much what they do in other areas if they are not
going to become more independent regarding the critical supply of nuclear
fuel they need. -30- [By The Action Ukraine Report Monitoring Service]
=============================================================
4. UKRAINE PRESIDENT PROMISES BETTER BUSINESS CLIMATE
Mistakes committed will be corrected

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

KIEV - Ukrainian President Viktor Yushchenko has promised that the mistakes
committed over the past few months will be corrected and the government will
improve the business climate.

"I think that in the next one and a half or two months we will correct those
mistakes, we will extend our hand to business, no-one will be brandishing a
sword in front of business circles, in front of businesses from this or
another country. They will be given equal rights, according to the law, this
I promise to you," Yushchenko told journalists in an interview today.

He said the country needed prosperity and an honest budgetary and economic
prospects. He said there was a need urgently to explain to the public what
happened and how to find a way out of the situation.

"This is why I give you my word, I will be candid and public. I am confident
that as never before Ukraine needs wise, patient and well-thought-out
decisions, without emotions, without artistic moves, without PR. We need to
say honestly what is going on in this country," Yushchenko said.

[On 8 September Yushchenko sacked the cabinet of Yuliya Tymoshenko,
saying infighting in his administration was damaging the country. In remarks
carried by Interfax-Ukraine earlier today, he accused the Tymoshenko cabinet
of mishandling the economy.] -30-
=============================================================
5. PRESIDENT SAYS PRIVATIZATION WRANGLE FORCED UKRAINE
GOVERNMENT DISMISSAL

Agence France Presse (AFP), Kiev, Ukraine, Sun, September 11, 2005

Ukrainian President Viktor Yushchenko said that ministers abusing their
positions to rig privatizations and jostling for power ahead of elections
had forced him to sack the government to avoid a "bloodbath."

He lashed out at his former prime minister Yulia Tymoshenko, who has
become a potentially formidable political rival since he dismissed her
along with the whole government Thursday.

"When certain ministers in the government begin to issue orders to judges
and prosecutors, to organize privatizations in secret and bring the country
to the edge of a bloodbath in search of favors worth hundreds of millions
for their parties -- I couldn't stand by idle," he told journalists.

Yushchenko sacked his seven-month-old cabinet in a bid to quash a
deepening corruption scandal sparked by a simmering battle for power
between top members of the government.

Ukrainian media said Tymoshenko and National Security Council chief
Petro Poroshenko headed opposite camps aiming to renationalize the
Nikopolsky Ferroalloy Plant (NZF), one of the world's largest metal alloy
plants, in order to reprivatize it in exchange for millions of dollars and
favorable television access ahead of parliamentary elections next year.

"It was the point of no return. The intrigue reached such a level that I
firmly decided ... that all of them had to go," Yushchenko said after the
inauguration of a monument in Kiev in honor of the victims of the
September 11, 2001 attacks in the United States.

Press reports have alleged that Tymoshenko sought to renationalize
Nikopolsky in order to later sell it to the metals group Privat, in
exchange for its support.

"No minister in Ukraine's previous ten governments had such extensive
powers as Yulia Tymoshenko," Yushchenko said.

This should have allowed her to "do good work, instead of staging
provocations in front of the entrance of this or that factory," he added,
apparently in response to Tymoshenko, who Friday described her
sacking as "planned ahead" and "unfair" in a live television talk show.

In her television appearance, Tymoshenko, who together with Yushchenko
roused huge crowds during last year's peaceful "Orange Revolution", said
she was breaking with the president and would campaign in next March's
parliamentary elections separately.

"Talking about the values (of the Orange Revolution) is more productive
than simply opting for harsh and incomprehensible opposition,"
Yushchenko said, answering a question about Tymoshenko's speech.

Following the dismissal of Tymoshenko's government, Yushchenko
named a trusted ally, Yury Yekhanurov, as acting prime minister.

The 57-year-old liberal economist has been huddling with political party
leaders and outgoing ministers in talks on forming a new government.
=============================================================
6. GEORGE BUSH CALLS UKRAINIAN PRESIDENT YUSHCHENKO

UNIAN news agency, Kiev, in Ukrainian 1330 gmt 10 Sep 05
BBC Monitoring Service,UK, in English, Sat, Sep 10, 2005

KIEV - Ukrainian President Viktor Yushchenko has assured US President
George Bush that the current changes in this country will not affect
Ukraine's strategic partnership with the USA. Yushchenko's press service
reported that Yushchenko said this during his phone talk with George Bush
today.

Yushchenko and Bush discussed Ukrainian-US cooperation, the situation in
Ukraine and in the world. Yushchenko stressed that the current changes in
Ukraine are aimed at strengthening democracy and restoring effective
government institutes but in no way will they change Ukraine's strategic
course for integration with Euroatlantic structures or strategic partnership
with the USA.

Yushchenko also said that Ukraine hopes for US support in granting Ukraine
market economic status and its accession to the WTO.

On behalf of the Ukrainian people Yushchenko spoke the words of support and
compassion for the victims of Katrina Hurricane and stressed that Ukraine is
prepared to assist in eliminating its consequences.

Bush stressed that the USA supports all processes aimed at democratization
and developing civil society in Ukraine. -30-
=============================================================
7. UKRAINE'S LEADER PLANS NEW GOVERNMENT FOR SWIFT REFORM

By Tom Warner in Kiev, Financial Times, London, UK, Sat, Sep10 2005

Ukraine's President Viktor Yushchenko yesterday said he aimed to form a
government within days so reforms in the former Soviet state did not lose
momentum. Mr Yushchenko met representatives of 11 of parliament's 13
political factions, proposing a "stability pact" and inviting them to put
forward candidates for the new cabinet.

The meeting excluded the Communists and Social Democrats but included
the Regions party, led by Viktor Yanukovich, Mr Yushchenko's rival in last
year's presidential elections.

Yuri Yekhanurov, acting prime minister, yesterday declared an end to
Ukraine's campaign to reverse privatisations, although he said there could
still be "negotiations". "I think there will be peace agreements," said Mr
Yekhanurov, who took over on Thursday after Mr Yushchenko sacked the
cabinet of Yulia Tymoshenko, a populist who had led the drive to reverse
privatisations. "There will not be reprivatisation."

Mr Yekhanurov said an auction planned next month of the steel mill
Kryvorizhstal, which was renationalised in June, would go ahead. He said a
majority stake in the Nikopol Ferroalloy plant would also be returned to
state ownership in line with a Supreme Court ruling yesterday, but he would
avoid the "hurry" that led to last week's armed stand-off at the plant.

Mr Yekhanurov said he was close to agreeing on new management for the plant
with Viktor Pinchuk, son-in-law of the former president, Leonid Kuchma, who
currently owns the majority stake in Nikopol Ferroalloy, and a rival
business group which owns a minority stake.

Mr Yekhanurov's comments confirmed expectations he would seek to
compromise with big business.

But political analysts said Mr Yekhanurov's new government, which could take
two weeks to form, was unlikely to undertake any big reforms and would be
little more than a caretaker government until parliamentary elections in
March. -30-
=============================================================
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=============================================================
8. "THE END OF THE ORANGE REVOLUTION"
This government has been an unmitigated disaster of socialist populism.

COMMENTARY AND ANALYSIS: Anders Åslund
Written for the Moscow newspaper Vedomosti
Washington, D.C., Monday, September 12, 2005

This has been a miserable year for the Ukrainian economy. Last year,
Ukraine enjoyed an economic growth of no less than 12.1 percent, but that
had declined to 3.7 percent during the first seven months of 2005. Moreover,
output has declined by almost every month and so has industrial production
that fell by 2.4 percent in July over July last year.

Construction and investment are falling ever more. A huge trade surplus last
year has been eliminated in the last months. Clearly, Ukraine is on the way
toward 2-3 percent growth this year. Only the budget balance is positive, as
the Ministry of Finance has pursued a conservative fiscal policy.

This economic deterioration has been caused domestic economic policy.
The dominant concern [FIRST] has been a wide-ranging discussion about
re-privatization. Prime Minister Yulia Tymoshenko once talked about the
revision of 3,000 privatizations. Another problem [SECOND] has been a
sharply increased tax burden of 5-6 percent of GDP needed to finance very
large increases in social transfers and public wages.

A THIRD issue has been far-reaching government intervention in the economy,
such as attempts to regulate the prices of petrol, meat and grain and to
reinforce state monopolies. A doubling of railway tariffs for metal freight
has also harmed the economy. The government has been run like a
profit-maximizing state holding company oblivious of effects on the private
sector.

Meanwhile, this government [FOURTH] has not undertaken any of the many
promised and badly-needed liberal reforms. The only positive step has been
the late adoption of half the WTO-related legislation that was necessary for
Ukraine's accession to the WTO this year. So far, no significant
deregulation has occurred in spit of much talk about it. No tax cuts have
occurred.

No financial legislation has been adopted, although Ukraine does not even
have a law on joint stock companies.

In short, this government has been an unmitigated disaster of socialist
populism. On top of everything, it has maintained a revolutionary discourse
of vehement public attacks against individual businessmen and politicians,
including members of the government. Eight months of this mess was too
much.

It was therefore a great relief when President Viktor Yushchenko reasserted
his authority to put an end to this public mismanagement. Sensibly,
Yushchenko also let several big businessmen, who helped finance and
manage his campaign, go, as their aspirations to make money on their
positions have been another worry.

This government change marks the end of the Orange Revolution. Yulia
Tymoshenko and her loyalists have now marched out of the government,
and Tymoshenko has declared that her political bloc will stay independent
of Yushchenko's. The question today is where various politicians and
businessmen will go.

One old oligarch, Alexander Volkov, and the probably second largest
oligarchic group, Privat Group in Dnepropetrovsk, are with Tymoshenko
since a long time. More than twenty businessmen in the parliament have
recently joined her party faction.

Sensationally, Kuchma's former chief of staff, Viktor Medvedchuk, and his
Social Democratic Party are suddenly favoring Tymoshenko, with Ukraine's
first President Leonid Kravchuk strongly supporting Tymoshenko. Curiously,
the real agitators of the Orange Revolution and some of the more
disreputable oligarchs appear to be coming together in Tymoshenko's bloc.

Meanwhile, others are joining Yushchenko. Anatoly Kinakh and his liberal
industrialist faction are already with him. Speaker Volodymyr Lytvyn appears
to turn to Yushchenko as well. Embattled oligarch Viktor Pinchuk and his
Labor Ukraine faction support Yushchenko. The assumption is that the new
government will contain about ten former Kuchma ministers of good
reputation, who can the support of four-five centrist party factions in
parliament for Yushchenko.

The big businessmen who have stood behind Yushchenko all along, notably
Petro Poroshenko, David Zhvania and Yevgeny Chervonenko, are staying
loyal to him, even if they are leaving their government portfolios. Former
President Leonid Kuchma has expressed his support for Yushchenko.

Thus, Yushchenko's old liberal, Western and moderate nationalist supporters
are likely to stay with him, while the centrist oligarchic factions will
probably join him. Oddly, the Socialist Party wants to stay in government
and thus support Yushchenko, although they have been much closer to
Tymoshenko.

Ironically, the biggest outstanding question is where the Donetsk party, the
Regions, including former presidential candidate Viktor Yanukovich and
Ukraine's leading oligarch, Rinat Akhmetov, will go. Akhmetov has long
seemed to want to make peace with Yushchenko, while Yanukovich sounds
as if he is leaning toward Tymoshenko.

A swift split of Ukrainian politics is taking place among the leader of the
Orange Revolution, and the two opposing leaders are Yushchenko and
Tymoshenko, even if they do not attack one another in public as yet. Both
are mobilizing substantial forces, which contain big businessmen.

In the ideal case, a US-type Republican Party could be formed around
Yushchenko and a somewhat populist Democratic Party around Tymoshenko,
while at least the small Socialist Party and the even smaller Communist
Party would stay independent. The nightmare would be a party fragmentation
as occurred in Poland in 1990-91.

The litmus test will come very soon, with the formation of the government of
Yuri Yekhanurov and the parliamentary vote on his candidacy. The assumption
is that he and Yushchenko will do what it takes to get a majority for the
new government, and they already seem to have secured enough votes.

In this hot political situation, it is difficult to imagine a more suitable
prime minister than Yuri Yekhanurov. As Chairman of the State Property
Fund from 1994 to 1997, he carried out mass privatization in Ukraine, and
very successfully so, leaving him in high repute. As first deputy to Prime
Minister Yushchenko in 2000-2001, he made sure that the government
worked well.

From 2002, he has been one of the leaders of Our Ukraine in parliament, and
as committee chairman he has shepherded substantial economic legislation
through parliament. In spite of many years in politics, he has virtually no
enemies. Yekhanurov should be able both to hold the Yushchenko loyalists
together and make the government start working, although parliamentary
elections are scheduled for March 2006.

Yekhanurov has his work cut out for him. In a short period, he needs to
accomplish many things. FIRST, of all, he is strongly committed to put an
end to mindless re-privatization campaign. Probably, the steel mill
Krivoryzhstal but nothing else will be re-privatized. SECOND, a long
prepared draft omnibus law abolishing some 3,600 regulations is ready
to be sent to parliament.

THIRD, the remaining WTO legislation is already in parliament, and Ukraine
needs to have it promulgated not later than October, if it is to have any
chance to enter the WTO this year.

FOURTH, the very populist budget for next year of the former government,
containing little but more social transfers and public wages, has to be
redone quickly. In particular, that high spending must be cut, and social
taxes should be unified and reduced.

Finally [FIFTH] , Yekhanurov might be able to push through some financial
legislation long prepared and lying waiting in the parliament. The economic
agenda can at long last become relevant for Ukraine's economic
development, and the growth could soon resume.

There are all reasons to cheer the change of government in Ukraine, and
the restructuring of Ukrainian politics, while the verdict of the voters is
difficult to predict. -30- [The Action Ukraine Report Monitoring Service]
-------------------------------------------------------------------------------------------------------
Anders Åslund, Director, Russian & Eurasian Program
Carnegie Endowment for International Peace
Washington, D.C.; E-mail aaslund@ceip.org
=============================================================
9. "ORANGE REVOLUTION NOT OVER"

COMMENTARY: By Richard H. Shriver
The Washington Times, Washington, D.C.
Tuesday, September 13, 2005

The handwringers and gloaters are out in force since Ukraine's President
Viktor Yushchenko fired his entire Cabinet last Thursday, including the
mercurial, attractive, never-to-be-underestimated populist prime minister,
Yulia Tymoshenko.

Ordinary Ukrainians are, momentarily at least, disillusioned. Their
collective response says, "All politicians are the same, look what we get
when we participate in a supposedly democratic political process -- the same
old corruption." Russia's President Vladimir Putin is fairly floating over
his imperial throne warbling, "I told you so. I knew it would never work.
Soon Ukraine will be back in Russia's orbit."

Not so fast, folks. Ukraine's recent history suggests otherwise. In
1993, Leonid Kuchma, then prime minister under President Leonid Kravchuk,
was sacked after just a few months. He returned to power in 1994 as
president, strengthened by a combination of three forces:

(1) Sympathy. Ukrainians have a long history of sympathizing with anyone
who finds himself or herself, as in the case of Yulia Tymoshenko, persecuted
by the government, whether fairly or unfairly -- and the latter treatment is
nearly always assumed.

(2) Name recognition, which raises the question, Why are there always so
few names of decent, competent people Ukrainian voters can recognize at
election time?

(3) Popular belief in Mr. Kuchma's string of reform-oriented campaign
pledges, not one of which, by my count, was ever carried out. Once in
office, Mr. Kuchma handed the economy to a pack of oligarchs that included
his family members. Despite his early claim he "didn't become president [of
Ukraine] to become a vassal of Russia," he rapidly became one.

In 1999, President Kuchma selected, with considerable fanfare inspiring
nationwide hope and enthusiasm, Viktor Yushchenko as his prime minister. Mr.
Yushchenko, in turn, named Yulia Tymoshenko his deputy prime minister for
energy.

Months later, Mr. Kuchma fired Mr. Yushchenko and Ms. Tymoshenko. The
two joined forces to plot their re-entry into Ukrainian politics, first via
the parliamentary route and then by plumping Mr. Yushchenko for president.

The Orange Revolution was hatched long before the presidential election
last fall. Mr. Yushchenko supporters had concluded well before that he would
lose in the official balloting because, they reasoned, the opposition would
steal enough votes to appall even Ukrainians. The supporters were right;
they were also extremely well-organized in advance, ensuring the Orange
Revolution would eventually become a reality.

This was political theater at its best. The fact is, no matter what else
the future holds, the Orange Revolution moved Ukraine irrevocably toward the
West and Western norms. The next president will be truly elected, not
appointed by a Russia- or oligarch-controlled mafia. As one Ukrainian said,
"No one kills journalists any more."

In January, newly elected President Yushchenko had to appoint a
government, one made up, ideally, of trustworthy people who shared his
vision for Ukraine and knew how to run a democracy, people the voting public
respected for their honesty and competence. Unfortunately, hardly any people
in Ukraine met all these qualifications.

This was an impossible job and Mr. Yushchenko instead installed people
who helped him become president, many with little ability or long-term
loyalty to Mr. Yushchenko or his vision. That his government came unraveled
should neither surprise nor shock.

As nearly everyone has noted recently, it is difficult to create
democracies where none existed before and takes a long time. The
difficulties and the time required both increase as the number of voters
involved rises. Afghanistan and Iraq are cases in point; the population of
each is about half Ukraine's.

Political infighting should be no surprise, either. Just ask anyone who
has observed how well -- or, more to the point, how badly -- the U.S.
departments of State and Defense worked together to support U.S. programs
in Iraq and Afghanistan. In developed democracies, political infighting and
grasping for power has been elevated to an art form that would make even the
most aggressive Ukrainian mountebank blush.

Despite the warring in Kiev, good things have been happening in
Ukraine's hinterlands. For example, tax police treat companies more like
clients than enemies. Foreigners can now enter Ukraine without a visa, a big
boost to tourism. Criminals protected by the former regime have actually
been thrown in prison, even in the eastern city of Donetsk.

Mr. Yushchenko will repair the immediate damage, probably by asking a
few trusted and competent friends (such as Oleh Rybachuk, formerly vice
prime minister for European Integration and now Mr. Yushchenko's chief of
staff) from his first Cabinet to rejoin the government, as well as a few
petty criminals who have served Ukraine in the past -- whose main advantages
are their name recognition (a calming influence) and their lack of
convictions for murder or grand larceny.

After he recovers from this inevitable crisis, Mr. Yushchenko has four
years in which to selectively replace members of his Cabinet and recover
politically, in time to run for his second term as president in 2009.

Meanwhile, Viktor, better keep an eye on Yulia. -30-
--------------------------------------------------------------------------------------------------------------
Richard H. Shriver was an assistant Treasury secretary U.S. in President
Reagan's first term. He lived in Ukraine and taught at the International
Management Institute in Kiev in 1990 and headed up a private-sector
development in Western Ukraine from 1995-2002. He is provost emeritus at
the European College of Liberal Arts in Berlin, where he teaches global
issues.
------------------------------------------------------------------------------------------------
http://www.washtimes.com/commentary/20050912-090351-2172r.htm
Richard H. Shriver, rhsusa@yahoo.com
=============================================================
10. "UKRAINE'S ORANGE REBELS SPLINTER"
The Orange Revolution is noisily eating its children

COMMENTARY: By Fred Weir, Correspondent
The Christian Science Monitor
Boston, Massachusetts, Monday, Sep 12, 2005

Ukraine's Orange Revolution is noisily eating its children, as the leaders
who steered the country to democracy last year turn on each other amid
charges of corruption, incompetence, and overweening ambition.

The crisis came to a head last week when President Viktor Yushchenko's
chief of staff, Olexander Zinchenko, resigned claiming the president's inner
circle was riddled with graft. Mr. Yushchenko, who endured poisoning and a
fraud-induced electoral defeat to rally Ukrainians in a battle for honest
polls last year, responded to the charges by sacking the entire government.

While that battle included fiery populist Prime Minister Yulia Tymoshenko,
she was also fired in the surprising shake-up. Also sacked was the main
target of Mr. Zinchenko's charges, Petro Poroshenko, chief of the Security
and Defense Council and top Yushchenko ally.

The stage is now set for an acrimonious face-off between the formerly united
pro-Western democrats in parliamentary elections next March, which could
facilitate a comeback by forces of the previous regime, led by Viktor
Yanukovich, who remain strong in Ukraine's heavily Russified east.

But many experts say the falling-out among the Orange revolutionaries was
probably inevitable and need not be fatal to Ukraine's struggling democracy.

"What we're seeing here is the end of the bright and shining myth, born in
the streets of Kiev last year, that Yushchenko and Tymoshenko were
completely like-minded leaders," says Alexander Shushko, an expert at the
Institute of Euro-Atlantic Integration in Kiev. "We always knew they were
together for political convenience; the contradictions and competition
between them was never a secret."

Yury Yekhanov, a liberal economist with a reputation for political
neutrality, was named acting prime minister. "Perhaps now we'll have a
government of technocrats, who will turn to problem-solving," says Irina
Podlutska, president of the independent Europe XXI Foundation in Kiev.
"Maybe this will give Yushchenko some breathing space, enable him to
strengthen his team and work on long-range strategy for the country."

Ms. Tymoshenko, whose popularity outpaces Yushchenko's, lashed back
after her firing. "With this decision [Yushchenko] destroyed our unity ...
our future and the future of the country," she said. "Today we are
definitely two different teams, and these teams will go their separate
ways."

In recent months Yushchenko had repeatedly criticized Tymoshenko for
populist measures, such as raising pensions and imposing price controls
on energy. She was also accused of stalling over the crucial review of
businesses that were privatized, through alleged fraud and corruption,
during the previous regime of Leonid Kuchma.

Under Tymoshenko's stewardship, Ukraine's economic growth has plunged
to just 3.7 percent in the first half of this year compared to almost 14
percent in the same period of 2004. Inflation has soared, eating away at the
country's meagre buying-power.

In his resignation speech, Zinchenko named Mr. Poroshenko and top
presidential aide Alexander Tretyakov and the parliamentary leader of
Yushchenko's "Our Ukraine" party as "corrupt officials" who have derailed
hope for transparent governance in Ukraine. "I have named only the
first-rank group," he said. "The list would be much longer if I mentioned
everyone who is an obstacle to Ukraine's development." (Olga Podolskaya
in Moscow contributed to this report) -30-
-------------------------------------------------------------------------------------------------------
http://www.csmonitor.com/2005/0912/p06s02-woeu.html
=============================================================
11. JAMES SHERR: THE MAGIC OF THE ORANGE REVOLUTION WAS
WEARING OFF LONG BEFORE THIS CRISIS

Interview with James Sherr, Senior Research Fellow
Conflict Study Center of the British Defense Academy
By Serhiy Solodky, The Day
The Day Weekly Digest in English, #27
Kyiv, Ukraine, Tuesday, Sep 13, 2005

The Ukrainian cabinet's retirement has made headlines across the world.
President Viktor Yushchenko has had telephone conversations, concerning the
domestic political crisis, with Vladimir Putin and Alexander Kwasniewski.

Over the weekend, he also spoke with George Bush (a significant fact, by
the way, for it is hard to recall when the US head of state has last called
his Ukrainian counterpart; under the previous Ukrainian leadership such
communications were carried out by lower-ranking US officials).

Speaking with his US counterpart, President Yushchenko assured him that
the events in Ukraine will not alter this country's strategic course. Nor is
official Kyiv overlooking the "Russian vector." Oleh Rybachuk, the newly
appointed State Secretary of Ukraine, flew to Moscow yesterday.

Below, James Sherr, senior research fellow with the Conflict Study Center of
the British Defense Academy, shares his views on recent developments in
Ukraine.

[DAY} What are the reasons for the crisis?

It pains me to say [FIRST] that the ultimate reason might be President
Yushchenko himself. He is a thoroughly good person, but he has been brought
to power to change a thoroughly rotten system. It was a system that made
power, wealth and business inseparable and conspiratorial norms of conduct
commonplace.

Some have graduated from this school and repudiated it. Some wish to
repudiate it and cannot. Some have no wish to. There can be no hope of
changing such a system - changing its ethos and trajectory - unless you
start with the top: the government, senior executive authorities, senior
staffs and their norms and methods of working.

The only criteria for choosing such people must be commitment and
professionalism. It shouldn't matter whether you are personally close to
them or not. A government is not a family. It is a political enterprise, and
politics is often a cold business.

But Yushchenko is not a cold person. He needs to believe in people, and it
would appear that some of those he believed in took advantage of his
decency and trust.

The SECOND reason, of course, is the struggle for power. It exists
everywhere. But in contrast, say, to Britain, there are very few checks on
this struggle in Ukraine, and the stakes are vastly higher. The fate of
Britain does not depend on whether Tony Blair stays or goes or on who
replaces him.

I find it difficult to believe that Brodskyy's statement and Zinchenko's
resignation were unconnected events or that either acted without
consultation with Tymoshenko. Whether the events were loosely or closely
coordinated is a question for the insiders. But the intent seems clear: to
force the President's hand against Poroshenko.

And the timing made sense. The latest opinion polls - not surprising, but
alarming - made a change of course urgent. Of course, had Yushchenko simply
dismissed Poroshenko and Tretyakov, that would have left Tymoshenko in a
virtually unassailable position - and it would have left Yushchenko more
than slightly dependent upon her.

After all, Poroshenko and Tretyakov would not have liked being dismissed,
and it is very unlikely that they would have behaved like friends
afterwards. So while there are compelling, principled reasons for Zinchenko
and Tymoshenko to stage this drama, it would be naive to pretend that they
didn't have political aims, too.

So, was the President's dismissal of the Cabinet a bold counterstrike
or not? It was certainly bold, even if it was his entourage who pushed,
pulled and cajoled him. But was it wise? Would it have been bolder and
wiser for Yushchenko to have dismissed his friends and stood with Yulia?

For me at least, it is too early to say. The key question is whether the
President really intends to retire Poroshenko to the gallery or whether he
remains the power behind the scenes. The good news is that the Acting
Prime Minister Yekhanurov brings to the task the ideal combination of
qualities.

He has a very sound grasp of the economy, is extremely competent,
committed and free of personal ambition. Can he, Rybachuk and Tarasyuk
provide the core of what is desperately needed - a coherent professional
team - or do they lack the critical mass to do that? I think we will know
the answers to these questions fairly soon.

[DAY] What will be the impact of the latest events on the international
image of the country?

Be in no doubt, the magic of the Orange Revolution was wearing off long
before this crisis. But don't underestimate the suspense and ambivalence
felt outside the country. On the one hand, no one would dare form firm
conclusions now.

We are still in the middle of the Tsunami. On the other hand, observers and
governments are alert to the positive as well as negative features of what
has occurred. The negative features are obvious, and they will be worse if
ambassadors report that a court camarilla is isolating and manipulating the
President.

But [FIRST] assessments will be guardedly positive if Yushchenko returns to
centre stage, builds a cohesive team and launches a bold and sustained
assault on the problems that Ukraine has inherited. SECOND, they will also
be positive if instead of having an opposition inside government, arguments
take place in the open and the lines between government and opposition are
clear.

And THIRD and not least, it will be far better for the country, particularly
after its constitutional reform, to have a political opposition dominated by
Tymoshenko and her supporters than Yanukovych and his.

But most important for Ukrainians is this: I am convinced that, like the
Orange Revolution, the current crisis will show that the greatest influence
on the international image of Ukraine remains Ukraine itself. -30-
---------------------------------------------------------------------------------------------
NOTE: The article expresses the views of the author that are not necessarily
those of the British Ministry of Defence.
--------------------------------------------------------------------------------------------
LINK: http://www.day.kiev.ua/148374
=============================================================
12. UKRAINE'S "POST-ORANGE" ORDER

OPINION: By Peter Lavelle, Political Commentator
RIA NOVOSTI, Moscow, Russia, Mon, Sep 12, 2005

MOSCOW - Viktor Yushchenko's decision to fire the government of Yuliya
Tymoshenko puts to an end Ukraine's "post-orange" order. The coalition of
revolutionaries who stirred the imagination of millions of Ukrainians in the
name of fair elections and transparent government has shown itself to
consist of inept and selfish civil servants.

Their failure to deal with what plagues Ukraine most - an economy controlled
by oligarchs - raises the question of whether the "Orange Revolution" has
any juice left to fulfill its promise.

During the days before and immediately after Tymoshenko's government
was dismissed, Ukraine's political elite engaged in a round of divisive
finger-pointing. Few have been spared over charges and counter-charges
of corruption and abuse of office - not even Yushchenko.

The leading personalities of the revolution and Yushchenko's strongest
supporters - Petro Poroshenko, Oleksandr Zinchenko and Tymoshenko - are
no longer in government, and it is difficult to foresee them ever working
together again on the same team.

This should come as no surprise: the pillars of the "Orange Revolution" have
made the same mistake as the old regime - they have used the state to pursue
personal interests and political agendas at the expense of good governance
and professional economic management.

Tymoshenko's claim that a parallel government headed by Petro Poroshenko
competed with her official duties as prime minister is doubtless true.
Nonetheless, her populist politics, short attention span and unchecked
political ambitions won her few friends in government.

Poroshenko's considerable business interests appear to have blinded him to
any acceptable meaning of the term "conflict of interest." Both have their
faults, but their greatest collective sin was to jockey for power at the
expense of real economic and political reform.

Yushchenko is not blameless. Up until the government's dismissal, he showed
little real leadership. Indeed, he was forced to act as a "nanny" (to use
his own term) to balance competing interests in his entourage instead of
leading as a president with the popular mandate needed to make hard
decisions.

Too busy playing nanny, Yushchenko overlooked the tasks which were most
expected of him - fighting corruption, and disentangling big business from
politics. He allowed Poroshenko and Tymoshenko, to name just two public
figures, to act as conduits representing oligarchic economic interests, just
as his predecessor did.

What is truly disappointing is how little the "Orange Revolution" has moved
away from Leonid Kuchma's corrupt style of politics, and the privatization
of the economy for the benefit of the few. Instead of breaking with Kuchma's
oligarchic system, Yushchenko's team - due to the lack of any team spirit -
has only continued it.

In principle, there was never anything wrong with Tymoshenko's plans to
re-visit the opaque privatizations of state-owned property under Kuchma.
What was disturbing was the perception that they were simply reversing some
privatizations in order to punish some oligarchs and benefit others. Instead
of doing away with corrupt practices, the "orange" elite appears to be more
interested in re-gigging Kuchma's failed system in its favor.

This approach now appears to be part of official policy. Acting Ukrainian
Prime Minister Yury Yekhanurov has ruled out the possibility of
re-privatizations. He stated that "Where there are problems caused by
election campaign promises of rivers overflowing with milk and honey, there
will be a negotiation process, there will be a negotiating table, and, I
think, there will be out-of-court settlements.

I think our friends will understand the government's policy, and we will try
to conduct negotiations as professionally as to not have problems afterward.
So that they should live in Ukraine and not hide away on some islands." What
sounds more like deal-making behind the scenes is now official policy.

Kuchma must be laughing up his sleeve. His successor is endorsing, out of
weakness, the corrupt political and economic system that he created - after
all, that was what Viktor Yanukovych was supposed to do. Yushchenko needs to
tear a page from Russian President Vladimir Putin's book - take the economic
oligarchy head on; he should not be open to negotiations with them until
they acknowledge the supremacy of the state.

Negotiations with the oligarchs will only serve to further split the "orange
coalition". Allowing the oligarchs to be the most meaningful point of
reference energizes the political and material ambitions of the "orange
coalition", who will be courted by them as the March 2006 elections
approach. No doubt, Ukraine's oligarchs welcome this arrangement.

On the upside, Yushchenko and Yekhanurov have stated that the new
government will be technocratic in profile, without prominent business
people.

This approach is designed to keep the oligarchs and their conduits directly
out of government. This is a positive first step, but may now be immaterial.
The oligarchs will deal with the political opposition to Yushchenko -
including Tymoshenko.

Yushchenko has done the right thing, but it may be too late. The
"post-orange" order is finally on track in principle; the question that
remains is whether it is still relevant. -30-
---------------------------------------------------------------------------------------------------------
FOOTNOTE: The opinions expressed in this article are those of the author
and may not necessarily represent the opinions of the editorial board.
================================================================
13. UKRAINE'S 'ORANGE' REVOLUTION STUMBLES
Ukraine Cronyism Scandal, Symbolized by Steel Plant, Divides New Government

By Guy Chazan, Staff Reporter
The Wall Street Journal Europe, Front Page
Brussels, Belgium, Mon, September 12, 2005

MOSCOW -- A standoff at a metals plant in eastern Ukraine has become a
symbol of the fading hopes of the country's Orange Revolution, showing how
an administration determined to break the political power of big business
appeared to be merely swapping one group of favored tycoons for another.

President Viktor Yushchenko cited the "scandal" over the Nikopol Ferroalloy
Plant when he dismissed his cabinet Thursday, saying the factory should have
been turned over to the state, but instead it was "passed from one gang to
another."

Mr. Yushchenko went even further yesterday, telling journalists the
situation showed that "high officials had begun to direct events in favor of
corporate interests." "It was the last straw," he said, adding that at this
point he decided "everybody should get lost."

The dispute over Nikopol has its roots in the lofty ideals of last year's
Orange Revolution, in which Mr. Yushchenko and Yulia Tymoshenko, the
firebrand orator he appointed as his prime minister, pledged to root out the
corruption that had so tarnished Ukraine since its 1991 independence from
Soviet domination.

A central pledge was to review the murky privatizations of state assets
carried out under then-President Leonid Kuchma.

But in the end, Mr. Yushchenko's government was perceived as just as
cronyistic as its predecessor. Oleh Rybachuk, Mr. Yushchenko's new chief of
staff, appeared to acknowledge that last week when he said members of the
new cabinet would have no business interests that might influence
decision-making.

A country the size of France with a population of 47 million, Ukraine has
been a key part of President Bush's democracy-building agenda since last
year's street protests. In a phone call to the White House during the
weekend, Mr. Yushchenko assured Mr. Bush that Ukraine would stick to its
revamped, pro-Western course despite the political turmoil.

Meanwhile, the upheaval showed no sign of abating. Ms. Tymoshenko declared
on national television Friday that she now is in opposition to Mr.
Yushchenko, marking the breakup of an alliance that had been the driving
force of last year's revolution. She called her dismissal "unfair," accused
the president's inner circle of conspiring to topple her and said she would
campaign in March's parliamentary elections as head of a separate political
force.

At the same time, her replacement, acting Prime Minister Yuriy Yekhanurov,
said his policies would be more moderate -- in particular, the approach to
reprivatization.

The charismatic Ms. Tymoshenko's anticorruption drive got off to an
inauspicious start. Shortly after being sworn in as prime minister in
February, she said the government would review about 3,000 privatizations.
Scrambling to calm horrified investors, Mr. Yushchenko quickly contradicted
her, saying the review would be limited to a dozen companies.

From the beginning, it was clear the policy would earn Ms. Tymoshenko
powerful enemies. One of the first targets was Krivoryzhstal, Ukraine's
biggest steel mill, which was sold last year to Viktor Pinchuk, Mr. Kuchma's
son-in-law, and Rinat Akhmetov, one of Ukraine's richest businessmen, for
$800 million (Euro 645 million) -- much lower than other bids.

The new government swiftly nationalized the mill and will resell it in
October, with bids expected to exceed $2 billion. But some said the policy
was more of a witch-hunt against members of the Kuchma clan than a quest to
restore economic justice. Those claims grew louder after Ms. Tymoshenko
moved against the Nikopol plant, another Pinchuk asset.

Last month, Ukraine's Higher Economic Court ruled that the Kuchma government
had acted illegally in 2003 when it sold Mr. Pinchuk just over 50% of shares
in the plant for about $80 million. Ms. Tymoshenko said the stake would be
reauctioned for not less than $400 million.

But the takeover of Nikopol was badly bungled, leading to accusations that
Ms. Tymoshenko had merely handed it to a fresh set of oligarchs.
"In any competitive battle between different business groups, the government
should act as a neutral referee," Mr. Pinchuk said in an interview. "But
here it was itself a player."

The oligarchs in question were from Privat, a powerful business group which
Ukrainian press reports say is backed by Ms. Tymoshenko -- a claim she has
denied. Last month, an extraordinary shareholders meeting of questionable
legality swept aside the Nikopol management and elected a new board.

The new bosses, who have links to Privat, tried to enter the plant on Sept.
1, backed by police and soldiers. But they were blocked by hundreds of
workers, supported by a recalcitrant Mr. Pinchuk.

Mr. Yushchenko denounced the government's handling of the affair and gave
authorities three days to return Nikopol's shares to state ownership. In a
similar conflict, workers at a chemical-fertilizer plant in Severodonetsk
demonstrated on Sept. 4 against government plans to assume control of the
factory and reprivatize it.

The Western company that owns a chunk of the plant, Worldwide Chemical LLC,
says it has abided by the original terms of the sale and says the government
should wait until a Supreme Court ruling on the dispute before trying to
take it over.

The Nikopol scandal opened a debilitating split between Ms. Tymoshenko and
Petro Poroshenko, a confectionary and media tycoon who was one of Mr.
Yushchenko's biggest financial backers during the Orange Revolution and
later became head of Ukraine's Security Council.

Mr. Yushchenko accepted Mr. Poroshenko's resignation on Thursday after he
was accused of corruption.

Jitters about nationalization already had begun to put a brake on Ukraine's
economy. Growth slumped to a five-year low of 4% in the first half of the
year, compared with a record 12.1% last year. Last month the International
Monetary Fund said investment in Ukraine would rebound only after a "speedy
resolution of uncertainty about the government's reprivatization plans."
----------------------------------------------------------------------------------------------------
Write to Guy Chazan at guy.chazan@wsj.com
=============================================================
Send in a letter-to-the-editor today. Let us hear from you.
=============================================================
14. UKRAINE'S SACKED PRIME MINISTER TYMOSHENKO SAYS
"ORANGE BIRD" NEEDED TWO WINGS

Rustavi-2 TV, Tbilisi, in Georgian 1700 gmt 11 Sep 05
BBC Monitoring Service, UK, in English, Sun, Sep 11, 2005

Presenter] The sacked Ukrainian prime minister, Yuliya Tymoshenko, has given
an interview to [Rustavi-2 TV] "Ghamis Kurieri" correspondent Nana Lezhava,
who is in Kiev. [Passage omitted]

[Correspondent] As regards our meeting with Yuliya Tymoshenko, it lasted
about an hour. Off camera, Yuliya Tymoshenko said that she was interested in
what ordinary Ukrainians thought about her resignation and what Georgians
thought about it too. By the way, off camera she also told us that Viktor
Yushchenko's decision came as a complete surprise to her and that Viktor
Yushchenko was, to some extent, jealous of her popularity.

I must say that our meeting with Yuliya Tymoshenko was her first meeting
with a journalist after she appeared in a live programme on [Ukraine's]
Inter TV [on 9 September].

[Presenter] Yuliya Tymoshenko looks as good as ever. She is not changing
either her hair style or her principles. She believes that it is precisely
these principles that are to blame for what happened.

[Tymoshenko, in Russian] Being one of the leaders of the Orange Revolution,
I could not put up with the president's entourage tarnishing the president's
reputation and creating a corrupt environment in Ukraine where everyone knew
who had be bribed. When the president's entourage again started to unite
with the old clans, including [former President Leonid] Kuchma's family, I
just could not ignore it.

[Presenter] The sacked prime minister regrets the president's decision, for
which she blames his entourage.

[Tymoshenko] Until the very last minute, when Viktor Andriyovych Yushchenko
was about to go live on air to dismiss the government - it really looked
strange that his entourage was accused of corruption, while people who had
nothing to do with corruption and were busy building up their country were
dismissed - so, when he was about to go live on air, I simply begged him not
to do it, not to destroy our unity, because our orange bird has two wings
and it is impossible to tear one wing away from the other.

I told him that he was breaking the hearts of many people in Ukraine, that
he was breaking the hearts of many families in Ukraine, and that what he was
about to do was a tragedy on a personal level.

However, literally minutes before Viktor Andriyovych went live on the air,
Petro Oleksiyovych Poroshenko [Security and Defence Council secretary] burst
into his office and said that, if he did not remove me, it would amount to a
betrayal of the president's team. So the president turned his back on me and
dismissed me.

In principle, this new union of old and new oligarchs effectively took power
away from the prime minister. But it does not mean that they could take me
out of politics, out of people's hearts or out of Ukraine.

I know that severe persecutions are about to start. I was persecuted for
eight years. I know that the most powerful systems will now kick into action
in order to destroy me and my team. We have been through all this once
before. That is why I know that there is popular support for me and my team.
There is strong support, which nothing can destroy.

Of course, I bear no grudge against Viktor Andriyovych. I am not going to be
his judge. I forgive him absolutely everything.

[Presenter] At the end of the conversation, Tymoshenko did not hide her
political ambitions. She hopes that she will win [the March parliamentary
election].

[Tymoshenko] The election campaign in Ukraine is already under way. This
election campaign will, of course, answer all the unanswered questions in
this story and certainly reveal where the people stand and where the truth
is. I think that our team will do well. [Passage omitted]
=============================================================
15. CORRUPTION ALLEGATIONS ABOUND IN UKRAINE

ANALYSIS: by Roman Kupchinsky
RFE/RL Organized Crime and Terrorism Watch, Vol 5, No. 12
Radio Free Europe/Radio Liberty (RFE/RL)
Prague, Czech Republic, Tue, 13 September 2005

Kyiv, home of the Orange Revolution, was first thrown into shock by the
resignation of Oleksandr Zinchenko, the head of President Viktor
Yushchenko's administration, on 5 September. The repercussions of
this resignation led to a major crisis and the dismissal of Yuliya
Tymoshenko's government on 8 September.

Long-time Yushchenko supporter Yuriy Yekhanurov was appointed
acting prime minister and instructed to form a new government.
Zinchenko accused two members of Yushchenko's closest
entourage, Petro Poroshenko, the head of the National Security and
Defense Council (and godfather to one of Yushchenko's children),
and Oleksandr Tretyakov, Yushchenko's top aide, of "corruption."

As an example of Tretyakov's alleged corrupt activities,
Zinchenko cited Tretyakov's membership on the supervisory boards
of Oshchad Bank, one of Ukraine's largest banks, and of
Ukrtelekom, the state-owned telecommunications giant.

He also charged that Tretyakov plays a "controlling role" in
the oil-and-gas sector. Tretyakov had earlier been named by critics
as the person lobbying for a continuation of earlier schemes in the
gas sector that were being investigated by the Ukrainian Security
Service (SBU).

Ukrainian experts contacted by RFE/RL believe that
Zinchenko's charges have more to do with conflict-of-interest
issues than the blatant corruption of the era of former President
Leonid Kuchma.

There is a lack of clear legislation on conflict of interest
in Ukraine, and earlier in 2005, for instance, Justice Minister Roman
Zvarych was accused of lobbying his wife's business interests.
Zvarych did not resign.

Yushchenko accepted Zinchenko's resignation immediately
and appointed Oleh Rybachuk, the deputy prime minister for
European integration, to replace him.

Zinchenko did not accuse Poroshenko of any specific corrupt
activities, but limited himself to criticizing him of staffing his
apparatus with people "close to him" and "blockading the president
from meeting with people" who were hostile to Poroshenko.
Soon after Zinchenko's accusations were aired at a Kyiv
press conference, the SBU announced that it would investigate his
charges.

Poroshenko resigned on 8 September, as did Deputy Prime
Minister for Humanitarian Affairs Mykola Tomenko. Tomenko had not
been accused of anything, but explained his resignation by claiming
that Tretyakov and Poroshenko had formed a shadow government and
that a "Byzantine system of management" had evolved.

Tomenko blamed the two men, along with parliament speaker
Volodymyr Lytvyn and the leader of the Our Ukraine faction in
parliament, Mykola Martynenko, of blocking public hearings in
parliament on the killing of journalist Heorhiy Gongadze.
Interfax on 8 September quoted Tomenko as telling a press
conference that if nothing had changed following the previous
day's late-night talks between Yushchenko and Prime Minister
Tymoshenko, "then it's evident the scenario of some people
stealing, and other people resigning" would continue.

As the resignations began coming in, parliament voted to
deprive some members of the Yushchenko administration of their seats
in parliament. According to Ukrainian law, executive-branch officials
are not allowed to sit in parliament.

Poroshenko had delayed submitting his resignation and this
had led to charges that he was trying to maintain his parliamentary
immunity from prosecution. He eventually submitted his resignation.
However, on 8 September, after he resigned from the National
Security and Defense Council, Poroshenko tried to reverse his
decision to leave parliament -- but parliament rejected this bid.
The same day, Yushchenko announced that he was dismissing the
government and named Yuriy Yekhanurov acting prime minister, ordering
him to take charge of forming a new government. He also said that he
had accepted Poroshenko's resignation and had suspended Tretyakov
while the SBU investigated the charges against him.

Yekhanurov, born in Yakutiya in present-day Russia in 1948,
is a Buryat by nationality and is presently the head of the
Dnipropetrovsk regional administration and a member of the presidium
of the parliament.

The conflict in the Ukrainian presidential administration has
been brewing for some time, as has been the broader conflict between
Tymoshenko and Poroshenko. Over the past few months, the two have
exchanged disagreements publicly and Yushchenko has unsuccessfully
tried to maintain peace within the ranks.

The major issue dividing the two sides were the delineation
of responsibilities between the cabinet and the National Security and
Defense Council. Tymoshenko charged that Poroshenko was attempting to
take too much power and this was leading to confusion, especially in
such matters as energy policy.

In August, Poroshenko announced unilaterally that he would go
to Moscow to negotiate with Russia on gas prices and supplies.
Critics close to Tymoshenko charged that Poroshenko was not qualified
to do so.

Some critics have charged that Moscow was lobbying on behalf
of Poroshenko and were adamant in refusing to deal with Tymoshenko,
who had frequently accused the Russian state-controlled gas giant
Gazprom of corruption in the transfer of gas from Turkmenistan to
Ukraine and Russian oil companies of price-fixing in Ukraine.
--------------------------------------------------------------------------------------------------
"RFE/RL Organized Crime and Terrorism Watch" (formerly "RFE/RL
Crime and Corruption Watch") is compiled by Roman Kupchinsky on
the basis of a variety of sources. Direct comments to Roman
Kupchinsky at kupchinskyr@rferl.org.
==========================================================
16. KUCHMA BACKS YUSHCHENKO IN UKRAINE TURMOIL

By Tom Warner in Kiev, Financial Times
London, UK, Sunday, September 11 2005

Ukraine's former president, Leonid Kuchma, gave his support to the troubled
administration of Viktor Yushchenko at the weekend, in what analysts said
was a signal that opponents of the Orange Revolution could be brought into
the new government.

Mr Kuchma, making his first public intervention in politics since he left
office in January under a cloud of allegations of corruption and election
fraud, also endorsed Yuri Yekhanurov, acting prime minister, who was
appointed by Mr Yushchenko on Thursday after he sacked the government of
Yulia Tymoshenko.

Mr Kuchma met Mr Yekhanurov a minor figure in Orange revolution in
Dnipropetrovsk, eastern Ukraine on Saturday. They greeted each other with
broad smiles and kisses on the cheek.

The meeting, though brief, was in sharp contrast to relations between the
two political camps last winter when Mr Yushchenko and Mr Kuchma held tense
negotiations under the watch of foreign mediators and Yushchenko supporters
stood face-to-face with armed police under Mr Kuchma's command.

Mr Kuchma on Saturday called on his former supporters who hold about half
the seats in parliament to back Mr Yushchenko's efforts to form a new
government. "Don't aggravate the situation," he said.

Mr Kuchma accused Ms Tymoshenko of using her position as prime minister
to take personal revenge against him and Viktor Pinchuk, his businessman
son-in-law. Mr Pinchuk was recently stripped of ownership of stakes in two
big metallurgy plants that he had bought from the state when Mr Kuchma was
president.

Analysts said a recent outpouring of support for Mr Yushchenko from Mr
Kuchma and other former administration figures reflected new political
realities in which Ms Tymoshenko had become the main proponent of change
and Mr Yushchenko had become a force for stability and social peace.

Parliamentary elections next March are shaping up a three-way contest
between Ms Tymoshenko, Mr Yushchenko and pro-Russian centrist and
leftwing groups.

Igor Burakovsky, director of Kiev's Institute for Economic Research and
Policy Consulting, said Mr Yushchenko was under pressure to form a new
government quickly because of talks with Russia over gas supplies and a
World Trade Organisation meeting at the end of the month which will look at
Ukraine's bid to join at the Hong Kong summit in December. That made him
more likely to choose experienced old-guard figures, Mr Burakovsky said.

Mr Yushchenko is expected to form the government after a confirmation vote
in parliament on Mr Yekhanurov next week. -30-
=============================================================
17. LEGITIMIZING UKRAINE'S CORRUPTION

COMMENTARY: by Walter Prochorenko, PhD
Paramus, New Jersey, Friday, 9 September 2005
Published by The Action Ukraine Report (AUR), Number 557, Article 16
Washington, D.C., Tuesday, Sep 13, 2005

The resignations and upheaval in President Yushchenko's government, as the
allegations of corruption mount, come as no surprise to the many that have
been doing business in Ukraine for the past several years. This was as
inevitable as was the "Orange Revolution" itself.

My own contacts with business associates and friends in Ukraine, albeit
limited, show that the two main factors that remain as impediments to
progress were and remain bureaucracy and corruption. Both are firmly in
place and are seemingly impregnable in Ukraine's government hierarchy.

Changes in the Ministries and other governmental bodies are laudable in one
respect but very destabilizing in many others. Business and investors do not
like radical changes. They abhor them. This is why the Bush administration
has been so strong and cohesive despite a multitude of problems and
accusations and why the US economy has not suffered any major setbacks over
the past several years.

Since corruption in Ukraine appears to be a fact of life (as it is in many
other countries - including our own United States), perhaps there should be
practices in place that can actually make it work for the benefit of the
country. Everyone agrees that corruption is disruptive, but US style
lobbying, special interests, "pork barrel" programs, and compromise have
legitimized US's own "corruption" methodologies.

Charles Lewis concluded his article entitled "U.S.A.: Corruption Notebook"
which was published in Global Integrity with the words: "There is something
rotten in the United States, but it is legal, and no one will dare call it
corruption". China too, was and remains one of the most corrupt nations on
earth and yet they have controlled it so effectively that it has enabled the
country to grow at an unprecedented rate.

Ukraine finds itself "between a rock and a hard place" in that the West
demands that it solve its corruption practices before the country is
accepted into any Western alliances while its own cultural, social and
ideological structure prevents it from doing so. Most experts agree that 85
years of corruption habits on top of several hundred years of
self-preservation practices learned while being under various foreign
occupations, will not be eliminated in 10 months or perhaps even 10 years.

Yet this is what Ukraine must learn to do if it wants to become a market
economy, part of the European and Western trading partner nations, and if it
wants to attract the much needed capital investments to rebuild itself.

Tackling corruption in such an environment is a monumental task but if
Ukrainians can learn to look outside their own borders and limitations
rather than constantly trying to reinvent the wheel, they may find solutions
that can be adapted to their needs.

Researchers and experts from Susan Rose-Ackerman to Vito Tanzi to the
numerous associates of the World Bank have written volumes on reigning in
corruption and legitimizing it. However my observations have been that
Ukraine has been reluctant to apply even the most basic principles, which
have worked well in other countries, to its own problematic situation.

Corruption - if properly managed or legitimized - can actually help a
country to achieve its goals and to attract foreign investments. If Ukraine
could learn to adapt some of the principles that have succeeded so well in
the US and elsewhere, then it could well be on the way to exceptional
development success. The key is superficial transparency combined with
publicly perceived legitimacy.

Poroshenko may very well be innocent of Zinchenko's corruption allegations
but if he is "perceived" to be corrupt, then he may as well be guilty in the
eyes of the media and the public. In a study by Inna _ábelková the
"perception of corruption" is as critical as corruption itself.

If the public is consistently bombarded with issues of bribery and
corruption, then even legitimate success by brilliant business people can be
perceived as corruption and the result, as we have already seen, can be
disastrous.

Many writers and several researchers on corruption in the US have linked
Vice-President Cheney to possibly corrupt practices because of his
association with Halliburton, but since he has isolated himself so well and
since all such dealings have been legitimized, there is little or no
political fallout from such an association. Poroshenko would have done well
for himself had he learned this methodology.

In his book "The Politics of Corruption in Contemporary China", Ting Gong
explains how the Chinese have legitimized corruption and bureaucracy from
the imperial days of the Qing Dynasty where the bureaucrats supported
themselves and their "children citizens" through a variety of solicitations
and extortion schemes, to the denial practices under Mao Tse Tung's regime
based on the Marx - Engels and Lenin theories and teachings that persists
even to this day.

The latter is a brilliant combination of denial and acceptance that only the
Chinese could conjure up. However, while overtly fighting and dissuading
corruption the Chinese continue to surreptitiously practice it and prosper
from it.

Although I don't want to be too skeptical and jaded, it is my firm belief
that Ukrainians will someday settle on their own versions of "legitimized
corruption" which will satisfy criteria set down by the IMF, the World Bank,
and foreign investors as well as their own social and cultural needs.
Hopefully it will not be too late for them to continue to enjoy the fruits
of economic success and national independence. -30-
---------------------------------------------------------------------------------------------------------
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. We
appreciate Walter sending us his latest article. Editor
=============================================================
18. UKRAINIAN PRESIDENT'S NEW CHIEF OF STAFF OLEH RYBACHUK
VOWS TO KEEP REVOLUTION PROMISES

INTERVIEW: with Oleh Rybachuk
UT1, Kiev, in Ukrainian 0900 gmt 9 Sep 05
BBC Monitoring Service, UK, in English, Mon, Sep 12, 2005

Ukrainian President Viktor Yushchenko's new chief of staff, Oleh Rybachuk,
has said that transparency, openness and separation of government from
business interests will be the key principles of the new administration.

Speaking at his first news conference following the sacking on 8 September
of the entire Cabinet of Ministers, Rybachuk also said the president had
invited all parliamentary parties to join talks on a new coalition
government. He also confirmed that the president would ask parliament to
approve Yuriy Yekhanurov as the new prime minister.

Rybachuk pledged that the new government will not lobby private business
interests or include members of the business elite and that the media would
be free to report the president's activities.

The following is an excerpt from Rybachuk's news conference broadcast live
by Ukrainian state-owned television UT1, 5 Kanal TV and the opposition
Ukrayina TV channel on 9 September; subheadings have been inserted
editorially:

[President's press secretary Iryna Herashchenko] We planned a possible press
conference by the president, however the Ukrainian president is on a very
tight schedule. This morning, he met the leaders of parliamentary groups and
factions, and he is about to begin meeting the heads of security agencies.

After this the president will meet the acting prime minister, Yuriy
Yekhanurov, and the speaker of the Supreme Council Volodymyr Lytvyn. The
president is also scheduled to meet the regional governors this afternoon.

It is obvious that these meetings are important to renew the team and to
stabilize the situation inside the team. The new state secretary of Ukraine,
Oleh Rybachuk, will be present at these meetings. We believe it would be
right for President Yushchenko to be talking with his team, while Oleh
Rybachuk will answer all your questions. But he will start by outlining his
vision of the State Secretariat under State Secretary Rybachuk. Thank you.

[Rybachuk] I would like to talk about principles. [Passage omitted:
difficulties in contacting predecessor.]

I will not repeat the classic behaviour of the Ukrainian elite or the
Ukrainian political culture whereby one blames one's predecessor for
everything that happened. I know that everybody says this, but you will be
able to hold me to my word.

President's office will not interfere with media

I would like to begin with our relationship with you. I do not believe that
anybody from the Yushchenko team has ever phoned to tell you whether you
were giving too much or too little airtime to the president or how you were
covering him. But I can promise you this. Not a single person will ever do
it within these walls or on my behalf. It would be humiliating for the
president. [Passage omitted: repetition]

We will not be telling you where, how and in what format you should cover
the president and his team. [Passage omitted: ready to meet TV executives
if they have complaints.]

Nobody in this government, starting with the president, is exempt from
criticism, down to our families. We will keep our promises.
Attempts to discredit president

As regards the president's promises, you will see his income declarations -
I don't know what his family budget balance is like, negative or positive -
but you will see it. The public has the right to know, and the president has
confirmed that this will be done.

If you are interested to know what will happen to the president's son - or
[as he has been described] the son of God - and I have seen opinion polls on
Ukrayinska Pravda [web site] that this is of interest, I will tell you this.
I have spoken to the president about this.

He [Andriy Yushchenko] is not the son of God and never will be. I have known
this family for 12 or 14 years, so it is easy for me to talk about it. Every
side has drawn lessons from what happened, and I have one message: you will
not see any - whatever the model it was - [luxury] cars in the streets. This
will never happen again, and as far as I know it is no longer there.

But again, I have a message for the Greeks bearing gifts. I have a simple
message for them. I will take this as an attempt to discredit the president.
If there are people who believe themselves to be the president's friends,
and if they make these gifts which then become the talk of the nation, this
is not an issue for the president and his entourage. It is for them, too,
however I would like to be heard by those who are using this to put the
president in an awkward position. I hope you know what I mean.

And finally, public TV. I have had many meetings on this as an MP, and I
believe it must be set up. Nobody disagrees with this. I have spoken to the
president, and we would like to see a public tender of projects. I am also
ready for a public discussion on who will replace Taras Stetskiv in that
very important post [as head of state TV]. This will not be someone
convenient for us or who will obey our commands. [Passage omitted: more
in this vein]

No more business people in government

You have heard about separation of government and business. [Passage
omitted: this has been a subject of discussion between Ukraine and foreign
governments.]

I want to tell you that the presidential secretariat - or the presidential
administration as you continue to call it - will never have anyone directly
linked to private business within its walls. Nor will you see anyone like
that in the new government.

So far we have not succeeded in implementing the principle of separating
business from government the way it is done in the West, where there is a
time-tested procedure of separating government from business, where it is
unthinkable of a person in government to use one's office directly or
indirectly. [Passage omitted: much scepticism about officials submitting
false declarations.]

At any rate, I would like to emphasize at this point that you will not see
any business people in government. [Passage omitted: digression]

I want to emphasize that you will not see any direct representatives of
private business either in the government being formed now or in this office
where I can already see my work cut out. This is the principle we shall use
for the time being.

President proposes cross-party coalition talks

The president has just finished meeting with the leaders of parliamentary
factions, which I also attended. What he proposed can be conventionally
described as a stability pact. [Passage omitted: comparison with party
collaboration in Germany after the war.]

The faction leaders are still meeting representatives of the secretariat and
Yuriy Yekhanurov who has been asked to form the government, and they are
talking about it. There is a real chance, a real opportunity to reach an
agreement. All political forces have been invited to define the principles
of forming the cabinet.

[Passage omitted: some wonder whether it is feasible for an MP to give up
his seat for a post in government five months before election.]
They agreed that each political force, even if it is unable to delegate its
MPs into government, has experienced and renowned experts who are not
members of parliament.

The president proposed, and this proposal was supported, to use this as a
principle in forming the new government. This does not mean that you will
not see those dismissed in a new cabinet. We declared the principles
according to which the new government will be formed. We can generally say
that there is a clean sheet of paper on the desk. But there are principles
and criteria according to which candidates will be selected.

The president said, and the political elite supported his view, that we must
reach a concrete agreement by tomorrow or Monday. We are talking about days.
There should be no impression that this is the end of the world, that there
is no government.

There is government, and always will be. This is the end of my introduction,
I am ready to see your hands and hear your tough questions.

Yekhanurov to head new coalition cabinet

[Journalist] Does the president intend to nominate Yuriy Yekhanurov for
parliament's approval?

[Rybachuk] Yes, he does.

[Journalist] When may this happen and to what extent will this be a new
government? Thank you.

[Rybachuk] I have just been answering this question. I can answer it in
part. I don't want to restrict the negotiation field for the acting prime
minister, but since the president has already named his candidate, there is
no logic to your question. We have no double standards. The president
invited Yuriy Yekhanurov to form the government.

This is the president's instruction. The same chance was offered to Yuliya
Tymoshenko, but she found it unacceptable.

Will there be new faces? We are not going to summon faction leaders and tell
them what to do. There will be no names given to parliamentary leaders and
they will not be ordered how to vote.

[Passage omitted: other questions, Rybachuk asked to speculate on
Tymoshenko's future and reasons for the president's decisions to sack the
government.]

Foreign Ministry to take over EU policy functions

[Journalist] Yesterday you said you would now have greater powers to pursue
European integration issues. What sort of powers did you lack as a deputy
prime minister that you now have as state secretary, could you list them one
by one? [Passage omitted: other questions from the same journalist]

[Rybachuk] I have made many public statements about my powers and various
agencies involved, and what I lacked. I will repeat. Two years before the
election, an agency was created at the centre of Europe, at Poland's
initiative. This was a public organization whose supervisory board was
headed by the president [Yushchenko].

This organization worked out a logic as to how, upon coming into government,
we would move towards the noble European dream at an accelerated pace. There
were many meetings. I spent much time on it, the president understood the
logic, and the Poles used the consolidated experience of all the new EU
states.

On Monday, Alan Mayhew will be visiting Ukraine. This is a person who
advised many prime ministers and governments of the new EU states. Before
that he worked in Brussels and was responsible for the PHARE programme that
brought countries into the European Union. So he continues to work on these
issues.

This never happened. And I don't want to blame anyone. What hasn't happened?
Ukraine never set up a committee called the European integration committee.
Why not? The idea failed to get the support of my colleagues, and I am not
one of those people who spend the first six months (breaking) bones and
twisting the president's arm into giving me structural powers.

This could have been done. But I took a different path. I followed the
principle of consensus. And here is where we encountered problems. In
response to these problems, there was a presidential decree on coordinating
foreign policy.

If you ask me, we have two options. One is to create a relevant agency in
the new cabinet. Another, which I prefer, is for the Foreign Ministry, as a
department headed by a person totally committed to the European integration
idea and which has the highest number of professional Eurointegrators, to
add [EU] coordinating functions to its powers.

Why coordination? At the moment, we have three key players in this process:
the Foreign Ministry, the Justice Ministry which has the department for
adapting national legislation to EU standards, and the Ministry of Economics
which deals with the body of the process.

With the government reshuffle, I am confident there will be new people, most
likely, a new minister of economics because - well, this is public
knowledge. And we can go the way of coordination. I have spoken to the
president, and he supports this option.

But I want to stress, it is inevitable in the initial stage when the country
gets closer [to EU accession talks] that we will have to set up this
committee. I understand that we are now far away from that stage. Now we
need to reach an agreement that will give us some prospect of EU membership.

Another issue is very important, and I spoke about it to diplomats
yesterday. There were 50 ambassadors here yesterday. They asked a logical
question, and after that I had a conversation with [Acting Foreign Minister
Borys] Tarasyuk and with the president.

They asked about us setting up a system of monitoring. All this time have
been working without necessary staff or tools to do it. I will study the
situation further, and we should work out a system of monitoring the action
plan, a kind that Brussels would understand.

I want to say something I have said a thousand times. The efficiency of the
new Ukrainian government, its ability to abide by commitments will largely
depend not on domestic programmes, but on how successful we will be in
implementing the Ukraine-EU action plan.

I am very happy - and this is where my new post will help - that on 1
December Yushchenko and Tony Blair will hold the Ukraine-EU summit, and I
want to assure you that by that summit we will have a very clear picture of
what has and has not been done.

Why is this easier for me now? Monitoring now is an automatic process, that
is, once a month there is a system of reporting alike the Poland-Brussels or
Baltics-Brussels model. This kind of monitoring is understandable to the
other side, but what is important is that we have spent four months to
ensure that Ukrainian ministries and departments follow this format.

Therefore it is very easy for me now to push a button on the computer, and
the screen shows the state of implementation. And this allows me to hand
over the monitoring function, which was the main one for me as deputy prime
minister, to the Foreign Ministry which will continue this business.
[Passage omitted: more questions on cabinet reshuffle] -30-
=============================================================
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=============================================================
19. PRESIDENT VIKTOR YUSHCHENKO TO MAKE WORKING VISIT TO
USA ON SEPTEMBER 14 - 18

Ukrinform, Kyiv, Ukraine, Mon, Sep 12, 2005

KYIV President Viktor Yushchenko will make a working visit to the USA on
September 14 through 18, where he will attend the 60th Session of the UN
General Assembly according to the President's press service. The Ukrainian
Head of State is scheduled to make a speech at the 4th sitting of a session
on September 15.

The visit's program provides for Mr Yushchenko's bipartite meetings with
foreign leaders, in particular, Presidents Luiz Inacio Lula Da Silva of
Brazil, Mahmud Ahmadi-Nejad of Iran, Belgian Prime Minister Guy Verhofstadt.

Besides, the President and First Lady Kateryna Yushchenko will attend events
on the occasion of foundation of the public organization "Orange Circle".
President Yushchenko is also supposed to attend a ceremony to open the
UkrExImBank's office.

During his stay in the USA President Viktor Yushchenko will meet with CEOs
of leading financial corporations, editors of major newspapers, chiefs of
other leading media bodies, religious and Ukrainian community members.

The President and his spouse are also expected to visit New York City's
Ukrainian Museum.

On September 17-18 President Yushchenko will be in Philadelphia, where he
will be decorated with the Liberty Medal at the National Constitutional
Center before returning to Kyiv. -30-
=============================================================
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John Stephens, Cape Point Capital, Secretary/Treasurer
10. UKRAINIAN AMERICAN COORDINATING COUNCIL (UACC),
Ihor Gawdiak, President, Washington, D.C., New York, New York
11. U.S.-UKRAINE FOUNDATION (USUF), Nadia Komarnyckyj
McConnell, President; John Kun, Vice President/COO; Vera
Andruskiw, CPP Wash Project Director, Washington, D.C.; Markian
Bilynskyj, VP/Director of Field Operations; Marta Kolomayets, CPP
Kyiv Project Director, Kyiv, Ukraine. Web: http://www.USUkraine.org
12. WJ GRAIN, Kyiv, Ukraine; New York, NY, David Holpert, Chief
Financial Officer, Chicago, Illinois.
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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
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Power Corrupts and Absolute Power Corrupts Absolutely.
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