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

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

TO SUM UP: GAS CHESS BOARD
The Ukrainian-Russian gas conflict and its influence on the bilateral
relations and political situation in Ukraine during the period of
parliamentary elections is only the "top of the iceberg" of this
complicated game, the bet being a really giant sum of money and
power preservation in the Kremlin.

It's like a game of chess: any price paid for the king defense can't
be too high, since after the mate to the main piece the game is over.
[article fourteen below]

"THE ACTION UKRAINE REPORT - AUR" - Number 629
Mr. E. Morgan Williams, Publisher and Editor
Washington, D.C., FRIDAY, DECEMBER 30, 2005

--------INDEX OF ARTICLES--------
Clicking on the title of any article takes you directly to the article.
Return to the Index by clicking on Return to Index at the end of each article.

1. UKRAINE REJECTS MOSCOW GAS LOAN OFFER
By Neil Buckley in Moscow and George Parker in Brussels
Financial Times, London, United Kingdom, Friday, December 30 2005

2. UKRAINE-RUSSIA GAS-PRICE DISPUTE DEEPENS
By Aleksandar Vasovic Associated Press (AP)
Kiev, Ukraine, Friday, December 30, 2005

3. HUNGARY ASKS EU TO ASSIST IN RUSSIA-UKRAINE GAS ROW
Hungary obtains some 80% of its gas supply through a
pipeline from Russia, which cuts through Ukraine.
Associated Press (AP), Budapest, Hungary, Thu, December 29, 2005

4. UKRAINE SAYS IT HAS ENOUGH GAS IF RUSSIA STOPS SUPPLY
By Aleksandar Vasovic, Associated Press (AP)
Kiev, Ukraine, Thursday, December 29, 2005

5. U.S. URGES COMPROMISE IN RUSSIA-UKRAINE GAS DISPUTE
AFX Europe (Focus), Washington, D.C., Friday, Dec 30, 2005

6. RUSSIA'S STATE-CONTROLLED GAS MONOPOLY GAZPROM TO
SIGNIFICANTLY INCREASE GAS IMPORTS FROM TURKMENISTAN
AP Worldstream, Moscow, Russia, Tuesday, December 29, 2005

7. UKRAINIAN PRESIDENT ISSUES DECREE RAISING FUEL RATES
Interfax-Ukraine news agency, Kiev, Ukraine, in Russian 29 Dec 05
BBC Monitoring Service, UK, in English, Thursday, Dec 29, 2005

8. UKRAINE - EFFECTS OF THE GAS CRISIS
ANALYSIS: Dr. Edilberto Segura
Director & Chief Economist, SigmaBleyzer
President, Advisory Board, The Bleyzer Foundation
Kyiv, Ukraine, Friday, December 30, 2005

9. RUSSIA-UKRAINE ON THE BRINK
ANALYSIS AND COMMENTARY: By Peter Lavelle
United Press International (UPI), Moscow, Russia, Wed, Dec 28, 2005

10.WILL YUSHCHENKO SURVIVE GAS ATTACK FROM MOSCOW?
ANALYSIS & COMMENTARY: Compiled by Jan Maksymiuk
RFE/RL Belarus, Ukraine, and Moldova Report, Vol. 7, No. 44
Prague, Czech Republic, Thursday, 29 December 2005

11.UKRAINE DENOUNCES DRASTIC GAZPROM PRICE INCREASE
Yekhanurov: Proposed $230/bcm price tag for gas unacceptable
NEWSLETTER: Our Ukraine Update, Vol II, Issue 3
People's Union Our Ukraine, Kyiv, Ukraine, Thu, Dec 29, 2005

12. "UNTYING AN INFERNAL FUEL KNOT"
ANALYSIS & COMMENTARY: By Serhiy Nikolayev
Ukrayinska Pravda web site, Kiev, in Ukrainian 21 Dec
BBC Monitoring Service,UK, in English, Thu, Dec 29, 2005

13. GREAT CHALLENGE: BALTIC PIPELINE HARDLY CONDUCIVE,
OR OUTRIGHT HARMFUL, TO EUROPE'S ENERGY SECURITY
ANALYSIS & COMMENTARY: By Janusz Steinhoff
Former Polish Deputy Prime Minister & Minister of Economics
Summary of an article featured in Rzeczpospolita
Polish News Bulletin, Warsaw, Poland, Friday, Dec 30, 2005

14. GAS "CHESS BOARD"
It's like a game of chess: any price paid for the king defense can't
be too high, since after the mate to the main piece the game is over.
GUEST ANALYST: Dr. Andriy Starodub, Scientist
Institute for Archeography and Cource Studies
National Academy of Science of Ukraine
UKRAINIAN MONITOR, #51/2005
Centre for Peace, Conversion and Foreign Policy of Ukraine
Kyiv, Ukraine, Tuesday, December 27, 2005

15. RUSSIA BANS MEAT IMPORTS COMING THROUGH UKRAINE
NTV Mir, Moscow, in Russian 2330 gmt 29 Dec 05
BBC Monitoring Service, UK, in English, Friday, Dec 30, 2005

16. JACKSON-VANIK GRADUATION COALITION CRITICIZES
STATEMENT BY UKRAINE'S INTER-REGIONAL
ACADEMY OF PERSONNEL MANAGEMENT (MAUP)
News Release: Jackson-Vanik Graduation Coalition
Amb Steven Pifer and Amb William Miller, Co-Chairmen
Washington, D.C., Friday, December 23, 2005

17. UKRAINE: PRESIDENT YUSHCHENKO VISITS KYIV SYNAGOGUE
Press office of President Victor Yushchenko
Kyiv, Ukraine, Wednesday, December 28, 2005

18. U.S.-UKRAINE FOUNDATION (USUF) CONDEMNS NOV 4, 2005
STATEMENTS BY THE INTERREGIONAL ACADEMY OF
PERSONNEL MANAGEMENT (MAUP) IN UKRAINE
U.S.-Ukraine Foundation (USUF), Washington, D.C., Fri, Dec 23, 2005

19. UKRAINE: PRES YUSHCHENKO OPENS CHRISTMAS EXHIBIT
Press office of President Victor Yushchenko
Kyiv, Ukraine, Wednesday, December 28, 2005

20. UKRAINIAN VILLAGE
By Anne Klockenkemper, Staff Writer, Sun-Herald
North Port Sun, North Port Florida, Friday, Dec 23, 2005

21. UTAH'S GREAT, BUT UKRAINE IS THE PLACE ON NEW YEAR'S
New Year's Eve in his hometown of Nikolaev, city of 700,000 near the
Black Sea in southern Ukraine, always biggest celebration of the year
By Cathy Free, Deseret Morning News
Salt Lake City, Utah, Thursday, December 29, 2005

22. ADOPTION IN UKRAINE FULFILLS COUPLE'S CHRISTMAS WISH
Their third adopted child from Ukraine, all three have cerebral palsy
By Todd G. Higdon, Neosho Daily News Staff Writer
Neosho, Missouri, Saturday, December 24, 2005
========================================================
1. UKRAINE REJECTS MOSCOW GAS LOAN OFFER

By Neil Buckley in Moscow and George Parker in Brussels
Financial Times, London, United Kingdom, Friday, December 30 2005

President Viktor Yushchenko of Ukraine last night rejected an offer of a
$3.6bn (£2bn) loan from Russia to pay for a big increase in gas prices by
Gazprom, the Russian energy company.

President Vladimir Putin had earlier said Moscow was ready to extend a loan
to Ukraine in an attempt to resolve a damaging dispute three days before a
Russian deadline to turn off gas supplies to Ukraine.

"We are very grateful for the proposed large credits, but Ukraine does not
need them," Mr Yushchenko said, according to Reuters. "Ukraine will pay with
its own money at a price set in a comprehensible, objective fashion."

Russia has demanded that Ukraine pay nearly five times as much for Russian
gas - part of a wider move by Moscow to end subsidised supplies to former
Soviet republics. The move has provoked the biggest rift between the two
neighbours since last year's "Orange Revolution" in Kiev. Mr Yushchenko has
turned Ukraine towards the European Union and Nato and wrenched it out of
Russia's orbit.

The dispute could cause shortages in western Europe if Russia carries out a
threat to reduce the gas it pumps into the huge export pipeline that crosses
Ukraine from January 1. By doing so, however, Russia would risk damaging its
claim to be a reliable energy supplier, just as it takes over the presidency
of the Group of Eight industrialised nations with energy security as a main
theme.

The European Commission said yesterday the reliability of Russian supplies
was "of the highest priority" and it was watching the Russian-Ukrainian
dispute closely.

Mr Putin, in televised remarks, told Ivan Plachkov, Ukraine's energy
minister, that Russia was prepared to lend "a huge sum" to Kiev to ease the
shift to market prices. "We are ready to provide a loan on commercial
conditions directly to [Ukraine's national gas company] under the guarantee
of one of the international banks, European or American," the Russian
president said.

Mr Putin added that subsidised gas had been acceptable while Russia and
Ukraine were part of a planned economy but no longer reflected economic
realities.

Mr Yushchenko has said Ukraine is ready to move to market prices over a
period of years. But he said yesterday that Kiev would "never accept" the
price of $220-$230 per 1,000 cubic metres Russia is demanding for next year,
up from $50 this year. "This price is a provocation," Itar-Tass news agency
quoted him as saying.

Gazprom, Russia's natural gas monopoly, earlier said it had signed a deal to
buy more gas from Turkmenistan, the second-biggest producer among the
former Soviet republics, by more than 50 per cent to 30bn cu m next year.

Analysts said that would leave less spare Turkmen gas available to Ukraine
to cover any reduction in Russian supplies. Ukraine, which uses about 80bn
cu m of gas annually, buys 25bn cu m from Russia and 36bn cu m from
Turkmenistan, which all flows through Gazprom's pipelines. But Ukraine said
it already had a contract with Turkmenistan to buy 40bn cu m of gas next
year. -30-
----------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
2. UKRAINE-RUSSIA GAS-PRICE DISPUTE DEEPENS

By Aleksandar Vasovic, Associated Press (AP)
Kiev, Ukraine, Friday, December 30, 2005

KIEV -- Ukraine dug in its heels in a bitter dispute with Russia over gas
deliveries, with President Viktor Yushchenko rejecting Russian President
Vladimir Putin's offer of a multibillion-dollar loan to help Kiev adjust to
a huge increase in Moscow's price tag for its gas.

With Russia threatening to stop selling gas to Ukraine on New Year's Day if
no solution is found, Ukraine's state-run gas company said the nation's 48
million people won't freeze and its factories won't go dark if Moscow
follows through on the threat.

At a second day of talks in Moscow, Russian authorities stuck by their
demand that Ukraine pay more than four times the current price, and no
agreement was reached. The negotiations were to resume today.

Meanwhile, Russia tightened the screws by signing a deal to purchase gas
from Turkmenistan that analysts said would leave the Central Asian nation
with less to sell to Ukraine -- which relies on Russia for about a third of
its gas and Turkmenistan for 45%.

The dispute has further damaged relations between Russia and Ukraine, two
mostly Slavic, Orthodox Christian ex-Soviet republics whose common history
goes back centuries but whose ties have been strained by the ascendancy of
the Westward-leaning Mr. Yushchenko a year ago.

Russia's state-run natural-gas monopoly OAO Gazprom says it will halt gas
sales to Ukraine Jan. 1 unless Kiev agrees to pay about $230 per thousand
cubic meters -- up from the $50 it pays now.

"This is a price that Ukraine will never accept," the ITAR-Tass news agency
and Russia's NTV television quoted Mr. Yushchenko as saying yesterday.
According to ITAR-Tass, he added that the Russian price was "a
provocation."

Ukrainian officials say they want a price increase phased in gradually and
say the sudden huge increase would cripple the steel and heavy industries
that are key components of the country's economy. -30-
---------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Send in names and e-mail addresses for the AUR distribution list.
========================================================
3. HUNGARY ASKS EU TO ASSIST IN RUSSIA-UKRAINE GAS ROW
Hungary obtains some 80% of its gas supply through a
pipeline from Russia, which cuts through Ukraine.

Associated Press (AP), Budapest, Hungary, Thu, December 29, 2005

BUDAPEST - Hungary Thursday asked the European Union to step in to
help resolve a dispute over gas between Russia and Ukraine which could
jeopardize Hungary's gas imports, a government official said.

The Hungarian Ministry of Economics and Transport has written to the E.U.
energy commissioner's office asking for help from Brussels, a ministry
official said.

The conflict between Russia and Ukraine arose when Russia said it will stop
selling gas to the country unless it agrees to a fourfold price increase.
E.U. countries fear their supplies could be curtailed by Russia's Gazprom,
the country's state-run monopoly.

Ukraine currently pays $50 per 1,000 cubic meters of gas. Gazprom is
demanding that the price in 2006 rises to $220 to $230. Hungary obtains
some 80% of its gas supply through a pipeline from Russia, which cuts
through Ukraine.

"We are expecting some serious help from the E.U. commissioner for energy,
as this conflict is a European concern," State Secretary Gabor Diossy told
the Associated Press. He expressed his confidence that the E.U. will come to
the rescue and assist politically as well as economically.

Hungarian households aren't threatened by the gas dispute and "there is
enough supply for months," Diossy said. The conflict between Russia and
Ukraine affects gas-importing countries including Hungary, Slovakia, the
Czech Republic, and Germany. -30-
--------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Send in names and e-mail addresses for the AUR distribution list.
========================================================
4. UKRAINE SAYS IT HAS ENOUGH GAS IF RUSSIA STOPS SUPPLY

By Aleksandar Vasovic, Associated Press (AP)
Kiev, Ukraine, Thursday, December 29, 2005

KIEV - Ukraine's people won't freeze and its factories won't go dark if
Russia follows through on its threat to cut off crucial natural-gas
supplies, Ukraine's state-run gas company said Thursday. The two countries
are in tense talks to resolve their dispute before a Jan. 1 deadline set by
Russia.

Russia's state-run natural gas monopoly OAO Gazprom(GSPBEX.RS), which
provides about a third of the gas used in Ukraine, plans to halt gas sales
to Ukraine on Jan. 1 unless the country agrees to a four-fold price
increase.

Gazprom also supplies about half the gas consumed by the European Union and
most of that goes through pipelines that cross Ukraine, raising concerns the
dispute could affect supplies to the West. Gazprom has pledged that
supplies to European customers won't be affected, but a spokesman for
Ukraine's state-run gas provider Naftogaz (NGAZ.YY) questioned that.

If Gazprom stops selling to Ukraine, "they can probably reduce gas pressure
in the pipelines. Nobody quite knows what happens then ... it will probably
affect other European customers," Dmytro Marunich told The Associated Press.

In a brief 2004 dispute with Belarus, Gazprom entirely shut down the supply
to that country's pipelines, which also affected gas transiting to Poland
and Germany.

However, Gazprom would be unlikely to risk alienating European countries
with a full shutdown of the flow through Ukrainian pipelines, which handle
about 80% of the Russian gas going to the E.U. Marunich said he did not
believe Gazprom had the technical capacity to completely shut off the
Ukrainian pipelines. Gazprom officials in Moscow couldn't immediately be
reached for comment.

Ukrainian Energy Minister Ivan Plachkov was in the Russian capital for talks
on the dispute. Russian Energy Minister Viktor Khristenko said Thursday that
no agreement had yet been reached. As the prospect of a Russian supply halt
loomed, Marunich said Ukraine wasn't in immediate danger.

The country maintains gas storage facilities with a capacity of about 40% of
the country's annual consumption. Marunich declined to say how much was
currently in storage, but said the country has enough "to keep us afloat
through the fall and winter under normal circumstances."

Ukraine currently pays $50 per 1,000 cubic meters of gas. Gazprom is
demanding that the price in 2006 rise to$220-230, saying that is more in
line with world markets.

Russian President Vladimir Putin on Thursday offered Ukraine $3.6 billion in
credits to help meet the higher gas price. Ukrainian President Viktor
Yushchenko rejected the offer, the Interfax news agency reported, saying his
country was thankful for the proposal but that "Ukraine does not need these
credits."

"Ukraine will rely on its own resources under a clear, correctly and
objectively formed price," the agency quoted him as saying.
Ukrainian officials say they want a price increase phased in over several
years and claim the sudden huge price hike would cripple industry;
energy-intensive steel and heavy industries are a key component of the
struggling country's economy.

"This is a price that Ukraine will never accept," Yushchenko said Thursday
according to the ITAR-Tass news agency. "This price is a provocation."

The dispute has brought to a boiling point the tensions that have strained
relations between Moscow and its former imperial satellite since the
reformist Yushchenko came to power in Ukraine after last year's Orange
Revolution, promising to move his nation of 48 million toward integration
with the West.

Along with Russia's supplies, Ukraine gets about 45% of its gas from
Turkmenistan and the remainder is domestically produced.
Gazprom said Thursday it had agreed to buy from Turkmenistan 30 billion
cubic meters at $65 per 1,000 cubic meters. The company said that 15 billion
cubic meters would be delivered from Turkmenistan in the first quarter of
2006 and that terms for gas sales for 2007 would be decided in the second
half of 2006.

Analysts say Turkmenistan was expected to produce 65 billion cubic meters of
gas next year. Piping 30 billion to Russia and reserving another 20 billion
for internal use and exports to Iran, leaves about 15 billion for Ukraine -
far short of the 35 billion it wanted.

"The signing of this contract means that less gas will be left for Ukraine -
for their direct purchases," said Valery Nesterov, oil and gas analyst with
Troika Dialogue brokerage. "In this gas dispute Russia gets another
instrument of pressure over Ukraine." -30-
--------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
5. U.S. URGES COMPROMISE IN RUSSIA-UKRAINE GAS DISPUTE

AFX Europe (Focus), Washington, D.C., Friday, Dec 30, 2005

WASHINGTON - The U.S. government has urged Moscow and Kiev to reach
a compromise in their dispute over the price of Russian natural gas exports, a
State Department spokesman said.

"We have been in touch with both countries to express the view that we urge
them to come to a compromise that meets the needs of both, underscoring the
importance of security of supply and stability of prices," spokesman Adam
Ereli said.

While emphasizing that the United States sees the issue as "a bilateral
matter between Russia and Ukraine," Ereli added that the dispute "is a
question of energy supply that we and the Europeans are all following
closely because it is significant and important."

Talks in Moscow between senior Russian and Ukrainian negotiators ended with
no deal Thursday, but will resume Friday just hours ahead of a deadline for
cutting off supplies to Kiev, Russian news agencies reported.

Russia has threatened to cut off gas shipments to Ukraine on January 1 if
Kiev refuses to accept a quadrupling of the price.

Ukrainian President Viktor Yushchenko was quoted by Interfax news agency
late Thursday as offering a much lower price increase of only 50 to 60 pct.

Western Europe is observing the crisis nervously as around a fifth of
European gas supplies come from Russia via Ukraine and there are fears the
row could disrupt shipments. (sl/pmh/ddl/mb) -30-
--------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Send in a letter-to-the-editor today. Let us hear from you.
========================================================
6. RUSSIA'S STATE-CONTROLLED GAS MONOPOLY GAZPROM TO
SIGNIFICANTLY INCREASE GAS IMPORTS FROM TURKMENISTAN

AP Worldstream, Moscow, Russia, Tuesday, December 29, 2005

MOSCOW - Russia on Thursday agreed to significantly increase its imports of
natural gas from Turkmenistan in 2006, buying 30 billion cubic meters at
US$65 (A52) per 1,000 cubic meters, the state-controlled gas monopoly
Gazprom said in a statement.

The agreement was reached in the Turkmen capital Ashgabat by Turkmen
President Saparmurat Niyazov and Gazprom chief executive Alexei Miller.

This year OAO Gazprom imported 19 billion cubic meters at US$44 (A35) from
the Central Asian nation. The deal was preceded by several rounds of tense
negotiations, because Gazprom was reluctant to accept the price hike. The
price and the amount of gas imports in 2007 will be determined in the second
half of 2006, the statement said.

Turkmenistan is the second-biggest gas producer, after Russia, among
ex-Soviet states and it currently supplies Russia, Ukraine and Iran. Russia
could meet its gas needs on its own, but cheap Turkmen supplies spare
Gazprom costly investments in natural gas field exploration and development
in Siberia. -30-
--------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
7. UKRAINIAN PRESIDENT ISSUES DECREE RAISING FUEL RATES

Interfax-Ukraine news agency, Kiev, Ukraine, in Russian 29 Dec 05
BBC Monitoring Service, UK, in English, Thursday, Dec 29, 2005

Ukrainian President Viktor Yushchenko has issued a decree raising fuel
prices to an "economically substantiated level" for all customers. The
decree set energy efficiency and the use of alternative and renewable
sources of energy as priorities for the state energy policy. Yushchenko also
called for building a facility to store used nuclear fuel in Ukraine.

The following is an excerpt from a report by Interfax-Ukraine news agency:

Kiev, 29 December: Ukrainian President Viktor Yushchenko has signed a
decree "On the state of Ukraine's energy security and basic principles of state
policy to ensure it", the presidential press service said today.

The decree implements a decision of the National Security and Defence
Council [NSDC] of 9 December 2005 "On the state of Ukraine's energy
security and basic principles of state policy to ensure it".

The decree approves the main directions of state policy on Ukraine's energy
security, which were approved by the NSDC.

The priority tasks of state policy on energy security are: implementing
energy-efficient investment projects, aimed at decreasing the use of energy
resources per unit of production in the fuel and energy sector, industries,
agriculture, utilities and households.
The decree also says that it is necessary to increase the extraction of oil,
gas, liquefied gas and coal.

It is planned to improve the efficiency of fuel usage, in particular, to
introduce the domestic technology of circular boiling layer in coal furnaces
and arch furnaces, use non-traditional and renewable sources of energy and
extract more methane at coal mines.

Yushchenko ordered in his decree that fuel prices and rates for all
customers should be set at an economically substantiated level.

The president also ordered steps to diversify the sources of fuel and its
transportation routes, in particular, by implementing the Eurasian oil
transport corridor, completing the Odessa-Brody pipeline to Plock, ensuring
that the pipeline is used in the European direction and attracting
international oil companies to the project.

The implementation of the decree will facilitate the integration of the
Ukrainian energy system into the trans-European system and will facilitate
further development of main oil and gas pipelines.

Yushchenko mentioned in the decree the necessity to create a full nuclear
cycle in Ukraine and build a facility big enough to store used nuclear fuel,
to complete the Dniester and Tashlyk hydro-accumulation power plants and
build a modern oil-processing facility with a high level of refining, in
particular for Caspian oil.

[Passage omitted: Yushchenko instructs the government to review Ukraine's
energy strategy for the period until 2030]

Yushchenko also ordered the Cabinet of Ministers to set the terms for and
amounts of Russian gas transit through Ukrainian territory and to submit to
parliament a draft law on re-evaluating the assets of energy companies.
--------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Send in names and e-mail addresses for the AUR distribution list.
========================================================
8. UKRAINE- EFFECTS OF THE GAS CRISIS

ANALYSIS: Dr. Edilberto Segura
Director & Chief Economist, SigmaBleyzer
President, Advisory Board, The Bleyzer Foundation
Kyiv, Ukraine, Friday, December 30, 2005

The possible increase in gas from Russia would have a major impact on the
Ukrainian economy over the short term. But it should have healthy economic
effects over the longer term.

Ukraine imports about 25 billion m3 of gas per year from Russia. If the
price of gas were to be increased from $50 per 1000 m3 to $230 per 1000 m3,
Ukraine would spend about $4.5 billion more in gas imports from Russia (
[$230-50]/th m3 x 25 bn m3 = $4.5 bn).

On the other hand, Ukraine should be able to increase transit fees from the
current level of $1.09 per 1000 m3 per 100 km to a "European" level of about
$3.00 per 1000 m3 per 100 km. Since about 130 billion m3 of Russian gas
passes through about 850 Km of Ukrainian territory, the increase of $1.91
per 1000 m3 per 100 km would result in additional transit fees of about $2.1
billion ([$1.91 /th m3 x 100 km] x 130 bn x 850 km.

Therefore, the net increase in the gas bill for Ukraine would be about $2.4
billion per year ($4.5 billion - $2.1 billion). This increase represents
about 3% of GDP. Therefore, GDP would decline by 3% pa, ceteris paribus.
Since Ukraine has now a current account surplus of $2.7 billion, the
additional gas bill of $2.4 billion would bring Ukraine's current account
into about balance, ceteris paribus. It would be a major increase, but not
a catastrophic one.

According to these calculations, the impact of gas price increases could be
manageable, ceteris paribus. But the impact on the balance of payments and
GDP would be more substantial, since many highly energy intensive exporters
may become unviable. It is difficult to predict the impact on exports and
GDP of the increase in gas prices to these industries, as it would depend on
the ability of these companies to retain their markets. Gas price increases
would also increase utility fees for everybody, further increasing costs.

But a catastrophic effect would occur if Turkmenistan, which provides 38
billion m3 of gas to Ukraine were to raise its gas price from the recently
agreed level of $60 per 1000 m3 to international levels. The import bill for
Turkmenistan gas would increase from $2.3 billion to about $9 billion in
2006.
MEDIUM TO LONG TERM EFFECTS
However, over the longer term, bringing gas prices to international levels
should have major economic benefits to the country. In fact, the
availability of cheap gas in the past has had a negative effect on Ukraine
similar to the "Dutch Decease" effect that has negatively affected so many
oil/gas-producing countries.

In these countries, the increased availability of foreign exchange through
cheap oil/gas prices has over-valued exchange rates and made other less
energy-intensive economic activities less attractive to investors. This has
led to a major misallocation of resources in the country, lowering the level
of efficiency - particularly energy efficiency - of the economy as a whole
over the long term.

It is no coincidence that the major industries developed in Ukraine over the
last decades (such as metals, fertilizer, etc) relied on cheap gas. It is
also no coincidence that Ukraine uses three times more energy per unit of
GDP that most European countries. The investments used in these industries
may have been better channeled to other industries in which Ukraine has a
competitive advantage (such as food processing or IT).

An increase in the price of gas should lead to a diversification of the
economy and improvements in energy conservation. But for these to take
place, substantial economic reforms would be needed to attract investments
in these sectors. The country would require a rapid and fundamental change
in its economic policies to give more emphasis to the creation of a
favorable business environment that would be attractive to investors.
-------------------------------------------------------------------------------------------
Contract: Dr. Edilberto Segura edisegura@sigmableyzer.com
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Send in names and e-mail addresses for the AUR distribution list.
========================================================
9. RUSSIA-UKRAINE ON THE BRINK

ANALYSIS AND COMMENTARY: By Peter Lavelle
United Press International (UPI), Moscow, Russia, Wed, Dec 28, 2005

MOSCOW - With hours left before the current bilateral agreement on
natural gas deliveries and transit to Europe end, Russia and Ukraine face
a crisis that could have serious international implications.

Energy giant Gazprom is demanding Ukraine pay a fourfold price increase for
gas deliveries staring next year. Ukraine says this is an exorbitant demand
that is politically motivated.

Three weeks ago, Gazprom wanted a new natural gas contract with Ukraine
starting next year that includes abandoning the current barter system of
payments for gas transportation services. It also demanded Kiev pay a price
for natural gas more in line with the firm's European customers -- $150-160
tcm vs. the $50 tcm Naftogaz, Gazprom's Ukrainian counterpart, pays.
Ukraine said this price increase is out of the question and European-level
pricing should be phased in over the next five years.

Due to what Gazprom calls intentional stalling on the Ukrainian side and
the company's renegotiation of gas contracts with other former Soviet
states, the price was later increased to $230 tcm. What was colloquially
called the Russia-Ukraine "gas war" of words now is interpreted as an
almost literal conflict. Gazprom has the upper hand in the dispute, but
Ukraine does have considerable wiggle room.

In 2004, Ukraine's natural gas consumption exceeded 70 bcm while domestic
production was 20 bcm. Gazprom covered part of this deficiency by providing
Ukraine 29.2 bcm as payment to Naftogaz for transportation services.

Ukraine's competitive advantage in dealing with Gazprom is its location.
The firm transits its natural gas through Ukraine to sell in other foreign
markets. Naftogaz is key to Gazprom's international operations and this is
the leverage Ukraine has in any agreement over the price it pays for
Russia's natural gas, as well as transit fees.

Gazprom's dependence on Ukraine is almost absolute. It earns most of its
income from exports, and its main export route runs directly across
Ukraine. Naftogaz has an extensive network of pipeline corridors that end
in Europe. Gazprom shipped 138 bcm of its total European exports of 153.2
bcm through the Naftogaz pipeline system in 2004. Gazprom pays Ukraine a
transit tariff of $1.09/mcm/100 km and has proposed $1.75/mcm/100 km.
Ukraine is demanding an increase to $3, which would essentially cover the
cost of the country's imports from Russia.

In an effort to go around Ukraine, Gazprom plans to build a pipeline that
will link the Russian port of Wyborg and the town of Greifswald, Germany.
It will initially provide gas to Germany, and offshoots may subsequently be
built to link it with several other countries, including Britain. The
pipeline is forecast to deliver 20 bcm of natural gas a year, a trifle
compared with its present total export regime.

Ukraine's leverage in these negotiations has become a political issue in
the country's parliamentary elections scheduled for March 2006. President
Viktor Yushchenko has no choice but to be reminded of what he said during
the Orange Revolution last winter: Ukraine should have economic relations
with Russia based on market principles, while protecting the country's
economic sovereignty.
YUSHCHENKO'S POSITION IS CLEAR
How his political opponents are approaching the dispute is odd at best.
Former Prime Minister Yulia Tymoshenko, who was nicknamed the "gas
princess" on the back of allegations she was involved in shady deals that
included acquiring and reselling natural gas transited through Ukraine, has
offered to act as intermediary. It is doubtful Yushchenko has any interest
in promoting a political opponent in this critical issue. Gazprom certainly
is not interested in dealing with Tymoshenko -- Russia's prosecutor general
closed a criminal investigation against her on Tuesday only because the
statute of limitations expired.

Former prime minister and presidential candidate Viktor Yanukovych's
position on the deadlock verges on the bizarre. He has supported the
Russian side in this conflict, though his supporters in the east of the
country would be hit hardest by the price increase.

What is really in play and how will this conflict be resolved?

[1] First, most of the talk and bitterness about the negotiations have come
from the companies most involved -- Gazprom and Naftogaz. When
Gazprom announced its new price demands, politicians entered the fray.

Presidents Vladimir Putin and Yushchenko have sought to cool tempers.
Putin's statement that the gas dispute should not hinder Russo-Ukraine
relations appears to be directed to Europe to apply pressure on Ukraine to
compromise. In the end, neither president has an interest in offending
Europe -- Gazprom's most-important customer.

[2] The second issue is how this dispute is perceived by the other former
Soviet republics that import Russian natural gas. The drawn-out
negotiations with Ukraine have sent the powerful message the days of cheap
Russian natural gas are coming to a close. Moldova, Georgia and the three
Baltic states -- and even Belarus -- have watched the spat closely and come
to the conclusion playing hardball with Gazprom is a losing proposition.

[3] Third is the issue of control over natural gas pipelines. The issue that is
making the headlines is natural gas prices, but the subtext is management
and ownership of pipeline lines transporting Gazprom's gas. The company is
offering to accept stakes in Ukrainian enterprises -- in particular the
country's natural gas transportation network -- instead of cash payment for
natural gas. Gazprom appears interested in acquiring control over the
remaining parts of the Europe-bound gas transportation network, even
accepting a price of $46.68 per 1,000 cu m from Belarus last week after
Minsk agreed to hand over 50 percent of its gas transport company,
Beltransgaz. This issue, of course, is delicate for Ukraine -- pipelines
are the country's most important card in this dispute.

As the clock ticks away, Russia and Ukraine remain at loggerheads. Gazprom
has repeatedly stated it will turn off the taps at 10 a.m. Jan. 1 if there
is no new agreement. This could happen, but for only a day or so as a way
for both sides to prove a point. However, an agreement is inevitable and
everyone involved know this. What is most likely to happen is an initial
three-month agreement to conclude negotiations. This will calm passions in
two ways. The conflict will be removed from the center of Ukraine's
parliamentary campaign and allow a more business-like atmosphere to
dominate the talks. All parties in the gas war have made their point, now
consumers expect a deal. -30-
=====================================================
Peter Lavelle is Moscow-based and a political commentator for
"Russia Today" television.
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
10.WILL YUSHCHENKO SURVIVE GAS ATTACK FROM MOSCOW?

ANALYSIS & COMMENTARY: Compiled by Jan Maksymiuk
RFE/RL Belarus, Ukraine, and Moldova Report, Vol. 7, No. 44
Prague, Czech Republic, Thursday, 29 December 2005

For Ukrainian President Viktor Yushchenko, Russia's announced
intention to increase more than fourfold the price for gas supplies in
2006 represents the most serious challenge since his inauguration nearly
a year ago. If such a price hike was implemented, the pro-Yushchenko
camp would most likely suffer a severe defeat in the parliamentary
elections in March, while the decelerating Ukrainian economy could
grind to a halt.

Ukrainian Fuel and Energy Minister Ivan Plachkov met on the
evening of 28 December with his Russian counterpart, Viktor
Khristenko, in Moscow. However, their talks to resolve the ongoing
dispute over the price of gas exports to Ukraine in 2006 ended
inconclusively and were due to continue on 29 December.
On 28 December, Ukrainian Prime Minister Yuriy Yekhanurov
once again rejected Moscow's demand to sign an agreement on
buying Russian gas in 2006 for $230 per 1,000 cubic meters, up
from the current level of $50 per 1,000 cubic meters.

"The Ukrainian side considers this to be an unacceptable
price...and direct economic pressure on the country," Yekhanurov
said, adding that Kyiv has sent its own proposal to Moscow to settle
the gas-price row. "Should the Russian side refuse [to accept our
proposal], we have grounds to appeal to the Stockholm court
[Arbitration Institute of the Stockholm Chamber of Commerce]."
Yekhanurov did not provide any further details, but the
proposal he mentioned is apparently close to what Plachkov made
public on 27 December. Plachkov told journalists in Kyiv that Ukraine
wants Russia to charge $80 per 1,000 cubic meters of gas in the first
three to six months of 2006, with a gradual switch to a "market
price" in 2009. Plachkov did not say what price Kyiv could accept in
2009.

The spiraling war of words between Moscow and Kyiv over the
lack of an agreement on Russian gas supplies culminated on 27
December. Russian Defense Minister Sergei Ivanov responded to
Kyiv's suggestion that it might change the terms for Russia's
lease of a naval base in Sevastopol to compensate for the expected
gas price hike.

"The agreement on the division of the Soviet Union's
Black Sea Fleet is an inseparable part of a larger Russian-Ukrainian
treaty, the second part of which contains recognition of each
other's borders. Therefore, in my opinion, attempts to revise
that treaty would be fatal," Ivanov said.

Ivanov's pronouncements should not be taken at face
value, and one should not expect that Moscow could venture to revise
its borders with Ukraine, let alone launch a military intervention in
that country. But Ivanov's comments well illustrate the intensity
of the Russian-Ukrainian gas dispute and indicate that Moscow is
firmly set on having its own way.

What could constitute a reasonable compromise for Moscow and
Kyiv? Some economic experts have suggested a compromise price
could be agreed at $150-$160 per 1,000 cubic meters of gas, adding that
Ukraine could simultaneously increase its gas-transit tariff from the
current $1.09 to some $2-$2.50 per 1,000 cubic meters of gas per 100
kilometers.

But even such a compromise would increase Ukraine's
present gas bill -- some $2.2 billion in 2005 -- at least threefold,
depending on the terms of Turkmen gas supplies to Ukraine in 2006.

As a result, the impact of such a rise could be painful for the
Ukrainian economy and Ukrainians in the upcoming year.
According to experts from the Economist Intelligence Unit, if
the Ukrainian government decided to cushion this impact, it would
have to raise household gas tariffs by 50-100 percent and double gas
tariffs for industrial consumers. Such moves would be fraught with
grave political and economic consequences.

[1] First, the Ukrainian electorate could offset such a gas price
shock by voting overwhelmingly for forces opposing the government
of President Yushchenko, primarily the Party of Regions led by his
unsuccessful presidential rival, Viktor Yanukovych. Current polls
indicate that the Party of Regions is supported by some 25 percent of
voters, while the pro-Yushchenko Our Ukraine bloc is backed by 15
percent of Ukrainians.

[2] Second, the industrial base of the Ukrainian economy --
particularly its energy-intensive metallurgical and chemical branches
-- would certainly shrink, spawning unemployment and possibly
consumer price hikes.

The economy is already decelerating, from a growth rate of 12
percent in 2004 to 3 percent in 2005. The Economist Intelligence
Unit has said the economy could be close to stagnation in 2006.
Kyiv seems to be well aware of such unpleasant consequences
of the gas row with Moscow and has already taken or declared
that it will take some precautions and countermeasures.

Prime Minister Yekhanurov announced on 28 December that
household gas tariffs would rise by 25 percent on 1 January, or
by some $1.20 monthly for the average Ukrainian family.

Earlier this week, Fuel and Energy Minister Plachkov returned
from Ashgabat, saying that he signed a contract for Turkmen gas
supplies for 2006. However, he has not disclosed either the
contracted volume of gas or its price. It is also not known how
much the operators of Russian gas pipelines will charge Ukraine for
Turkmen gas transit next year.

In addition, Yekhanurov publicly warned Moscow that if
Gazprom reduces its gas flow across Ukraine in 2006 only to transit
volumes, Ukraine will take 150 cubic meters of gas from every 1,000
cubic meters as payment for transit. Gazprom responded that such a
practice would be treated as theft. However, Gazprom did not go as
far as to say that it will stop sending gas via Ukrainian pipelines
to Europe in 2006 altogether.

In theory, government measures could help the Ukrainian
economy survive at a relatively stable level until the 26 March vote
even without a gas-supply contract for 2006. But it is anybody's
guess as to whether President Yushchenko and his allies can maintain
their current political weight for that long. -30-
------------------------------------------------------------------------------------------
"RFE/RL Belarus, Ukraine, and Moldova Report" is prepared by Jan
Maksymiuk on the basis of a variety of sources including reporting by
"RFE/RL Newsline" and RFE/RL's broadcast services. It is distributed
every Tuesday. Direct comments to Jan Maksymiuk at
maksymiukj@rferl.org. HOW TO SUBSCRIBE: Send an e-mail to
pbureport-subscribe@list.rferl.org
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Be A Vice-President In Charge Of The Continuing Orange Revolution
========================================================
11. UKRAINE DENOUNCES DRASTIC GAZPROM PRICE INCREASE
Yekhanurov: Proposed $230/bcm price tag for gas unacceptable

NEWSLETTER: Our Ukraine Update, Vol II, Issue 3
People's Union Our Ukraine, Kyiv, Ukraine, Thu, Dec 29, 2005

KYIV - Prime Minister Yuriy Yekhanurov denounced Gazprom's proposal
to charge Ukraine $230 per billion cubic meters of natural gas next year,
calling it "unacceptable economic pressure - this is far from a market
approach."

Russia is threatening to cut off natural gas supplies to Ukraine on 1
January 2006 unless Kyiv agrees to pay almost five times more than the
$50/bcm stipulated in existing contracts between the two sides signed in
2004 and effective until the end of 2009.

"Ukraine will go to international arbitration if Gazprom unilaterally
reduces gas supplies to Ukraine next week," Yekhanurov said. Gazprom
sent invitations to reporters for a press opportunity on 1 January that
features turning off Russian gas to Ukraine.

Ukrainian interlocutors proposed raising the price for Russian gas to
$80/bcm, with gradual increases each year in line with existing agreements.
This approach would allow Ukrainian enterprises to gradually adjust to price
increases rather than being confronted by a five-fold price hike, which
could paralyze Ukraine's economy. Gazprom rejected the offer.
POLITICAL DECISION EXPECTED
President Viktor Yushchenko expects Moscow and Kyiv to reach a political
decision within the next few days regarding the supply of Russian gas to
Ukraine. "In the coming days, we will come to a political decision,"
Yushchenko said, referring to Russian President Vladimir Putin. "Ukraine
intends to justly pay for those goods and services which it receives,"
Yushchenko said.

"There can be no discussion about $230/bcm. This price will never be
accepted by Ukraine. This price is an ultimatum and not one that works
towards cooperation between our two economies, peoples and states. This
price is a provocation," Yushchenko stated.
CONTRACT WITH GAZPROM
The Ukrainian-Russian gas agreement was signed on 21 June 2002 between
Gazprom and Naftogas Ukrayiny for a period beginning 1 January 2003 through
1 January 2014. Eighty-five percent of Russia's natural gas supplies to the
European Union pass through pipelines owned and located on Ukrainian
territory.

During the height of last year's presidential election campaign, Ukraine's
pro-Russian Prime Minister Viktor Yanukovych signed an addendum to that
agreement 9 August 2004 whereby both countries agreed to transport Russian
gas through Ukraine's pipeline from 2005 through 2009 for a cost of
$1.09/bcm.

In August 2004, Russia advanced Ukraine $1.25 billion as payment
to secure the transportation of its natural gas through Ukrainian pipelines
to destinations in Europe through 2009. That same addendum guaranteed
Russia would supply Ukraine 25 bcm of natural gas at a rate of $50/bcm
from 2005 through 2009. Gazprom provides Ukraine the 25 bcm of natural
gas as barter in return for the transit of 120 bcm of gas to Europe.
KREMLIN TAXES UKRAINE'S EUROPEAN POLICIES
Since the signing of the August 2004 addendum, the political situation in
Ukraine and its geo-political orientation changed. Ukraine's President
Viktor Yushchenko declared and implemented a firm policy of closer
integration into Europe, intensified negotiations on accession to NATO,
rejection of deeper integration within the Single Economic Space proposed
by Russia, and refusal to participate in a gas transport consortium with
Russia, which called for Ukraine to give up ownership of its natural gas
pipelines to Europe.
GAS FUELS UPCOMING ELECTION DEBATES
Viktor Yanukovych, leader of the pro-Russian Region's Party, has used the
gas dispute between Moscow and Kyiv to lobby official Kyiv to ratify the
Single Economic Space agreement with Russia, Belarus and Kazakhstan and
cut a deal with Gazprom for cheap Russian gas.

Gazprom yesterday gave Minsk a cut-rate gas deal of $47/bcm in exchange for
its ownership of Belarus pipelines carrying Russian gas to Europe. Gazprom
proposed similar deals for Georgia and Armenia. Ukraine refuses to give-up
its natural gas pipelines and considers them a vital national security
interest.

To help bolster popular support for Yanukovych's position and raise hysteria
in the region, officials report that since December 21, pressure in Russian
gas pipelines to Donetsk have been gradually reduced by 30-50%.

"If Yanukovych had Ukraine's national interests in mind, he would propose
ratifying the free trade agreement between Russia and Ukraine rather than
the Single Economic Space, which strips Ukraine of its national
sovereignty," Our Ukraine legal advisor Roman Zwarych said. -30-
----------------------------------------------------------------------------------------------
Newsletter: Our Ukraine Update. Comments and questions:
responses@ourukraine.org, 1 Yaroslavska Street, Kyiv, Ukraine 04071
LINK: http://www.razom.org.ua/en/news/8686/
----------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
If you are receiving more than one copy of the AUR please contact us.
========================================================
12. "UNTYING AN INFERNAL FUEL KNOT"

ANALYSIS & COMMENTARY: By Serhiy Nikolayev
Ukrayinska Pravda web site, Kiev, in Ukrainian 21 Dec
BBC Monitoring Service,UK, in English, Thu, Dec 29, 2005

There are three practical ways of solving the current energy crisis in terms
of rising world prices and problems in gas talks with Russia, a Ukrainian
website has said. One option is to create a vertically-integrated energy
company, while others include ensuring the same rules for all energy
producers and getting rid of bureaucracy in the process of issuing licences
for developing wells, the article said.

The following is the text of the article by Serhiy Nikolayev entitled
"Untying an infernal fuel knot", posted on the Ukrainian website
Ukrayinska Pravda on 21 December; subheadings are as published:

This year's rise in the price of energy sources and the crisis in gas
negotiations with Russia have clearly highlighted the knot of problems which
has been blowing wind on the neck of the Ukrainian fuel and energy sector.

However, now is the time when, under pressure from insurmountable
circumstances in the fuel crisis, the Ukrainian authorities have a chance to
untie this knot and to optimize the work of the oil and gas sector. As US
President John Kennedy used to say, the wise Chinese write the word "crisis"
with two hieroglyphs at once: "catastrophe" and "opportunity".
OPPORTUNITY 1. ESTABLISHMENT OF VERTICALLY-
INTEGRATED COMPANY
Indeed, catastrophes in Ukrainian fuel and energy sector happen with obvious
regularity: twice a year, in April-May and in September-October. For some
reasons, both sowing and harvesting campaigns always turn out to be a great
surprise for Ukrainian authorities. This is why growing demand for fuel
almost usually transforms itself into price rises. Following the notorious
"ratchet rule", the price does not fall any more.

Twice a year, having stepped on the same rake, the state resumes playing
administrative games: it tries to regulate prices, bans oil production
experts, searches for ones guilty of incompetence and wages an exhausting
fight to get cheap fuel for agricultural works.

But neither of these "steps" produces important results because officials do
not understand the most important point: it is much more effective for the
state not to press on the market, but to have it own major player on this
market.

Of course, the State Committee for Material Reserves of Ukraine might have
been a player of this kind: it might have entered the market with fuel
interventions to drop the price. But we can recall a quotation from a
classical cat [from Russian animated film]: "For selling something we don't
need, it is necessary to buy something we don't need first. But we have no
money."

The 2005 state budget envisages just 625m hryvnyas [about 125m US dollars]
for the State Committee for Material Reserves, while according to the former
committee's chief Yevhen Chervonenko, the State Committee for Material
Reserves needs at least 2.7bn [hryvnyas] to fulfil all its functions.

There is a different way: to establish a vertically-integrated oil company
(VIOC) with the controlling interest in shares belonging to the state. It
should also have a completely closed cycle of production and distribution of
its produce: borehole - oil refinery - refueling station. According to
experts' calculations, taking into account the possible elements of this
company, the VIOC might control about 30 per cent of the fuel sales market
and substantially influence its retail price.

Not only the majority of Russian oil companies (in particular, Lukoil and
TNK), but also Russian officials have understood the benefits of this model.
It is no accident that the Russian Gazprom, whose controlling interest in
shares is owned by the state, is building up its muscles in oil extraction,
refining and sales (in particular, this concerns recent purchase of Sibneft
[Russian oil company] by Gazprom).

For developing a VIOC, not a single penny from the state budget funds is
required. All funding can be carried out within the limits of bank loans. In
particular, a loan for formation of the third "segment" of the mentioned
"chain", i.e. purchasing refueling stations, has been provided to [Ukrainian
state oil company] Ukrnafta by Deutsche Bank (240m dollars).

Taking into account credit interest rates, profit rate (the average profit
of a Ukrainian refueling station is up to 15,000 dollars), the number of
planned refueling stations (947 stations which are being purchased with the
existing customers' basis), taxation rates, etc., experts have calculated
that the purchase of refueling stations will pay for itself in four years.

Meanwhile, the state will get its powerful player on the fuel sales market
in one or two years, and it will be able to influence the price level and
stability in practice.

However, the groups which currently control oil refining and the sales
market are unlikely to be happy with this news. Despite the fact that nobody
will take the risk of doubting the establishment of a VIOC (as the former
President [Leonid] Kuchma and the incumbent President [Viktor] Yushchenko
have clearly stated that this kind of VIOC is necessary for the state), but
small spokes are already being put in its wheels.

In particular, MP Ihor Yeremeyev, who controls 41 per cent of the Halychyna
oil refinery, and has close ties with the oil trading entity Continuum
(owning the Western Oil Company which, in its turn, controls a chain of fuel
stations) has already launched a public attack against VIOC. Ukrnafta
reportedly buys its fuel stations for an extremely high price.

Another MP and Yeremeyev's colleague from the People's Party faction, Vasyl
Nadraha, came to saying that 120,000 dollars for building a fuel station is
just a pittance (in general, it is surprising for a member of the
parliamentary Committee for Pensioners' Veterans' and Disabled People's
Affairs to assess oil issues as an expert).

Having heard this comment, oil traders whom I know smiled skeptically and
immediately promised "to make an order to this 'expert' for building several
dozen fuel stations for this price."

Meanwhile, according to calculations by experts, the cost of building one
fuel station (including purchase of land) is from 700,000 to 1.2m dollars.
By the way, when Deutsche Bank accepted purchased fuel stations as a
mortgage (as a rule, the mortgage price is 50-60 per cent of the actual
price), made an evaluation of 600,000 dollars for each one.

The second offensive line against a VIOC goes through the Halychyna oil
refinery. The point is that the auction to sell 32.86 per cent of
Halychyna's shares has been scheduled for 25 January 2006. Ukrnafta is very
likely to take part in the contest, as the company needs an enterprise for
refining extracted oil.

On the other hand, Ukrnafta's board decided to abstain from participation in
the mentioned auction as early as on 19 October, because, first, purchasing
the mentioned stockholding does not guarantee the company's participation in
managing the enterprise, and second, there are questions with regard to the
relationship between the Halychyna oil refinery and Ukrainian taxation
authorities: statements with regard to the refinery's failure to pay taxes
on a large scale have been made).

Yeremeyev makes accusations again, and accusations are related to prices
again. The initial price of the package is allegedly three times higher.

There is information that, in response to this, Ukrnafta is ready to offer
Yeremeyev to buy his own package according to the proposal he has announced.
The desire to purchase Yeremeyev's package has been indirectly confirmed by
the fact that one of Ukrnafta's shareholders, Ihor Kolomoyskyy, said after
the shareholders' meeting on 20 December that it would be feasible for the
company to take part in the refinery's economic activities if it had a
controlling stake of shares, very preferably 60 per cent and more.
OPPORTUNITY 2. INTRODUCTION OF UNIFIED AND STABLE
RULES OF THE GAME FOR ALL EXTRACTORS
What do the Russians, the Romanians or the Turks do when the world price for
oil and gas grows? Regardless of the volumes of their own prospected oil
stocks, they cautiously begin to increase extraction (in order not to scare
the market, as happened in mid-1980s). This way they either save on
importing energy sources from abroad or increase income from exporting their
own fuel.

Everything is on the contrary in Ukraine: in the course of the first half of
2005, when the world price of Russian gas saw almost 20-per-cent growth and
when Russia began speaking about liberalization of gas prices, the growth of
Ukrainian gas extraction saw... [ellipsis as published] a 24-fold slowing
down in comparison with the same period of the previous year.

The situation with oil is similar. While contracted Russian oil prices for
Europe saw growth of 65 per cent (in nine months), Ukrainian oil extraction
growth was just 2.6 per cent, and extraction of gas condensate, which
accompanies, oil fell by 4.4 per cent.

In reality, these surprising statistical discrepancies have very clear and
understandable reasons. The most important of them does not lie in the fact
that we have insufficient reserves of prospected energy sources (even if
volumes of gas extraction are increased by half, and if new deposits are not
prospected at all, reserves of prospected deposits will be sufficient for
about 20 years).

As strange as it may seem, the main reason lies in the fact that...
[ellipsis as published] it is unprofitable to extract oil or gas following
the regulations in force for those enterprises where the state has a
controlling share interest (the share of Ukrainian gas extracted by them is
over 95 per cent, and the share of oil is over 97 per cent).

Let us take gas as an example. The average cost of extracting 1,000 cubic
metres of gas in Ukraine equals 197 hryvnyas. Being a state-owned
enterprise, the national joint-stock company [NJSC] Naftohaz [Ukrayiny] is
obliged to sell its gas primarily to the population and municipal
enterprises. Taking into account the fact that all of them taken together
consume larger volumes of gas than Ukraine extracts, the word "primarily" is
transformed into the phrase "almost impossible".

Taking into account the fact that the Naftohaz sale price is 112 hryvnyas
(which is lower than the cost price), one can ask Naftohaz board members a
"very simple question": why do they reduce the company's profitability by
prospecting new deposits and extracting and selling more gas?

As reduction of the company's profitability also results in a reduction of
the amounts of taxation revenues and state dividends, this "simple question"
can bring the Naftohaz board to criminal liability.

Meanwhile, gas companies which have obtained licences for gas deposits
supply gas to the chemical and metals industries not for 112, but for
440-450 hryvnyas per 1,000 cu.m. Therefore, it is obvious that,

[1] FIRST of all, it will be necessary to increase gas tariffs for the
population to the level of its cost price. The price of 1,000 cu.m. of gas
for the population is 22 dollars in Ukraine, compared to 38 dollars in
Russia, 70 dollars in Kazakhstan and 120 dollars in Moldova. Those who are
not able to pay the higher price should get direct aid instead of exhausting
the sector with price limits.

In addition, the actual gas price will promote energy saving.

[2] SECOND, certain standards for supplying gas to the population should
be developed, and they should not depend on the form of ownership of the
extractor.

As to oil, the situation here is not simple either. Ukrnafta extracts oil,
but it is not sure whether it will be able to sell it for the market price.
There were quite frequent cases in the course of the recent year when oil
refineries did not want to take part in auctions to sell oil, but in cases
when they took part, they were not in a hurry to bargain for oil and
demonstrated "a surprising coordination of positions".

Consequently, Ukrnafta was forced to "request" other refineries to refine
extracted oil. Despite the fact that almost all of them do not work to full
capacity (Odessa and Kherson oil refineries were actually idle in the course
of recent months), and the state is a shareholder in three of them
(Kremenchuk, Nadvirna and Halychyna oil refineries), there are frequent
cases when oil refineries' management refuses to work with Ukrainian oil.

The stance of the owners of Russian oil refineries is absolutely clear: they
are already vertically-integrated entities and are oriented at refining
their own oil. Even when oil refineries are out of work, their owners still
get profit through redistribution of incomes in the whole chain from
borehole to fuel station.

"Manual management" [presumably through administrative means] of rent
payments also prevents normal oil and gas extraction. Despite the fact that
the law "On rent payments for oil, gas and gas condensate" exists in
Ukraine, its legal force is suspended every year. The rent figure doubled in
2005 alone. There was not a single case when calculations were presented on
whether the sector would survive the new rent rates.

How can one calculate profitability, how can one develop a financial plan
for an extractor, how can one calculate the feasibility of developing new
deposits in the face of this uncertainty? There is no way. This is why
extraction growth is dropping. This is why prices are growing. This is why
the country's energy dependence is growing.
OPPORTUNITY 3. OPTIMIZING PROCEDURE FOR ISSUING
PERMITS FOR DEVELOPING DEPOSITS
There is another problem which does not allow Ukraine to increase oil and
gas extraction volumes: it is the extremely bureaucratized procedure for
issuing permits for developing deposits and land allocation for them.

Just guess the time which, in accordance with Ukrainian legislation, is
needed for government entities to issue a permit for developing a deposit?
It is two years! However, this process could, objectively, last no more than
two months.

As for land allocation, the situation is even more complicated, as land is
allocated by local councils. Any person having relative powers in a region
(first and foremost, its governor) can block this process.

For example, one former governor of Sumy Region was so keen on trying to
appoint his man the chief of Okhtyrkanaftohaz [oil and gas company in Sumy
Region] that he blocked the process of land allocation for boreholes. As the
result, only half of the 70 boreholes planned in the region have been
developed.

Major questions also emerge with regard to transparency of the process of
issuing licences. The State Committee for Natural Resources issued 116
licences for developing oil and gas deposits last year. Over 80 of them were
distributed among private companies. A large number of these companies did
not deal with extracting natural resources at all previously.

The State Committee for Natural Resources allocated 22 wells without any
tenders or contests last year.

According to the NJSC Naftohaz Ukrayiny, gas extraction at many of these
deposits has not begun yet, though in accordance with the law "On oil and
gas" and the code "On mineral wealth", licences for land plots should be
revoked if works fail to start in the course of six months from the date
when the permits come into force.

Consequently, the need exists to minimize the terms for obtaining permits
and land allocation at legislative level, having determined a limited list
of grounds for a refusal to allocate land for a deposit, along with defining
clear restrictive criteria for candidates for "purchasing" deposits and
increasing control over the process of their development. -30-
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Send in a letter-to-the-editor today. Let us hear from you.
========================================================
13. GREAT CHALLENGE: BALTIC PIPELINE HARDLY CONDUCIVE,
OR OUTRIGHT HARMFUL, TO EUROPE'S ENERGY SECURITY

ANALYSIS & COMMENTARY: By Janusz Steinhoff
Former Polish Deputy Prime Minister & Minister of Economics
Summary of an article featured in Rzeczpospolita
Polish News Bulletin, Warsaw, Poland, Friday, Dec 30, 2005

The following is a summary of an article, featured in Rzeczpospolita, by
Janusz Steinhoff, former deputy prime minister and minister of economics in
the conservative Jerzy Buzek cabinet (1997-2001). The, pending for some time
now, Polish energy security debate, writes Steinhoff, has recently been
joined by Wolfgang Clement, minister of economics in the Gerhard Schroeder
cabinet.

The fact that a former minister responsible for Germany's energy policy
makes an attempt to convince the Polish public to his arguments relating to
Europe's energy security is laudable. Alas, Clement's arguments are hardly
convincing. Clement stresses on several occasions the importance for western
Europe of ensuring fluent natural gas supplies in a situation where its
consumption has been rapidly growing. It is forecast that the EU's gas
imports will grow by 100 billion cubic metres by 2015.

While one can hardly question those forecasts, it needs to be noted that a
further steep fall in the EU economy's energy intensity, or a substitution
of the basic energy sources, could reduce the forecast gas import needs. It
is of course beyond debate that Europe's own gas resources are limited and
do not make it possible to boost production proportionately to growing
consumption.

It is also beyond dispute that energy security depends to a significant
extent on the diversification of supplies and on storage capacity. Of
course, "diversification" means not only diverse gas suppliers but also
diverse transport routes. All those arguments, cited by Clement, are obvious
and beyond dispute.

Alas, his other arguments, referring to the Northern Gas Pipeline project in
the context of Europe's energy security, are hardly acceptable. Firstly, Mr.
Clement has failed to notice that, since May 1, 2004, Lithuania, Latvia,
Estonia, and Poland are rightful EU members, and that cooperation with
Ukraine and the region's other countries is as important as developing good
economic relations with Russia. The EU's energy policy, aimed at ensuring
the continent's energy security, will only be effective if it respects the
interests of all member states.

Nor has Mr. Clement noticed the fact that, in the recognition of, among
other things, its western neighbour's energy needs, Poland signed in 1993 an
agreement with the Russian government on the "development of a gas pipeline
system for the transit of Russian gas, and on supplies for the Republic of
Poland."

Under that agreement, and an additional 1995 protocol, a system of transit
pipelines was to be developed consisting of two pipelines of a joint annual
capacity of some 65 billion cubic metres. The length of the pipeline
stipulated in the above agreement, known as the Yamal pipeline, from the
Polish-Belarussian border to the Polish-German border, amounts to 665 km.

So far, only the first pipe has been developed, which transports gas to
Germany. Poland receives from that pipeline only some 2.5 billion cubic
metres, receiving the bulk of its Russian gas supplies from existing
Ukrainian and Belarussian terminals.

Due to the Russian government's decision, the pipeline's second line hasn't
been developed so far, and the chances that it ever will, in the light of
the intensely promoted concept of the Baltic pipe, appear ever slimmer. It
is worth noting that Poland has granted significant public aid to the second
Yamal line project, and the Polish-Russian company EuRoPol Gaz (in which
Germany's Wintershall also holds a small stake) has actually spent funds on
documentation and planning work.

The second Yamal line would be supplying some 32 billion cubic metres of gas
to Germany annually. One therefore needs to ask what was the rationale of
awarding the Baltic pipe a higher priority than that awarded to the
continuation of the second Yamal line?

The economic arguments leave no doubt: at some 1 billion euro, the cost of
developing the second Yamal line would be three to four times lower than the
cost of the Baltic pipe. The latter, connecting Vyborg near St. Petersburg
with Greifswald in northern Germany, with a length of some 1,200 km, has a
planned annual capacity of 27.5 billion cubic metres, and, in the twin-pipe
version, 55 billion cubic metres. The forecast transit cost of $3-3.5 per
1,000 cubic metres per 100 km is high compared with average transit costs in
European land pipelines.

Mr. Clement points to one advantage of the northern pipe: higher energy
security for the EU as a result of securing a direct connection between
Germany with the Yuzhno-Russkoye deposit in Russia, and thus eliminating
transit countries, which, according to Mr. Clement, would be significantly
impairing the certainty of supplies. That is an argumentation one cannot
agree with.

Does Mr. Clement rate the credibility of Lithuania, Latvia, Estonia, and
Poland, all four EU members, below that of the Russian Federation? Sad to
say, everything suggests that he does indeed.

Mr. Clement also suggests that the Northern Pipeline, which will run "only"
100 km from the Polish shore, will improve the energy security of Poland and
the Baltic states, because, as Mr. Putin has pledged, it will be possible in
the future to connect those countries to the pipe.

Well, writes Steinhoff, that argument is simply absurd. Why should linking
those countries to the Baltic pipe be more rational, even putting the
economic arguments aside, than simply transporting gas through their
territories through a ground pipe?

The argument about the uncertainty of transit through Ukraine and Belarus is
also false. Mr. Clement seems to be forgetting that last year's
perturbations in gas supplies to Poland and Germany weren't in any way
caused by Belarus, but were instead the result of Gazprom's conscious
decision to pull the plug.

Thus, in its dispute with Minsk over pipe ownership issues, gas prices, and
transit fees, Gazprom reached for instruments of pressure seldom used in the
civilised world. In the Russian-Ukrainian dispute, too, Mr. Clement sides
firmly with the Russians, as if he didn't know, or refused to acknowledge,
that the EU mediators' position on this dispute has hardly been unambiguous.

One needs to remember that business disputes should be solved through
arbitration and on the basis of international law, rather than through
blackmail by a gas provider who, due to historical factors, has achieved a
monopolistic position.

Mr. Clement should therefore demonstrate greater distance and empathy to
both sides' positions instead of locating his sympathies so clearly. The
consecutive Polish cabinets have always stressed the importance of energy
security for Europe. We have always believed that, as a transit country, we
should be a credible partner for the suppliers and recipients of energy
commodities. We have been and will be, writes Steinhoff, open to proposals
of transporting gas through our territory from various directions.

Poland was also interested in the concept of the so called inter-system
connector, an idea that reflected growing gas consumption levels in southern
EU. The Jerzy Buzek cabinet initialled contracts for the supply of gas from
Denmark and Norway as an important element of the Baltic Pipe project. One
is convinced that all those projects were in line with a rational vision of
Europe's energy security, without harming Poland's relations with its
neighbours.

Unfortunately, judging by the arguments presented by Mr. Clement, the
Northern Pipeline project, supported so strongly by the German and Russian
governments, is hardly consistent with a rational vision of Europe's energy
security. In fact, it is actually harmful for it, and for the new government
in Warsaw, the situation represents a major challenge. -30-
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Send in names and e-mail addresses for the AUR distribution list.
========================================================
14. GAS "CHESS BOARD"
It's like a game of chess: any price paid for the king defense can't
be too high, since after the mate to the main piece the game is over.

GUEST ANALYST: Dr. Andriy Starodub, Scientist
Institute for Archeography and Cource Studies
National Academy of Science of Ukraine
UKRAINIAN MONITOR, #51/2005
Centre for Peace, Conversion and Foreign Policy of Ukraine
Kyiv, Ukraine, Tuesday, December 27, 2005

The analysis of the Kremlin actions in Russian-Ukrainian "gas-information"
war presents problems to many political scientists. Really, not sufficient
seem explanations, such as Putin's administration, pressing Ukraine,
acts only in the interests of the relatively "Russian" forces or "revenge
forces", aiming at bringing them to power after March, 2006.

Moreover, the intervening pressing result is the rate increase of
the presidential "Nasha Ukraina", but not Akhmetov and Yanukovych
"Regions Party". It would be naive as well to think that the Kremlin didn't
plan possible counteractions of the Ukrainian authorities in response to
the gas blackmail: from the consideration of the lease payment
conditions for the Black Sea Fleet basing in the Crimea to the
cancellation of lending radar stations at Sevastopol and Mukachevo.

And these Ukrainian steps, no matter how ironically the chances of
their usage are presented by Russian mass media, are a real threat
to the national security of the Russian Federation.

The threat being more real than newly created Democratic Choice
Community or "NATO forwarding to the East". Besides, it was clear
that this conflict will overstep the limits of bilateral relations
long before the claims of Ukrainian high-ranking officials,
announced last week (concerning the appeal to the Stockholm
Arbitration Court and to the countries that in 1994 guaranteed not
to use the mechanisms of political and economic pressure onto
Ukraine in exchange for the refusal of nuclear power possession).

And all this scandals will hardly improve the international image of
Putin's Russia and its gas monster - "Gasprom" company, and profits
from the price increase for several countries won't cover possible losses.

So, the Ukrainian patriots can continue to satisfy themselves with
the fact that Russian Federation has aroused the present conflict
only to return "refractory" Ukraine under its influence, but certain
reasons exist to think that for real the gas price for Ukraine,
"revenge forces" support and even the desire to occupy the transit
gas-transport system couldn't be a motivation to rush to the "gas"
attack. What problem is solving the Kremlin actually, playing rather
a dangerous game?

There is a Polish proverb: "When the matter is unclear, the matter
concerns money". At first sight, "Gasprom" is constantly talking about
money - 160 dollars for a thousand gas cubes, 230, and at the end of the
last week Medvedev, the deputy chief of the managing board of the
company, didn't exclude the price of 500-700 dollars. President
Putin even counted how many additional milliards of dollars will
bring to the Russian treasury the price increase for Ukraine and how
they may be spent for the welfare of the Russian people.

But a more interesting question is that of money which are not
announced nor by the President, neither by "Gasprom" - namely
profits from the gas monopolist share sale - how they will be spent
(and to whom they will belong). Last week Putin has signed the law
removing restrictions on "Gasprom" shares' purchase by foreigners.

That means that "Gasprom" de-jure turns into a fully commercial
structure, being moreover one of the most powerful in the world, and
its shares will be purchased freely and sold at the stock exchanges.

The scandals, like the present one, could essentially influence the stock
price, which creates ideal conditions for speculative earnings on prices
fluctuation and for transfer process manipulation of the Gasprom
shares from one owners to others. In the context of the "Peter
chekist" problem - power reservation after 2008 - it is very
important whose hands the above-mentioned shares will fall into.

So, "the question price" is much higher than additional 3-4 milliards
dollars got from Ukraine. Perhaps, that was exactly what the Russian
political strategist Stanislav Belkovsky meant, when proposing to consider
Putin and his team rather businessmen, but not people ready to sacrifice
everything to the Russian Empire restoration?

Taking everything into consideration, this aspect of the problem is
known to the Ukrainian authorities, since the prime minister Yuriy
Yekhanurov in the recent interview to the "Dzerkalo tyzhnia"
(December,24) hinted as the possible development of events, when a
London suburbian citizen, the owner of several Gasprom shares, would
bring an action against the company management, that it makes
decisions on political motives risking his (shareholders) investments.
By the way, a couple of interesting persons live in London watching
closely the Moscow events and looking forward to the year 2008:

The "Gasprom" leadership, having no desire to go into this problem,
was also made to claim about the possibility of such development of
events in case :if gas would be sold to Ukraine at the price, lower
than to the west-european consumers.

According to "Gasprom" statement, minor owners will bring actions against
Miller and Medvedev, accusing them for a profit deficiency from price
preferences granted to Ukraine. The things, "Gasprom" doesn't want to
comment on, are reasons, because of which foreign stock owners are
not offended today by the gas price for Byelorussia amounting only15-
20% from the European one.

TO SUM UP, the Ukrainian-Russian gas conflict and its influence on
the bilateral relations and political situation in Ukraine during the period
of parliamentary elections is only the "top of the iceberg" of this
complicated game, the bet being a really giant sum of money and
power preservation in the Kremlin.

It's like a game of chess: any price paid for the king defense can't
be too high, since after the mate to the main piece the game is over.
-------------------------------------------------------------------------------------
Ukrainian Monitor is an information-analytical project of the Center
for Peace, Conversion and Foreign Policy of Ukraine (CPCFPU).
Nataliya Parkhomenko, E-mail: office@cpcfpu.org.ua;
http://www.cpcfpu.org.ua; http://www.foreignpolicy.org.ua
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
15. RUSSIA BANS MEAT IMPORTS COMING FROM UKRAINE

NTV Mir, Moscow, in Russian 2330 gmt 29 Dec 05
BBC Monitoring Service, UK, in English, Friday, Dec 30, 2005

MOSCOW - Russo-Ukrainian relations are becoming increasingly diverse.

It has been announced that as of Friday [30 December] Russia is closing
its borders to imports of all types of animal produce from Ukraine.

This is due to the failure to meet Russian hygiene standards, in particular
where animal produce transiting through Ukrainian territory is concerned.
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Power Corrupts and Absolute Power Corrupts Absolutely.
========================================================
16. JACKSON-VANIK GRADUATION COALITION CRITICIZES
STATEMENT BY UKRAINE'S INTER-REGIONAL
ACADEMY OF PERSONNEL MANAGEMENT (MAUP)

News Release: Jackson-Vanik Graduation Coalition
Amb Steven Pifer and Amb William Miller, Co-Chairmen
Washington, D.C., Friday, December 23, 2005

WASHINGTON - The Co-Chairs of the Jackson-Vanik Graduation
Coalition, Ambassadors Steven Pifer and William Green Miller, today
criticized the December 20 statement by the press service of Ukraine's
Inter-Regional Academy of Personnel Management (MAUP), as published
on MAUP's web-site. That statement is factually wrong on several counts.

[1] First, the MAUP press statement claims that there is no connection
between recent statements by MAUP and efforts in the U.S. House of
Representatives to pass legislation to graduate Ukraine from the Jackson-
Vanik Amendment.

Coalition representatives, however, in recent contacts with Congress have
heard considerable concern about the anti-Semitic nature of MAUP
statements, in particular those statements expressing MAUP's support for
the Iranian president following his outrageous remarks regarding Israel.
There can be no place for anti-Semitism in a modern European democracy.

[2] Second, the MAUP press statement attributes several quotes to Mark
Levin, Director of the National Conference of Soviet Jewry (NCSJ). Mr.
Levin, a very active and supportive member of the Jackson-Vanik
Graduation Coalition, has never made such comments.

Indeed, he is extremely concerned that recent MAUP statements will
weaken support for Jackson-Vanik graduation among those Jewish-
American organizations that make up the NCSJ.

[3] Third, the MAUP press statement falsely suggests that Ihor Gawdiak,
President of the Ukrainian American Coordinating Council, is an opponent
of graduating Ukraine from Jackson-Vanik. To the contrary, Mr. Gawdiak
has long supported graduating Ukraine from Jackson-Vanik and has been
closely involved with the Jackson-Vanik Graduation Coalition since its
founding.

Mr. Gawdiak has criticized earlier MAUP statements precisely because of
his outrage at the nature of those statements and because they could delay
Jackson-Vanik graduation for Ukraine. -30-
---------------------------------------------------------------------------------------------
LINK: http://www.usukraine.org/news.shtml; http://www.maup.com.ua/.
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
17. UKRAINE: PRESIDENT YUSHCHENKO VISITS KYIV SYNAGOGUE

Press office of President Victor Yushchenko
Kyiv, Ukraine, Wednesday, December 28, 2005

KYIV - Victor Yushchenko visited the Central Synagogue in Kyiv to
mark Chanukah with Ukrainian Jews.

He congratulated them on this religious holiday and pledged to spare
no effort to help the people of all nationalities and beliefs preserve and
develop their traditions, culture and language.

The President wished those present good health, peace, happiness,
and inspiration. -30-
----------------------------------------------------------------------------------
LINK: w photo: http://www.president.gov.ua/en/news/data/1_5236.html
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Send in names and e-mail addresses for the AUR distribution list.
========================================================
18. U.S.-UKRAINE FOUNDATION (USUF) CONDEMNS NOV 4, 2005
STATEMENTS BY THE INTERREGIONAL ACADEMY OF
PERSONNEL MANAGEMENT (MAUP) IN UKRAINE

U.S.-Ukraine Foundation (USUF), Washington, D.C., Fri, Dec 23, 2005

WASHINGTON- The U.S.-Ukraine Foundation condemns the November
4, 2005 statements by the Interregional Academy of Personnel Management
(MAUP) as hateful, virulent and having no place in the public discourse in
Ukraine or anywhere else.

MAUP's anti-Semitic statements supporting the Iranian President's recent
call for Israel to be "wiped off the map" was an affront to decency that
provoked the unequivocal international condemnation it deserved.

Even before Ukraine's independence the leadership council of the democratic
movement, Rukh, included representatives of all religious and ethnic groups
in Ukraine and advocated religious and ethnic tolerance and cooperation.

Since independence one of the most notable achievements of each successive
government of Ukraine has been a consistent commitment to defending the
religious and ethnic rights of all the people of Ukraine.

Current President Victor Yushchenko has continued this unambiguous
commitment by pledging to bring minority groups together and reconciling
historic conflicts.

The International Religious Freedom Report for 2005, published by the U.S.
State Department, recognized that "President Yushchenko has, since taking
office, spoken publicly about his vision of a Ukraine in which religious
freedom flourishes and people are genuinely free to worship as they please."

There is no place in any civilized society for the type of vicious and
malignant sentiments being espoused in the name of MAUP. Such ugly views
must be openly and unequivocally denounced and not allowed to influence
and distort either Ukraine's domestic or external dialogue. -30-
--------------------------------------------------------------------------------------------
The U.S.-Ukraine Foundation, is a non-for-profit organization working in
Ukraine for 15 years ".to facilitate democratic development, encourage free
market reform, and enhance human rights in Ukraine. The Foundation
creates and sustains channels of communication between the United States
and Ukraine for the purpose of 'Building Peace and Prosperity Through
Shared Democratic Values.' USUF is dedicated to strengthening the mutual
objectives of both nations while advancing Ukraine as a cornerstone of
regional stability and as a full partner in the community of nations."
----------------------------------------------------------------------------------------------
LINK: http://www.usukraine.org/news.shtml; http://www.maup.com.ua/.
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
19. UKRAINE: PRES YUSHCHENKO OPENS CHRISTMAS EXHIBIT

Press office of President Victor Yushchenko
Kyiv, Ukraine, Wednesday, December 28, 2005

KYIV - Today, the President will take part in a ceremony to open a
Christmas exhibition of old things from private collections of Victor
Yushchenko, Petro Honchar, Lidiya Lykhach, and Vasyl Vovkun.

This exposition, 'The Colors and Melodies of Ukrainian Christmas', is
being conducted by Rodovid-Gallery, Ivan Honchar Center of Folk
Culture and Ukraine 3000 to promote Ukrainian traditions and culture,
and will be held at the Ukraine House (Ukraiinsky Dim) until January 15,
2006. -30-
-----------------------------------------------------------------------------------------
FOOTNOTE: If you have the good fortune to be in Kyiv anytime
between now and January 15 we recommend you go see "The
Colors and Melodies of Ukrainian Christmas' Exposition. When I
was in Kyiv in early December Lidiya told me the President had
contacted her and asked her to organize this Exhibition. We have
worked closely with Lidiya Lykhach, Petro Honchar and Vasyl
Vovkun on other exhibitions and this should be a really good one.
EDITOR
------------------------------------------------------------------------------------------
LINK: http://www.president.gov.ua/en/news/data/1_5240.html
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
20. UKRAINIAN VILLAGE

By Anne Klockenkemper, Staff Writer, Sun-Herald
North Port Sun, North Port Florida, Friday, Dec 23, 2005

NORTH PORT -- Snowcapped mountains reach into the starry sky,
towering over a scenic Ukrainian village complete with straw-thatched
houses, a gold-domed Orthodox Cathedral and colorfully dressed
residents.

This isn't a real Ukrainian village, however. It sits in Irene and Myron
Radzykewycz's lanai, and the residents are dolls and angels, each clothed in
authentic Ukrainian garb lovingly and intricately embroidered by Irene. "I
started doing this 50 or 60 years ago," said Irene.

Close to 70 dolls of various sizes are dressed in the native costumes of
various areas of the Ukraine, including Kiev and the Carpathian Mountain
regions. Irene learned to embroider as a girl in the Western Ukraine, and
she came up with the idea to set up the village on her lanai during
hurricane season. "When we put up the hurricane curtain, that gave her the
idea to set up the extra room," said Myron.

Irene, who came to the United States from the Ukraine in the 1950s, does
extensive research into the costumes of different Ukrainian regions before
creating a new doll. Some of them are bright and colorful; others,
especially the angels, wear dresses that are all white, cream or tan.

"The special Ukrainian name for white-on-white embroidery, or for very pale
colors, is merezhewo," said Myron. Depending on the size of the doll, it
takes Irene between four weeks and three months to embroider the dresses
her dolls wear. And when she needed boots for several of the male dolls, she
found a creative way to make them. "I went into my closet, and I found an
old pair of black, leather gloves and I cut off the fingers," she said.

The entire tableau takes nearly three weeks to set up. "I arrange it
differently every year," Irene said. "You have to have patience to do this."
And while Irene constructed all the smaller buildings, Myron built the
cross-shaped church that dominates the miniature landscape. "My uncle was
a monsignor in (the) Ukraine, and he built a village church from stone. I
was trying to copy from that," Myron said.

Irene likes to go into the lanai and just sit on the floor contemplating her
creation and the history her village reflects. "These things don't exist
anymore," she said. "When I sit in here, I dream. I go back in time." Irene
doesn't sell her creations, and can't name one that is her favorite.

"How can you have a favorite, when they are all so beautiful?" she asks.
"And I'm not ready to part with them yet -- it's my little heaven." -30-
------------------------------------------------------------------------------------------------
You can e-mail Anne Klockenkemper at aklockenkemper@sun-herald.com.
http://www.sun-herald.com/NewsArchive2/122305/np2.htm?date=122305&story=np2.htm
-------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
Send in names and e-mail addresses for the AUR distribution list.
========================================================
21. UTAH'S GREAT, BUT UKRAINE IS THE PLACE ON NEW YEAR'S
New Year's Eve in his hometown of Nikolaev, city of 700,000 near the
Black Sea in southern Ukraine, always biggest celebration of the year

By Cathy Free, Deseret Morning News
Salt Lake City, Utah, Thursday, December 29, 2005

It's tough to find decent caviar, and the fireworks show seems to last no
longer than it takes Oleg Kustov to toast the New Year.

But the man who runs Salt Lake City's only Russian cafe doesn't mind a few
trade-offs to fulfill his dream. In his homeland of Ukraine, he probably
never would have been able to open his own restaurant.

"There's too much crime there, too much corruption," he says. "When I visit,
I am always glad to come home to Utah. This feels like home now." Still, on
Dec. 31, Oleg usually feels a twinge of homesickness for the traditions he
left behind when he came to Salt Lake City 15 years ago with his parents and
younger sister.

New Year's Eve in his hometown of Nikolaev, a city of about 700,000 near the
Black Sea in southern Ukraine, was always the biggest celebration of the
year. More than 50 relatives would fill his family's apartment and sit down
at 11 p.m. to an elegant feast of roast goose with apples, veal cutlets, cod
liver salad and loads of red and black caviar.

At 11:59, the adults would fill their glasses with vodka and say "goodbye"
to the old year. Then, they'd quickly refill them to toast the New Year at
midnight, says Oleg.

"When the clock struck 12, there was an enormous fireworks show in the
city that would last 45 minutes," he says. "To a child, it seemed to go on
forever - these magnificent bursts of red, gold and white. It was magical -
the fireworks in America just can't compare."

The best part of the celebration, though, was when his relatives pushed the
furniture against the walls, turned on some loud music and danced -
sometimes until 4 or 5 in the morning.

" Everybody was so happy - that's what I remember," he says. "Even in hard
times, people always came together to celebrate the New Year. It was the
most special night of the year."

Hoping to share a few memories of his favorite holiday, Oleg, 29, invited me
to join him for a Free Lunch chat at Rasputin, the Russian restaurant he
opened with his mother, Asya, seven years ago. As the tantalizing aroma of
roast pork drifts from the kitchen, Oleg opens a large picture book about
his hometown.

"It was a beautiful city, but the economy went bad after the (Soviet Union)
breakup," he says. "So many people wanted to leave - they would talk about
the United States like money grew on trees. 'Everybody has a car, everybody
has a house,' they would say. 'It's an easy life.' Of course, they were
wrong. Yes, you can have a house and a car. But you have to work hard."

In high school, Oleg taught himself to speak English by watching the
television news. Homesick for old celebrations, he went to Salt Lake City's
annual New Year's fireworks show at Gallivan Plaza but was disappointed.

"It took a while to get used to Christmas being such a big deal here," he
says. "I was surprised when everyone went home to bed on New Year's
Eve at 12:30."

Between the 1917 Revolution and the fall of the Communist Party in 1991,
public observances of Christmas weren't allowed in Oleg's homeland. The
Russian New Year became the biggest day on the calendar - a celebration
that Oleg looked forward to for months.

Grandfather Frost- a Santa-like fellow with a flowing beard - would visit
that night, giving each child a small present. But the family feast was
always the star attraction. "Our family is smaller now in Utah, but we'll
still make a nice dinner," says Oleg. "At midnight, I will pour myself a big
glass of Stoli (vodka). It is in my blood, what can I say?" -30-
--------------------------------------------------------------------------------------------------
LINK: http://deseretnews.com/dn/view/0,1249,635172326,00.html
--------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
22. ADOPTION IN UKRAINE FULFILLS COUPLE'S CHRISTMAS WISH
Their third adopted child from Ukraine, all three have cerebral palsy

By Todd G. Higdon, Neosho Daily News Staff Writer
Neosho, Missouri, Saturday, December 24, 2005

BENTONVILLE, Ark. - "We feel like we got what we wanted." That phrase is
ringing in the home of the Jimmie and Amanda Clark family as they received a
Christmas gift a month early - a third child.

Amanda, who is originally from Neosho, and Jimmie, originally from Carl
Junction, have been married for seven years. Amanda's parents are Jim and
Marcy Crawmer of Neosho and Jimmie's parents are Jim and Virginia Clark
of Carl Junction.

The Clarks traveled to the Ukraine to adopt a little girl, Elena "Lena," 5,
from the Antoshka Baby Orphanage in Kramatorsk, Ukraine. The couple
made the trek in late October and was there for 28 days during the adoption
process.

"We got permission to see her in the orphanage 10 days prior to going to
court to adopt her," said Amanda, in a recent telephone interview with the
Neosho Daily News. "The first time that we saw her in person, Lena told the
staff 'this is my mama and my papa, they have come for me.' " According to
Amanda, those first words that Lena spoke made the couple feel really good.

This was not the first time that the couple has adopted children: they have
two sons also from the Ukraine. "We have always wanted children," Amanda
said in a previous interview with the Daily News. "But due to medical
problems, my doctor advised us not to have children." Then looking on the
Internet one day, the couple found the Web site of Cathy Harris from Florida
who has "found homes for more than 1,000 children from the Ukraine."

"We wanted to adopt," added Jimmie. So with paperwork and donating
$5,000 for the process the couple trekked to the Ukraine back in 2002 to
adopt Dimitri "Dima" (now 6) and Aleksei (now 5). Lena, like her brothers,
has cerebral palsy. She currently does not walk, but with time, the couple
is eager that she will walk.

However, the couple decided this time to go on their own in the adoption
process. Fundraising attempts, private donations and three churches raised
$16,000 (including a large portion of donations coming from Neosho) was
raised for the adoption. Not only did they get donations from local people,
but from people all across the United States.

According Amanda, the article which appeared in the Daily News back in
August was picked up by a Ukrainian news source and in return, people in
the United States donated to the cause. They also contacted the
Life2Orphans Web site, where the orphanage is listed.

While in the Ukraine, their two sons stayed in the United States with family
and friends.

According to the couple, the boys are elated on having a sister. Then when
they got back to the United States and with Christmas coming about, they
made preparations for her first Christmas. The family has decorated their
Christmas Tree and the couple has taken their children to see Santa Claus.

"At first, she (Lena) called Santa Claus 'grandpa' in Russian," Amanda said.
"Lena speaks Russian, but is learning English in her kindergarten class."
While visiting Santa, the boys told Santa what they wanted for Christmas.
Dimitri wants a race track and a snow shovel.

"He wants a snow shovel to help his dad shovel all of the snow that we will
have," Amanda said with a laugh. Aleksei would also like to get a race track
similar to his brother's and a robot. "Aleksei loves robots," added Amanda.
For Lena, she loves clothing, toys and according to her parents, "loves to
unwrap them."

Taking in more of the American entertainment scene, recently the family
watched the hit movie "The Polar Express." "That was the first film that we
as a family watched together," Amanda said. "We loved it...it is an amazing
movie."

Now as the Clarks' wake up on Christmas morning, thoughts run through
their heads. "We feel extremely blessed, we are whole now," said Amanda.
----------------------------------------------------------------------------------------------
http://www.neoshodailynews.com/articles/2005/12/24/news/news12.txt
--------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
PROVIDE DIRECT ASSISTANCE TO IMPOVERISHED UKRAINIAN
ELDERLY THROUGH AMERICAN FRIENDS OF "FOR SURVIVAL"
Make A Difference: For Survival, For Dignity, For Ukraine

Katie Fox, Volunteer Director, American Friends of "For Survival"
Washington, D.C., Wednesday, December 21, 2005

Dear Friends,
Please consider a final year end gift to Ukraine this year. As most of you
know, for the past several years I have been running a very small charity to
provide direct assistance to impoverished Ukrainian elderly. I decided that
I needed to do something to immediately and directly help the elderly people
who I saw begging on Kyiv's streets, in the wake of the economic collapse
that accompanied the break up of the Soviet Union.

This charity, the American Friends of "For Survival," is an all volunteer
effort, run by Americans here and in Kyiv. All funds collected are sent to
the American volunteers in Kyiv, who work with the established Ukrainian
charity "For Survival" so screen applicants and distribute funds. Every
cent of the funds we collect go directly to a poor elderly person to cover
basic living expenses.

I am making a final appeal this year, because, unfortunately, I have to.
Most of you know that Ukraine saw momentous changes this year, many
very positive. However, 2005 was also a year of tremendous inflation and
rising prices, especially in Kyiv. More than 80% of pensions are still
below the government-established minimum subsistence level.

"American Friends of 'For Survival'" is a registered 501(c)3 not-for-profit
organization. Donations are tax-deductible. Donations should be made out
to "For Survival" and mailed %Katie Fox, 3100 Connecticut Avenue #235,
Washington, D.C.

Thank you very much just for considering this and happy holidays!
Katie Fox, Washington, D.C.
----------------------------------------------------------------------------------------------
FOOTNOTE: The Action Ukraine Report (AUR) is publishing this
appeal because we have known about this project for some time and
are impressed with the work Katie Fox and the group of volunteers
that run the American Friends of "For Survival." Katie's daytime job
is as Deputy Director - Eurasia for the National Democratic Institute
(NDI) here in Washington. She can be contacted at katief@ndi.org.
Your support for this fine program will be much appreciated. EDITOR
----------------------------------------------------------------------------------------------
If you are receiving more than one copy of the AUR please contact us.
========================================================
"THE ACTION UKRAINE REPORT - AUR"
An Agent Of Change
A Free, Not-for-profit, Independent, Public Service Newsletter
ARTICLES ARE FOR PERSONAL AND ACADEMIC USE ONLY
Articles are Distributed For Information, Research, Education
Discussion and Personal Purposes Only
========================================================
SigmaBleyzer/The Bleyzer Foundation Economic Reports
"SigmaBleyzer - Where Opportunities Emerge"
The SigmaBleyzer Emerging Markets Private Equity Investment Group
and The Bleyzer Foundation offers a comprehensive collection of documents,
reports and presentations published by its business units and organizations.
All publications are grouped by categories: Marketing; Economic Country
Reports; Presentations; Ukrainian Equity Guide; Monthly Macroeconomic
Situation Reports (Romania, Bulgaria, Ukraine).
LINK: http://www.sigmableyzer.com/index.php?action=publications
You can be on an e-mail distribution list to receive automatically, on a
monthly basis, any or all of the Macroeconomic Situation Reports (Romania,
Bulgaria, Ukraine) by sending an e-mail to mwilliams@SigmaBleyzer.com.
"UKRAINE - A COUNTY OF NEW OPPORTUNITIES"
========================================================
UKRAINE INFORMATION WEBSITE: http://www.ArtUkraine.com
========================================================
"WELCOME TO UKRAINE"- "NARODNE MYSTETSTVO"
(Folk Art) and ContempoARTukraine MAGAZINES
UKRAINIAN MAGAZINES: For information on how to subscribe to the
"Welcome to Ukraine" magazine in English, published four times a year
and/or to the Ukrainian Folk Art magazine "Narodne Mystetstvo" in
Ukrainian, published two times a year, and ContempoARTukraine '
published in English four times a year please send an e-mail to
ArtUkraine.com@starpower.net. Complete information can be found
on the web at: http://www.artukraine.com/availbooks/index.htm.
========================================================
"THE ACTION UKRAINE REPORT- AUR" - SPONSORS
"Working to Secure & Enhance Ukraine's Democratic Future"
1. THE BLEYZER FOUNDATION, Dr. Edilberto Segura, Chairman;
Victor Gekker, Executive Director, Kyiv, Ukraine; Washington, D.C.,
http://www.bleyzerfoundation.com.
Additional supporting sponsors for the Action Ukraine Report (AUR) are:
2. UKRAINIAN FEDERATION OF AMERICA (UFA) , Zenia Chernyk,
Chairperson; Vera M. Andryczyk, President; Huntingdon Valley,
Pennsylvania
3. KIEV-ATLANTIC GROUP, David and Tamara Sweere, Daniel
Sweere, Kyiv and Myronivka, Ukraine, 380 44 298 7275 in Kyiv,
kau@ukrnet.net
4. ESTRON CORPORATION, Grain Export Terminal Facility &
Oilseed Crushing Plant, Ilvichevsk, Ukraine
5. Law firm UKRAINIAN LEGAL GROUP, Irina Paliashvili, President;
Kiev and Washington, general@rulg.com, www.rulg.com.
6. BAHRIANY FOUNDATION, INC., Dr. Anatol Lysyj, Chairman,
Minneapolis, Minnesota
7. VOLIA SOFTWARE, Software to Fit Your Business, Source your
IT work in Ukraine. Contact: Yuriy Sivitsky, Vice President, Marketing,
Kyiv, Ukraine, yuriy.sivitsky@softline.kiev.ua; Volia Software website:
http://www.volia-software.com/ or Bill Hunter, CEO Volia Software,
Houston, TX 77024; bill.hunter@volia-software.com.
8. ODUM- Association of American Youth of Ukrainian Descent,
Minnesota Chapter, Natalia Yarr, Chairperson
9. UKRAINE-U.S. BUSINESS COUNCIL, Washington, D.C.,
Dr. Susanne Lotarski, President/CEO; E. Morgan Williams,
SigmaBleyzer, Chairman, Executive Committee, Board of Directors;
John Stephens, Cape Point Capital, Secretary/Treasurer
10. UKRAINIAN AMERICAN COORDINATING COUNCIL (UACC),
Ihor Gawdiak, President, Washington, D.C., New York, New York
11. U.S.-UKRAINE FOUNDATION (USUF), Nadia Komarnyckyj
McConnell, President; John Kun, Vice President/COO; Vera
Andruskiw, CPP Wash Project Director, Washington, D.C.; Markian
Bilynskyj, VP/Director of Field Operations; Marta Kolomayets, CPP
Kyiv Project Director, Kyiv, Ukraine. Web: http://www.USUkraine.org
12. WJ EXPORT-IMPORT, Agricultural Companies, Kyiv, Ukraine,
David Holpert, Chief Financial Officer, Chicago, Illinois.
13. EUGENIA SAKEVYCH DALLAS, Author, "One Woman, Five
Lives, Five Countries," 'Her life's journey begins with the 1932-1933
genocidal famine in Ukraine.' Hollywood, CA, www.eugeniadallas.com.
========================================================
"THE ACTION UKRAINE REPORT - AUR" is an in-depth, private,
independent, not-for- profit news and analysis international newsletter,
produced as a free public service by the non-profit www.ArtUkraine.com
Information Service (ARTUIS) and The Action Ukraine Report Monitoring
Service The report is distributed in the public interest around the
world FREE of charge. Additional readers are always welcome.
TO GET ON OR OFF THE DISTRIBUTION LIST
If you would like to read "THE ACTION UKRAINE REPORT- AUR"
please send your name, country of residence, and e-mail contact
information to morganw@patriot.net. Additional names are welcome. If
you do not wish to read "THE ACTION UKRAINE REPORT" around
five times per week, let us know by e-mail to morganw@patriot.net. If
you are receiving more than one copy please contact us and again please
contact us immediately if you do not wish to receive this Report.
===================================================
HAPPY NEW YEAR 2006 !
=======================================================
return to index [The Action Ukraine Report (AUR) Monitoring Service]
=======================================================