"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 591
Mr. E. Morgan Williams, Publisher and Editor
Washington, D.C., Kyiv, Ukraine, WEDNESDAY, October 26, 2005
--------INDEX OF ARTICLES--------
"Major International News Headlines and Articles"
1. PRIME MINISTER SAYS KRYVORIZHSTAL PRIVATIZATION
AND EUROBOND PLACEMENT INCREASE UKRAINE'S
INVESTMENT ATTRACTIVENESS
Ukrainian News Agency, Kyiv, Ukraine, Tue, October 25, 2005
2. PRESIDENT VICTOR YUSHCHENKO'S STATEMENT
ON KRYVORIZHSTAL AUCTION
Press office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Tue, 25 October 2005
3. UKRAINE: AN EXEMPLARY START
A good beginning for ending past wrongs
EDITORIAL COMMENT: Financial Times
London, United Kingdom, Wed, October 26 2005
4. SALE ENDS UKRAINIAN 'REPRIVATISATIONS'
By Tom Warner in Kiev, Financial Times
London, UK, Wednesday, October 26 2005
5. MITTAL WINS AUCTION FOR STEELMAKER
Industry Benchmark Is Set With $4.8 Billion Bid For Ukraine's Kryvorizhstal
By Paul Glader & Geoffrey T. Smith, Staff Reporters
The Wall Street Journal, New York, NY, Tue, Oct 25, 2005; Page A3
6. UKRAINE ECONOMY: A GOOD DAY AT THE AUCTION
NEWS ANALYSIS: The Economist Intelligence Unit Limited
The Economist, London, UK, Tue, October 25, 2005
7. MITTAL SHARES ARE A "STEAL"
Mittal Steel (MT: NYSE) By Goldman Sachs ($25.39, Oct. 25, 2005)
ANALYSIS: by Aldo Mazzaferro, CFA
HOT RESEARCH PM, Barron's OnLine
New York, New York, Tue, October 25, 2005
8. STEEL DEAL WON'T SAVE YUSHCHENKO
Ukraine Leader's Popularity Is Likely to
Keep Sliding Despite Big Privatization
By Alan Cullison, Staff Reporter, The Wall Street Journal
New York, NY, Tuesday, October 25, 2005, Page A19
9. UKRAINIAN LEADERS DEBATE HOW TO SPEND MASSIVE
WINDFALL FROM STEEL MILL SALE
Associated Press (AP), Kiev,Ukraine, Tue, October 25, 2005
10. UKRAINIAN PRESIDENT WANTS PRIVATIZATION MONEY
SHOULD BE SPENT ON STIMULATING ECONOMIC GROWTH
Interfax-Ukraine news agency, Kiev, in Russian 1549 gmt 25 Oct 05
BBC Monitoring Service, UK, in English, Tue, Oct 25, 2005
11.UKRAINIAN OPPOSITION FIGURE YANUKOVYCH CRITICIZES
SALE OF STEELWORKS TO FOREIGNERS
"They will come and buy Ukraine up."
Ukrayina TV, Donetsk, in Russian 1400 gmt 25 Oct 05
BBC Monitoring Service, UK, in English, Tue, Oct 25, 2005
12. PRES YUSHCHENKO NOT GOING TO ACCEPT RESIGNATION
OF STATE PROPERTY CHAIR, VALENTYNA SEMENIUK|
Ukrainian News Agency, Kyiv,Ukraine, October 25, 2005
13. UKRAINIAN PRESIDENT URGES PRIVATIZATION OF
STATE TELECOMMUNICATIONS MONOPOLY
Interfax-Ukraine news agency, Kiev, in Russian 1635 gmt 25 Oct 05
BBC Monitoring Service, UK, in English, Tue, Oct 25, 2005
14. PRES TAKES PART IN INVESTMENT COUNCIL MEETING
Press office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Thursday, 20 OCTOBER 2005
15. REPUBLICAN PARTY OF UKRAINE RUNS A ONE-FOURTH
PAGE ADVERTISEMENT IN THE WASHINGTON POST
"Sometimes you can't see the tree for the forest"
By E. Morgan Williams, Publisher and Editor
The Action Ukraine Report (AUR), Number 591, Article 15
Washington, D.C., Wednesday, October 26, 2005
16. DISMISSAL OF PROSECUTOR-GENERAL, CLOSURE OF
POROSHENKO CASE CREATE NEW QUESTIONS
ANALYSIS: By Tammy M. Lynch, Senior Research Analyst
THE ISCIP ANALYST, Volume XI, Number 1,
Institute for the Study of Conflict, Ideology & Policy
Boston, Massachusetts, USA, Thursday, 20 October 2005
17. EUROPE NEEDS STRENGTH AND SOLIDARITY
COMMENT: By Jacques Chirac, President of France
Financial Times, London, UK, Tue, October 25 2005
18. THE FAILED EXAMINATION
63rd founding anniversary of the Ukrainian Insurgent Army
Original article by Serhiy Hrabovs'kyi
Translated by Vitaliy Voznyak
Ukrayinska Pravda On-line, Kyiv, Ukraine, Tue, October 25, 2005
19. THESES OF VIKTOR YUSHCHENKO'S ELECTION CAMPAIGN
FROM THE NEW BOOK: "The Orange Revolution
The Way It Was, Chronicle Of Victory" Page 95
Publisher: Andrew Kinsel; Editors: Volodymyr Ruban, Oleksiy Priydan
"Perekhid Outdoor" In English and in Ukrainian,
Kyiv, Ukraine, Fall, 2005, 255 pages
====================================================
1. PRIME MINISTER SAYS KRYVORIZHSTAL PRIVATIZATION
AND EUROBOND PLACEMENT INCREASE UKRAINE'S
INVESTMENT ATTRACTIVENESS
Ukrainian News Agency, Kyiv, Ukraine, Tue, October 25, 2005
KYIV - Premier Yurii Yekhanurov believes that the privatization of mining
and metallurgical mill Kryvorizhstal and placement of Ukrainian Eurobonds
worth EUR 600 million in October increase Ukraine's investment
attractiveness.
Yekhanurov made a statement to that effect at a meeting with representatives
of biggest foreign investment companies that invest in securities in
Ukraine.
"I think that after yesterday's event and following the successful work of
the Finance Ministry in London, we may speak of new standards of
Ukrainian assets on international markets," Yekhanurov said.
He gave a positive evaluation of investors' interest in Ukraine. "It's very
important that you came to smell the air in Ukraine," the Premier said.
The BarCap investment bank's (Great Britain) director for work with Ukraine,
Sergei Stankovski, commenting on the meeting with Yekhanurov, told
journalists that during the meeting, investors were interested in prospects
of Ukraine's economic growth, further reforms, prospects for Ukraine's
membership in the World Trade Organization, and also chances for
continuation of repeat privatizations in Ukraine.
According to Stankovski, Yekhanurov assured the meeting participants that
the investment climate in Ukraine will improve, and talks on repeat
privatizations in Ukraine are over.
According to the report by the Cabinet of Ministers' press service,
investors also showed interest in the question regarding the options for
using funds from the Kryvorizhstal privatization by Ukraine's authorities.
Yekhanurov said that UAH 4.2 billion will be returned to former owners of
the enterprise, UAH 7 billion, as projected earlier, will be channeled into
the state budget, and the cabinet intends to funnel part of the funds to the
special fund for further investment in priority industries, including the
aircraft building industry, development of programs in the space sphere,
construction of transport corridors.
Particularly, representatives of the investment bank Morgan Stanley (Great
Britain), investment bank AIG (the United States), portfolio investment fund
Compass Group (the United States), insurance company NY Life (the United
States), asset management fund RAB Capital (Great Britain), investment bank
Nordea (Denmark) took part in the meeting with Yekhanurov.
As Ukrainian News reported, the State Property Fund declared Mittal Steel
Germany GmbH (Germany) as the winner of the competition for 93.02% of
the shares in Kryvorizhstal on October 24.
Among the three participants in the competition for the shares, Mittal Steel
offered the highest price of UAH 24.2 billion.
On October 6, Ukraine sold its ten-year Eurobonds worth EUR 600 million
with the yield of 4.95% per annum to foreign investors.
The Eurobonds have the face value of EUR 50,000 each (or over if divisible
by EUR 1,000); the yield on bonds is paid once a year on October 13
(starting on October 13, 2006); the repayment date is on October 13, 2015.
====================================================
2. PRESIDENT VICTOR YUSHCHENKO'S STATEMENT
ON KRYVORIZHSTAL AUCTION
Press office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Tue, 25 October 2005
Dear fellow citizens!
The Kryvorizhstal auction has been conducted fairly, bringing Ukraine
considerably closer to justice.
It will remain in our history as the biggest foreign investment so far. Its
price, 24.2 billion hryvnyas, greatly exceeds other privatization prices in
the past fourteen years.
This is also one of the biggest investments in the former Soviet Union and
the greatest price ever paid for an integrated industrial enterprise. Only
British Telecom privatization and auctions to sell Chilean copper mines can
compete with this one.
The transparent auction would not be possible without the 2004 revolution.
It showed that our policy, supported in the Maidan, was irreversible. Owing
to your firmness, the mill was legally returned to the state.
The new government was accurate and consistent to stage transparent
privatization. The actual price was six times the 2004 price. This victory
belongs to all of us.
We will use this money to finance state development programs to ensure
qualitative changes in the economy and social life. This year and in 2006,
we are going to start a range of projects to modernize the municipal sector,
support farming, develop high technologies and science.
The cabinet will soon announce its initiatives. We will find mechanisms to
use this money to benefit each Ukrainian citizen.
It was politically difficult to organize the auction. However, despite
numerous attempts to artificially reduce the price or even derange the
auction, investors trusted us and our country's ability to keep its
promises. This proves Ukraine is politically stable and economically
attractive.
Each of us benefited from this privatization. The auction procedure
demonstrated the highest standards of democracy. We showed all that
our political will can create a new reality, making business and common
people harmonically co-exist. -30-
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3. UKRAINE: AN EXEMPLARY START
A good beginning for ending past wrongs
EDITORIAL COMMENT: Financial Times
London, United Kingdom, Wed, October 26 2005
This week's auction of Kryvorizhstal steel mill was a resounding triumph for
Ukraine's fledgling market economy and much-needed good news for Victor
Yushchenko's government. The £4.8bn paid by Mittal Steel exceeded
expectations and was achieved through a fair and open process.
It will reassure investors unsettled this year by divisive government
debates; it will also reassure Mr Yushchenko's restive supporters that he
has the will to redress the wrongs of Leonid Kuchma's corrupt government.
The sale of Kryvorizhstal last year was one of the worst of some
questionable post-Soviet privatisations. Foreigners were excluded from the
auction, and the mill was sold for only $800m (£448m) to a group of local
businessmen, among them Mr Kuchma's own son-in-law.
It was therefore the most obvious candidate for reprivatisation. The more
challenging question is what should be done next.
On a visit to London, and the Financial Times, last week, Mr Yushchenko
was passionate in his insistence that the millions of people who came out
on the streets in the Orange Revolution demanded and deserved a clean-up
of Ukraine's corrupt shift of assets from the state to private hands.
He is right, but this process must be strictly controlled, lest the remedy
prove worse than the illness.
Ukraine's review of past privatisations must be limited in scope, governed
by transparent rules and completed within a clearly stated, and very brief,
time. Otherwise, the process risks being distorted by political vendettas,
as with Yukos in Russia.
In an ideal world, each privatisation would be evaluated and addressed by
an open, institutional process, possibly culminating in a windfall tax.
But given the weakness and corruptability of state institutions in Ukraine,
as in the rest of the former Soviet Union, it is unlikely the courts or any
bespoke commission would be able to oversee such a process.
A less desirable - but more feasible - alternative is reprivatisation, a la
Kryvorizhstal. Mr Yushchenko is wise to hold this possibility in reserve,
while seeking to negotiate a settlement that takes account of the
discrepancy between the price paid and the true market value of a few
prize assets. Where companies are reprivatised, it is essential that the
government compensate the original owners.
A few well-managed reprivatisations could raise much needed funds for
the state and, by shifting ownership from a small clique of oligarchs,
re-orient the economy into one that is more outward looking and
internally competitive.
Achieving all this, and avoiding the mistakes that Russia made, will be
challenging.
But Mittal Steel's successful bid is the best possible start -tribute both
to the global clout of Asia's diaspora entrepreneurs, and the real
opportunities for credible international investors in post-Soviet states.
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4. SALE ENDS UKRAINIAN 'REPRIVATISATIONS'
By Tom Warner in Kiev, Financial Times
London, UK, Wedneday, October 26 2005
Ukraine expects the $4.8bn sale of its flagship steel mill Kryvorizhstal to
Mittal Steel to spur further deals with foreign investors, but the
government plans no more "reprivatisation" auctions, foreign businessmen
were told yesterday in a meeting with prime minister Yuri Yekhanurov.
Mr Yekhanurov said Mittal's unexpectedly high bid in Monday's auction and a
$600m eurobond placement this month at a record low interest rate for
Ukraine of 4.95 per cent allowed them "to speak of a new standard for
Ukrainian assets on international markets".
Mittal's $4.8bn bid exceeded by six times the price that Kryvorizhstal
fetched last year in a tender closed to foreign investors, but the tender
was cancelled and reversed after last year's Orange Revolution.
Mr Yekhanurov said he had not changed his mind about the negative effects to
the investment climate of "reprivatisation" - the reversal of privatisations
it believes were sold too cheaply under the former president,Leonid Kuchma.
Mr Yekhanurov's comments indicate he will resist popular pressure to
continue reprivatisation, which he declared was"finished" after President
Viktor Yushchenko appointed him last month to replace Yulia Tymoshenko,
who fought to renationalise Kryvorizhstal and other plants.
His stance will reassure owners of dozens of plants that had been considered
candidates for reprivatisation. Mr Yekhanurov is seeking to negotiate
settlements with the owners of companies where Ms Tymoshenko had initiated
the reprivatisation process but did not have time to complete it, such as
Severodonetsk Azot, a fertiliser plant.
However, the second-biggest target of reprivatisation after Kryvorizhstal,
Nikopol Ferroalloy, appears likely to remain in legal limbo.
Ms Tymoshenko won a ruling reversing the 2003 privatisation of a majority
stake in the plant to Mr Kuchma's son-in-law, Viktor Pinchuk, but Mr
Yushchenko sacked her after she allied with minority shareholders in an
effort to seize control of the plant.
A spokesman for Mr Pinchuk said Nikopol was "a totally different matter"
from Kryvorizhstal. The spokesman said another Ukrainian oligarch, Igor
Kolomoysky, who controls most of the rest of Ukraine's ferro-alloy industry,
was seeking to use the reprivatisation process to wrest Nikopol away from
Mr Pinchuk.
Mr Yekhanurov has tried to bring Mr Pinchuk and the rival shareholder into
talks but they continue to battle it out in court. -30-
====================================================
5. MITTAL WINS AUCTION FOR STEELMAKER
Industry Benchmark Is Set With $4.8 Billion Bid For Ukraine's Kryvorizhstal
By Paul Glader & Geoffrey T. Smith, Staff Reporters
The Wall Street Journal, New York, NY, Tue, Oct 25, 2005; Page A3
Mittal Steel Co., the world's largest steel company by production, bought
Ukraine steelmaker Kryvorizhstal for about $4.8 billion in a tense televised
auction that set a new benchmark for acquisitions in the steel industry.
The price for a 93% stake, which values the entire company at more than $5.2
billion, far exceeded many analysts' forecasts and was more than five times
what parties paid last year at an auction in which the winners included
relatives and associates of former Ukraine President Leonid Kuchma.
The sale also provided a much-needed political and financial boost for
President Viktor Yushchenko's administration. Mr. Yushchenko said the resale
"showed that Ukraine is able to conduct an honest privatization according to
the law."
The sale underscored the increasing premiums being paid for former
state-owned steel plants, as steel companies are flush with profits as
demand from China has lifted supply, demand and prices world-wide.
"What we are seeing is a shift in the valuation on steel mills" as the
industry enters a third year of unprecedented earnings, said Mark Parr, a
steel analyst at Key/McDonald in Cleveland. But some in the industry are
worried that companies could be paying more than some steel assets are
worth.
The price exceeded the $4.5 billion Mittal Steel of Rotterdam paid in 2004
for steelmaking assets in the U.S. with capacity to produce 16 million
metric tons of steel a year -- more than twice the capacity of
Kryvorizhstal.
During a conference call with investors yesterday, Chief Executive Lakshmi
Mittal said that the plant is a low-cost producer, and the purchase comes
with significant raw-material reserves and has the potential to produce
higher-quality steel that fetches higher prices.
Mr. Mittal said the acquisition includes one billion tons of iron-ore
reserves, which are becoming more difficult for steelmakers to attain
affordably, making Mittal Steel the fourth-largest iron-ore mining company
in the world, behind BHP Billiton Ltd., Rio Tinto PLC and Brazil's
Companhia Vale do Rio Doce.
The acquisition also increases Mittal Steel's steelmaking capacity to nearly
80 million metric tons a year, up from 70 million metric tons, further
cementing its lead over Arcelor SA of Luxembourg as the world's largest
steel producer.
In an interview, Mr. Mittal conceded that "at one point we were definitely
getting nervous because we didn't have much flexibility to go up" in price
but says he doesn't believe they overbid "our own internal limit."
Mr. Mittal and his son and chief financial officer, Aditya, watched the
bidding from a room at the Premier Palace Hotel in Kiev.
The price was pushed up in the equivalent of $20 million increments, with a
consortium led by Arcelor bidding together with the Industrial Union of the
Donbass, a group of Ukrainian industrialists.
A third Ukrainian bidder, LLC Smart Group, dropped out early in the bidding.
Shares in Mittal Steel rose $1.65 a share, or 7%, on the New York Stock
Exchange to $25.39.
Earlier this month, Arcelor and Mittal were among foreign steel giants that
lost out in the televised auction of a stake of just under 50% in Turkey's
biggest steel producer, Eregli Iron & Steel Works Co., or Erdemir, which
was won by Turkish industrial conglomerate OYAK for $2.96 billion. Mittal,
however, still owns an 8.3% stake in Erdemir. -30-
--------------------------------------------------------------------------------------------
Write to Paul Glader at paul.glader@wsj.com and Geoffrey T. Smith at
geoffrey.smith@dowjones.com
=====================================================
Send in a letter-to-the-editor today. Let us hear from you.
====================================================
6. UKRAINE ECONOMY: A GOOD DAY AT THE AUCTION
NEWS ANALYSIS: The Economist Intelligence Unit Limited
The Economist, London, UK, Tue, October 25, 2005
The leading asset in Ukraine's re-privatisation programme, steel mill
Kryvorizhstal, has been sold to Mittal Steel for nearly US$4.8bn in an open
auction. This is highly welcome for the president, Viktor Yushchenko, at the
end of a year in which he has disappointed many of the expectations arising
from the "Orange Revolution".
Ukraine is not, however, on the brink of a run of high-yielding
privatisations and large-scale foreign investment. Nor are Mr Yushchenko's
political difficulties behind him.
In a competitive auction that was nationally televised, Mittal Steel-the
world's largest steel producer-on October 24th beat Arcelor of Luxembourg
for a 93% stake in Kryvorizhstal, Ukraine's leading steel enterprise.
The price was six times the US$800m paid for Kryvorizhstal in a mid-2004
tender that was won by a Ukrainian grouping including Viktor Pinchuk, the
son-in-law of the then-president, Leonid Kuchma, despite the fact that
higher offers were tabled.
In the wake of the "Orange Revolution", that privatisation was cancelled by
the authorities via the courts and Kryvorizhstal was prepared for sale once
again. The former owners will have their US$800m refunded.
BIG PAYOUT
The price paid by Mittal Steel is very high by regional standards and has
led some observers to suggest that the world's leading steel group has
overpaid. Partly the price reflects the intense competition between Mittal
and Arcelor, in an open competition, for the last major steel plant in
eastern Europe.
Yet it also reflects the fact that Kryvorizhstal is a large, profitable
plant that probably has the potential to become more efficient and
profitable with the application of better management.
It is, furthermore, insulated from the sharp rises in the price of inputs
seen across the global steel sector this year: Kryvorizhstal owns a large
iron ore mining complex, which is located on its doorstep, and it also has
vast supplies of coking coal.
As a result, the company is largely self-sufficient with regard to its two
major factor inputs. It is also proximate to coal mines and has good
communication links with ports on the Black Sea.
Assuming that the sale proceeds smoothly, the Kryvorizhstal privatisation is
very good news for Mr Yushchenko. The US$4.8bn is equal to 6% of GDP
and will give a huge boost to the budget, thereby allaying financial
concerns for this year and next at least.
Because the auction was televised, it is a clear demonstration to the
population that privatisation in the post-Kuchma era is open and honest.
Some Ukrainians who doubted the wisdom of the controversial re-privatisation
programme might be convinced that, at least in Kryvorizhstal's case, it was
worthwhile because of the US$4bn revenue gain.
The attraction of the world's two leading steel groups is also a coup for
the president and marks of one the few votes of confidence in Ukraine by a
major foreign player since Mr Yushchenko became president.
Despite the positives, however, this does not mark a turning point in Mr
Yushchenko's political fortunes, nor is it likely to herald a dramatic
turnaround in progress on privatisation and the attraction of foreign
investment.
NO RUSH
On the economic front, the Kryvorizhstal sale follows soon after Raiffeisen
acquired Ukraine's second-largest bank, Aval, for just over US$1bn. The
banking sector, indeed, seems poised for further foreign investment as the
third- and fourth-largest banks, Ukrsotsbank and Ukrsibbank, are reportedly
in the sights of other big European financial houses.
With the exception of the banking sector, however, Ukraine is not about to
experience a huge influx of foreign investors-despite the fact that there
are plenty of large, potentially lucrative state-owned enterprises left to
sell.
These include Ukrtelecom, the fixed-line telecoms monopoly, a number of
electricity distributors and generators, a large part of the mining sector
and the (re-privatised) Nikopol Ferro-alloys Plant (NFP).
Under Mr Yushchenko, privatisation has made little progress. Indeed,
large-scale privatisation was frozen until recently and it will be difficult
quickly to turn things around.
Even if bureaucratic and legal obstacles can be overcome-in the form of a
fractious parliament and (in the case of NFP) disgruntled, litigious
dispossessed owners-it is arguable that no other state asset is on a par
with Kryvorizhstal. That plant, after all, is largely self-sufficient and
sells most of its output abroad.
The state's telecoms, power and coal assets, by contrast, are locked into
domestic markets which remain poor and ill-liquid, and beset by payment
problems. In the case of Ukrtelecom, moreover, the stake on offer is likely
to be just 43%. This does not offer the security that most investors would
prefer.
Aside from privatisation, there is little sign that many other major
international investors will be following Mittal Steel into Ukraine anytime
soon. Too many of the flaws in the business environment inherited from the
Kuchma era remain, and the political stability that the country has enjoyed
in the weeks since the change of government is highly tenuous.
STILL CORNERED
The investment outlook is not especially bright, but it appears hopeful when
compared with Mr Yushchenko's political situation. The president is
scheduled to lose a large part of his powers to parliament at the start of
next year. At that point he will be more reliant on the strength of his
parliamentary grouping, which is not faring well in opinion polls.
At present, his Our Ukraine faction has around 20% support in opinion polls,
on a par with the blocs of Yulia Tymoshenko, his erstwhile ally and ousted
premier, and Viktor Yanukovych, whom Mr Yushchenko defeated in the re-run
presidential election.
It is difficult to see further growth in Our Ukraine's polling numbers in
the next few months, despite the boost provided by the Kryvorizhstal sale.
As a result it is likely that, following the parliamentary election, Mr
Yushchenko will have to conclude an alliance with the parliamentary speaker,
Volodymyr Lytvyn, and either Ms Tymoshenko or Mr Yanukovych.
For the president, neither option is attractive. His supporters would regard
an alliance with the oligarchic Mr Yanukovych as a betrayal of the
principles of the Orange Revolution, while investors would have grounds to
worry once again about how level the playing field would be in the Ukrainian
market.
A reunion with Ms Tymoshenko, meanwhile, would be embarrassing because
the president has accused his former prime minister of corruption in recent
weeks. More seriously, Ms Tymoshenko would demand an important role in
government, at which point the rows which largely paralysed the authorities
for several months earlier this year would probably resume-with added
bitterness.
Increasingly, it appears that the calm which has accompanied the
establishment of Yuri Yekhanurov's government will prove to be only a
temporary phenomenon, followed by unstable and fractious governments
for the four-year duration of the parliamentary term.
ONE BIG DEAL
The Kryvorizhstal privatisation is certainly welcome news for Mr Yushchenko
and for Ukraine's economy, but it is unlikely to herald a decisive
breakthrough politically or economically.
Primarily, it shows that the country has a valuable company that can attract
international investors of the highest calibre and that can, in the right
circumstances, demand a sale price which exceeds expectations.
Kryvorizhstal is not the only state asset in Ukraine worth over a billion
dollars that could interest major international players. Until the economic
environment and political stability improve, however, the country will
struggle to tap this potential. -30-
====================================================
7. MITTAL SHARES ARE A "STEAL"
Mittal Steel (MT: NYSE) By Goldman Sachs ($25.39, Oct. 25, 2005)
ANALYSIS: by Aldo Mazzaferro, CFA
HOT RESEARCH PM, Barron's OnLine
New York, New York, Tue, October 25, 2005
WE ARE UPGRADING OUR SHARES of Mittal Steel to Outperform
from In-Line, within a Neutral steel coverage view. The acquisition of the
steel mill in Ukraine adds to longer term earnings potential. Mittal's
shares appear 30% undervalued relative to a fair value of $33.
The share price has become more undervalued after a correction, and we
are impressed with Mittal's acquisition strategy and untapped earnings
potential.
The just announced $4.8 billion acquisition of Kryvorizhstal in Ukraine
could unlock major synergies with other Mittal plants, increases raw
material reserves, and adds another large, extremely low-cost and
significantly upgradeable steel mill to Mittal's mix.
The deal price may look high at almost 10x EBITDA (earnings before
interest, taxes, depreciation, and amortization) when measured against
current earnings and at over $700 per ton of output of about 6.7 million
tons.
But based on 10 million tons of capacity and considering at least $200
million of synergies from increased utilization rates, new products, mix
enhancements, market impact to pricing, and cost reductions at
Kryvorizhstal and other Mittal plants, it looks attractive. -30-
------------------------------------------------------------------------------------------
NOTE: Companies mentioned in Hot Research are subjects of research
reports issued recently by investment firms. Their opinions in no way
represent those of Barron's Online or Dow Jones & Company, Inc.
Share prices at the time the report was issued and the date of the report
are in parentheses. (http://online.barrons.com)
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8. STEEL DEAL WON'T SAVE YUSHCHENKO
Ukraine Leader's Popularity Is Likely to
Keep Sliding Despite Big Privatization
By Alan Cullison, Staff Reporter, The Wall Street Journal
New York, NY, Tuesday, October 25, 2005, Page A19
KIEV, Ukraine -- Yesterday's reprivatization of Ukraine's largest steel
plant provides a much-needed lift for President Viktor Yushchenko, but the
deal will go only so far toward offsetting his steadily sagging popularity
and abandonment by many allies from last year's Orange Revolution.
After being swept to power on outrage from rigged elections, a corrupt
government and an economy dominated by cabals, Mr. Yushchenko
promised Ukrainians a clean break from the past.
He vowed a reversal of crooked privatizations and the prosecution of crimes
tied to the prior regime, including his own attempted assassination and the
murder of a high-profile opposition journalist five years ago.
But Mr. Yushchenko has appeared irresolute about how many privatizations
to reverse and how many crimes to investigate. His sinking popularity has
highlighted fears that Western-style democratic movements in former Soviet
states that bloomed during the past two years are beginning to splinter and
fail.
Mr. Yushchenko's former prime minister, whom he fired in a cabinet reshuffle
last month, has emerged as a rival in vital parliamentary elections
scheduled for March, forcing Mr. Yushchenko to pursue allegiances with
pro-Moscow politicians.
The disarray in Ukraine comes amid tensions in the former Soviet state of
Georgia, where a revolution two years ago swept another Westward-leaning
president, Mikheil Saakashvili, into office.
Mr. Saakashvili's popularity also has been sinking; last week, he fired his
foreign minister, who later warned that the revolution there is at risk of
being derailed.
Part of Mr. Yushchenko's problem, analysts say, is that the rhetoric of
revolution has been bad for the economy. Earlier this year his cabinet
scared off foreign investment in a contentious debate over how many
companies they would nationalize to reverse suspect privatizations.
Ukraine's economic growth is expected to slow to 2% this year from
12% last year.
Yesterday's sale of the Kryvorizhstal steel plant ensures the government
will remain solvent at least until the March elections, according to Katya
Malofeeva, an analyst at Renaissance Capital brokerage in Moscow.
Mittal Steel Co. of the Netherlands paid $4.8 billion for a 93% stake, more
than five times the amount paid last year at an auction whose winners
included relatives and associates of former President Leonid Kuchma.
Yet, the reprivatization debate has so damaged the economy that many
analysts believe the auction will be the last major sale of Mr. Yushchenko's
presidency.
"This was a very successful auction, and a very big vote of confidence from
investors in the Ukrainian government," said Ms. Malofeeva. But given the
broader upheaval, "we hope that it is the last."
Last month, Mr. Yushchenko signaled he wanted to scale back talk about
privatization reviews when he fired his cabinet and replaced his prime
minister with a technocrat and former professor, Yuri Yekhanurov.
Since then, Mr. Yekhanurov has put criminal probes on the back burner and
said he is focusing on getting Ukraine into the World Trade Organization and
reviving economic growth.
But Mr. Yushchenko's problems appear to add up to more than flawed economic
policy. Though a popular icon during the Orange Revolution, he has been an
obtuse and often absentee president, Western diplomats and analysts say.
Meanwhile, some high-profile crimes have been left unsolved. A test case for
most Ukrainians has been the murder of opposition journalist Hiorhiy
Gongadze, whose headless body was discovered in a forest outside Kiev.
Audio tapes smuggled from Mr. Kuchma's office suggest he ordered the
killing.
So far, Mr. Yushchenko's government has arrested three former police
officers who are expected to testify they were taking orders from above, yet
nobody responsible for ordering the killing is expected to be arrested
anytime soon.
The government also seems to have balked at prosecuting last year's vote
fraud. Dozens of low-level officials were arrested, but none of the
masterminds. Even Mr. Yushchenko's poisoning during last year's campaign
remains unsolved.
Western diplomats say there are practical reasons for stalling the probes:
Much of the election tinkering, and even the assassination attempt, could
lead to suspects in Russia, a major trade partner and the supplier of the
bulk of Ukraine's energy needs. Kiev and Moscow -- which favored Mr.
Yushchenko's political rival -- currently are in talks over winter fuel
deliveries.
But Ms. Malofeeva, of Renaissance Capital, says the Kryvorizhstal auction
will give Mr. Yushchenko a response to allegations that he hasn't corrected
some wrongs of the past. "His opponents are taking the political campaign
very seriously," she said. "Now he has to do the same."
--------------------------------------------------------------------------------------------
Write to Alan Cullison at alan.cullison@wsj.com
=====================================================
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=====================================================
9. UKRAINIAN LEADERS DEBATE HOW TO SPEND MASSIVE
WINDFALL FROM STEEL MILL SALE
Associated Press (AP), Kiev,Ukraine, Tue, October 25, 2005
KIEV - Lawmakers Tuesday argued over how to spend the massive windfall
earnings from the privatization of Ukraine's flagship steel plant - the
single largest foreign investment ever for the former Soviet republic.
The world's largest steel producer, Mittal Steel, acquired Kryvorizhstal for
24.2 billion hryvna (US$4.8 billion) Monday, well above what analysts had
predicted. The sale of the mill, which produces 20% of Ukraine's entire
metal output, is equivalent to about 20% of this year's anticipated budget
revenues.
Ukraine has no experience with receiving such a windfall, and lawmakers are
divided over whether to use the money for social needs, cover the budget
deficit or to develop the country's economy.
"We are creating a mechanism so that this money is used to benefit every
Ukrainian," President Viktor Yushchenko said, according to his office. He
mentioned a number of projects, including modernizing apartment buildings,
offering support to villages and developing high technology and science.
Finance Minister Viktor Pinzenyk said the government also plans to cover the
budget deficit and pay off state debt. However, Socialist and opposition
lawmakers, who opposed the sale, proposed compensating Ukrainians who
saw their bank savings wiped out during the Soviet collapse.
"Money must be given to Ukraine's people who really owned Kryvorizhstal,"
said opposition lawmaker Nestor Shufrych.
"Every Ukrainian citizen must feel that the state sold their property and
everyone must receive something from it," said Socialist lawmaker Mykola
Rudkovsky.
Others pleaded for restraint. "The main thing is not to eat up the money
instead of putting it toward economic development," said Kost Bondarenko,
a political analyst at Kiev's Institute of National Strategy.
Pinzenyk insisted that all new spending would only be done within the
framework of the budget, rejecting concerns that the money would be "eaten
up." "When we pay a salary to a teacher, we are spending money on the
country's economic development," Pinzenyk told The Associated Press in a
telephone interview.
When the mill was first sold off in a murky deal in 2004, Ukraine received
five times less. That sale to former President Leonid Kuchma's son-in-law
Viktor Pinchuk and tycoon Rinat Akhmetov was annulled earlier this year.
Oleksandr Peklushenko, an ally of opposition leader Viktor Yanukovych,
argued that the money should be used to improve the country's investment
climate, but he warned the government not to hurry to spend it.
The mill's former owners still have legal appeals pending before the
European Court of Human Rights. Mittal Steel also still has 60 days to
deliver the cash. Economics Minister Arseniy Yatsenyuk warned such a huge
influx of cash into the economy could trigger inflation.
Monday's televised auction was hailed as a huge success for President Viktor
Yushchenko, who held it up as a show of transparency. Pinzenyk said it
should be a good sign for investors. "I hope it will become a new era of
privatization in Ukraine," he said. -30-
=====================================================
10. UKRAINIAN PRESIDENT WANTS PRIVATIZATION MONEY
SHOULD BE SPENT ON STIMULATING ECONOMIC GROWTH
Interfax-Ukraine news agency, Kiev, in Russian 1549 gmt 25 Oct 05
BBC Monitoring Service, UK, in English, Tue, Oct 25, 2005
KHARKIV - Ukrainian President Viktor Yushchenko is convinced that
funds from the privatization of the Kryvorizhstal steelworks should be
spent on stimulating economic growth.
"I don't think that there is any political force that will initiate a system
of consuming this money, because we understand very well that this policy
won't leave anything for future generations," Yushchenko told a news
conference in Kharkiv today.
The president said he meant the modernization of public-utility
infrastructure, the military and the high-tech industry, and support for
agriculture.
This is the main concept the government is working on, he said. The
Cabinet of Ministers is working out a mechanism to use the money,
Yushchenko said. He expressed hope that it would be made public for
discussion and taking the final decision. -30-
=====================================================
11. UKRAINIAN OPPOSITION FIGURE YANUKOVYCH CRITICIZES
SALE OF STEELWORKS TO FOREIGNERS
"They will come and buy Ukraine up."
Ukrayina TV, Donetsk, in Russian 1400 gmt 25 Oct 05
BBC Monitoring Service, UK, in English, Tue, Oct 25, 2005
KIEV - [Presenter] Viktor Yanukovych [head of opposition Regions of
Ukraine party] has criticized the sale of Kryvorizhstal steelworks.
This strategic plant should have remained state-owned instead of having been
sold to foreigners, the leader of the Party of Regions said. Foreign owners
of such companies can significantly influence Ukraine's internal and foreign
policy.
[Yanukovych, in Russian] If Ukraine chooses the path of selling its plants
then we will lose independence completely very soon, because after the
economic dependence of our country we will have political dependence too.
We should understand clearly who will come to Ukraine to buy our companies
and with what money. They will be buyers from the world's top league, those
who have enormous capital. They will come and buy Ukraine up.
=====================================================
12. PRES YUSHCHENKO NOT GOING TO ACCEPT RESIGNATION
OF STATE PROPERTY CHAIR, VALENTYNA SEMENIUK|
Ukrainian News Agency, Kyiv,Ukraine, October 25, 2005
President Viktor Yuschenko is not going to accept the resignation of State
Property Fund Chair Valentyna Semeniuk. He announced this at a press
conference in Kharkiv, asked by reporters.
'To my mind, the work of the State Property Fund on privatization of
Kryvorizhstal was irreproachable,' he said. Yushchenko emphasized that
this is his unequivocal assessment of the SPF activity.
'The Fund chair is being assessed at different angles, including by
political partners, teammates and allies. I believe, this subject must be
resolutely separated from the process and functions performed by the
State Property Fund,' the president added.
He also noted that he does not understand the logics by which some
political forces are guided on this issue, and asked not to hamper
effective work of the SPF.
As Ukrainian News reported, on October 24 Semeniuk submitted a letter
of resignation, saying a discrediting campaign had been launched against
her agency, the Socialist Party and herself because of the regulation of
property relations and protection of government interests in this field.
=====================================================
Send in a letter-to-the-editor today. Let us hear from you.
=====================================================
13. UKRAINIAN PRESIDENT URGES PRIVATIZATION OF
STATE TELECOMMUNICATIONS MONOPOLY
Interfax-Ukraine news agency, Kiev, in Russian 1635 gmt 25 Oct 05
BBC Monitoring Service, UK, in English, Tue, Oct 25, 2005
KHARKIV - Ukrainian President Viktor Yushchenko has called for the urgent
privatization of Ukrtelekom [state-owned telecommunications monopoly].
"There are a number of strategic assets the privatization of which is
topical today. I would put Ukrtelekom at the top of the list," the president
said in Kharkiv today.
Yushchenko said that over the last several years "many quite competitive
players" have entered the country's telecoms market. "Modernization in the
competing structures is narrowing Ukrtelekom's market every day and every
month.
We have to admit today that if we do not proceed with privatization quickly
and effectively, we will start losing the potential that could yield a
significant financial profit for Ukraine," he said. He believes that
dragging out this matter "will work against Ukraine's interest".
The state currently owns a 92.86-per cent stake in Ukrtelekom. Since 1997,
the sale of Ukrtelekom had been delayed several times.
[Passage omitted: the law on Ukrtelekom privatization repealed this July.]
=====================================================
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=====================================================
14. PRES TAKES PART IN INVESTMENT COUNCIL MEETING
Press office of the President of Ukraine Victor Yushchenko
Kyiv, Ukraine, Thursday, 20 OCTOBER 2005
Addressing those present, he reassured them that Ukraine's market course had
not changed, and government was facing the challenge to draw more foreign
investment and create new opportunities for investors.
The President said he believed his major task was to make Ukraine join the
WTO this year and get a market economy status, considerably improving the
business climate.
He said that, having achieved these goals, we would be able to negotiate
free trade zone regulations with the European Union.
Speaking about perspectives of Ukraine's economic development, Yushchenko
noted that mutual respect and civilized relations between government and
business were necessary for economic growth. "We agreed we would
compromise to settle all conflicts between government and business," he
said.
Yushchenko reiterated that the President, the Prime Minister and the Rada
Speaker had recently signed a memorandum to protect property rights.
The Head of State admitted that government had made several mistakes in the
past nine months and told those present about specific measures they were
taking to improve the economic state. They plan to employ young
professionals to work for state agencies, simplify procedures to register
businesses, and adapt our standardization system to European norms.
The President also said it was important to "totally revise all paid
services the state renders to business," meaning various services that have
their own budget funds. "We aim to cancel these special funds, including
them in our state budget," he explained.
Yushchenko also stressed that it was vital to implement judicial reforms to
create an "efficient judicial system and genuinely independent courts and
judges."
Speaking about the current investment rate ($ 197 per capita per year), he
said this was "yesterday's policy." The Head of State added that Ukraine had
great potential to increase this rate by ten times, using capabilities of
our machine-building, chemical and light industries and high-tech sector.
"I have no doubts we will find the logical way in this direction," he said.
Speaker Volodymyr Lytvyn said this meeting was a sign of investors' trust in
Ukraine. Commenting on stagnation in the economy, he said there were three
reasons for that.
The most obvious one [FIRST] is the so-called left-wing disease of the
Ukrainian economy whose major symptom is state interference and control. The
SECOND reason is absence of any clear concept of Ukraine's development.
THIRDLY, there is political misbalance. Lytvyn said he hoped the situation
might improve after next year's elections.
Prime Minister Yuriy Yekhanurov assured all that he strived to create stable
conditions and define clear rules for business to function. He said they had
already restored Cabinet consultative commissions and decided that
businessmen would be able to assess decisions of the Cabinet at a phase of
their elaboration.
Then the participants made brief statements and exchanged comments.
The oldest participant of the meeting, Paul Ostling, Chief Operating Officer
of Ernst & Young Global, said there were all reasons to believe that
"Ukraine can now do more than in the past fourteen years."
He noted that the Council had not functioned properly and regularly since
2001. "Now we are sure that we have been heard and we are ready to
express our opinion," said Mr. Ostling.
To make the council work efficiently, he suggested they should work in
groups involving representatives of different industries. These groups
should work publicly to elaborate a strategy to improve the investment
climate in Ukraine. Ostling stressed that they should actively cooperate
with the Cabinet.
Other members of the Council said the world should receive a clear signal
that political events in Ukraine would never affect the economy and the
chosen course of market reforms.
Speaking about a Kryvorizhstal auction, they said they hoped it would be
transparent, public and legally impeccable to convince foreign businessmen
that property rights are respected in Ukraine.
After the plenary meeting they signed a memorandum, elaborated a concept of
working groups headed by government officials and accepted new Council
members. -30-
=====================================================
15. REPUBLICAN PARTY OF UKRAINE RUNS A ONE-FOURTH
PAGE ADVERTISEMENT IN THE WASHINGTON POST
"Sometimes you can't see the tree for the forest"
By E. Morgan Williams, Publisher and Editor
The Action Ukraine Report (AUR), Number , Article
Washington, D.C., Wednesday, October 26, 2005
WASHINGTON - The recently established Republican Party of
Ukraine ran a one-forth page advertisement in The Washington Post
on Tuesday, October 25, 2005, on page A18 in the first section of
the newspaper.
The title of the ad was, "Sometimes you can't see the tree for the
forest." The top one-third of the advertisement shows a black
and white photograph of the sun's rays shining through the trees
into an opening in a forest with the focus being on one small tree.
The advertisement for the Republican Party of Ukraine was created
and placed by the East West Communications company of
Washington, D.C. (LINK: http://www.eastwestcoms.com/).
The text of the Republican Party of Ukraine's one-fourth page
advertisement in The Washington Post is as follows:
"SOMETIMES YOU CAN'T SEE THE TREE FOR THE FOREST"
"A PARTY OF REFORM AND NATIONAL UNITY
The fall of the Berlin Wall. The fall of the Soviet Union. East European
nations joining NATO and the EU. These events have changed the world,
spreading a new wave of liberty, democracy, and security throughout the
Euroatlantic region. Ukraine's Orange Revolution marked another historic
break with the past. But much work to build a lasting democratic
foundation for our country. The Republican Party of Ukraine believes
in the Ukrainian people and their ability to build that foundation and shape
a bright and secure future for future generations.
For the past 15 years, Ukrainian politicians have thought only of their
own interests. Nevertheless, the people have never given up their pursuit
of true freedom and the rights that are their due in a true democracy.
Their steadfast, peaceful demonstrations through Kyiv's bitter winter
nights proved their quiet resolve to the entire world. And despite
haggling and corruption of the 'new' political elite, Ukrainians all across
the country are hard at work transforming our nation from its socialist
past into a modern, market economy. As a result, a strong middle class
is growing in our country.
The Republican Party of Ukraine was created to give the middle class a
voice in politics, a voice it has never had before. Our party represents
and defends the interests and values of those good individuals and
families, believing that they are the bedrock of a democratic and
prosperous Ukraine.
The Republican Party is dedicated to carrying forward reforms that will
make Ukraine a modern country with transparent systems of government,
free from bureaucratic obstacles to private sector development. At the
same time, our party is the party of unity. The values of the middle
class - responsibility, private property, and initiative - have the power to
unify the interests of eastern and western Ukraine, and we will mobilize
these forces to give all Ukrainians equal opportunities.
In a time of transition and confusion in our country, with political parties
and leaders scrambling for power at any cost, one party has clear
principles and an unwavering commitment to freedom and democracy,
at home and abroad."
REPUBLICAN PARTY OF UKRAINE
Fulfilling the Nation's Promise
www.RepublicanPartyofUkraine.com
East West Communications
--------------------------------------------------------------------------------------------
FOOTNOTE: According to the website of the new Republican Party
of Ukraine, www.RepublicanPartyofUkraine.com, the top leadership
of the party is shared by three persons.
[1] YURI BOYKO - is Chairman of the Republican Party of Ukraine.
He was elected at first all-Ukrainian congress of the newly-established
political party April 23, 2005.
Boyko comes from a background of senior government administration
and business leadership. Most recently, he was deputy minister of fuel
and energy until the beginning of 2005, and from early 2002 to the
beginning of 2005 the chairman of Naftogaz Ukraine, the country's
largest company.
[2] KOSTYANTYN GRYSHCHENKO - is Vice-chairman of the
Republican Party of Ukraine. Before entering politics, Mr. Gryshchenko
had a distinguished career as a senior government official in foreign
affairs, serving Ukraine as its representative in international negotiations
that were critical in strengthening Ukraine's independence and security.
His rise through the ranks of diplomacy [including being Ukraine's
Ambassador to the United States] culminated in his appointment
as Ukraine's Foreign Minister (September 2003-February 2005).
[3] YULIY YOFFE - is Vice-chairman of the Republican Party
of Ukraine. Yuliy Yoffe is a four-term member of parliament with
extensive experience in state matters and business. He was born in
Lugansk, in eastern Ukraine, in 1940, and graduated from the nearby
Komunarsk Mining and Metallurgical Institute as an electrical engineer
in 1964. He has represented the Lugansk region in Parliament.
Before co-founding the Republican Party of Ukraine in January 2005,
he had served on Parliament's Committee on State Construction
Projects and Local Self-Government, as well as an energy advisor
to the president of the republic and a supervisory director on
Ukraine's largest energy company, Naftogaz.
For more information on the three top leaders of the Republican Party
click on: http://www.republicanpartyofukraine.com/Leadership.htm
=====================================================
Power Corrupts and Absolute Power Corrupts Absolutely.
=====================================================
16. DISMISSAL OF PROSECUTOR-GENERAL, CLOSURE OF
POROSHENKO CASE CREATE NEW QUESTIONS
ANALYSIS: By Tammy M. Lynch, Senior Research Analyst
THE ISCIP ANALYST, Volume XI, Number 1,
Institute for the Study of Conflict, Ideology & Policy
Boston, Massachusetts, USA, Thursday, 20 October 2005
On 14 October, Ukraine President Viktor Yushchenko fired
Prosecutor-General Svyatoslav Piskun, citing his constitutional right
to do so, but providing no reason for the dismissal. While most in
Ukraine will not be sorry to see the beleaguered Prosecutor-General go,
the timing of the dismissal creates new questions for Yushchenko and
new concerns for those interested in ensuring that corruption is rooted
out in the country. The subsequent closure of an investigation against
Yushchenko's friend and aide Petro Poroshenko adds to the questions.
Piskun's office clearly did not fulfill the goals set for it by the
Orange Revolution. The mastermind of the murder of journalist Heorhiy
Gongadze remains at large, even though, in March, Piskun furtively
suggested, "This person is known." (1) At the same time, the
Prosecutor-General's office announced that three of the four
individuals who carried out the murder had confessed and were in
custody, but the investigation disturbingly has been hidden from view.
It was Gongadze's death that sparked the first mass protests against
the regime of former President Leonid Kuchma in 2001, and it was this
case that President Viktor Yushchenko has promised repeatedly to solve.
It was, he said, "a matter of honor." (2) Further, he underscored,
"The main task now is to get to the most important thing: who organized
and ordered the murder." (3) Nevertheless, despite a parliamentary
investigation that named several high-ranking Ukrainian officials,
including President Kuchma, as ordering the murder, and despite taped
conversations of Kuchma that allegedly captured those orders, no
progress has been made on bringing those who arranged the murder to
justice.
Piskun, who served under the Kuchma administration, also had little
success in pursuing the organizers of electoral fraud during the 2004
election. In June, Deputy Prosecutor Viktor Shokin confirmed that his
office had instituted "778 criminal cases relating to violations of
electoral legislation during the 2004 presidential election." Of these,
he said, "nearly half - 361 criminal cases - have been sent to court."
However, he also suggested that locating those who tampered with a
computer server at the Central Election Commission, as well as "the
organizers of the ballot rigging," would be difficult. "They are very
sizable cases that call for a large amount of time to be spent," he
said. (4) Shokin's statement seemed to ignore the fact that during the
revolution the Security Services of Ukraine publicly distributed a tape
said to include conversations between CEC members planning voter fraud.
Despite this potential evidence, and despite a number of witness
statements, not a single individual thought to have organized the
large-scale fraud, which led directly to the revolution, has been
charged.
For months, the majority of Ukrainians have called for Piskun's ouster,
in hopes that this would lead to the justice for which so many
protested late in 2004. However, the former will not necessarily lead
to the latter. While a new Prosecutor-General may, in fact, vigorously
and successfully pursue the cases that now seem to be lying dormant, it
is just as likely that he or she simply will maintain the status quo.
This is especially true if the Prosecutor-General is not the one making
decisions or setting policy regarding high-profile cases.
Former Prime Minister Yulia Tymoshenko has suggested that Yushchenko
and his allies are protecting former President Kuchma, tying the
prosecutor's hands. She and many others have long speculated that
Yushchenko privately agreed to protect Kuchma from potential
prosecution in the Gongadze case in exchange for his support for a
negotiated settlement during the Orange Revolution. Yushchenko's
refusal to dismiss Piskun for nine months, despite repeated calls to do
so publicly by some of his revolution allies and privately by Western
international organizations, lends credence to this theory.
It is also supported by the fact that, for months, Yushchenko publicly
discouraged parliament from hearing the final report of its committee
investigating the murder - a report which found Kuchma responsible. In
September, Gongadze's widow, Myroslava, said, "Unfortunately, even
now there is no political will to find those who ordered the killing." (5)
If this is the case, a new prosecutor-general will make no difference.
Yushchenko's critics also have suggested that delays in pursuing the
organizers of electoral fraud may be related to the president's alleged
agreement with Kuchma or those close to him, and a fear of exacerbating
regional cleavages, since the majority of the fraud organizers likely
would be located in the East or South of Ukraine. Yushchenko's recent
signature on a bill providing immunity from prosecution to all
Ukrainian elected officials, and his agreement to introduce a bill
potentially providing amnesty for those accused of electoral fraud,
provide support to these theories. In this case, too, replacement of
the prosecutor-general will change nothing.
There is one potential shift that is likely to occur as a result of the
removal of Piskun - the new chief prosecutor will be more closely
allied to the president. This could provide a useful tool in the
run-up to the parliamentary elections of March 2006. Whether this
result was intended or not, the timing of Piskun's dismissal creates
questions.
One month ago, Piskun announced that five criminal investigations had
been opened dealing with corruption and abuse of office by those within
the National Security and Defense Council (NSDC), which is technically
led by the president. These five cases were launched following charges
by Yushchenko's former chief of staff, who suggested that some of the
president's closest aides were engaging in corrupt activities.
Just before his dismissal, Piskun opened a new case against former NSDC
Secretary Petro Poroshenko, who is also one of Yushchenko's closest
confidants. Piskun charged that Poroshenko threatened to block
construction of a new apartment complex in downtown Kyiv if he didn't
receive space in the building or shares in the project. Piskun also
was reportedly investigating Poroshenko's dealings with businesses in
Moldova, and possible pressure placed on judges in several high-profile
cases.
Moreover, the president had requested that Piskun examine
whether former Prime Minister Yulia Tymoshenko, Yushchenko's former
ally and current opponent, had pressured courts to forgive the debts of
her former company.
On 17 October, Piskun charged that his dismissal came because he
refused to institute criminal proceedings against Tymoshenko, and
refused to drop proceedings against Poroshenko. Piskun said, on the
night before his dismissal, Yushchenko "reproached me because I
ostensibly closed the criminal cases against Tymoshenko too quickly
[The Kuchma administration had charged Tymoshenko with embezzlement
and bribery. She - and Yushchenko at the time - called these charges
politically motivated. The majority of these charges were dismissed
for lack of probable cause by courts. The rest were closed by Piskun
in February.]"
Piskun claimed, "Yushchenko hinted that it would be
very good if the investigations were renewed," for use "against
Tymoshenko in the upcoming parliamentary elections." Further, he said
that Yushchenko had urged him to drop the investigation of Poroshenko
and had become angry when Piskun said that he had questions about the
payment for a plane chartered to carry guests from the US to his
inauguration. (6) Perhaps not coincidentally, Piskun is thought to be
interested in a spot on the electoral list of The Yulia Tymoshenko Bloc
in the upcoming elections.
The vacancy at the prosecutor-general's office leaves a number of
deputies in charge of high-profile cases. One of those deputies,
Viktor Shokin, was tasked by Kuchma in 2002 with overseeing the
investigation into Tymoshenko's activities, and with "investigating"
the Gongadze murder. He was also the lead investigator of the Gongadze
case under Yushchenko.
Shokin is known to be close to Poroshenko, earning himself the nickname
Poro-Shokin in Ukraine's media. The activities of Shokin in the coming
weeks should be instructive, particularly if, as expected, Yushchenko
finds it difficult to convince parliament to confirm his new choice for
prosecutor-general. The first signal of things to come came just days
after Piskun's dismissal, when the prosecutor general's office summarily
closed the case against Poroshenko.
There is little doubt that Piskun's tenure as prosecutor-general was
disappointing. As Zerkalo Tyzhnia (Nedeli) put it, "Nobody was too
fond of him." (7) However, nobody has been too fond of Piskun for
quite some time. His critics have been pushing for his dismissal for
months. Perhaps the president simply was responding to these calls.
But the fact that Yushchenko chose this particular moment, weeks after
investigations were opened surrounding the activities of his aides, and
months before a pivotal parliamentary election where he faces his
former ally as his opponent, leads to more questions than answers.
------------------------------------------------------------------------------------------
FOOTNOTES:
1) Agence France Presse, 2 Mar 05 via Lexis-Nexis.
2) ITAR-TASS, 20 Apr 05 via Lexis-Nexis.
3) Associated Press, 1 Mar 05 via Lexis-Nexis.
4) Stolichnyye Novosti, 22 Jun 05; BBC Monitoring via Lexis-Nexis.
5) Associated Press, 15 Sep 05.
6) ForUm, 18:59 CET, 17 Oct 05, using material from Svoboda, 17 Oct 05.
7) Zerkalo Tyzhnia, No. 40 (568), 15-21 Oct 05.
====================================================
17. EUROPE NEEDS STRENGTH AND SOLIDARITY
COMMENT: By Jacques Chirac, President of France
Financial Times, London, UK, Tue, October 25 2005
The outcome of the French referendum exposed a crisis of confidence in
the European project that affects our whole continent. We must revive the
European spirit and give it renewed impetus. Europe cannot stand still while
its competitors forge ahead.
In rejecting the constitutional treaty the French were not turning their
backs on a long-standing commitment to Europe. They were expressing
their displeasure at Europe's inability to give them confidence in their
future.
To meet their expectations we must reassert our belief in a powerful
Europe of growth and jobs that strengthens us.
Europe carries in its genes our wars and reconciliations, our struggles for
liberty and social progress. Its model is the social market economy,
alliance of liberty and solidarity, with the public authority safeguarding
the public interest. The society Europe strives for is centred on human
dignity.
Were we to give up this ideal we would betray our heritage. France will
therefore never let Europe become a mere free-trade area. We want a
political and social Europe rooted in solidarity.
Globalisation spells enormous economic and social challenges. A united
Europe is the only means to address them. Europe affords us the critical
mass to stand alongside the world's giants. Our fellow citizens expect us to
come up with answers.
We must use the three forthcoming European meetings to rekindle the
European initiative. Tomorrow, in Hampton Court, our aim is to restore
the momentum from which Europe draws its strength. It must move fast
in order to keep up with international competition.
It must increase innovation and research to support tomorrow's jobs.
Germany and France have launched major programmes in the most
promising sectors.
I suggest we extend this approach throughout Europe. Such efforts require
further funding. France's proposal is to mobilise the European Investment
Bank to double community research capabilities. Let us set up with the bank
an instrument endowed with euro 10bn which, by leveraging public and private
co-funding, will generate an additional euro 30bn in research and innovation
projects up to 2013.
We must come to grips with globalisation's social consequences. When
corporations, tailoring global strategies to short-term profit
considerations, take decisions that affect employment throughout the Union,
such as relocation, our strength lies in numbers.
That is why France has called for the Commission to initiate European
consultations in such circumstances and supports the globalisation fund
mooted by President José Manuel Barroso.
We are now moving into the post-oil and global warming period. Beyond
implementing the Kyoto protocol, we must devise together a revolution in our
way of life and production methods: energy supplies, transport systems,
industry, housing and urban planning. France will submit a memorandum on
these issues early next year.
Our economies can benefit from expansion of properly organised world trade.
Europe must defend its interests at the World Trade Organisation. The Union,
which is already the world's leading importer of agricultural products from
developing countries, has shown its commitment to success by reforming the
Common Agricultural Policy.
It is now time for our partners to make equivalent proposals in a spirit of
give and take, in agriculture as well as in manufacturing and services.
The world faces increasing migratory pressure. Europe is in the front line
and must devise a response combining security, development and human
dignity. The Union's border controls must be strengthened but this is not
enough.
There is a more and more shocking gap between rich and poor countries.
People would not leave their countries if they had access to a decent
living.
At France's initiative, Europe is substantially increasing its development
assistance and must now work with sub-Saharan and north African
countries for a concerted approach based on shared responsibility.
We must endow co-development projects, for example, by providing
innovative funding at European level. The second date is the December
European Council. To restore confidence in the Union's workings, we
must agree on the 2007-2013 European budget.
The success of European reunification is at stake. If we all act in a spirit
of solidarity and responsibility, we can achieve this in December. France
has participated very actively in the effort to devise a compromise - one
that must comply with commitments already made.
The Treaty of Nice is not a powerful enough engine to drive a 25-member
state Europe. We need more democratic, efficient and transparent
institutions. The constitutional treaty ratification process will be
reviewed under the Austrian presidency. France intends to work with all
partners, in particular the new German government, to prepare this review.
Meanwhile, we could think of improving the workings of the institutions
within the framework of the existing treaties, especially in economic
governance, domestic security and foreign and defence policy.
Likewise, France rejects the idea of a "directoire". The Union needs and
must respect each of its members. I believe, however, that states wishing to
act together in addition to the common policies should be allowed to form
pioneering groups. Such groups must remain open to those wanting to join
them.
We did so with the euro, Schengen and defence initiatives. Likewise,
eurozone members should deepen political, economic and social
integration. -30-
-----------------------------------------------------------------------------------------
The writer is president of France
=====================================================
18. THE FAILED EXAMINATION
63rd founding anniversary of the Ukrainian Insurgent Army
Original article by Serhiy Hrabovs'kyi
Translated by Vitaliy Voznyak
Ukrayinska Pravda On-line, Kyiv, Ukraine, Tue, October 25, 2005
It was evident before the October 15th, the events held in Kyiv that day -
to honor the 63rd founding anniversary of the Ukrainian Insurgent Army
(UIA), and to demand a full and unreserved recognition from the government
for sacrifices made by the UIA soldiers for an independent Ukraine - were
going to fail on a massive scale.
That the events were going to fail was evident when Kyiv-based leaders of
the Ukrainian People's Party (UPP) refused to organize a petition supporting
recognition of the UIA. From the available information, the reasoning behind
this decision was approximately this: no need to provoke the citizenry.we
will not gather enough signatures in the capital.Kyiv is a unique city.and
so on.
Some leaders of the Ukrainian People's Party said the party is organizing
the UIA veterans march; others said it [the party] does not; still others,
for example Sobor leaders, were torn by internal disagreements and kept
quiet. Rukh leaders announced something opaque and unintelligible.
Therefore, the final result should have been expected.
Indeed, Kyiv - is a unique city. At the time of the Orange Revolution, this
uniqueness was visibly observable. Skipping further back one can recall
1990-91. August 24th, 1991 - Kyivans made up 95% of those tens of thousands
of people who surrounded Verkhovna Rada, demanded the proclamation of
independence, turned back the communist deputies who were trying to disperse
and in this way undermine the necessary quorum for the vote to count.
The result: those who did not want to vote for independence understood that
Kyivans will not let them go unscathed, and were forced to say "aye."
Yet Kyiv does not like ambiguous statements, disorganization and
indecisiveness. Kyivans who on October 14th, 2005 watched the ICTV's
program "Freedom of the Word," clearly saw this indecisiveness present
within national-democratic party leaders. The problem did not consist with
incorrect ideological position or a lack of theoretical arguments, but in a
completely different aspect.
Whereas Natalya Vitrenko, leader of progressive socialists and a
communist-deputy, made it understood repeatedly during the program that she
and her supporters were ready to go to the end by any means in order to stop
recognition of the UIA veterans by the government, the leaders of
national-democrats showed anything but such readiness and determination.
In addition, absent were calls by reputed Ukrainian politicians in the name
of the UIA cause.
That is why Kyivans did not show up. At the event, three thousand
"red-blacks" and eight thousand "reds" were present. The latter acted in an
organized pre-planned manner; the former improvised. The Ukrainian National
website claims the confrontation of October 15th as 1:1.
But without a doubt, the national-democrats lost and lost big. Otherwise,
how do you explain a situation when communists and progressive socialists
(who receive only 3.5% of Kyivan votes - data is fresh from October 2005)
are able to sabotage an event honoring veterans of the Ukrainian Insurgent
Army taking place at the Independence Square?
We're not talking about putting into action words, "put a commie on a
stick," although some may like to think it that way.
The issue is this: if in an independent state does not respect and recognize
those who gave their life for its existence, such a state cannot survive for
long, and its citizens should not expect anything from such an ungrateful
state. It does not matter whether the state's name is Ukraine, Bangladesh,
Russia or the USA.
As it is, either Ukraine pays proper respect to the UIA veterans, or
otherwise it will simply continue to supply prostitutes to the Eastern
brothels, nurses and cheap labor to the West, new "Kursk" sailors for
Russia, and finally body parts to the whole paying world, and no more, just
a great reserve of biomass.
Let's repeat this once again: the issue is about honoring ALL who fought for
Ukraine, for her happiness and freedom, however these may be understood.
Where was Natalya Vitrenko when Kyiv Rada renamed the Prospect of Red
Cossacks into Moscow's Prospect? Where was the Communist Party of
Ukraine?
Why did they not protest the disappearance from the capital's map of one of
the most interesting phenomenon in Ukrainian military history? On the other
hand, where were the national-democrats? Everyone was uniformly quiet.
For national-democrats, Red Cossacks were bad because they were "red," for
the CPU because the Red Cossacks were Ukrainian. But history cannot be
erased, it was the Red Cossacks who at the end of 1919 were the primary
causes for the defeat of Russian force led by a chauvinistic,
Ukrainian-hater General Denikin, the remains of whom were recently
ceremoniously reburied in Moscow. But this does not interest Ukrainians, as
do not many other things.
This year president Yushchenko posthumously awarded the title "Hero of
Ukraine" to Lieutenant Oleksiy Berest who raised the flag of victory above
the Reichstag, and who afterwards - for being a bit too independent - was
thrown out of the military into the Gulag. But why not give this recognition
while he is alive to the last commander and the UIA general Vasyl Cook?
Yes, there were those in the UIA, who committed crimes against the civil
population - either consciously, from desperation or from other reasons (war
is war: you shoot everything that moves). But let's level the standards, and
approach both sides with equal criteria.
It has been historically proved that Red Army soldiers during 1944-45 on
purpose killed hundreds of thousands, if not several millions of German
civilians, but also - raped hundreds of thousands of German, Serb, Polish,
Slovak and - what is interesting Ukrainian women. And not simply out of
a biological desire, rapes were done with ideological connotations: "you
served Hitler!"
Even the survivors of the Nazi prisons and camps - Jewish women - were not
spared, raped while ideology provided the justification.
All this does not mention the malicious cooperation between the Red Army and
the Nazis in the war against Poland in 1939. So take away all the pensions,
benefits and honors from the "red" veterans? Will we declare the Red Army a
criminal organization?
There are not less reasons to de-honor the Red Army as presently are given
against the UIA veterans, even more reasons! Unlike the Red Army, the
Ukrainian Insurgent Army never was an official ally of the Nazis.
Such an approach to the issue, however, is doomed. Marshall Tymoshenko,
Ukrainian Soviet Socialist Republic's General Herasymenko, a pilot Kozhedub,
a tank-operator Popel' or private Berest - they deserve the respect and
honor as fighters in the Red Army, who did not forget about their Ukrainian
roots and went into battle for the greater good of the native land.
And what about the other side? Why should the UIA's side be held to
different standards and demands? Still, during the WWII there was a third
side fighting for Ukraine - the Galicia division. Differing from the Red
Army and the UIA, those fighters fought for Ukraine as well. What should be
done?
There also exist enough reasons and evidence to payback modern political
hooligans and veterans of NKVD, SMERSH and KGB (by the way, it was these
veterans that made up a sizable portion of "red" veterans supporting Natalya
Vitrenko on October 15th, 2005).
As noted a certain journalist, it appeared that the "red" veterans possessed
experience in forcefully expressing their feelings, perhaps an experience
acquired in the youthful years while breaking teeth during an investigation
of a "bourgeoisie nationalist" or killing him with a cold bullet. The
question of course is about people at the political margins - but Lenin and
Hitler were also at one point, outsiders.
But the important part is not the above. The important is the following.
On October 15, where was the "Fatherland" party with its mighty name? Where
was the grand "People's Union "Our Ukraine" party? Where were all the
diverse patriotic, people-based, national parties, unions and organizations?
Why was the task to honor the UIA veterans given to a branch of UNA-
UNSO, a branch consisting of a handful of young nationalists under the
name "Tryzub?"
Could it be that Yushchenko, Tymoshenko, Yekhanurov, Moroz and Lytvyn
do not realize that without the Ukrainian Insurgent Army that they would not
be leaders of a Ukrainian state, but under the best scenario would be
regional directors of "the great Russia?"
Don't they know that it was heroic, and what appeared then hopeless
resistance by the UIA, that forced the CC CPRU after Stalin's death to
review ineffective policies towards the collective villages - first in the
western regions of the USSR and later throughout the Soviet Union?
Is it not clear that the motto "Freedom for people! Freedom for an
individual!" still needs to be made manifest in an independent Ukraine, and
therefore, the task of the UIA is not over?
More can be said about this subject. Including - the Maidan which now in
many people's minds will be associated with Vitrenko.
In the end, the failed examination will need to be retaken. Therefore the
march of the UIA veterans on Khreshchatyk and vigils on Maidan need
to be repeated.
Only this time the march should be led by the president, the prime-minister,
the speaker, at least those ministers with the task for Ukraine's national
security, and all politicians for whom the Fatherland or the people - are
not just components of their party's name.
And when television and radio join the call, tens of thousands of Kyivans
will stand next to those who announced the fight for independence and
democracy already in 1940s - and the fight against those who in the 21st
century strive to rehabilitate the totalitarian regimes - if not on the
world scale then in Ukraine.
The veterans of Cheka fuming with anger, let them be.
But today - the Ukrainian Insurgent Army veterans are the victors.
=====================================================
19. THESES OF VIKTOR YUSHCHENKO'S ELECTION CAMPAIGN
FROM THE NEW BOOK: "The Orange Revolution
The Way It Was, Chronicle Of Victory" Page 95
Publisher: Andrew Kinsel; Editors: Volodymyr Ruban, Oleksiy Priydan
"Perekhid Outdoor" Two Editions, in English and in Ukrainian,
Kyiv, Ukraine, Fall, 2005, 255 pages
I BELIEVE I KNOW WE CAN
I say I BELIEVE
Because I believe in Ukraine, I believe in every one of
us! I believe that we will build a state where everyone
would be proud to say: Yes! It's my Ukraine!
I say I KNOW
Because I know my duty. Everyone should gain from
my actions whether he likes Yushchenko or not.
I say I know, because I know what to do!
I proved this in the National Bank and
as the Prime Minister of Ukraine.
I say WE CAN
We can, and it's the will in inspiration
of each and every one of us.
Together we can do everything! There are millions
of us! And our people are talented. We have the
richest land and a great history.
We can live as all humans live. Everyone
would earn an honest and worthy livelihood
for himself and his children.
We will build a fair and humane society.
We will bring about the changes so long awaited
for by every Ukrainian!
The strong will stand for the weak,
The rich will help the poor.
Ukraine won't be a "small coin" any more.
Enough of setting our hopes on Europe,
American or Russia! We must drag us out
of the pit ourselves.
We will do it and Ukraine will be respected. -30-
--------------------------------------------------------------------------------------------
FOOTNOTE: "This new [absolutely outstanding] book attempts to
convey the events and spirit of the Orange Revolution, using photos
and the written and spoken words of those days to immortalize
clearly and precisely what was said and done. As well, expert
opinions are presented for analysis of these frightening and glorious
events." [Back cover of book]
FORWARD TO BOOK:
"The Orange Revolution caught me in Kyiv, and it shocked me,
an American, no less than it shocked the Ukrainians who were living
their quiet, measured lives.
And then, as the Revolution took hold, sudden and tremendous
changes were upon us.....
I'm not a political scientist and I can't tell for sure what caused such
an uprush of collective energy, which, in turn, focused the global
media spotlight on the Ukrainian struggle. Perhaps, the beginnings
of this revolution hark back to the early 1990's. Back then, because
of the USSR's collapse, Ukraine has gained only formal independence.
The 1990 student hunger strike in tents was a protest against the old
state on its last legs. Less than a year later that state collapsed, and
with six months - on December 1, 1991, the citizens of the newly
independent state of Ukraine confirmed by referendum the historical
fact that had already evolved.
And only thirteen years later Ukrainians had to fight for their true
independence on the streets and squares. Thank God, without
bloodshed. I was so impressed by the events of November-
December, 2004 that I wanted to commit them to paper, day by
day, night by night, step by step...The way Ukrainians themselves
saw the chronology marking their national victory.
I hope this almanac will help you feel a bit of the excitement and
wonder that the Orange Revolution evoked in all of us.
ANDREW KINSEL, Publisher.
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