"THE ACTION UKRAINE REPORT - AUR"
An International Newsletter, The Latest, Up-To-Date
In-Depth Ukrainian News, Analysis, and Commentary
THE ORANGE REVOLUTION CONTINUES IN THE HEARTS,
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PEOPLE IN UKRAINE AND AROUND THE WORLD
Be an active member of the ongoing Orange Revolution in 2006
"THE ACTION UKRAINE REPORT - AUR" - Number 623
Mr. E. Morgan Williams, Publisher and Editor
Washington, D.C., TUESDAY, DECEMBER 20, 2005
--------INDEX OF ARTICLES--------
1. ONE GAS MASK FOR ALL
The country has only one gas mask for all to survive this gas attack.
ANALYSIS & COMMENTARY: By Yulia Mostovaya
Zerkalo Nedeli on the web, Mirror-Weekly,
International Social Political Weekly, No. 49 (577)
Kyiv, Ukraine, Sat 17-23 Dec, 2005
2. ENERGY ASPECTS START PLAYING A DOMINATING ROLE
IN THE FOREIGN POLICY OF RUSSIA
Source: Nezavisimaya Gazeta, December 16, 2005
Published by WPS - CIS Oil & Gas Report
Moscow, Russia, Monday, December 19, 2005
3. UKRAINE AGREES ON LIBERALIZATION OF PRICES FOR
GAS, BUT WITHIN ACTIVE INTERNATIONAL NORMS,
PM YEKHANUROV REPORTS ON HIS RETURN TO KYIV
Ukrinform, Kyiv, Ukraine, Monday, December 19, 2005
4. A EUROPEAN APPROACH TO UKRAINE'S GAS DILEMMA
Road Map To Solve The Gas Dilemma
ANALYSIS & COMMENTARY: By Daniel Kurdelchuk,
President of Ukrinyurkolehiya, honoured lawyer of Ukraine;
Olexander Malynovsky, international law expert; and
Inna Novak, Vice President, Prudence Consulting Group.
Zerkalo Nedeli on the web, Mirror-Weekly,
International Social Political Weekly, No. 49 (577)
Kyiv, Ukraine, Sat 17-23 December, 2005
5. UKRAINIAN POPULATION PAYS THE LOWEST PRICE
FOR GAS IN EUROPE
ITAR-TASS, Kiev, Ukraine, Monday, Dec 19, 2005
6. GAZPROM: PEG GAS PRICES FOR UKRAINE TO WORLD CRUDE
RIA Novosti, Moscow, Russia, Monday, December 19, 2005
7. FORMER PRIME MINISTER SAYS INTERMEDIARIES TO
BLAME FOR UKRAINE'S GAS PROBLEMS
Ukrayina TV, Donetsk, in Russian 1900 gmt 19 Dec 05
BBC Monitoring Service, UK, in English, Monday, Dec 19, 2005
8. ANOTHER ENTENTE IS ADVANCING TOWARD US
Georgia, Ukraine, Moldova, and Turkmenistan unite against Russia
By Nikolai Orlov, Rossiya, No. 48
Moscow, Russia, Thursday, December 15, 2005
9. UKRAINIAN AUTHORITIES STILL OPTIMISTIC WITH
REGARD TO UKRAINE'S JOINING WTO
Protocols needed with the USA, Australia, Panama, Egypt & Colombia
Ukrinform, Kyiv, Ukraine, Monday, December 19, 2005
10. TRIAL DATE SET OVER KIEV REPORTER DEATH
By Tom Warner in Kiev, Financial Times, London, UK, Tue, Dec 20 2005
11. UKRAINIANS WERE NEVER LUCKY WITH THEIR RULING
POWERS, OR ALMOST NEVER
ANALYSIS & COMMENTARY: By Sehii Soroka in Ukrainian
Ukrayinska Pravda website, Kyiv, Ukraine, Mon, Dec 12, 2005
12. KREMLIN STRUGGLES WITH UKRAINE-NATO RELATIONS
By Simon Saradzhyan in Moscow for ISN Security Watch
International Relations & Security Network
Zurich, Switzerland, Friday, December 16, 2005
13. PRES YUSHCHENKO ATTENDS CEREMONY OPENING KYIV
ACADEMIC PUPPET THEATER'S NEW BUILDING
Ukrinform, Kyiv, Ukraine, Monday, December 19, 2005
14. NEW CENTER FOR HASID PILGRIMS CREATED IN LVIV REGION
1,000th anniversary of founding of this Ukrainian bulwark of spirituality
Ukrinform, Kyiv, Ukraine, Monday, December 19, 2005
15. UKRAINIAN CHRISTMAS EVE DINNER AND SUGGESTIONS
HOW TO COOK SOME DISHES FOR IT
Mariya Vlad describes the Christmas Eve dinner the way it used to be -
and in many homes still is - prepared in Western Ukraine.
Article By Mariya Vlad, photos by Oleksiy Onishchuk
WELCOME TO UKRAINE magazine, Issue 4 (35)
Kyiv, Ukraine, November, 2005, Pages 134-135
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1. ONE GAS MASK FOR ALL
The country has only one gas mask for all to survive this gas attack.
ANALYSIS & COMMENTARY: By Yulia Mostovaya
Zerkalo Nedeli on the web, Mirror-Weekly,
International Social Political Weekly, No. 49 (577)
Kyiv, Ukraine, Sat 17-23 Dec, 2005
On June 2, ZN published an article entitled "Ukraine: Hamlet's Choice,"
which analyzed three ways to build relations with Russia - the main supplier
of natural gas to Ukraine. One option was to develop "corporate
relationships" within the already operational consortium RosUkrEnergo,
which quite suited Kuchma, Putin, and a narrow circle of the "initiated."
The second option was to engage in "transition-period relationships," in
which prices for natural gas inevitably would be raised, but Ukraine would
have a couple of years to prepare. (A new go-between structure would be
established to satisfy both Kyiv and Moscow without being too heavy a
burden on the Ukrainian budget.)
The third option involved replacement of corporate relationships with
interstate relationships. In the latter case, payment schemes would be
absolutely transparent and prices for natural gas would rise abruptly.
At first, Ukraine would sustain a heavy blow to its industries but, upon
recovery, it would finally escape cheap Russian fuels and become a truly
independent state.
In any event, it was obvious that Russia would raise the price, and the
Ukrainian government had time to forestall the impact. So did it take any
steps? It should be noted that the idea of monetizing payments for Russian
natural gas belonged to the Ukrainian president, who reiterated it on many
occasions. He authorized Neftogaz Ukrainy President Oleksiy Ivchenko to
raise this issue in negotiations with Moscow.
Yushchenko must have counted on monetizing the "gas relations" within the
existing scheme: Russia supplied certain amounts of gas to Ukraine at $50
per 1,000 cubic meters as payment for transit to Western Europe. But the
scheme did not suit Moscow. And Yushchenko's statements gave it a perfect
formal pretext for demanding a changeover to European market prices.
Initially, Moscow demanded $120 per 1,000 cubic meters, then $160, and
now as much as $230.
It is naive to think that Russia's move is aimed exclusively at patching the
hole in its coffers. Vice Prime Minister of Defense Sergey Ivanov said, "In
my opinion, sometimes we don't formulate our policy in relation to different
CIS countries clearly enough.
And we act too irresolutely when it comes to our economic influence on those
countries' attitudes to Russia." According to ZN's information, Lavrov
promised at a closed-door session of the Duma to employ "all available means
of economic pressure" on the "disobedient" neighbors. Natural gas and oil,
which the Kremlin justly views on par with nuclear arms, is supposed to be
the main diplomatic means.
ZN wrote in January that the Kremlin would by all means exact revenge for
its defeat in the Ukrainian presidential elections as soon as possible. In
fact, the Kremlin did not even have to try that hard: the new Ukrainian
leadership, badly compromised by too many unfulfilled promises and torn
by permanent internal conflicts, discredited itself in the eyes of its
nation.
All the Kremlin had to do was to choose the right moment and angle for
knocking down all those loose tenpins.
The Kremlin knew that energy-consuming industries formed the basis of
Ukraine's economy and the rate of energy consumption per unit of produce
was four times higher than in developed countries. The Kremlin knew that, by
raising the price three to five times, it would simply knock out the country
in which non-industrial consumers paid $37 per 1,000 cubic meter of Russian
natural gas (while the same category of Russian consumers paid $44).
The likelihood of such a move was evident. Moreover, many Ukrainian
politicians and economic experts presumed that, in the long run, such a
move would do Ukraine good. That is, after a certain period of financial
difficulties, this country would emerge politically independent and would
have a reformed system of energy consumption and a more efficient economy
reoriented toward the domestic market. The idea was very rational and
feasible, but there were three prerequisites.
[1] Number one, the new government should have started preparing from
the very first days in office by negotiating terms of gradual price rise with
Russia; by drawing credits and external loans for reequipping industrial
facilities; by searching for alternative sources of fuel supplies.
[2] Number two, the government should have approached negotiations
with Russia and Turkmenistan at an adequate professional level and with
a clear-cut position.
[3] Number three, the government should have made people aware of the
inevitable necessity to pay at European prices. Following the example of
Poland or Latvia, Ukrainians would then be ready to weather a winter in
cold houses in order to preserve their dignity and independence.
The government did none of the above.
In the meantime, Moscow was meticulously preparing for a final cut. Every
move was well-planned: from a series of official statements to a massive
propaganda campaign. President Putin was not idle, either: while the
Ukrainian government was losing ground, he met with the leaders of all major
Ukrainian political forces.
He learned the lesson of the Ukrainian presidential elections and chose not
to put all his eggs in one basket. He met with Yanukovych, Tymoshenko,
Moroz, and Lytvyn - all those who preferred not to react to the announced
fivefold price rise.
Putin interlaid them with "washers". As a result, Ukraine has loose fingers
versus Russia's fist.
Roman Bezsmertniy, campaign chief of staff for Yushchenko's election bloc,
says that Tymoshenko's demand to sack the government unless it signs a
contract with Russian natural gas suppliers by January 1 is a stab in the
back. He is absolutely right and his patriotic statement demonstrates very
clearly which Tymoshenko is more concerned about: her problems with
Russian prosecutors or her country's national security.
But what government does Tymoshenko mean? What resignation is she
talking about? The country is divided into sundry political camps, and their
irresponsible inhabitants are too busy lobbying for personal or corporate
interests and entries in the top part of election rolls. In this situation,
the government's resignation would plunge the country into total chaos.
Does Tymoshenko think that if she were the prime minister, she would
manage to negotiate with Russia more fruitfully? Maybe she would. And
Ukraine really should blame itself for the fix it has gotten itself into.
But it would be incorrect to ignore the fact of Russia's evident political
and economic pressure.
Now, where is Yushchenko's party Our Ukraine? Why is it still silent? Are
the national democratic forces following their leader's advice "not to
politicize the negotiating process?" That is a very good screen for certain
"friends" of his, who make money on shady deals with Russian businessmen.
The gas deadlock is also another opportunity for them to "drown"
Tymoshenko. The impending doom does not seem to worry them much.
Why does Bezsmertniy not mention the statement by National Security and
Defense Council Secretary Anatoliy Kinakh, the leader of a party in
Yushchenko's bloc? Kinakh offered a compromise solution on the platform of
a joint Ukrainian-Russian gas transportation consortium. Was it not a "stab
in the back?" And was this the unanimous position of the council, whose
session was dominated by the president's criticisms?
Why do the Socialists keep silent? And does Lytvyn's muttering about
"unprofessional Ukrainian negotiators" mean that he has nothing more to
suggest?
The Party of Regions demonstrates utter near-sightedness. Supposing
Ukraine fails in the negotiations and the price for Russian natural gas goes
up fivefold. This defeat may be fatal for Yushchenko: the critical mass of
his errors will drag his team to the bottom in the parliamentary race.
Subsequently, Yanukovych and Akhmetov will win, securing a majority in
the future parliament, which entitles them to form a government. But the
economic impact from the gas price rise will crush their government in a
mere six months.
Besides, the Party of Regions represents the interests of big
financial-industrial groups and its electorate is concentrated in the
heavily industrialized regions of the country, which will suffer from these
price hikes more than others. In view of such prospects, it would be logical
to help the government stand its ground in negotiations with Russia.
It is in their interests to secure the terms of the new gas supply contract,
under which their chemical and metallurgical plants would profit. But do
they move a finger? No. Obsessed by their mania for power, they are ready
to victimize thousands of people employed at their factories, not to mention
the entire country.
But regardless of different ideologies and goals, Ukrainian political forces
should have consolidated vis-a-vis the real external threat. It is the
president who should have coordinated their search for an optimal solution.
Instead, Yushchenko acted very much like Stalin, who refused to believe that
Hitler would breach the non-aggression pact and unleash a war.
Yushchenko keeps assuring everyone that he and Putin are friends: they talk
on the phone every other day, they are going to spend the Christmas holidays
skiing in the Carpathians, and there is no economic threat to Ukraine.
According to Yushchenko, the higher price for natural gas could be exactly
balanced by higher charges for transit services.
However, that could only work if Russia raised the price twofold. But what
if it raises it threefold or fivefold? What if Turkmenistan follows suit?
Yushchenko's opinion on that score is unknown. It is only known that he
calls upon Putin to "be humane, because we are going to have elections."
Experts are puzzled: why create a new intermediary company in lieu of
RosUkrEnergo? What makes Yushchenko think that it will help resolve the
gas problem or that Moscow will treat it as "kindly" as Kuchma used to be
treated? Against the background of firm and unambiguous statements by the
Russian leadership, Yushchenko's placidity means that he is either in the
dark about what is going on or knows something that others do not.
Supposing, Yushchenko does have some secret information. But he should
not forget about the Kremlin's real goals:
[1] firstly, to discredit Yushchenko and his team in the eyes of the people,
impoverished by imminent price hikes;
[2] secondly, to alter the course of Ukraine's foreign policy;
[3] thirdly, to buy for a song bankrupt Ukrainian chemical and metallurgical
factories, and then resell them to Russian companies that would make them
profitable again by using dirt-cheap natural gas;
[4] fourthly, to control Ukraine's gas mains;
[5] fifthly, to aggravate the political and economic crisis in this country
and thus show all other post-USSR countries what may happen to them
should their voters go against the "Russian grain."
The Russian president took the throne handed down by his predecessor.
The leaders of Belarus and Central Asian republics retain theirs simply by
prolonging their presidency. Voters in those countries only serve as a
"crowd scene" during elections. But Yushchenko became president having
defeated the candidate who was supported by Moscow. So now Moscow is
strongly determined to discredit him (thanks to his own mistakes, this is
anything but a difficult job for the Kremlin).
Judging from the Ukrainian top leaders' mental paralysis, Putin must have
learned well Carnegy's recommendations while serving in the KGB.
So what do we have? Russia's clear intention to use its energy resources for
economic and political pressure on Ukraine; well-coordinated actions by all
Russian pro-government and opposition forces; a nationwide campaign in
Russian mass media, thanks to which the majority of Russians support the
Kremlin's position and anti-Ukrainian sentiments grow steadily.
Besides, Russian diplomats are breaking their backs to enlist support from
the USA and the EU - the major consumer of Russian natural gas. And the fact
that the main Western players have distanced themselves from the Moscow-Kyiv
dispute may be viewed as a success for Russian diplomacy. Moreover, the
ex-chancellor of Germany is working for Gazprom and the ex-secretary of the
U.S. Energy Department - for Rosneft.
And what do we see in Ukraine? The government is critically short of
managerial and intellectual resources; the president is sure that the
country is not in danger; relations with Turkmenistan are going from bad to
worse (largely owing to the unprofessional managers of Naftogaz Ukrainy);
the selfish political elite is set exclusively on the pre-election campaign;
the opposition forces, chiefly represented by the Party of Regions, are sure
that higher prices for Russian natural gas could help them weaken their
opponents; the parliament keeps turning down all draft versions of the 2006
national budget bill and appears to be seriously poised to sack the
government.
There are not the slightest signs of a coordinated dissemination policy,
even in the government-controlled mass media. There is an outstanding
exception - the position of the 1+1 TV channel: it is a position of those
who understand what national security is and how seriously it is threatened
now. But exceptions only prove the rules. The majority of owners of mass
media are involved in the election race and national interests are secondary
to them.
Ukraine is evidently unprepared for any of the likely scenarios. There are
some attempts to analyze the situation. Fuel and Energy Minister Ivan
Plachkov, for example, has drawn up a summary table of correlated prices for
supplies and transit of natural gas. But the government has no preparation
plans for or response to any of the 15 variants presented in the table.
What can Ukraine juxtapose to Russia's position?
[1] First of all, legal argumentation (the active gas supply contract, which
has not expired yet, provides for a fixed price).
[2] Secondly, Ukraine may propose raising the price for leasing its land and
naval facilities in Crimea to the Russian Black Sea Fleet. Considering the
skyrocketing market prices of land in the coastal resort area where the
Russian Navy base is stationed, Ukraine could charge it even 100 times more!
Such a step, however, should be preceded by a comprehensive inventory of
the land and facilities leased to Russia. Seven years ago, the State
Property Fund conducted such an inventory. Seven boxes with those
documents are still unpacked.
[3] There is another possible counterweight: several Russian air defense
complexes deployed in Crimea and Transcarpathia, which the Kremlin regards
as vital. Currently, Russia covers a mere 19 percent of expenses for their
operation and maintenance and would be very unnerved to hear about higher
charges.
These and other counterweights might help Ukraine obtain some financial and
moral compensation. But if Moscow is so determined to demonstrate its
"power of the stronger," Ukraine needs to bring in the heavy artillery.
Therefore, the president should [1] immediately set up a crisis group of
lawyers, economists, and experts in the field of natural gas and other
energy resources, irrespective of their political or religious convictions,
nationality, or social status.
Also, [2]it is obviously necessary to replace the Naftogaz Ukrainy
management. Yushchenko should make a hard choice between loyalty and
professionalism. Oleksiy Ivchenko has made a lot of blunders and
irresponsible statements, but he is still the president of Naftogaz. There
is only one explanation: Yushchenko, for some personal reasons, wants
Ivchenko to have his job.
The president should also [3]meet with oligarchs, but not those who trade in
soccer players, contraband vodka, or posts in the government. He should talk
to those who own the country's basic industrial resources and show them the
limits which the country could never exceed if it wants to remain
independent. For example, the country could not cede its gas transportation
system to Russia, however lucrative the idea of a consortium may appear.
Then the president [4] should hear all their proposals - from terms of
duty-free imports of energy-saving equipment to credits and loans from
foreign banks against the government's guarantees. As a separate subject,
they should also discuss feasible ways to increase extraction of natural gas
from Ukrainian fields.
[5] A special group of lawyers should develop a mechanism to "uncork" the
country's gold reserves. After all, the rainy day for which this reserve of
$15 billion is kept, is about to come. And there should be a mechanism for
redistributing the proceeds from the sale of the Kryvorizhstal steel works
according to new priorities.
In case Ukraine fails to dissuade Russia from sharply raising the price of
natural gas, it needs to have enough resources to cushion the impact: from
Western credits to gold reserves and the Kryvorizhstal money. And if the
president wants lawmakers to vote for such forced amendments to the national
budget, he should offer them memorandums on this very issue, not on "fair
elections" or a would-be "coalition of democratic forces."
The external threat must mobilize and consolidate the Ukrainian political
and economic elites and put an end to mutual accusations and fault-finding.
If Moscow gets what it is after, then Yushchenko (or Tymoshenko or
Akhmetov) will have nothing left to manage.
The country has only one gas mask for all to survive this gas attack.
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LINK: http://www.mirror-weekly.com/ie/show/577/52117/
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2. ENERGY ASPECTS START PLAYING A DOMINATING ROLE
IN THE FOREIGN POLICY OF RUSSIA
Source: Nezavisimaya Gazeta, December 16, 2005
Published by WPS - CIS Oil & Gas Report
Moscow, Russia, Monday, December 19, 2005
CEO of Gazprom, Alexei Miller, announced that Gazprom might stop gas
supplies to Ukraine from the beginning of 2006. Miller said, "If the
contract is not signed until January 1, 2006, Gazprom will not have grounds
for gas supply to the territory of Ukraine. Goods cannot be supplied outside
of the customs territory of Russia having no contract."
Meanwhile, the energy issue grows increasingly important in the eastern
direction. Cooperation in the fuel and energy sector was the key topic of
the recent summit of ASEAN with participation of Russia. As a result of
negotiations Russian President Vladimir Putin signed a declaration on
partnership in exploration, production, transportation and consumption of
oil and gas.
Thus, strategy aspects in the foreign policy of Russia start occupying an
exclusively dominating role in the foreign policy of Russia. All this shows
that the energy factor is the most important in negotiations between Russia
and other countries.
To understand how foreign countries depend on Russia and to determine the
real motives of the intergovernmental negotiations Nezavisimaya Gazeta in
cooperation with the Institute of Problems of Natural Monopolies and
Institute of Economy and Finance drew a rating of dependence of countries
on Russian oil and gas supplies.
Three main groups were singled out in the table.
[GROUP A] The first group A includes the "oil and gas satellites of Russia."
Countries from this category are practically fully dependent on Russian
energy resources and the share of Russia in their oil and gas consumption
varies from 50% to 100%.
To this group belong Ukraine, Moldova, Finland, all Baltic republics and
majority of East European countries. A part of them, like Finland, Bulgaria
and Czech Republic, has a very loyal or constructive attitude towards
Russia.
Thus, Speaker of the Duma Boris Gryzlov previously said that, "interstate
relations of Russia and Finland are on a very high level" and assigned the
role of "builder of bridges" between Russia and European Union to Finland.
With regard to many European issues related to Russia, Finland has a neutral
position and, for instance, with regard to softening of the visa regime
Finland speaks positively.
In 2004, when Finland was considering entrance into NATO, special
presidential envoy to the European Union, Sergei Yastrzhembsky, criticized
this intention. In Finland, interference of Russia triggered a heated
discussion. This way or the other, Finland did not enter NATO in the end.
For loyalty, Russia supplies Finland with oil up to 70% and with gas 99%.
Alexei Tefdoi-Burmuli, senior researcher of the European integration
department of the Institute of Europe, remarks that to be just it is
necessary to say that, "Finland also tries to use good relations with Russia
for increase of its capitalization in the European Union."
With regard to Finland's neighbor Sweden where Russia's contribution to the
energy balance amounts only to 20% of the oil situation there is radically
different. German political scientist Alexander Rahr comments, "Sweden does
not look at Russia with interest and sometimes even advocates policy of the
Baltic republic risking to soil relations with the northern neighbor."
At any rate, not all oil and gas satellites behave friendly towards Russia.
On the contrary, Poland, Baltic countries and Ukraine raise a hysteric
anti-Russian wave. This is explainable. Vladimir Milov, President of the
Institute of Energy Policy says, "Historic factor plays the main role there.
Many East European countries believe that they have been occupied by the
Soviet regime illegally and anti-Soviet phobia keeps living there." These
countries are also so dependent on Russia that this irritates them.
Oleg Trudov, chief specialist of the Institute of Problems of Natural
Monopolies, says, "The largest buyers of Russian gas are Hungary, Slovakia,
Czech Republic and Poland. There is practically no alternative to Russian
gas in this region now." Alexander Tefdoi-Burmuli adds, "Relations of Russia
with Poland and Latvia are at the freezing point. Simultaneously, this shows
their extreme vulnerability."
[GROUP B] The second group B was formed by the countries being seriously
dependent on Russian oil and gas. The share of Russian oil and gas in their
energy balance varies from 60% to 100%. This category includes the largest
countries of old Europe (Germany, France, Italy and Austria), as well as
Turkey, Greece, Kazakhstan and Belarus.
Belarus is outstanding against the common background. Being a junior brother
of Russia, it receives unprecedented preferences in gas supplies. In 2006,
Belarus will buy gas at $47 per 1,000 cubic meters whereas Ukraine is forced
to pay $160 and European countries pay $200 and more.
Large European countries Germany, France and Italy play the main role in
this group. They pursue pragmatic policy towards Russia. They are interested
in development of energy cooperation but simultaneously they are large
countries that can pursue independent policy if necessary. Rahr comments,
"These countries are peculiar because they themselves move towards this
energy dependence. Possible profit from cooperation looks very attractive.
For example, due to the German-Russian energy alliance German companies
will be the first to receive a possibility to participate in gas extraction."
Developing cooperation with Russia Germany also pulls the rest of Europe
towards Russia, for which according to Rahr it is severely criticized by
other members of the European Union. For example, Germany advocates
softening of the visa regime and Spain and Portugal that do not depend on
supplies of Russian energy resources do not.
Tefdoi-Burmuli says, "The case of Italy is interesting. In 2004, Gazprom
permitted Italian company ENI to re-export gas although previously it tried
not to give any possibility to anyone. The reasons were good relations of
the heads of the state and large business. Thus Russia also paid for the
"good word" of Italy towards Russia said in Europe." With France Russia is
building positive relations too but along with this Russia cannot rely on
France very much because it has traditionally positioned itself as an
independent center of force.
With regard to Turkey, Trudov comments, "It possesses alternative sources
of gas supplies from Iran and Azerbaijan. Moreover, Turkey tries to act in the
role of re-exporter of Russian gas to Europe and is actively promoting
alternative gas pipeline routes to Western Europe without participation of
Russia."
[GROUP C] The third group C consists of the countries dependent on energy
from Russia. First of all, these are Norway, Holland, Denmark, Spain, UK,
Japan, India, China and US.
Recently President of LUKoil, Vagit Alekperov, announced that LUKoil was
going to stop supplies of "spare" oil to Europe. Alekperov explained,
"Russian Urals crude should be much more expensive than it is now. New
pipelines to China will divert Russian, Kazakh and Azerbaijani oil from
Europe."
According to analyst Maria Belova, of the Institute of Energy and Finance,
at this point LUKoil tries to support the government in its idea to equalize
prices of Urals and Brent crude. There was also another version saying that
this statement was released to redirect a part of Russian oil to China in
the form of gratitude for assistance to Russian authorities with money in
acquisition of Yuganskneftegaz. An expert willing to remain anonymous said,
"It was obvious that money came from China. This agreement was evidently
achieved 18 months ago when Russia signed an agreement with China on
long-term cooperation in oil supplies."
Meanwhile, LUKoil already stopped oil supplies to other countries. Thus, in
2000 the country limited oil supplies to the refinery of Mazeikiu Nafta in
Lithuania. Then this decision was made due to a wish to establish control
over the refinery and oil trade in the Baltic republics. American oil
company Williams stood in the way of LUKoil. -30-
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3. UKRAINE AGREES ON LIBERALIZATION OF PRICES FOR
GAS, BUT WITHIN ACTIVE INTERNATIONAL NORMS,
PM YEKHANUROV REPORTS ON HIS RETURN TO KYIV
Ukrinform, Kyiv, Ukraine, Monday, December 19, 2005
KYIV - During Monday negotiations in Moscow, Russia, Ukraine agreed
on liberalization of prices for gas, but within active international norms,
Prime Minister Yuriy Yekhanurov told journalists on his return to Kyiv.
According to the Ukrainian Premier, the two sides stated their readiness to
gradually shift to a new formula of calculating the price for gas and its
transit. "Unfortunately, neither NaftoGaz Ukrainy nor GazProm offered such
formula. Personally I have an impression there is no such formula", Yuriy
Yekhanurov said.
With a view of drafting such a formula, Deputy Chairman of the national
joint-stock company NaftoGaz Ukrainy Ihor Voronin left in Russia to adjust
al the issues on the level of experts.
As the Prime Minister said, the story is not about refusal from the
contract, but about its certain correction. As the Prime Minister noted, the
Russian side is ready to take the active contract as the basis. As Premier
Yekhanurov stated, while the old contract exists, Ukraine views it as active
and it suites Ukraine with all its additions. "No conditions change and all
the agreements are in effect. But the matter of the new formula will be
considered", the Ukrainian Premier noted
As he said, the new formula of the price will envisage the active European
model "transport or pay", to which end certain technical alterations are
needed, which will take some time. According to him, Ukraine is ready for
shifting to the new system, but technological time is needed. "When
agreements on new pricing formula are reached, then we may talk about
gradual transition to new prices, or to completely new price", Yuriy
Yekhanurov said.
As the Ukrainian Premier specified, during the Monday negotiations in
Moscow, the topic of using the Ukrainian gas transportation system was not
discussed. This issue was mentioned during the negotiations with Russian
Minister for Industry and Energy Viktor Khristenko in the context of
reliability of supplies of gas to Europe, but the issue of giving Russia the
part of the "Ukrainian pipe" was not directly touched. -30-
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4. A EUROPEAN APPROACH TO UKRAINE'S GAS DILEMMA
Road Map To Solve The Gas Dilemma
ANALYSIS & COMMENTARY: By Daniel Kurdelchuk,
President of Ukrinyurkolehiya, honoured lawyer of Ukraine;
Olexander Malynovsky, international law expert; and
Inna Novak, Vice President, Prudence Consulting Group.
Zerkalo Nedeli on the web, Mirror-Weekly,
International Social Political Weekly, No. 49 (577)
Kyiv, Ukraine, Sat 17-23 December, 2005
WHEN PASSIONS RUN HIGH,
THERE IS NO WAY TO FIND THE TRUTH
The gas segment of Russian-Ukrainian relations has been seething with
passions lately. The Ukrainian party is trying to assert the earlier agreed
cooperation terms, whereby the transit dues for Russian gas is USD 1.09375
per 1000 cubic meters per 100 kilometers, while the price of gas supplied in
return for transit services is USD 50 per 1000 cubic meters.
The Russian party rejects these terms point blank insisting, instead, that
the gas price should go up to USD 220-230 and the transit dues to USD
1.75. They also argue that the two parties' failure to sign the 2006
intergovernmental gas protocol on their conditions will create a regulatory
vacuum in the Russian-Ukrainian relations in the gas sphere.
In the meantime, legal logic in the Ukrainian-Russian gas negotiations is
gradually giving way to emotions. In legal terms, Ukraine's position is
well-substantiated, but Russia is bringing a huge psychological pressure to
bear on Ukraine in order to impose its terms.
The authors of this article took part in the 2000-2001 Ukrainian-Russian gas
negotiations. The law firm Ukrinyurcolehia successfully represented
interests of the National Joint Stock Company Naftogas Ukrainy in American
and Russian courts in the cases dealing with its arrears to the Public Joint
Stock Company Gasprom for natural gas supplied to Ukraine. The Prudence
Group consulted for Naftogas Ukrainy in its negotiations with Gasprom on the
founding of the gas transportation consortium.
POLITICAL AND COMMERCIAL DIMENSIONS OF GAS TRADE
Straightening out the Russian-Ukrainian gas relations for 2006 is both a
political and a commercial issue. Therefore it should be addressed in a
sensible manner, i.e. by dint of methods and tools that would be in line
with European standards and the rule of law, and with due regard for two
key aspects.
FIRST, setting the gas prices and transit dues in annual intergovernmental
protocols is a political resolution to the gas issue, in form as well as in
essence. This practice was introduced into the Ukrainian-Russian relations
back in 2000-2001, primarily because of the Russian government's desire to
exercise a more effective control of Gasprom headed by R.Viakhiriev.
Prior to that and according to the Ukrainian-Russian Intergovernmental
Agreement on Exporting Russian Gas to Ukraine and Transiting It through
Ukraine's Territory to European Countries of 1994, these matters were
settled on a commercial basis - in contracts between Naftogas Ukrainy and
Gasprom.
In particular, Article 5 of the 1994 agreement laid down that the parties
(i.e. governments of Ukraine and the Russian Federation) mandated the
UKRGasprom Company (later succeeded by the National Joint Stock
Company Naftogas Ukrainy) and Russian Joint Stock Company Gasprom
to sign contracts stipulating annual volumes, commercial and technical
terms of Russian natural gas transit and export to Ukraine.
Article 11 envisioned that all payments for supplied gas and transit
services were to be made on the basis of agreed rates and dues in US
dollars, the mode of payment being defined in contracts between the two
companies. Thus, annual intergovernmental protocols emerged as a political
"superstructure" in Ukrainian-Russian gas cooperation based on the
commercial contracts between Naftogas and Gasprom.
SECOND, today many think of when Ukraine and Russia are going to sign the
2006 intergovernmental gas protocol. We suggest looking at the situation at
a different angle and answer another important question: what will happen if
the 2006 intergovernmental gas protocol is not signed, specifically, will
the existing contracts between Naftogas and Gasprom remain valid?
The Gasprom management gave their answer in the press release dated 7
December 2005. In their opinion, if this is the case, commercial contracts
between Naftogas and Gasprom for transporting Russian gas via Ukraine's
territory will become null and void. According to the Gasprom management,
Ukraine and Russia should end up in a stalemate and the two countries should
stop, respectively, transiting gas and supplying it to pay for the transit.
This is absurd, both in the terms of commercial law and commonsense.
We will explain why.
FAILURE TO SIGN THE 2006 GAS PROTOCOL: LEGAL IMPLICATIONS
On the one hand, Gasprom is right in that, according to Article 2 of the
Agreement between the Cabinet of Ministers of Ukraine and the Government of
the Russian Federation on Additional Measures to Ensure Transporting Russian
Natural Gas via the Territory of Ukraine dated 4 October 2001, the volumes
of transited gas and transit dues (set either in monetary terms or in terms
of gas volume to be supplied as payment for transporting services) should be
adjusted annually in intergovernmental protocols for a respective year.
On the other hand, the above agreement of 4 October 2001 makes no provision
for terminating commercial contracts between Naftogas and Gasprom in the
event of the two countries' failing to sign the intergovernmental protocol.
Moreover, the Agreement on Guarantees of Transiting Russian Natural Gas via
the Territory of Ukraine dated 22 December 2000 (which, coupled with the
agreement of 4 October 2001, makes up a cohesive legal package of
intergovernmental instruments in the gas sphere) stipulates in Article 11
that all intergovernmental agreements in the gas sector concluded in
2000-2001 complement the 1994 Agreement on Exporting Russian Gas to
Ukraine and Transiting It through Ukraine's Territory to European Countries.
It means that unless the 2006 intergovernmental gas protocol is signed (in
other words, unless the gas issue is resolved politically), the provisions
of Articles 5 and 11 of the 1994 agreement cited above should remain in
force. Thus, the transit dues and gas price set in the contracts between
Gasprom and Naftogas should apply (i.e. commercial levers should be put
in motion).
Finally, Article 2 of the 1994 agreement stipulates that annual
intergovernmental protocols adjust, rather than establish, the volumes of
transited gas, transit dues, and volumes of gas supplied in return for
transportation services. It means, yet again, that unless a relevant annual
protocol addresses these issues, the earlier agreed terms should apply.
In our judgment, both Ukrainian and Russian parties tend to overlook an
important thing. In fact, Gasprom claims that annual intergovernmental
protocols serve as a legal basis for commercial contracts on the volumes
of transit, gas prices, transit dues, and gas supplies in return for transit
services.
However, none of the four earlier signed protocols took effect: Ukrainian
Parliament was to ratify them but did not, for a number of reasons. It was
evident from the protocol language that their signing did not automatically
lead to their coming into force.
Furthermore, those protocols did not make any provisions for their temporary
enforcement. Put differently, from the standpoint of international public
law and national legislations of the Russian Federation and Ukraine, annual
intergovernmental protocols signed in 2002-2005 did not and could not
constitute a legal basis for setting the volumes of transit, gas prices,
transit dues, and gas supplies in return for transit services in commercial
contracts between Gasprom and Naftogas, since they never took effect.
Nonetheless the Russian government did not use it as a pretext for
suspending gas supplies to Ukraine and its transit via Ukrainian territory
accepting, by default, that the contractual terms agreed upon by Gasprom
and Naftogas should apply!
In view of the above, one can conclude that unless the 2006
intergovernmental gas protocol is signed, provisions of the commercial
contracts between GASPROM and NAFTOGAS should apply.
COMMERCIAL TRANSACTIONS IN THE GAS SPHERE
Hence a question: how are commercial relations between GASPROM and
NAFTOGAS in respect of the 2006 gas supplies and transit regulated, if at
all?
In its press release of 7 December 2005, Naftogas refers to the Agreement on
Volumes and Terms of Russian Natural Gas Transit via the Territory of
Ukraine for 2003-2013, dated 21 June 2002, and Addendum #4 to it, dated 9
August 2004. NAFTOGAS also quoted Addendum #4 setting transit dues for
2005-2009 at USD 1.09375 and the gas price at USD 50 per 1000 cubic meters.
Establishing the fixed transit dues and gas price at the said level for five
consecutive years was neither a gift nor a concession to Ukraine; it was
part of the procedure for settling the Naftogas monetary debt to Gasprom for
the USD 1,250 million worth of Russian gas it received in 1997-2000.
The procedure for settling the gas debt was described in Resolution #1002 of
the Cabinet of Ministers of Ukraine of 6 August 2004. According to it,
NAFTOGAS received an advance from Gasprom (and immediately returned
it, in order to settle the accrued debt) as part of payment for the transit
services Naftogas undertook to render in 2005-2009.
The procedure was so designed as to allow Ukraine to annually receive
form Gasprom natural gas in payment for its transit services during the
stipulated period of time, in the volume reduced by 5 billion cubic meters.
Therefore, the fixing of the transit dues and gas price for a five-year
period (during which the gas debt is to be repaid) is a crucial, legally
defined element of the procedure for the settlement of Naftogas debt to
Gasprom. So any changes in gas prices will inevitably upset the balance of
interests behind the agreement on debt settlement and necessitate its
revision.
Some time ago, the former Ukrainian Minister of Justice R.Zvarych made an
attempt to initiate the reconsideration of this agreement when he stated
Ukraine was prepared to repay the debt in cash, which would allow the
country to earn an additional USD 2 million within five years. However, the
Gasprom response came quick and sharp: the deal of debt repayment was
closed in August 2004.
In its press release of 11 August 2004, Gasprom clarified: "The signed
documents envision a gradual reduction in the volumes of gas that Gasprom
supplies to Ukraine in payment for transit services. It will enable Gasprom
to export the remaining volumes of gas to the European countries and sell
them at a higher price".
On the other hand, the Addendum #4 provisions in respect of transit dues and
gas prices for 2005-2009 are of universal character, i.e. they apply to the
entire volume of Russian gas supplies to and transit via Ukraine within this
period of time. More than that, Addendum #4 stipulates that neither party
can unilaterally revise the contractual terms.
Not a single document envisages a situation whereby some part of gas would
be transported through Ukraine's territory on certain commercial terms (set
in Addendum #4 for repaying the gas debt), and another part on different
terms (set in the 2006 intergovernmental protocol), within one and the same
period of time. All effective international agreements, including commercial
contracts, should be based on uniform transit dues and gas prices within a
defined period of time.
It is noteworthy that the abovementioned Gasprom press release of 11 August
2004 specified that "the advance payment [to settle the debt] will allow to
fix gas transit dues for the period of 2005-2009 at USD 1.09 per 1000 cubic
meters per 100 kilometers.
Obviously, the statement pertains to the transportation of all transit gas,
rather than of its part. The press release does not mention the gas price,
but that it will remain stable can be inferred from a fixed correlation
between gas price and transit dues. Thus, the Gasprom official position at
that time is in total harmony with the Naftogas stance of today!
One should remember that Addendum #4 was signed on 9 August 2004 and
implemented throughout the entire 2005, while the 2005 intergovernmental
protocol was not in effect. So there will be no legal grounds for changing
the status quo should the parties fail to sign the 2006 protocol.
Even if the two governments manage to sign the document before 1 January
2006, it will take some time for the Supreme Rada to ratify it so that it
could come into force. If the 2006 intergovernmental protocol sets new
transit dues and gas prices, different from those stipulated in Addendum #4,
a legal collision will arise between provisions of the private treaty
(Addendum #4) and norms of the international instrument (2006 protocol)
to be transformed, upon ratification, into the national legislation norms.
Resolution of this collision will require amending Addendum #4 and
Resolution #1002 of the Cabinet of Ministers of Ukraine dated 6 August
2004 (since it will affect the procedure for the Naftogas debt repayment to
Gasprom), which will also be time-consuming.
In other words, even if the 2006 protocol is signed in the remaining days of
2005, the new terms of Russian gas transit and supply will not be legally
enforceable starting 1 January 2006. If the 2006 intergovernmental protocol
does not take effect, the commercial transactions between Naftogas and
Gasprom will continue to be regulated by the Contract of 21 June 2002 and
Addendum #4 of 6 August 2004.
GAS THEFT OR A LEGITIMATE RIGHT TO PAYMENT FOR SERVICES?
Of late, the Russian party has repeatedly declared that "gas extraction from
the export pipeline by Ukraine will be an outright theft" (in response to
the Naftogas chair of the board to the effect that starting next year the
company will extract gas from the pipeline as payment for its transit
services) and that "gas supplies to Ukraine will be suspended unless the
Russian-Ukrainian gas talks have been completed by 1 January 2006." This
reaction seems overly emotional.
For one thing, the Contract of 21 June 2002, as far as we know, defines a
basic volume of annual transit of Russian gas via Ukraine's territory. It
means that both Gasprom and Naftogas have a contractual (i.e. legal)
obligation to maintain the basic volume of gas transit. Moreover, according
to Article 1 of the agreement dated 22 December 2000 and Articles 1 and 3
of the agreement dated 4 October 2001, the governments of Ukraine and the
Russian Federation guarantee that gas will be transported in the volumes
stipulated by the Contract of 21 June 2002.
Under the circumstances, the European Union should not worry: Russian
gas transit via the Ukrainian territory is fully regulated, and there are no
reasons for suspending the transit.
For another thing, should Gasprom cease to supply gas to Ukraine in payment
for transit services (you will remember that this gas should be supplied at
USD 50 per 1000 cubic meters), it will breach its contractual obligations,
as Russian gas transit by Naftogas is a chargeable service to be paid by
Gasprom. Besides, the Russian government guaranteed payment for the
Naftogas transit services (Article 2 of the agreement dated 4 October 2001).
In the event that Ukraine's counterpart stops supplying gas in return for
transit services, the former will be able to invoke Article 7 of the 1994
agreement stipulating whenever the Russian party under-supplies gas to the
Russian-Ukrainian border, Ukraine will proportionally decrease the volumes
of gas transit and export. So if the Russian party ceases to supply gas in
payment for transit services, thus reducing the overall volumes of gas
supplies, the Ukrainian party can get payment for its services by
withdrawing a commensurable volume of transited gas.
This provision and existing commercial contracts enable Ukraine to get the
payment for transporting Russian gas, should Gasprom refuse to honor its
contractual obligations. Of course, this scenario could entail shortages in
gas supply to European consumers, and in order to fulfill its obligations to
the European partners Gasprom could be forced to increase the volumes
of gas transit via Ukraine's territory.
We believe both parties will benefit if Russia abandons its rhetoric about
"theft" and "unsanctioned gas extraction" by Ukraine and studies, carefully
and dispassionately, the intergovernmental gas agreements it sighed. Since
the Agreement of 22 December 2000, there has been no reason whatsoever to
resort to such rhetoric. The agreement admits and regulates the situation
whereby the Ukrainian party is entitled to extract Russian gas from the
pipeline in excess of the volumes defined in the contracts between
NAFTOGAS and Gasprom.
The agreement of 22 December 2000 characterizes these extractions as being
"in excess of contractual volumes" and lays down that Ukraine should pay for
them with Eurobonds issued for an amount approved by Ukraine and Russia
and properly calculated on the basis of the gas price of USD 80 per 1000
cubic meters. The Ukrainian party could use relevant provisions of the
agreement dated 22 December 2000 as a way to enforce the payment for
transit services if Gasprom suspends its gas supplies.
ARBITRATION AS A TOOL FOR RESOLVING THE GAS DISPUTE
We hope that the above legal arguments will be conducive to a mutually
acceptable resolution of the 2006 gas dispute by the negotiating parties.
At the same time, we admit that each negotiating party (Russian and
Ukrainian governments; Gasprom and Naftogas) is entitled to its own
position. However, if those positions are in conflict and the parties' wish
to resolve it in a civilized and legitimate manner, they should agree about
available and appropriate tools for doing so.
The best way to settle disputes at the intergovernmental level is through
negotiations. International instruments regulating Ukrainian-Russian
relations in the gas sector do not provide for any other options that would
not require additional coordination between the Russian and Ukrainian
governments.
However, Naftogas and Gasprom agreed that all disputes between them,
pertaining to the Contract dated 21 June 2002 and Addendum #4 dated 6
August 2004, should be considered by the Arbitration Institute of
Stockholm Chamber of Commerce unless the parties are able to reach a
compromise within 45 days of the dispute origination. The companies
also agreed that decisions of Stockholm Arbitration Institute should be
binding for both of them.
Press releases Naftogas and Gasprom issued on 7 December 2005 reflect
the companies' official positions. They testify to the existing difference
in the parties' understanding and interpretation of the same provisions of the
Contract dated 21 June 2002 and Addendum #4 dated 6 August 2004, which
is not an uncommon situation in the world of business. Yet wherever the
contractual parties exhaust the means of settling their contentions
available to them, they seek recourse in court, including a court of
arbitration.
Naftogas and Gasprom have been trying to resolve their dispute for much
longer than 45 days, so they have the right to turn to the Stockholm
Arbitration Institute, which is unprejudiced toward either party, is
internationally renowned for its sound judgment, and is capable of
resolving the dispute over the Addendum #4 provisions.
Filing a petition with the Stockholm Arbitration Institute would be the most
civilized way of settling the Ukrainian-Russian gas conflict, particularly
if the two countries fail to address this issue at the political level.
We also believe that arbitration is the most practical way of settling the
gas conflict. Intergovernmental negotiations will hardly yield any desirable
results soon, whereas emotional outbursts and nerve strain can only
exasperate the situation further and have an adverse impact on final dues
and prices cited in the 2006 protocol. We would venture to suggest that
any document that will eventually be signed will offer worse terms and
conditions than those currently stipulated in the existing commercial
contracts, and will be economically detrimental to Ukraine.
The dispute resolution by the Stockholm Arbitration Institute will relieve
the leaders of Ukraine and Russian of the burden of political responsibility
for addressing of gas issue.
The history of Ukrainian-Russian relations in the gas sector has known
instances of seeking international judicial recourses. For example, in
2000-2003 US courts considered a claim against Naftogas and the state of
Ukraine in the case of allegedly unsanctioned withdrawal of Russian natural
gas from the pipelines running through Ukraine's territory. The courts ruled
in favor of Ukraine then.
GAS ISSUE AND THE BUDAPEST MEMORANDUM
Lawyers usually disapprove of discussing specific legal matters and disputes
in public. They feel equally reluctant to expand disputes to other spheres
of bilateral relations. However, now that Ukraine has become subject to an
insistent and hard-edged foisting of onerous terms of cooperation in the gas
sector that could undermine its national economy, one cannot help
recollecting the Memorandum of Security Guarantees given Ukraine by the
nuclear states upon its accession to the Nuclear Nonproliferation Treaty on
5 December 1994 (the Budapest Memorandum).
According to Paragraph 3 of the Budapest Memorandum, the guarantor-states,
including Russia, committed themselves to abiding by the "principles of the
OSCE Final Act and refraining from economic pressure aiming to take
advantage of Ukraine and to submit Ukraine's sovereign rights to their own
interests." Isn't the Russian Federation's stance over the gas issue a case
of bringing overt economic pressure to bear on Ukraine?
One should also bear in mind that, while signing the 2005 intergovernmental
gas protocol, the Russian party agreed to set the gas price several times as
low as what Russia offers today (could the European market prices have risen
many-fold within a year?). In this context, noteworthy is the
Russian-Belarusian gas agreement signed on 8 December 2005 and setting the
price for Russian natural gas supplied to the Republic of Belarus at USD
46.68 per 1000 cubic meters (lower than the price Ukraine insists on).
At a briefing on 7 June 2005, A. Riazanov, Gasprom chair of the board,
acknowledged: "We will supply 23 billion [cubic meters] as payment for
transit services at USD 50. The price is low, indeed. Yet I still think it
is a very good deal for us; the transit dues in Ukraine's territory are USD
1.09; hence this gas price of USD 50. Last year we exported about 106
billion cubic meters of gas via Ukraine. I believe we have reached a mutual
understanding and established a partnership with Ukraine.
You may remember that our basic approach was as follows: the gas price under
the relevant intergovernmental agreements is USD 80 and the transit dues are
USD 1.75 per 100 cubic meters per 100 kilometers. We agreed to decrease
both the transit dues and gas prices. If we press for the European prices
for gas, the transit dues will also grow. So will the Gasprom costs. That
is why we have to calculate all economic implications of this approach."
Given all of the above, Ukraine's leadership should fully and timely inform
the European Commission and the guarantor-countries under the Budapest
Memorandum (UK, USA, France, and China) of its political position vis-a-vis
the Russian-Ukrainian gas dispute to assure them that it is neither
counterproductive nor impractical.
ROAD MAP TO SOLVE THE GAS DILEMMA
IN CONCLUSION, we would like to offer the most adequate road map
for solving the Russian-Ukrainian gas dilemma:
1) Not to politicize the gas issue; not to hurry to sign a protocol for
2006, in which the terms of economic cooperation would be worse than
those stated in the commercial contracts between Naftogaz Ukrainy and
Gazprom. In any case, it is politically and economically advantageous
for Ukraine not to sign documents that contradict its national interests;
2) To bear in mind that, in accordance with the principal intergovernmental
agreements, non-conclusion of a protocol for 2006 automatically leaves
valid the current terms (the price of supplied gas and the tariff for
transit services), which are stated in the commercial contracts between
Naftogaz Ukrainy and Gazprom;
3) The government of Ukraine should propose to the government of the
Russian Federation to jointly recommend Naftogaz Ukrainy and Gazprom
to seek arbitration in the Stockholm Court as provided for by their contract
of 21 June, 2002;
4) In case the Russian government and Gazprom are not ready to appeal to the
Stockholm Court together with the Ukrainian party, Naftogaz should ask the
Stockholm Court for an official interpretation of the 21 June, 2002
contract, which would be binding for both parties;
5) The government of Ukraine should ask the government of the Russian
Federation to refrain from hampering Naftogaz and Gazprom in fulfilling
their mutual obligations under their commercial contract, pending the final
verdict by the Stockholm Court;
6) In case the Russian side ignores the juridical argumentation and
overrides the principle of supremacy of law in approaching the gas dilemma,
the government of Ukraine and Naftogaz should proceed exclusively from the
presumption of economic expediency and Ukraine's monopoly status as the
transporter of Russian natural gas to Western Europe;
7) The government of Ukraine should present its position to the European
Commission, the UK, the USA, France, and China as the guarantor countries
under the Budapest Memorandum;
8) Should the gas problem escalate at the political level due to Russia's
continued psychological pressure, to seek consultation with the guarantor
countries as provided for by Paragraph 6 of the Budapest Memorandum.
The latter recommendation may be applied if Ukraine fails to persuade the
Russian Federation to set emotions aside and turn to the Stockholm Court
for arbitration and a binding verdict on their dispute over the 9 August,
2004 Addendum to the contract between Naftogaz Ukrainy and Gazprom.
If the dispute resolves in a decision to conclude an intergovernmental
protocol for 2006, then the negotiating politicians and diplomats should
demonstrate reserve. It should be remembered that, in practice, the most
important provisions of such documents have been negotiated and inked at
the eleventh hour. That is why the negotiations on the 2006 protocol should
be dominated by professionalism and friendly constructivism rather than
emotions or time limits.
International diplomatic practice knows examples of very important
disputable issues resolved under circumstances of time shortage. In this
case, the sides may just as well stop the clock hands in the negotiating
room at 23.59 on December 31 and continue to negotiate in a calmer
atmosphere on the next day.
The above recommendations follow European standards of resolving business
conflicts. We are convinced that if Gasprom had a similar dispute with a
western European gas company, the government of that country would never
agree to conclude any intergovernmental agreement to the detriment of the
company's commercial rights.
And since Ukraine declares its readiness to integrate with the European
community, it should resolve all gas-related disputes with the Russian
Federation in a "European" way, in accordance with European approaches
and standards. And the key standard is the principle of supremacy of law.
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LINK: http://www.mirror-weekly.com/ie/show/577/52114/
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5. UKRAINIAN POPULATION PAYS THE LOWEST PRICE
FOR GAS IN EUROPE
ITAR-TASS, Kiev, Ukraine, Monday, Dec 19, 2005
KIEV - The Ukrainian population pays the lowest price for gas in Europe,
namely, thirty-six U.S. dollars per thousand cubic metres. It costs more
even in Russia - forty-four U.S. dollars for the same amount of gas, the
Kiev "Inter" TV reports. It has devoted a separate program to the
upcoming talks between the prime ministers of the two countries, which
are to begin in Moscow on Monday.
The Poles and the Moldovans, who are Ukraine's neighbours, pay 223 and
112 U.S. dollars respectively per thousand cubic metres of gas, and the
population of the West European countries - an average of 523 U.S. dollars.
It is worth noting, the TV pointed out, that "Kiev had itself offered last
spring to go over to market prices, but began to backpedal shortly
afterwards". Ukraine is ready to go over to European prices, but gradually
so as to give the Ukrainian industry and the communal sector sufficient
time to introduce energy-saving technologies, and the population -- to get
used to thrifty gas consumption, the "Inter" quotes Ukrainian politicians
and economists as saying.
Minister for Industrial Policy Vladimir Shandra stated that "cheap gas
cannot prompt the enterprises to use energy-saving technologies". In expert
opinion, up to forty billion hryvnas, i.e. eight billion U.S. dollars, and
from three to five years will be needed to re-equip the industry.
"Metallurgy will have to seek money for this purpose from its own funds
or to take credits. The state will not subsidize business, but will most
likely revise the taxes," the minister stated. "The situation in the
chemical industry is even more difficult, but it, too, will be able to use
barter deals during the first three years - gas in exchange for
commodities," Shandra added.
Minister of Fuel and Energy Ivan Plachkov believes the Ukrainian premier
will advocate during his negotiations in Moscow a phased transition period
from 2006 to 2009, and complete transition to the new form of relations as
of 2010. Otherwise, many economists believe, "the profitability of the
country's main exporters - metallurgy and chemical industry - will be
reduced to zero" if the cost of gas tops 100 U.S. dollars, since Ukraine
has the world's most energy-consuming GNP.
The Ukrainian TV had broadcast statements on "the Kremlin blackmail"
throughout last week without caring to explain why the demand to honestly
pay for the gas it consumes is regarded as blackmail in Ukraine, which is
now a market-economy country. -30-
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6. GAZPROM: PEG GAS PRICES FOR UKRAINE TO WORLD CRUDE
RIA Novosti, Moscow, Russia, Monday, December 19, 2005
MOSCOW - Russian energy giant Gazprom said Monday that it was
moving away from fixed pricing of its natural gas exports to Ukraine
toward a price regime based on world oil prices.
"Next year, we'll be using not some specific figure, but a pricing formula,
one fully consistent with the formulas we employ in working with countries
of eastern and western Europe," the Gazprom CEO's official spokesman,
Sergei Kupriyanov, said in a radio interview. "We will rely on the same
parameters related to the price of alternative fuels."
He said the price of gas for Ukraine would now be determined in accordance
with the price of crude oil and oil products on global commodity markets.
Speaking of Gazprom's interest in gas distribution networks, Kupriyanov
said the issue of setting up a consortium to operate Ukraine's pipeline
networks had been essential to coordinating the terms of work in the gas
sector in 2004 and 2005.
"However, as we can see, no headway has been made on the issue. Although
the topic remains quite relevant to us," he said. Moscow and Kiev have
been locked in a dispute over gas prices and transit that has intensified in
the last week.
Ukraine wants Russia to stick to a deal signed three years ago to provide
gas at prices of $50 per 1,000 cu m in lieu of pipeline transit fees for
Gazprom's gas supplies to Europe. Gazprom is willing to pay higher transit
fees, but wants Kiev to pay the European-level of $220-230 per 1,000 cu m.
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7. FORMER PRIME MINISTER SAYS INTERMEDIARIES TO
BLAME FOR UKRAINE'S GAS PROBLEMS
Ukrayina TV, Donetsk, in Russian 1900 gmt 19 Dec 05
BBC Monitoring Service, UK, in English, Monday, Dec 19, 2005
DONETSK - Excerpt from report by Ukrainian regional TV channel
Ukrayina on 19 December.
[Presenter] The talks between Ukraine and Russia [on conditions for
delivery of Russian gas to Ukraine] should go to the government level.
They think so in Moscow and Kiev.
[Correspondent] Gas talks between Ukraine and Russia have risen to the
level of prime ministers at last. Two former prime minister were looking
for those to blame today.
[Yuliya Tymoshenko] All the intermediaries, in effect, destroyed the balance
of Russian-Ukrainian gas. If the new Ukrainian authorities have enough
political will to cut out all those who have attached themselves by
suction - a company like RosUkrEnergo, for example, has 7bn cu.m. of
gas a year - and allow Ukraine to receive this gas then there won't be any
problems.
It is necessary to stop corruption, shadow schemes. Then the issue
of natural gas will disappear.
[RosUkrEnergo, the company that handles deliveries of Turkmen gas to
Ukraine, receives gas in payment for its services.]
[Passage omitted: former Prime Minister Viktor Yanukovych says that
officials at state oil and gas company Naftohaz Ukrayiny are to blame for
the dispute - see TV 5 Kanal, Kiev, in Ukrainian 1700 gmt 19 Dec 05.]
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8. ANOTHER ENTENTE IS ADVANCING TOWARD US
Georgia, Ukraine, Moldova, and Turkmenistan unite against Russia
By Nikolai Orlov, Rossiya, No. 48
Moscow, Russia, Thursday, December 15, 2005
For the first time since the Cold War ended and the USSR collapsed,
a political alliance against Russia is being established on Eurasian territory.
The leading roles in this alliance are played by some former Soviet
republics: Georgia, Ukraine, Moldova, and Turkmenistan.
With the West's help, they are trying to drive Moscow out of
the Caucasus and the Black Sea area. In the south, Tbilisi, Kiev,
and Chisinau are cooperating in the energy sector and establishing
transport corridors from Central Asia and the Caspian region to
Europe, bypassing Russia. And while the leaders of Moldova and
Ukraine are playing their game diplomatically, Georgia is openly
requesting the United States and the European Union to provide
"real support" in "removing the remnants of Russian influence."
That primarily concerns the military basis allegedly responsible
for the existence of separatist regimes in Abkhazia and South
Ossetia. Thus, with the help of our former satellite states, the
West is steadily implementing its plan to establish a cordon
sanitaire around Russia, from the Caucasus to the Baltic Sea.
President Saparmurat Niyazov of Turkmenistan was the first to
make a contribution to breakup of the CIS and creation of an anti-
Russian axis in the south of the post-Soviet space. At the CIS
summit in Kazan on August 27, Niyazov announced through his
representative that Turkmenistan gave up permanent membership in
the CIS and moved to the category of associate members.
Turkmenbashi also said that he did not like summits of the CIS at
such at all. If we recall summits of the CIS leaders, already in
the mid-1990s it was noticeable that Niyazov felt bored by the
plenary meetings and integration in the post-Soviet space. The
only thing that leased him were personal meetings with Yeltsin,
especially when Yeltsin was ill and weak. Niyazov mostly kept
silent and was listening at the summits. He had no wish to visit
Kazan being tired and sent Deputy Prime Minister Akyev instead of
himself.
Thus, Turkmenistan departed on autonomous voyage. Making of
this decision was reportedly difficult for the Turkmenbashi. He
fluctuated for many years but finally chose independence and
decided to say goodbye. Ukraine and Georgia are evidently the next
in a queue.
It turned out that all CIS member states had their own
visions of the future. Two groups of interests appeared. The first
got united around Russia and the second started building the anti-
Russian axis in the south. Turkmenbashi refused to take part in
this shady enterprise referring to the neutral status of his
country. He remained in Ashkhabad watching the events. On the
contrary, presidents of Georgia, Ukraine and Moldova began
construction of the new anti-Russian bloc with enthusiasm.
Mikhail Saakashvili is the most active participant of this
block. Saakashvili stated that CIS finally outlived itself and
time came to create a new association. The purpose of this
association is combating of the influence of Moscow. At the forum
of the Community of Democratic Choice held in early December in
Kiev Saakashvili released a zealous speech. In its form the speech
was a program and in its essence it was anti-Russian rhetoric.
Saakashvili called for surrounding of Russia on all sides and
blocking of the way to the West for it, because democracy would
allegedly come to Russia quicker then. In the forum in Kiev
participated 23 countries, nine of them being represented by the
presidents, as well as leaders of OSCE and Council of Europe. At
the meeting nine countries of the Baltic, Black Sea and Caspian
regions signed a declaration on establishment of a new inter-state
alliance named Community of Democratic Choice (CDC). It included
Georgia, Ukraine, Moldova, Lithuania, Latvia, Estonia, Romania,
Macedonia and Slovenia.
Interestingly, the countries being Russia's debtors claim the
leading role in the CDC. These are Georgia, Ukraine and Moldova.
Having returned from Kiev, Mikhail Saakashvili and Moldovan
President Vladimir Voronin immediately called on Russia to
withdraw its troops in an accelerated manner.
Simultaneously with establishment of the CDC Georgia, Ukraine
and Moldova are also negotiating on revival of GUAM block that
includes not only these republics but also formally Azerbaijan.
Because President of Azerbaijan Ilkham Aliev refuses to actively
participate in the anti-Russian actions, Tbilisi, Chisinau and
Kiev decided to revive this organization in trilateral format and
to name it GUM. According to Saakashvili, after the victory of
"democracy" in Georgia and Ukraine GUM "will play an important
role in the issues of regional security and liquidation of
separatism in the post-Soviet space."
According to the Georgian President, the new incarnation of GUAM
will bear not as much economic nature (it has been declared during
establishment of the bloc) as political nature. The presidents of Georgia,
Ukraine and Moldova do not hide that the main task of reanimation of
GUAM is counteraction to "Russian imperialism" in the region,
conduction of coordinated policy for ousting of Russia from the
Caucasus and from the Trans-Dniester Republic and formation of
transport corridors bypassing Russia. The matter is actually about
creation of a "sanitary cordon" for isolation of Russia form Europe and
Transcaucasia. (Translated by Pavel Pushkin) -30-
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9. UKRAINIAN AUTHORITIES STILL OPTIMISTIC WITH
REGARD TO UKRAINE'S JOINING WTO
Protocols needed with the USA, Australia, Panama, Egypt & Colombia
Ukrinform, Kyiv, Ukraine, Monday, December 19, 2005
KYIV - Despite Ukraine's accession to the World Trade Organization during
the 6th WTO Ministerial Conference in Hong Kong was not included into the
agenda, members of a Ukrainian delegation, who participated in the forum as
observers, are still optimistic. As Deputy Economics Minister Valeriy
Piatnytskyi stated, presently, Ukraine's accession to the organization is
very close to completion.
In particular, the USA's position demonstrating its readiness for reaching
positive result makes Ukraine optimistic. Agreements with the USA, as many
people think, is a key to completion of the negotiating process. However,
Valeriy Piatnytskyi admitted, in a multilateral organization one should not
say that anyone is less important.
As Mr Piatnytskyi stressed, it's highly desirable for Ukraine to soon
complete bipartite negotiations and sign protocols with the rest of the
countries before a working group meeting, slated for first quarter of 2006.
According to Valeriy Piatnytskyi, upcoming parliamentary elections, which
turned the process of Ukraine's accession to the WTO into subject for
political clashes, is very disturbing. Actually, this situation is lasting
for almost a year, the Parliament opposing the WTO bills, without listening
to arguments.
As the Deputy Economics Minister believes, introduction of normal,
predictable and transparent trade rules is necessary not for the WTO, but
for the normal development of Ukraine's national economy. The most
important is not to lose partners' confidence in Kyiv's readiness to wind
up the process.
According to the Ukrainian delegation, led by Economics Minister Arseniy
Yatseniuk, Ukraine's efforts on the way to the WTO were positively assessed
by the organization leaders and by other member-states.
Signing the Ukraine - China protocol on mutual access to markets of goods
and services is among key results of the Ukrainian delegation's
participation in the Conference. Thus, the protocols with the USA,
Australia, Panama, Egypt and Colombia left to be signed. -30-
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10. TRIAL DATE SET OVER KIEV REPORTER DEATH
By Tom Warner in Kiev, Financial Times, London, UK, Tue, Dec 20 2005
KIEV - A court in Kiev decided yesterday to go ahead with the trial of three
Ukrainian Interior Ministry officers accused of taking part in the murder of
internet journalist Georgy Gongadze, rejecting complaints from his mother,
who argued that prosecutors should determine first who ordered the killing.
The case is being closely watched because of the role Mr Gongadze's death
played in galvanising opposition to Leonid Kuchma, the former president
whose rule ended with last year's Orange revolution.
Lesya Gongadze, wants prosecutors to determine whether Mr Kuchma was
behind the killing, as a parliamentary inquiry concluded in 2002.
Kiev's appellate court set a January 9 trial date. The officers are accused
of playing different roles in an operation in September 2000 in which Mr
Gongadze was allegedly killed and buried in a forest outside Kiev.
Ukraine has issued an international arrest warrant for the officers' former
chief. -30-
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11. UKRAINIANS WERE NEVER LUCKY WITH THEIR RULING
POWERS, OR ALMOST NEVER
ANALYSIS & COMMENTARY: By Sehii Soroka in Ukrainian
Translated by Olena Czebiniak into English
Ukrayinska Pravda website, Kyiv, Ukraine, Mon, Dec 12, 2005
Throughout the more than thousand-year history of Ukrainian statehood,
the ruling powers never voluntarily served their people or the country, but
selflessly and eagerly served foreign invaders starting from the Varangians
of Sweden, the Tatar-Mongolians, to Poles and Lithuanians and finally the
Muscovites.
The ruling powers in Ukraine could never independently protect their people
or land from foreign invaders such as the Tatar-Mongolians, Poles, the
Muscovites, Bolsheviks or Fascists.
There was not a single time that the government would apologize to its
people for the lack of talent, for the burning of Kyiv (several times), the
destruction of Chyhyryn, the Brody tragedy, the famine and the endless
number of ruined lives and lost fortunes of the Ukrainian people.
Harmony and prosperity in Ukraine occurred only during those short periods
in history when the people took power into their own hands and appointed
their own ruling authorities. Such was the period of the early Kyiv Rus,
when the people got tired of their own dukes' quarrels and discords, and
invited Swedish Varagians to Kyiv.
The Cossack times were another period, when Cossacks elected their own
officers and protected their territories. There was also a short period of
Ukrainian National Republic and Western Ukrainian National Republic, when
the people of Ukraine gave a chance to their politicians to establish a new
state on the ruins of the Russian Empire.
However, as soon as the government pushed the people away from state
management, it caused the destruction of the state. Time and again, the
government was drowning in discord, squabbling, corruption and empty
promises.
Generally speaking, Ukrainians never really needed a ruling authority over
them because the nation has a remarkable ability to self-regulate and
develop (think of how many Ukrainian towns received the Magdeburg Right
during the time when the central government was practically non-existent in
the country).
The best government for a Ukrainian is the one that does not prevent him
to live his life, zealously work, zealously play, and peacefully die.
A Ukrainian will tolerate and eagerly defend this kind of government (by the
way, this is contrary to the way things are with a brotherly northern
neighbor, where historically the more the powers mistreat and oppress the
people - the more they love that power).
The recent history of Ukraine generally only demonstrates the same manner in
which the people and the government coexisted over the last thousand years.
At the 1991 referendum, the people of Ukraine expressed their strong will to
become an independent state, and the management of the new country was
immediately taken over by the mediocre former servants of the colonial
communist regime led by Kravchuk.
The total mediocrity of that government led to the "revolution on the
granite". As a result, in 1994 the people won the right to change their
elected representatives and members of the government.
No matter how wretched the new government led by Kuchma was, the
people tolerated it only because it did not interfere with their lives.
Once again, Ukrainians display miracles of self regulation: there is no
work - they find it abroad; there is no merchandise in the stores - they
import it from Turkey and Poland and sell it at the outdoor markets; no
food - farmers markets blossom; the credit system does not function -
they develop barter relations and a dollar-based economy.
At that time, Ukraine had the most democratic tax system in the world: an
entrepreneur himself decided how much tax should be paid to the government.
The tax system existed de jure, but the people created an effective system
of avoiding taxes, and tax inspectors did not yet become a tool of
oppression.
If this situation remained unchanged for another several years, Ukraine
would have quickly turned into the most developed and democratic European
country and we would have been in the European Union together with our
lame government leaders. If only they had not interfered.
Unfortunately, at the end of the 1990s the government decided to exercise
some power. The government officials started to grow appetites: each had
to have an acre of land with a three-storey house, a small factory, a few
luxury automobiles, a small plane or a yacht. In addition, they had children
and an endless number of relatives and friends.
Hence, the ruling authorities became greedy and cynical. Government
officials were receiving land, forests, factories, production plants and
ports as gifts, or paid next to nothing for them. Not only did they pay no
taxes on the so-called "privatized" businesses, but they also sent all the
profit into offshore bank accounts.
The bulk of the tax burden was put on the small and medium size
enterprises run by ordinary Ukrainians.
Apparently that was not enough, so government officials created a system
of embezzlement of taxes already paid to the state by means of returning
VAT on fictitious exports. In 2004 alone the amount of this returned (or
rather stolen from the people) VAT reached 5 billion hryvnia.
The growing demands of government officials and the need to satisfy them
led to the creation of a deeply hierarchal system of corruption throughout
the whole country.
Giant and tiny pyramids of corruption penetrated into every segment of
society, from the maternity wards, kindergartens, educational system,
healthcare and police to the army and ritual establishments.
The tax and permit issuing authorities basically became the tools of
oppression, systems of bribery and institutionalized theft.
Ukraine became one of the most corrupt countries of the world.
In order to stay in power, regardless of the will of the people, Kuchma and
his allies used a system of manipulation during the elections of 1999, 2002
and 2004.
Those were elections bereft of choice. In 1999 Ukrainians had to choose the
lesser of two evils - Symonenko or Kuchma. In 2002, the representatives of
the opposition were eliminated from the electoral process in major electoral
districts and did not have access to mass media.
It was clear that those means would not suffice to rig the presidential
elections of 2004, so the government officials created a new system of
election manipulation unprecedented in scale and cynicism.
And it was at this historic moment that the Ukrainian people took power into
their own hands, which even the government could not foresee. In fact,
starting November 2004 through January 2005, the country was ruled by a
new democratic institution - the Maidan.
The President, Verkhovna Rada, the Supreme Court as well as the country's
security forces were forced to bow to the will of the Maidan as a
consolidated institution of a new Ukrainian democracy.
CONCLUSIONS AND FORECASTS
Back in 1946 in his famous Fulton speech, Winston Churchill defined the
three main components of democracy as the freedom of speech, free
unfettered elections and independent courts.
As history proves, these democratic institutions are very acceptable for
Ukrainians as they feed into the historic and mental abilities of Ukrainians
to self-organize and self-govern. Only effective democratic institutions can
secure the constitutional right of the people to power.
As a result of the Orange Revolution in Ukraine we have, more or less
active, two out of the three necessary democratic institutions: freedom of
speech and democratic elections.
As for the courts - unfortunately, they were reorganized into a system that
could be easily manipulated by the government. Victor Medvedchuk, a
professional manager and "the Grey Cardinal" of the former government
was working tirelessly to create this system.
At first, this judicial system suited the new government, since some of the
"friends" of the new President were hoping to take control of the courts.
But things did not work out the way they expected. The judicial system
continues to work for its patrons and "founding fathers".
We hope that the new government will begin judicial reform soon; especially
after a couple of disgraceful slaps in the face it received from apologists
of the old regime (Piskun, who has Medvedchuk's ears sticking from behind
his head, is simply mocking the President).
If, on the other hand, the new government will not be able to reorganize the
court system, then the people or their representatives will do the job
(Vlasenko and Reznikov already expressed their willingness to help).
Whatever the case may be, any ruling power, especially still budding
Ukrainian democracy, will try to avoid being controlled by its people or
will try to shift its responsibilities to the people.
Yekhanurov's persistent appeals to entrepreneurs to declare actual salaries
sound like so much hot air. The same appeal was heard from the President
during the forum "Challenges brought by freedom".
The new government still has not reformed the crumbling healthcare system,
which is free of charge only in theory, just like the corrupted system of
education, where parents have to "feed" the teachers or hire tutors.
The new government will have to reform the permit issuing system. The
bribes have gone up because of the extra risk of taking them (try buying
a space in Kyiv to open a pharmacy or a hair salon; it will cost you
minimum of $25,000 to $30,000 and a year and a half of going through
purgatory).
The government only asks right now that we give the state 60 kopecks out
of every gryvnia earned in the form of taxes.
This is probably because they need the money to pay the 18,000 gryvnia
pensions to former government officials and people's deputies like our
beloved Kuchma and Bilokon'.
And where are the tax reform and the 20% unified social tax promised by
the President?
Don't the President and the Prime Minister understand that a tax burden of
more than 60% (38% various deductions from the salary, 13% income tax,
20% VAT which we pay every time we make purchase or sale) is simply
unrealistic!
The population will never pay such high taxes unless the people receive
guarantees that the government will provide effective social services
(healthcare, education, police, court system, social protection services
and insurance).
So far, the government has not fulfilled these obligations. That is why
Ukrainians, through democratic institutions, should keep a tight grip on
the government authorities and not to loosen that grip for even a minute.
This is the only way to ensure peace and prosperity in Ukraine. Otherwise,
as before, the promises of the politicians will remain promises, and the
risk of Ukraine losing its statehood will become real again. -30-
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LINK: http://www.pravda.com.ua/en/news/2005/12/8/4913.htm
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12. KREMLIN STRUGGLES WITH UKRAINE-NATO RELATIONS
Though Moscow will likely use a range of covert and public measures to
prevent Ukraine from joining NATO, should the Kremlin fail to halt the
accession of its ally into the alliance, the end result will not be another
Cold War.
By Simon Saradzhyan in Moscow for ISN Security Watch
International Relations & Security Network
Zurich, Switzerland, Friday, December 16, 2005
If there is anything that the hawkish part of Russia's ruling regime would
agree with Zbigniew Brzezinski on, then it is that Ukraine's entry into NATO
could bury hopes of Russia re-emerging as a global superpower any time
soon.
It is in Russia's interests as perceived by the Kremlin to either coerce
Ukrainian President Viktor Yushchenko's administration into abandoning the
drive for NATO or try to facilitate a regime change in Ukraine to prevent
its further integration into the Western security alliance. This could be
done by boosting financial support for the traditionally pro-Russian
opposition against Yushchenko in eastern Ukraine..
These coercive policy tools are both public and covert and could include
measures such as threats of 100 per cent hikes on gas. Anti-NATO sentiments
could be also incited in the Crimea and in eastern Ukraine, where 70 per
cent of the population oppose Ukraine's entry into NATO, compared to the
national average of 51 per cent, according to results of an opinion poll
conducted by Russian pollster VTsIOM in late October.
The upcoming parliamentary elections in Ukraine and the weakening role of
the president thanks to constitutional reforms would also offer the Kremlin
a chance to alter the course towards European integration pursued by
Yushchenko and his allies.
However, should these efforts fail and Ukraine's entry into NATO become
inevitable, this will not become a showstopper in Russia's relations with
NATO, Western Europe, and the US in general.
Should Ukraine enter NATO, Russia would probably review and revise
the entire spectrum of its security, political, and economic relations with
Ukraine and other neighbors ahead of this entry to try and minimize the
perceived negative consequences of Kiev's accession to the alliance.
Russia is likely to stir up anti-Western rhetoric once the process of
Ukraine's accession to NATO reaches a final stage, but it will likely
neither alienate the US and Western Europe nor try to act as a long-term
spoiler.
While this issue may be used extensively to rally the public on a variety of
domestic and foreign policy matters, the Kremlin seems to realize that the
costs of trying to exact revenge or act as a spoiler if Ukraine does enter
NATO outweigh the benefits.
This is clear even for the hawks in President Vladimir Putin's team, given
the scope and importance of Russia's economic and political cooperation
with the US and Western Europe as well as personal business interests
that Russia's ruling elite has in maintaining amiable relations.
BELARUS COULD BE THE REAL SHOW-STOPPER
But while Moscow might be forced to tolerate Ukraine's entry to NATO, a
regime change in Belarus that would turn the country into a pro-EU state
with NATO aspirations could become the real showstopper.
Russia would certainly try to compensate for the loss of Ukraine's already
questionable neutrality by attempting to upgrade the Collective Security
Treaty organization (ODKB) into a full-fledged military alliance with a
standing combat-ready force. The recent statements by chief of the General
Staff of the Russian Armed Forces Yury Baluyevsky indicated that the
ODKB would be part of the Russian military-political leadership's response
to Ukraine's entry.
"Attempts are being observed to weaken the Commonwealth through
recruitment of CIS states into NATO," Baluyevsky said in an apparent
reference to Ukraine earlier this month. "Russia will defend its interests"
vis-à-vis this process, the four-star general told Russian reporters,
Interfax reported.
Baluyevsky's remarks followed a warning by Defense Minister Sergei Ivanov
that Russia would end military-technical cooperation with Ukraine if it
joined NATO. Security Council chief Igor Ivanov also earlier this month
accused the US and NATO of pressuring former Soviet republics in Central
Asia.
In spite of this rhetoric, Russia will in all likelihood continue to
maintain bilateral defense and security relations with the most powerful of
individual NATO members, such as the US and "Old Europe" countries,
even if Ukraine does win entry to NATO.
However, Russia may still walk out of NATO's Partnership for Peace (PfP)
program and force other ODKB members to follow suit, but such a move would
also likely be accompanied by an offer to launch a partnership between NATO
and the ODKB.
It is less probable that Russia would want to withdraw from the Russia-NATO
council, given the relative prestige it gives, as Russia is perceived as an
equal partner in the organization. However, it may similarly demand that it
become the ODKB-NATO Council or alternatively ask for a power of veto
over certain decisions.
In fact, the Kremlin's policy to try and add the ODKB to the equation became
clear at a recent NATO-Russia meeting of foreign ministers, when Russian
Foreign Minister Sergei Lavrov tried to position himself as representing the
ODKB rather than Russia alone.
While keeping Armenia and other members of the ODKB anchored, Moscow
will likely continue to woo Iran, Azerbaijan, and Turkmenistan by a
combination of sticks and carrots to try and balance out the strengthening of
the roles of NATO, the US, and the EU in the Black Sea and Caspian sea
regions, which Ukraine's membership in the alliance would facilitate.
Russia may also seek to transform the Shanghai Group into another
full-fledged alliance with commitments of mutual assistance in case of
aggression to further strengthen its position on the arena of the
continental politics vis-à-vis NATO.
On a less grand scale, Ukraine's entrance into NATO could force Russia to
start withdrawing its Black Sea fleet from the Crimea earlier than 2017,
which is the year the current lease agreement expires. Deputy chief of
Ukrainian President Yushchenko's secretariat, Anatoly Matviyenko, told a
press conference in Kiev last week that Ukraine might demand that Russia
pay more for renting coastal areas and infrastructure for its Black Sea
fleet in the Crimean peninsular.
Under the 1997 agreement, Moscow is supposed to pay US$93 million a year,
but that gets written off in the lieu of Ukraine's debt for gas deliveries.
Matviyenko floated this prospect of raising the rent, which can be
implemented only if the 1997 agreement is renounced, in response to Russia's
demand that Ukraine pay more for Russian gas. Yushchenko - who himself
publicly floated the idea of raising the Black Sea fleet rent this spring -
did not publicly follow up on the threat of his subordinates, and his press
secretary, Irina Gerashchenko, told the same Kiev press conference that the
Ukrainian leadership would oppose linking the gas talks to other issues.
Instead, the Ukrainian president expressed hope on Monday that both sides
would find a "mutually beneficial solution".
However, while belligerent rhetoric in the gas war will subside sooner or
later, questions on whether the Russian Navy should pull out of Sevastopol
before 2017 will linger as Ukraine boosts its efforts to entry to NATO.
In addition to the navy, Russia's Strategic Missile Forces (RVSN) may also
start feeling the negative impact of Ukraine's NATO bid soon. In fact, the
RVSN may have to phase out SS-18's and other Soviet-made ICBM's, that
Yuzhnoe of Dnipropetrovsk has designed, produced, and contracted to extend
service lives of, according to a report by Nezavisimaya Gazeta earlier this
month.
Similarly, the Russian air force also depends on Ukraine's Antonov design
bureau and Artyom holding for servicing and extending lives of Antonov
planes and R-27 air-to-air missiles. Ukraine's Sich Motors is also the
exclusive supplier of engines for Russian military helicopters and Ukrainian
plants supply most of turbo gas engines for Russian warships. However, the
reliance on Ukraine for servicing systems and extension of service lives
will decrease as these and other systems age and get decommissioned.
As for conventional systems, Russia's military-political leadership fully
realizes that the national defense industry can no longer produce the full
spectrum of weaponry. Therefore, ties with suppliers of non-key elements
of Russian defense systems will not be ended due to such political
considerations, as Ukraine's membership in the bloc.
As for key future projects, Russia has been already looking for other
partners, such as India, which has been invited to take part in the
fifth-generation fighter project. As for the Black Sea fleet, Russia's
military-political leadership has realized the inevitability of withdrawing
this fleet from Sevastopol and is investing into construction of new bases
in Novorossiysk and other parts of that Russian coast.
This is more of a financial than a security sacrifice, as regardless of
where it is based, the Black Sea fleet cannot bypass the Bosporus straits if
it is to operate in the Mediterranean or further in the ocean zone.
However, one weak spot remains when it comes to the negative impact that
Ukraine's entry into NATO would have on the combat potential of the Russian
military, which may find it costly and time-consuming to compensate for loss
of access to the data collected by early warning radars in Mukachevo,
Transcarpathia, and Sevastopol, Crimea.
Whether Ukraine dismantles Mukachevo and Sevastopol radars - as Latvia did
with the Skrunde facility - or re-directs the flow of data to NATO, the loss
of these two radars would deal the heaviest blow to the level of the combat
preparedness of Russia's strategic triad.
Even with Mukachevo and Sevastopol, the triad's early warning system is
already half-blind, given the loss of Skrunde and the failure to replenish
the fleet of early warning satellites in what increases the possibility that
the triad could react to a false alarm by launching real nuclear missiles.
But while being tangible, the loss of these two radars easily could be
offset if the Defense Ministry convinced the Kremlin to add the early
warning to the list of priority federal program and wrested enough cash
from the ballooning stabilization fund to build new radars and launch new
satellites.
According to Aleksander Franchikhin of the Institute of Political and
Military Analysis in Moscow, however, Russia should unilaterally scale down
cooperation with Ukraine regardless of whether the two sides agree on gas
prices this time, as Kiev is seeking NATO membership under the new
leadership and will probably eventually gain entry to this alliance.
First and foremost, Russia should first minimize dependence of its ICBM
fleet and early warning systems on Ukraine, according to both Franchikhin
and Ruslan Pukhov, director of the Centre for Analysis of Strategies and
Technologies (CAST).
And, while trying to replace Ukrainian subcontractors with Russian ones,
Moscow can leverage with Ukraine because many of the Ukrainian suppliers of
Russian arms makers have no other markets to diversify to and, thus, are as
dependent on their Russian partners, the experts.
In general, Ukrainian industries need Russia as much, if not more, as
Russian industries need Ukraine, as Russia is the largest market for
Ukraine's industries, such as the pipe and defense industries. On the other
hand, the EU mostly imports raw materials from Ukraine, they said.
According to Vitaly Shlykov, former deputy defense minister and one of
Russia's leading independent military experts, Russia should not revise its
arms production cooperation with Ukraine at all over the neighbor's NATO
membership bid because it can no longer hope to single-handedly design and
produce the entire spectrum of weaponry it needs.
"This spat over gas reminds me of the banana wars fought by the United
States and Europe," he told ISN Security Watch. "It should not be allowed
to spill over into military-industrial cooperation as no country in the
world can hope to produce an entire range of weaponry, not even the
United States, to say less of Russia."
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Simon Saradzhyan is a veteran security and defense reporter based in
Moscow, Russia. He holds a degree in public administration from
Harvard University, where he studied international security and wrote a
working paper on nuclear terrorism. He is a co-founder of the Eurasian
Security Studies Center in Moscow.
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LINK: http://www.isn.ethz.ch/news/sw/details.cfm?ID=13899
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13. PRES YUSHCHENKO ATTENDS CEREMONY OPENING KYIV
ACADEMIC PUPPET THEATER'S NEW BUILDING
Ukrinform, Kyiv, Ukraine, Monday, December 19, 2005
KYIV - On Monday, December 19, St Nicholas Day President Viktor
Yushchenko participated in a solemn ceremony to open the Kyiv Academic
Puppet Theater's new building.
The ceremony was also attended by Vice Premier Viacheslav Kyrylenko,
Presidential Secretariat First Deputy Head Ivan Vasiunyk, Kyiv Mayor
Oleksandr Omelchenko, Culture & Tourism Minister Ihor Likhovyi. Kyiv
and All-Rus-Ukraine Patriarch Filaret sanctified the building.
Speaking in the ceremony, President Yushchenko referred to the event as
many generations' dream having come true. As Viktor Yushchenko said,
once Ukraine's independence was just a dream, which came true not so long
ago.
So, your most cherished dreams will eventually come true and many a kid
will see fairy tales at the theater which will remain forever in their adult
life, the President said, addressing the juvenile audience.
President Yushchenko then commented on the Theater's opening on St
Nicholas Day as a real miracle, which construction workers have created.
The President presented the symbolic golden key to the Theater to its director
Mykola Petrenko, following which the President and Mayor Olemchenko cut
the entrance ribbon.
President Yushchenko donated a computer to the Puppet Theater. Mayor
Omelchenko's gift was a Bohdan bus.
UKRINFORM NOTE: The Kyiv Academic Puppet Theater was founded
on October 27, 1927. In 1991 the Theater initiated international puppet festivals,
in which puppet theaters from Belgium, Austria, Canada, Slovakia, Finland,
Japan, China, Sweden, Switzerland, Germany, Russia, Bulgaria, Moldova,
Turkey, other nations participated.
In 1995 the Theater was awarded the Druzhba ("Friendship") Order, in 2002 it
got the Academic Theater status. The Theater's repertoire numbers over two
scores of plays by Ukrainian and foreign authors. -30-
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14. NEW CENTER FOR HASID PILGRIMS CREATED IN LVIV REGION
1,000th anniversary of founding of this Ukrainian bulwark of spirituality
Ukrinform, Kyiv, Ukraine, Monday, December 19, 2005
KYIV - Yet another center for Hasid pilgrims has been added to Ukraine's
spiritual map. On December 19 early guests from Israel were accommodated
by a hotel-tourist complex in the township of Belz in Lviv region.
The Israeli pilgrims came to the township to attend celebrations marking the
1000th anniversary of founding of this Ukrainian westernmost bulwark of
spirituality, which was destined to become a cradle of three religions,
Christian Orthodox, Catholic and Judaic.
Though the Judaic religion's peak there was in the 19th century, it was at
that time that Orthodox Judaic Jews started regarding as sacred the mansion
of Rabbi Aron Rokakh, the miracle worker.
For centuries the numerically small Judaic community used to be part and
parcel of the local ethnically very patchworky population. Suffice it to
say that the community's trade with neighboring towns and foreign countries
accounted for over half of the town's coffers.
WWII, arbitrary borderline changes, the totalitarian regime's policies did
everything to destroy any remnants of Jewish culture there. The once
3,000-strong Judaic community, who lived there in 1939, has reduced to few
persons.
The new Ukrainian authority has created necessary conditions for reviving
the ethnic-religious minority. The Government's resolution on marking the
town's 1000th anniversary provides for implementing a restoration program.
It also opens doors to foreign initiatives.
This program has drawn investments. In particular, Israel has allocated
250,000 US dollars for construction of a new synagogue, a bath, a hotel, for
putting to order the Judaic cemetery where four Judaic saints are buried.
Documental materials, which Israel has preserved, will allow to very
accurately reconstruct the synagogue which was once built in Belz.
Incidentally, this structure is mentioned in a legend which says that this
will be the place from which Yahve's second advent will start.
This makes the town of Belz pilgrim frequented. Annually about 10,000
Judaic pilgrims come there. The Government's decision to open a new
border-crossing checkpoint will make pilgrims' travels easier. -30-
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15. UKRAINIAN CHRISTMAS EVE DINNER AND SUGGESTIONS
HOW TO COOK SOME DISHES FOR IT
Mariya Vlad describes the Christmas Eve dinner the way it used to be -
and in many homes still is - prepared in Western Ukraine.
Article By Mariya Vlad, photos by Oleksiy Onishchuk
WELCOME TO UKRAINE magazine, Issue 4 (35)
Kyiv, Ukraine, November, 2005, Pages 134-135
In Ukraine, as in many other Christian countries, the Christmas Eve dinner
was believed to have some special, mystical significance. The dishes served
and even their number had some symbolical meaning.
Traditionally, the Christmas Eve dinner in Ukraine was made up of twelve
dishes, to symbolize the number of the Apostles. All the dishes had to be of
the Lenten kind - no meat, but fish was allowed.
Though there were some local differences in various parts of Ukraine, the
Christmas Eve dinner was basically universal for all of Ukraine as far as
the main dishes were concerned.
The central dish was kutya. Mostly, it was made from wheat, but in some
parts of Eastern and Central Ukraine, rice or buckwheat were used. In
Prykarpattya, Western Ukraine, where wheat is not practically grown, a
handful of wheat was always kept for the festive occasions.
I am from Western Ukraine, the Land of Hutsulshchyna, and I remember well
the way the Christmas Eve dinner was prepared. My mother used about a kilo
of wheat for the family of seven people.
The wheat, from which we, the children, had picked all the little pieces of
tiny stones, bad grains or whatever else that did not belong to the wheat (I
hated this work and always asked my elder sister to do my portion of work)
was left in warm water for the whole night before it was to be boiled.
The wheat was boiled in a big saucepan which could hold enough water to boil
the wheat in - for one kilo of wheat she used four litres of water. When the
wheat was cooked - it took about three to four hours for the water to
evaporate and the grains to become soft - the saucepan with the cover on it
was wrapped in thick towels for the wheat to become still softer.
Meanwhile, my father ground the poppy seeds with a sort of a wooden pestle.
Doing it, he sat on the floor; instead of the mortar he used a makitra - a
big earthen bowl. The well-ground poppy seeds produced some juice which
looked like milk.
We, the children, shelled walnuts and then went kolyaduvaty (go round the
village singing carols and asking for presents of candy and nuts). Mother
placed the boiled rice into the makitra, added walnuts and honey. Two
handfuls of poppy seeds and two handfuls of ground walnuts were used for
one kilo of wheat.
Then all of the ingredients were stirred to form one, more or less uniform
mass - and the kutya was ready to be served. I found it to be very
delicious. But not a little bit could be eaten until dinner - the day was to
be spent in fasting.
Another must dish was uzvar - a soft drink made from dry fruit - apples,
pares, and plums. It was also sweetened with honey.
Holubtsi, another traditional dish, was made like this: the stuffing made
from corn or rice or buckwheat with some spices, chopped onions, carrots and
mushrooms added and sprinkled with oil, was wrapped in big leaves of pickled
cabbage or leaves of pickled beets (they were pickled together with apples
in wooden barrels) and placed in a big pot with some oil on the bottom.
Each layer of holubtsi rolls was separated from the next by bay leaves. Then
water was poured in so that the topmost layer of the holubtsi rolls would be
barely covered. The pot was placed into the hot oven and left to cook for a
couple of hours.
Fresh water fish was boiled with bay leaf, carrots and parsley added, then
the fish was removed from the stock and some gelatine and garlic were added.
The meat of the fish was separated from the bones, the pieces of fish were
laid into dishes, the stock was poured over them and then the dishes were
taken out to turn into jelly in the cold.
Varenyky had various kinds of stuffing - cabbage, poppy seeds, jam,
potatoes, apples, mushrooms, and even herring. The dough was made from
flour, some warm water and a bit of oil; then it was rolled thin and flat
and little pieces were cut out of the rolled dough. Each piece was filled
with stuffing and then the ends were firmly pressed and squeezed together.
Then the varenyky were boiled and served with sour cream.
My mother also cooked a dish which is not cooked any longer and which was
made from beans and dry plums. There were some other dishes to bring their
number to twelve. One of the dishes I liked in particular was a sort of a
salad made of mushrooms and beets - both the dry mushrooms which were
used for this salad and the beets were first boiled, then diced, sprinkled
with oil and spices.
Asparagus, pickled tomatoes, cucumbers and mushrooms were as much food
as they were the decoration for the table. On the white tablecloth, uzvar,
kutya and other dishes in earthen ware created a feast for the eyes as well
as the joy for the palate. Candles added their own mysterious and festive
touch.
At each of the corners of the table cloves of garlic were placed - we
followed this age-old tradition which was passed on to us by our
grandparents. And under the tablecloth a layer of fragrant hay was evenly
spread to provide a nice smell.
Have a good Christmas Eve dinner - and Merry Christmas to you!
And don't forget to give something from your table to the destitute and
handicapped so that they would pray for the salvation of the souls of the
dead. -30-
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LINK: http://www.wumag.kiev.ua/index2.php?param=pgs20054/134
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