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

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

THE ACTION UKRAINE REPORT - AUR - Number 637
Mr. E. Morgan Williams, Publisher and Editor
Washington, D.C., MONDAY, JANUARY 9, 2006

--------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. PUTIN AND THE NEW COLD WAR
Who got burned in the great gas war?
Only clear winner from last week's deal is RosUkrEnergo,
promoted to "exclusive distributor" of Russian gas to Ukraine.
COLUMN SEVEN: By Ben Aris in Moscow and Richard Orange
The Business Online, London, UK, Sunday, January 8, 2006

2. UKRAINE COMES IN FROM THE COLD
VIEWPOINT: Yuliya Tymoshenko, Former Prime Minister of Ukraine
Daily Times, Your Right To Know, A New Voice for Pakistan
Lahore, Pakistan, Monday, January 09, 2006

3. UKRAINIAN PM TAKES SWIPE AT CRITICS OF GAS DEAL
Interfax-Ukraine news agency, Kiev, in Russian 1146 gmt 6 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 06, 2006

4. UKRAINE LOCKED INTO PURCHASING 45% OF ITS TOTAL
NEEDS FROM MIDDLEMAN TRADING COMPANY
ROSUKRENERGO FOR US$95 per 1,000 CM
Yuras Karmanau, AP Worldstream, Kiev, Ukraine, Friday, Jan 06, 2006

5. UKRAINIAN GAS OFFICIAL DETAILS DEAL WITH RUSSIA
Interfax-Ukraine news agency, Kiev, in Russian 1624 gmt 6 Jan 06
BBC Monitoring Service, UK, In English, Friday, Jan 06, 2006

6. GAZPROM SAYS ALL RUSSIAN GAS FOR UKRAINE ALREADY
SOLD TO ROSUKRENERGO WHETHER OR NOT UKRAINE BUYS
Ekho Moskvy radio, Moscow, in Russian 1200 gmt 6 Jan 06
BBC Monitoring Service, UK, in English, Friday, January 06, 2006

7. RUSSIA'S GAZPROM SAYS ANY ANY DEVIATIONS FROM GAS
CONTRACT UNACCEPTABLE AND WILL LEAD TO JUST ONE
RESULT, DISRUPTED FUEL SUPPLIES TO UKRAINE
RIA Novosti, Moscow, in Russian 1342 gmt 6 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 06, 2006

8. UKRAINE: "WITH NO WINNERS. BUT WITH NO LOSES EITHER.
WHAT GOT IN THE WAY OF AN AGREEMENT IN NOVEMBER
2005, WHEN THEY WERE OFFERING 160?
Several questions remain unanswered
ANALYSIS & COMMENTARY: By Yana Stadilna
Holos Ukrayiny, Kiev, Ukraine, in Ukrainian 5 Jan 06, p 1, 3
BBC Monitoring Service, UK, in English, Saturday, Jan 07, 2006

9. RUSSIAN MEDIA COVERAGE OF GAS DISPUTE DESCRIBED
AS WAR OF "LIES" AND "ANTI-UKRAINIAN HYSTERIA"
Ukrainian TV 5 notes biased coverage of gas dispute by Russian media
TV 5 Kanal, Kiev, Ukraine, in Ukrainian 1800 gmt 6 Jan 06
BBC Monitoring Service,UK, in English, Friday, Jan 06, 2006

10. GAS CRISIS WITH RUSSIA FUELED UKRAINIAN PATRIOTISM,
MAY BOOST ORANGE REVOLUTION LEADER
Mara D. Bellaby, Associated Press, Kiev, Ukraine, Sat, January 7, 2006

11. REASONS BEHIND THE GAS DISPUTE
ANALYSIS & COMMENTARY: Harry Bucknall, Senior Analyst
Aegis Risk Management, London, United Kingdom
Published in Johnson's Russia List 2006-#7, Article 17
Silver Spring, Maryland, Saturday, 7 January 2006

12. "TEN COMPLAINTS TO THE AUTHORITIES AND THE
OPPOSITION IN UKRAINE IN THE WAKE OF THE GAS CRISIS"
Ukraine Lost Gas War to Russia Over Lack of Strategy
ANALYSIS & COMMENTARY: By Serhiy Datsyuk
Ukrayinska Pravda online, Kyiv, Ukraine, January 7, 2006

13. RUSSIA REACTS ANGRILY TO SHARP U.S. CRITICISM OVER
MOSCOW'S CONDUCT IN UKRAINE GAS DISPUTE
Steve Gutterman, AP Worldstream, Moscow, Russia, Friday, Jan 06, 2006

14. RUSSIAN, UKRAINIAN PRESIDENTS TO MEET WEDNESDAY
AP Worldstream, Kiev, Ukraine, Saturday, Jan 07, 2006

15. SHUTTING OFF THE GAS WAS A DISASTER FOR RUSSIA,
AND A TRIUMPH FOR UKRAINE
EDITORIAL: Canberra Times, Canberra, Australia, Mon, Jan 09, 2006

16. NEW CRIMEAN WAR: HOW UKRAINE SQUARED UP TO MOSCOW
For 200 years, the Black Sea has been a haven for the Russian fleet.
By Andrew Osborn, The Independent Online Edition
London, United Kingdom, Monday, 09 January 2006

17. THE WEST'S UKRAINE ILLUSION
COMMENTARY: by Anatol Lieven, Senior Research Fellow
New America Foundation in Washington
International Herald Tribune, Neuilly Cedex, France, Thu, 5 Jan 2006

18. PRESIDENT PUTIN -- GET YOUR HANDS OFF UKRAINE
The West's true friends, and comrades are Ukraine - not Russia
COMMENTARY: By Christopher Berry-Dee, Co-publisher
Editor, New Criminologist Online Edition, London, UK, Sun, 08 Jan 2006

19. FAMILY LIFE: SNAPSHOT: LEAVING HOME, UKRAINE, 1918
By Sue Kruk, The Guardian, London, UK, Saturday, Jan 07, 2006

20. "IN NEED OF COLOURING IN"
BOOK REVIEW: By Bridget Hourican
RE: "Ukraine's Orange Revolution" By Andrew Wilson
Irish Times, Dublin, Ireland, Saturday, January 07, 2006
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1. PUTIN AND THE NEW COLD WAR
Who got burned in the great gas war?

The only clear winner from last week's deal is a company called
RosUkrEnergo, which has been promoted to "exclusive distributor"
of Russian gas to Ukraine. Although it is a 50/50 joint venture between
Gazprom and Ukraine, no one really knows who owns the Ukrainian
half, which is controlled by Swiss registered holding companies in
nominee accounts of Austria's Raiffeisen Zentralbank Oesterreich.

COLUMN SEVEN: By Ben Aris in Moscow and Richard Orange
The Business Online, London, UK, Sunday, January 8, 2006

THE Gazprom control room, set in the guts of the gas giant's aquamarine
Moscow skyscraper, is the quintessence of economic control. The rear
wall is taken up almost in its entirety by a 20ft high electronic model of
Eurasia's gas network, the lights and screens embedded in it broadcasting
information on gas pressures from the farthest reaches of Siberia and
Turkmenistan to the entry points to western Europe's markets.

Studious-looking Gazprom engineers sit facing it, calling detailed readings
on to their own dedicated computers. Together they are fine-tuning a
continent's worth of energy flows. In their hands is a quarter of Europe's
gas supplies, most of it delivered through pipelines in Ukraine.

On New Year's Day, Russia's television channels set up in this energy
shrine to film engineers carrying out an order from the Kremlin that has
left western analysts casting around for a logical explanation. The
engineers cut pipeline supplies to Ukraine, which carries 80% of Europe's
Russian gas imports, after Ukraine refused to pay a fourfold increase in
energy prices demanded by Russian president Vladimir Putin. As the
engineers complied with the Kremlin order, supplies were cut by up to 40%
in more than half a dozen European countries, leaving some with only two
weeks of reserves just as the coldest months of winter arrived.

The answer as to why Gazprom was willing to take such a risk depends on
which of the many forces you believe held sway. Should Gazprom, with its
51% state ownership, be seen in this case as simply the puppet of Putin's
energy-driven foreign policy? If that were the case the move could be
viewed alternatively as the final death throes of the Soviet Union
manifesting itself in the ending of a generous gas subsidy to a former
client state - Ukraine - that is no longer an ally.

Alternatively, it could be seen as a crude attempt to push Ukraine's
electorate, post the Orange Revolution, into voting out Ukraine president
Viktor Yushchenko in favour of a pro-Russian candidate in the March
elections. Or it could be interpreted as a sign of Russia deliberately
flexing its muscles ahead of its leadership of the G8 this year, when the
security of energy supplies will be the focus of its leadership.

Whatever the truth, one thing is clear. At a stroke Gazprom demolished a
reputation for reliability built up over 40 years of unbroken supplies to
western Europe. Gazprom is set to become the largest emerging market
stock, with a potential valuation of $300bn (£174bn, E252bn) now that
Russia has removed the block on foreign investment.

The pipeline shutdown gave the West a short, sharp shock, and there was
much relief when a deal was struck on prices with Ukraine a few days later
and supplies were restored. Thus the dispute could also be seen as a
high-risk move by Putin to bring a revenue-destructive gas subsidy from its
Soviet days on to a market footing.

Some believe the move was motivated by something more sinister. Jérôme
Guillet, a French banker who has worked closely with Gazprom, said: "There
is a story behind this deal as most of the negotiations go on behind the
scenes and what we see in public is only ever a small part of the iceberg.

"Gas transit is the biggest source of loot on offer. It looks like
Yushchenko has been trying to clean up but that new people are attempting
to barge into the business. They have caused the public row in an effort to
embarrass the president."

The only clear winner from last week's deal is a company called
RosUkrEnergo, which has been promoted to "exclusive distributor" of
Russian gas to Ukraine. The deal will see its sales nearly double from 40bn
cubic metres to 77bcm as a result. Although it is a 50/50 joint venture
between Gazprom and Ukraine, no one really knows who owns the
Ukrainian half, which is controlled by Swiss registered holding companies
in nominee accounts of Austria's Raiffeisen Zentralbank Oesterreich.

The draft agreement between Russia and Ukraine also creates another
intermediary to handle the imports from Russia, jointly operated by
RosUkrEnergo and jointly owned with the Ukrainian national gas
company Naftogaz.

One western gas executive who works with Gazprom and Naftogaz said:
"Something very fishy is going on here as Gazprom has further diluted its
share of the profits it gets from selling gas to Ukraine. It looks very
much like someone behind the scenes was blocking a compromise unless
they were cut in on the deal. Gazprom only owns half of RosUkrEnergo,
which means it owns half of a half of the profits this new intermediary will
earn. Someone was making a lot of money before. Now they are going to
make even more."

Under the deal, Gazprom will receive from Ukraine its demanded four-fold
increase in price from $50 to $230 per 1,000 cubic metres. Although the
volume of gas it delivers to Ukraine will fall to 17bcm from 23bcm, it will
still net $3.9bn this year from the higher prices, up from $1.1bn last
year. struck on prices with Ukraine a few days later and supplies were
restored. Thus the dispute could also be seen as a high-risk move by Putin
to bring a revenue-destructive gas subsidy from its Soviet days on to a
market footing.

RosUkrEnergo, set up in the summer of 2004, is the latest in a line of
mysterious companies acting as an unnecessary middleman between
Naftogaz and Gazprom. It replaced EuralTransGas, which was a 100%
Ukrainian-owned company with unknown owners, which in turn replaced
the scandal-ridden Itera, believed to be controlled by Gazprom's previous
management.

Bill Browder, president of Hermitage Capital, a big Gazprom minority
shareholder, said: "There is no economic reason to justify the existence of
this company. It earns hundreds of millions of dollars a year of profit,
but why would Gazprom, a monopoly supplier, want to give away this money
to a faceless company when it could perfectly well handle this business on
its own?"

Western businesses such as Gaz de France and Centrica have repeatedly
turned down offers of equity in RosUkrEnergo, which plans to float a stake
in 12 to 18 months' time, because they were uncomfortable with its
ownership, but this has not prevented Russia using it as its main
intermediary.

Ukrainian Security Service chairman Oleksandr Turchynov said publicly
earlier this year that he believes Ukrainian-born mafia boss Semyon
Mogilevich, known as "the Brainy Don", controls the company. A former
member of President Leonid Kuchma's administration, Mogilevich is wanted
by America's FBI and Interpol on money-laundering charges. He lives
openly in Moscow, and Russia refuses to extradite him. Wolfgang Putschek,
a Raiff-eisen director and chief executive of Centragas, the front for
RosUkrEnergo's Ukrainian owners, has denied any connection to Mogilevich.

But however powerful the RosUkrEnergo beneficiaries are, could they wield
enough clout to force a move on Putin that seems entirely against Russia's
interests? The answer is that Russia urgently needed to alter relations
with Ukraine. Doing so was difficult without confrontation because Russia
is almost as dependent on Ukraine as a transit country for its gas as
Ukraine is on Russia for energy. Putin was already signalling the change in
relations with Ukraine last March, when he called the formation of the
Commonwealth of Independent states "a kind of civilised divorce" between
former Soviet republics.

Since Yushchenko became president this time last year on a staunchly
pro-European mandate, Moscow could no longer justify selling subsidised gas
to it, especially when western Europe has seen prices rise from $135 per
1,000 cubic metres at the start of last year to $255 this year.

Under the deal, Gazprom will receive from Ukraine its demanded four-fold
increase in price from $50 to $230 per 1,000 cubic metres. Although the
volume of gas it delivers to Ukraine will fall to 17bcm from 23bcm, it will
still net $3.9bn this year from the higher prices, up from $1.1bn last year.

But as the Russian gas is mixed with gas deliveries from Turkmenistan,
which are paid for separately, the average price at Ukraine's border will
still be $95 per 1,000 cubic metres, as Ukraine was demanding. RosUkrEnergo
will reportedly buy Turkmen gas, which previously cost $65 per 1,000 cubic
metres, for $50, selling some of it on to Europe at the prevailing market
price of more than $250 and using the profits to subsidise Ukraine. Ukraine
also stands to receive its transit fees in cash, rather than, as
previously, in gas.

Ukraine consumed just over 75bn cubic metres (bcm) of gas last year, of
which Gazprom delivered 25bcm; 35bcm came from Turkmenistan, via
Russian pipelines, and rest is produced by Ukraine for itself.

Giancarlo Perasso, an energy analyst at West LB, says: "Gazprom has been
subsidising Ukraine and other former Soviet republics by selling gas at
prices well below market prices. This does not make sense, especially if
one thinks that most of the beneficiaries of the subsidised prices proudly
consider themselves to be market economies."

Poland and Germany were affected by an earlier Gazprom shutdown of the
Yamal pipeline though Belarus for a day in February 2004, after Gazprom
demanded a doubling of the price Belarus pays for gas. This led Poland to
seek a deal for a long-term gas supply agreement with Norway, so far
unsuccessful.

But the volume of gas that crosses Belarus is negligible and the impact on
Europe is slight. About 80% of Russia's exports cross Ukrainian territory
and Ukraine's control of its portion of pipeline gives it immense leverage.

Gazprom's plans for a new 55bcm pipeline under the Baltic Sea to Germany
and a Liquefied Natural Gas (LNG) plant near St Petersburg are aimed partly
to loosen Ukraine's stranglehold. The stranglehold depends, however, on
Ukraine's conviction that Russia will not alienate western markets.

Erik Mielke at Merrill Lynch said: "In the short term they're mutually
dependent on each other and that's unlikely to change in the immediate
future. All the new routes will maybe take some volumes coming from
Ukraine but they can never replace all of it. Yes, they're bullying Ukraine,
but they have to bully Ukraine."

Russia needed to show that it could not be held to ransom by Ukraine. Its
tough stand is to push Ukraine's population towards voting for a pro-Russia
candidate at the March elections, which would solve Russia's problems more
directly.

Yushchenko is already trailing the party of Russia-orientated former prime
minister Viktor Yanukovych and the Ne Tak! Coalition, opponents of the
Orange Revolution. He has said: "The high price of Russia's gas is a direct
result of the senseless actions of Yushchenko's team, which took an openly
provocative position towards Russia, in particular by pulling Ukraine,
against the people's will, towards the Nato alliance."

Assuming Yushchenko can keep control, the fact that Gazprom could not
politically withhold gas supplies for more than a day seems to emphasise
Ukraine's strong bargaining position.

Perasso said: "Russia has basically shot itself in the foot after its
tough-man stance spectacularly backfired. The Kremlin assumed it could
see Ukraine off, but discovered it couldn't as this means cutting off all its
other customers as well. All they have managed to do is damage Russia's
reputation as a reliable supplier of strategically important energy
supplies."

The face-saving deal reached between Gazprom chief executive Alexei Miller
and his counterpart Naftogaz Ukrayiny head Oleksiy Ivch-enko allows both
sides to claim victory. It is still unclear how badly Russia's move has
harmed its relationships with its European Union customers. While the
European press has cited this as further proof of Russia's unreliability,
European politicians have pulled back from outright criticism of either
side.

As the Ukraine crisis grew, economy ministers from Austria, France, Germany
and Italy sent a joint letter to Russian and Ukrainian energy ministers on
31 December appealing to both not to allow their dispute to affect the
long-standing reliable deliveries of gas into the EU. Significantly, the
letter was not signed by any of the "new" EU states most dependent on
Russian deliveries, such as Hungary, Slovakia, Czech Republic and Poland.

European Commissioner Andris Piebalgs said only: "I think Russia has
overplayed the issue. We have never had such a situation in 40 years since
Russia made gas supplies."

Mielke points out: "Not too long ago the EU was pushing for market pricing
of gas in Ukraine. All that changed when Ukraine went from pro-Kremlin to
pro-EU."

The real risk for Russia is not the breakdown of diplomatic relations with
the EU, but that it might trigger a diversification of Europe's energy
supplies towards nuclear power, cutting demand for its energy.

Nuclear advocates have jumped on the chance to push the technology. German
economy minister Michael Glos last week made the firmest statement yet that
Germany may extend the operating lives of its nuclear plants, reversing the
previous phaseout programme. Italian industry minister Claudio Scajola said
that Italy should "return to nuclear energy".

The scare over supplies will also accelerate calls for new nuclear power
stations to be built in the UK, whose energy white paper of 2003 argued
that a massive increase in the UK's dependency on gas imports was an
acceptable price to pay for achieving lower carbon emissions without
nuclear.

The other risk to Russia is that Europe will seek alternative sources of
gas. Martin Bartenstein, economy minister of Austria, which is chairing the
European Union spring summit, said after last week's emergency meeting of
EU energy experts: "Diversification in terms of pipeline systems is
something to work on."

The only significant planned piped alternative to Russian gas, the Nabucco,
would move gas from Iran and Central Asia to Europe through Turkey to
Austria.

Until Gaz-prom's move, it looked far from a sure thing, due to the
difficulty in reaching agreement between the partners, Bulgaria, Turkey,
Romania, Hungary and Austria. But Bartenstein said last week that EU
states backed a 2011 startup date. The move could also speed up final
decisions on new pipelines from Algeria to Spain and Italy.

Mark Smedley, an analyst at World Gas Intelligence, said: "LNG seems to
be the focus as a low-cost practical way to increase security of supply. Do
you want slightly costlier infrastructure that gives you the ability to
import from several countries?"

There are proposals to build some 60bcm of LNG gas import capacity in the
UK, Smedley said, which, if they all get built, would come close to meeting
the UK's demand of about 70bcm.

The Dutch are planning an LNG terminal, Germany is considering building
one at the port of Will-emshaven on its North Sea coast, and Croatia is
considering a terminal in the Adriatic that would bring alternative
supplies to central European countries most dependent on Gazprom.

Smedley believes there is little chance than Gazprom will let its gas
stranglehold be weakened. He said: "Russia has such huge gas reserves
and has such political nous that it will swing into action, it will mobilise
alliances, it will throw gas temporarily into countries and then take the
gas away. It will use all the tricks in the book."

Indeed, it is more than plausible that Putin welcomes the publicity that
last week's crisis gives Russia's seemingly unavoidable role in global
energy security, the theme he wants to dominate the meeting of G8 leaders
in St Petersburg later this year.

Gazprom's UK chairman Yuri Komarov told The Business last year,
pointing to a vast map of Siberia: "It does not matter if you like Russians.
Whether it is gas, oil, mining, wood, it is all here. Maybe you could also
look in the Amazon rain forest. In Europe and the US it is all gone."

It would not be surprising if Gazprom's technicians are already putting
together a new wall-sized map with pipelines to the UK, France and
Germany added in. -30-
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2. UKRAINE COMES IN FROM THE COLD

VIEWPOINT: Yuliya Tymoshenko, Former Prime Minister of Ukraine
Daily Times, Your Right To Know, A New Voice for Pakistan
Lahore, Pakistan, Monday, January 09, 2006

The issues raised by the gas dispute between Ukraine and Russia go beyond
energy security, reviving questions about Ukraine's place in Europe and the
world. As this struggle shows, Ukraine has been obliged to assume a
higher-profile role in European affairs. It must consider where and in what
sort of Europe it fits

Europe's sigh of relief at the supposed end of the dispute between Russia
and Ukraine over gas pricing was audible here in Kyiv. But the settlement
raises more questions than it answers. By placing Ukraine's energy needs in
the hands of a shadowy company linked to international criminals, the
agreement has planted the seeds of a new and perhaps more dangerous
crises.

As a result, I am challenging this deal in court. Let a public hearing
before a judge reveal exactly who will benefit from this deal.

The settlement between Ukraine and Russia's state-owned gas monopoly,
Gazprom, is intolerable because Ukraine's energy future has been placed in
the hands of RosUkrEnergo, a criminal canker on the body of our state gas
corporation. RosUkrEnergo was established in the last months of the regime
of our former ruler, Leonid Kuchma. Yet it miraculously gained control of
all of Ukraine's gas imports from Central Asia. Under the deal agreed this
week, it retains that control.

As one who worked in the gas industry before entering politics, I know that
the gas trade in the countries of the former Soviet Union is riddled with
corruption. During my premiership, my government sought to investigate
RosUkrEnergo - to discover who precisely its owners are, how it gained a
virtual monopoly on the import of Central Asian gas, and where its profits
go.

Now that I am not in government, that investigation has been shelved.
Ukraine's energy needs, and thus the certainty of energy supplies across
Europe, will never be secure as long as gas transit is in the hands of
secretive companies with unknown owners.

But the issues raised by the gas dispute between Ukraine and Russia go
beyond energy security, reviving questions about Ukraine's place in Europe
and the world. As this struggle shows, Ukraine has been obliged to assume a
higher-profile role in European affairs. It must consider where and in what
sort of Europe it fits, what balance it should strike between Russia and the
European Union, and how it should find the self-assurance needed to play
its full part in world affairs.

It would be sheer folly to suggest that the Ukrainians start with a blank
slate. Centuries of being part of the Russian and Soviet empires have, in
different ways, shaped how Ukrainians view their country and its interests.
One consequence of this is that Ukrainians are often shy about asserting
Ukraine's independent interests plainly - exemplified by Ukraine's
acceptance of a deal that leaves its energy future so insecure.

Like any country, Ukraine's relations with the world are determined by four
interlocking factors: history, patriotism, national interests, and
geography. Each factor has special resonance here. True, Ukrainians rightly
feel like citizens of a normal, independent country, and want to be treated
that way. But this does not mean we want to bury history and our historic
ties. We are a normal country with an abnormal history.

Indeed, Ukraine's interests form a comfortingly familiar triangle of
economic, political, and strategic priorities: free trade and open markets
across the globe; prosperous and democratic neighbours; and not being
on the front-line of a conflict, still less a potential battleground,
between Russia and the West. Our goal is thus a democratic Ukraine
located between prosperous like-minded neighbours to east and west.

Of course, the risk of tyranny, turmoil, and war within the so-called
"post-Soviet space" is large, leaving Ukraine keen to limit its
vulnerability. Ukrainian enthusiasm about the EU is based on the idea that
European security is indivisible.

We recognise, of course, that few of even the most fervent supporters of
European integration want to help Ukraine quickly become a member. But the
risk to EU gas supplies shows that our fates are linked. Europe must play
its part as Ukraine redefines its historic ties to Russia, and its actions
must do nothing to undermine Ukraine's national independence - or, indeed,
that of any of the countries that emerged from the Soviet Union's break-up.

The proposed Baltic Sea pipeline, which would bring gas to Germany directly
from Russia, bypassing Poland, Ukraine, the Baltic states, and the rest of
Central Europe, is dangerous in this regard, because it may allow Gazprom
the freedom to cut gas supplies to customers without endangering supplies to
its favoured western markets. That is a recipe for renewed threats, not only
to Ukraine, but to EU members like Poland, the Czech Republic, Hungary,
Slovakia, Slovenia, and the three Baltic states.

In broad terms, Ukraine seeks security and stability, and it should be
remembered that our record here is strong. Our decision more than a decade
ago to surrender Ukraine's status as a nuclear nation is the clearest sign
of our good-neighbourly intentions and political maturity.

Today's crisis over gas supplies must not be overblown. Objectively
speaking, Ukraine today is more secure as a nation than at any time in its
history. But Ukrainians do not feel as secure as they should.

The way to deal with uncertainty and complex situations is to think clearly
and act decisively, not cut deals that place Ukraine's future in the hands
of shadowy businesses. Only by clearly articulating and defending Ukraine's
national interests can today's dispute over gas supplies establish our role
in a transformed Europe. -30-
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3. UKRAINIAN PM TAKES SWIPE AT CRITICS OF GAS DEAL

Interfax-Ukraine news agency, Kiev, in Russian 1146 gmt 6 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 06, 2006

KIEV - Ukrainian Prime Minister Yuriy Yekhanurov has taken a swipe at
domestic critics of the recently signed gas deal with Russia, accusing them
of trying to capitalize on the country's problems.

His statements today came as a response to yesterday's barrage of scathing
criticism from Ukrainian politicians, including former Prime Minister Yuliya
Tymoshenko, who blasted the deal as a "betrayal of Ukrainian national
interests".

Yekhanurov said that the deal helped Ukraine secure economic freedom,
and thanked Russia for teaching Ukraine to defend national interests. The
following is the text of a report by Interfax-Ukraine news agency:

Kiev, 6 January: Ukrainian Prime Minister Yuriy Yekhanurov has expressed
confidence that most of the Ukrainian citizens have figured out "on whose
side some commentators [of the gas deal with Russia] fought and keep
fighting". He noted that some political forces "are not ashamed of trying to
earn political capital on the country's problems".

Speaking to journalists in Kiev today, he thanked the Ukrainian people for
supporting the authorities during the negotiations with Russia. "The
Ukrainian people have turned out to be wiser and more professional than
some politicians," he said.

"A year ago we showed the whole world an example of a civilized solution to
a political crisis, and today we confirmed our aspiration to be free at the
economic level... [ellipsis as published] Everything in the world has a
price, including independence.

We had enough wisdom to see the main thing, we had enough common sense
to prove our position to our partners during negotiations, we had enough
responsibility to ignore unfair accusations. Therefore, we held our own and
attained the main aim: it is the Ukrainian people and the authorities they
elect that will be master in the Ukrainian house," Yekhanurov said.

The Ukrainian prime minister stressed that Russia was and would remain
"Ukraine's leading partner". "Moreover, we are thankful to our Russian
colleagues for yet another graphic demonstration of how national interests
should be defended. We will be diligent pupils," the prime minister said.
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4. UKRAINE LOCKED INTO PURCHASING 45% OF ITS TOTAL
NEEDS FROM MIDDLEMAN TRADING COMPANY
ROSUKRENERGO FOR US$95 per 1,000 CM

Yuras Karmanau, AP Worldstream, Kiev, Ukraine, Friday, Jan 06, 2006

KIEV - Ukraine will try to hold gas prices steady for residents in this
former Soviet republic even though the government is now paying almost
twice as much under a complicated deal with Russia, the prime minister
said Friday.

Yuriy Yekhanurov said the government would aim to keep the price at about
US$45 (A37) for 1,000 cubic meters. The price for industry, which is
currently about 422 hryvna (US$85, A70), will be determined by Jan. 17,
Yekhanurov said. Some experts have suggested that Ukrainian industry could
survive on prices of US$110 (A91), adding that it would force the
energy-inefficient chemical and steel industries to adopt new technologies.

Ukraine and Russia ended their gas row on Wednesday with a deal under which
Ukraine must pay US$95 (A80) for 1,000 cubic meters of gas from Russia and
Central Asia, almost double what it had been paying for Russian gas.

Russia had wanted to quadruple the price - and under the deal its
state-controlled gas monopoly Gazprom will sell gas meant for Ukraine to a
middleman trading company, Rosukrenergo, at the US$230 (A195) it had
demanded from Kiev.

Under the contract, Ukraine is locked into purchasing 34 billion cubic
meters of gas - or 45 percent of its total needs - from the partly
Russian-owned Rosukrenergo for US$95 per 1,000 cubic meters. That price
is guaranteed only for the first half of the year, said Serhiy Lukyanchuk,
spokesman for Ukraine's state-controlled Naftogaz. Changes must be agreed
to by both sides, Lukyanchuk said.

Rosukrenergo will supply Ukraine with a mix of gas that it buys from Gazprom
and the former Soviet Central Asian nations of Turkmenistan, Kazakhstan and
Uzbekistan. Some Ukrainian media reports suggested that the mix would not
include Russian gas, but Lukyanchuk said that Ukraine will not know whether
Gazprom supplies are included. "We aren't interested in that," Lukyanchuk
said.

Ukraine will also receive 22 billion cubic meters from Turkmenistan as part
of a separate deal for US$50 (A41) per 1,000 cubic meters in the first half
of the year, and for US$60 (A50) per 1,000 cubic meters in the second half
of the year, Lukyanchuk said - contradicting Gazprom officials who have said
all Ukraine's imported gas will come from Rosukrenergo.

Ukraine also relies on 20 billion cubic meters of natural gas from its own
sources, Lukyanchuk said. In 2007, Ukraine will buy up to 58 billion cubic
meters from Rosukrenergo, according to the contract.

The hard-fought deal with Russia came after Moscow temporarily turned down
the taps, sparking concern across Europe, which receives its the bulk of its
Russian gas supplies via Ukrainian pipelines. Russia's Interfax news agency
quoted Gazprom spokesman Sergei Kupriyanov as saying that the contract
could not be altered.

"Any deviations from this contract are just impossible," he was quoted as
saying. "Any unilateral actions can lead to the only result, namely,
disruptions in energy supplies to Ukraine."

Later Friday, Gazprom and Naftogaz released a joint statement declaring that
they had "successfully resolved the contradictions ... the conflict is
over."

Yekhanurov, meanwhile, suggested that another agreement would be needed
between Russia and Ukraine, since the one already signed was just between
Gazprom and Naftogaz. He said that agreement would spell out Russia's
obligations, since the Central Asian gas will flow via Russian-owned
pipelines. -30-
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5. UKRAINIAN GAS OFFICIAL DETAILS DEAL WITH RUSSIA

Interfax-Ukraine news agency, Kiev, in Russian 1624 gmt 6 Jan 06
BBC Monitoring Service, UK, In English, Friday, Jan 06, 2006

KIEV The national joint-stock [oil and gas] company Naftohaz Ukrayiny will
continue paying with natural gas for the services of [gas intermediary]
Rosukrenergo A.G. (Switzerland) for delivery of Turkmen gas from the
Turkmen-Uzbek border to the Russian-Ukrainian border, Naftohaz's first
deputy board chairman, Andriy Lopushanskyy, has said. Lopushanskyy was
addressing journalists today.

"I would not like to make comments, but I will say one thing... [ellipsis as
published] We have agreed with [Russia's gas monopoly] Gazprom - 1.6 for
2006, but we have retained the conditions of 2005 with Rosukrenergo, that
is, 37.5 and 1.09. We have not raised the rate, there is no mirror
reflection. This situation is very beneficial to Ukraine," Lopushanskyy
said.

He therefore explained that the rate of payment for transit of gas belonging
to Gazprom through Ukraine in 2006 would rise to 1.6 dollars per 1,000 cu.m.
per 100 km, but the rate of payment for transit of gas transported by
Rosukrenergo through the Russian Federation would remain for Naftohaz
Ukrayiny at the previous level - 1.09 dollars per 1,000 cu.m. per 100 km.
Meanwhile, Naftohaz Ukrayiny will give Rosukrenergo 37.5 per cent of gas
transported to the Russian-Ukrainian border as payment for delivery of
Turkmen gas, as was the case in 2005.

Lopushanskyy also said that the contracts between Naftohaz Ukrayiny and
Rosukrenergo for delivery of Turkmen gas were amended to incorporate the
increased volume of gas from 36bn to 40bn cu.m. [Passage omitted: Gazprom
and Naftohaz Ukrayiny signed the gas deal on 4 January.]

Therefore, Rosukrenergo in 2006 can receive up to 15bn cu.m. of gas on the
Russian-Ukrainian border as payment for delivery of Turkmen gas to Ukraine,
while Naftohaz Ukrayiny can receive up to 25bn cu.m. of gas under the
contract with [Turkmen state gas monopoly] Turkmengaz.

Lopushanskyy also said that the rate of payment of 1.6 dollars per 1,000
cu.m. per 100 km for transit of gas belonging to Gazprom through Ukraine,
and also the volumes of transit for 2006 were fixed in the annual supplement
(1GU-06) to the contract between Naftohaz Ukrayiny and Gazprom on the
volumes and conditions of transit of Russian natural gas through Ukraine for
the period between 2003 and 2013 dated 21 June 2002.

[Passage omitted: background to the creation of Rosukrenergo] -30-
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6. GAZPROM SAYS ALL RUSSIAN GAS FOR UKRAINE ALREADY
SOLD TO ROSUKRENERGO WHETHER OR NOT UKRAINE BUYS

Ekho Moskvy radio, Moscow, in Russian 1200 gmt 6 Jan 06
BBC Monitoring Service, UK, in English, Friday, January 06, 2006

MOSCOW - [Presenter] Unexpected news has come from Ukraine: Prime-
Minister [Yuriy] Yekhanurov has announced that the Ukrainian government
is drafting its own version of an agreement on gas supplies to Ukraine. The
agreement will be an intergovernmental one.

[Ukraine's state oil and gas company] Naftohaz [Ukrayiny] for its part says
that this year Ukraine will not be buying Russian gas through the
Rosukrenergo company. Roman Plyusov has further details.

[Correspondent] The Ukrainian prime minister has confirmed Kiev's intention
to sign an intergovernmental agreement. Yuriy Yekhanurov said that up to the
Ukrainian border gas would be supplied by a company that will be selected by
the Russian side.

But at the border gas will be received by a joint Russian-Ukrainian
enterprise whose management will be appointed in Kiev. [Passage omitted:
earlier reported details of agreement signed by Gazprom, Naftohaz and
Rosukrenergo on setting up a joint company]

Today the management of Naftohaz announced that they would not be buying
Russian gas from Rosukrenergo. It turns out that Ukraine simply does not
need it. The first deputy chairman of Naftohaz Ukrayiny [Andriy
Lopushanskyy] said that talks with Rosukrenergo would begin only if a need
for Russian gas arises.

[Presenter] According to the Naftohaz representative, Rosukrenergo will be
dealing exclusively with supplying Central Asian gas to Ukraine. We have
just received a comment from Gazprom's official spokesman Sergey
Kupriyanov.

[Kupriyanov] On 4 January we provided exhaustive information on the
agreements reached with the Ukrainian side. We have sold all the gas in
Gazprom's balance that was envisaged for Ukraine to Rosukrenergo at the
European price formula. There is a clear understanding of how and on what
terms Rosukrenergo will be supplying gas for Ukrainian consumers. To us
this a secondary question.

We have resolved our main tasks. I have already mentioned the price formula.
One should add here the separate contracts for transit, the fixed terms of
transit for a period of five years, monetary relations as opposed to barter
and a scheme of transit relations that we find far more transparent. This is
the main thing. -30-
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========================================================
7. RUSSIA'S GAZPROM SAYS ANY DEVIATIONS FROM GAS
CONTRACT UNACCEPTABLE AND WILL LEAD TO JUST ONE
RESULT, DISRUPTED FUEL SUPPLIES TO UKRAINE

RIA Novosti, Moscow, in Russian 1342 gmt 6 Jan 06
BBC Monitoring Service, UK, in English, Friday, Jan 06, 2006

MOSCOW - [Russian gas major] Gazprom has said that any deviations
from the Russian-Ukrainian gas contract are unacceptable.

"I would like to recall that a contract has been drawn up and signed, which
in its price parameters and volumes covers the entire balance that Ukraine
needs. There can be no deviations from this contract, and any unilateral
actions will lead to just one result - disrupted fuel supplies to Ukraine,"
Gazprom spokesman Sergey Kupriyanov told journalists on Friday [6
January] in response to the latest statement on the gas issue by Ukrainian
representatives.

[ITAR-TASS at 1347 gmt quoted Kupriyanov as saying that the Russian
side intends to honour all its commitments agreed with Ukraine]
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8. UKRAINE: "WITH NO WINNERS. BUT WITH NO LOSES EITHER.
WHAT GOT IN THE WAY OF AN AGREEMENT IN NOVEMBER
2005, WHEN THEY WERE OFFERING 160?
Several questions remain unanswered

ANALYSIS & COMMENTARY: By Yana Stadilna
Holos Ukrayiny, Kiev, Ukraine, in Ukrainian 5 Jan 06, p 1, 3
BBC Monitoring Service, UK, in English, Saturday, Jan 07, 2006

There are no clear winners in the gas deal agreed between Ukraine and Russia
this week, a Ukrainian daily has said. It said that while the agreement
formally makes everyone happy, there are a number of issues which remain,
including the role of the RosUkrEnergo company as an exclusive supplier of
Russian gas to Ukraine. It also said the dispute was the first serious
battle in an energy war on the post-Soviet landscape.

The following is the text of the article by Yana Stadilna, entitled "With no
winners. But with no losers either. What got in the way of an agreement in
November 2005, when they were offering 160?", published in the Ukrainian
parliamentary newspaper Holos Ukrayiny on 5 January; subheadings have
been inserted editorially:

Gazprom and Naftohaz Ukrayiny signed a five-year contract on supplying
Russian gas to Ukraine. Naftohaz Ukrayiny and Gazprom chiefs Oleksiy
Ivchenko and Aleksey Miller stated this yesterday [4 January].

Pursuant to the contract, the RosUkrEnergo company (a joint venture between
Gazprombank, Raiffeisen Bank and Gazprom owns over 50 per cent of shares,
with Naftohaz Ukrayiny also a shareholder) will supply gas to Ukraine. And
Gazprom will sell its gas meant for Ukrainian consumers under a price
formula based on 230 dollars [here and further] for 1,000 cubic metres. In
turn, RosUkrEnergo will supply Ukraine gas for 95 dollars.

The difference between the price of the Russian gas which RosUkrEnergo gets
from Gazprom and the price of the gas this company sells to Ukraine will be
compensated for at the expense of RosUkrEnergo's balance of Turkmenistan
gas (at 50 dollars) as well as Uzbek and Kazakh sources. Since there is more
Turkmenistan gas than Russian gas, the price comes out this way.

The sides also agreed on increasing the tariffs for transiting Russian gas
across Ukrainian territory from 1.09 dollars to 1.6 dollars. Payment fully
in money for 1,000 cubic metres over 100 kilometres. That means Gazprom,
which wanted to sell us gas for 230 dollars and Naftohaz, which wanted a
price of 80, got what they wanted. Ukraine will buy gas for 95 dollars, but
since the transit tariffs have gone up, they get the same 80 dollars.
SEVERAL QUESTIONS UNANSWERED
The negotiators at the joint news conference looked tired and unsatisfied,
which makes it possible to forecast that merely the first serious battle in
the energy war on the post-Soviet landscape has ended. Several questions
remain unanswered.

[1] The first question is that of the new exclusive supplier, the
RosUkrEnergo company.
[2] The second question is who exactly took Russian gas without sanction in
the first days of the new year and who will pay fines to Hungary and a
number of other countries?
[3] The third question is what volume of gas will be supplied by
RosUkrEnergo for sale in Ukraine? According to Russian data it will be
carried out in correspondence with the Gazprom balance, which envisions
supplying 17bn cubic metres of gas to Ukraine in 2006. Earlier talk was of
bigger volumes.
[4] The fourth question is will Naftohaz Ukrayiny continue to re-export gas?

And so the high price of Russian gas for RosUkrEnergo will be compensated
for by the low price of gas from Central Asia. As Holos Ukrayiny learnt from
the Ukrainian mission to Turkmenistan, Kiev and Ashgabat discussed in detail
the issue of fulfilling the contract signed in December for supplying 40bn
cubic metres of Turkmenistan natural gas to Ukraine for 50 dollars. At the
same time, the sides confirmed their intention to adhere to all agreements
and obligations agreed upon.
ENERGY NOW INSTRUMENT OF RUSSIA STATE POLICY
The high level of tension, passion and hysterical nerves over the past few
weeks can be explained by a fact everyone knows: the basis of war in the
modern world comes down in one way or another to energy resources and
ways of transporting energy resources. It is entirely logical that after the fall
of the USSR, Russia has now turned the energy business into an instrument
of state policy.

Meanwhile, Kiev has also stated that our gas transport system is a strategic
facility. And that there can be no talk of following the example of Belarus,
which gave up its pipes to Moscow in return for cheap gas. The information
war and political speculation on the gas topic were conditioned first of all
by the fact that for the first time in 14 years, instead of the traditional
appearance at the Russian White House in a state of repentance, meaning the
hypothetical issue of surrendering to prison - Kiev took a hard line.

At the same time, this hard stance was joined with flexibility, though it
was not a bending in the traditional manner. So, in putting pressure on the
negotiation process, in the first days Russia tried to put Ukraine in an
unpleasant role in a zone of instability, simply accusing Ukraine of
stealing gas.
EUROPE CONCERNED BY STANDOFF
Europe did not take Gazprom's word for it. Most experts expressed the view
that the gas war between Russia and Ukraine was going far beyond the bounds
of a standoff between Kiev and Moscow. In particular, European MP and former
member of the Polish Security Council, Marek Sivec, said that the problem
which had arisen in connection with the gas conflict had to be defined as a
general European problem, since not only was Ukraine's independence under
threat, but the energy security of Europe was too.

He said the gas standoff between Russia and Ukraine was a clear message to
European consumers of gas. And the worst message of all, one which nobody
could ignore.

And yesterday, after Kiev and Moscow had signed all the documents, there was
a short meeting of European commission experts on energy issues in Brussels.
They discussed the Ukrainian-Russian gas crisis and welcomed the agreement
between Russia and Ukraine.

Answering journalists' questions, European Commissioner of Energy Issues
Andris Piebalgs noted that there was a "commercial dispute" between Russian
and Ukraine "with political consequences". Now the EU has decided to build a
collective policy on securing the delivery of gas. "We need a broad approach
of European magnitude", Piebalgs said, explaining that the first proposals
should be formed by March. -30-
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9. RUSSIAN MEDIA COVERAGE OF GAS DISPUTE DESCRIBED
AS WAR OF "LIES" AND "ANTI-UKRAINIAN HYSTERIA"
Ukrainian TV 5 notes biased coverage of gas dispute by Russian media

TV 5 Kanal, Kiev, Ukraine, in Ukrainian 1800 gmt 6 Jan 06
BBC Monitoring Service,UK, in English, Friday, Jan 06, 2006

KIEV - Ukraine's 5 Kanal television has described coverage of the
Ukrainian-Russian gas dispute by the Russian mass media as an information
war full of "lies" and "anti-Ukrainian hysteria". It pointed to the stark
transformation Russia's NTV television has undergone under President Putin
from being a paragon of impartiality a decade ago to becoming the Russian
government's mouthpiece now.

The 5 Kanal journalist added that many Ukrainian politicians took advantage
of the freedom of speech in the Ukrainian media to earn political dividends
on the gas conflict. He said the media war had already set many Russians and
Ukrainians against each other. The following is an excerpt from a report by
the Ukrainian television TV 5 Kanal on 6 January:

[Presenter] A lie, more lies and still more lies - Moscow's information war
against Ukraine is gaining momentum. The New Year war waged by Putin's
Gazprom against the Ukrainian people and government ahead of Christmas
brought into the focus of public attention a topic that had until recently
been only discussed by some experts.

The topic is as follows: How the Russian media, which were exemplary in
terms of pluralism, professionalism, intellect and tact just a few years
ago, have been fanning an anti-Ukrainian hysteria.

The aggressive and targeted propaganda campaign by the Cheka-dominated,
pro-Putin media and reactions to it by the multicoloured Ukrainian media
have only left one with a feeling of embarrassment.

If God wants to punish a person, he takes away that person's mind. This
expression is well known to [correspondent] Valentyn Trokhymchuk. What he
does not know, nor do I, is what the Lord takes away when he wants to punish
a lot of people at the same time. [An excerpt from Russian NTV news bulletin
starts]

[Presenter] Hello. You are watching news on the NTV channel. Yelena Vinnik
is in the studio. The main news by this hour. The first figures confirming
Gazprom's accusations against Ukraine. The company has calculated how
much gas intended for Europeans Kiev has illegally siphoned off. [End of the
excerpt]

[Correspondent] A decade ago the abbreviation NTV was synonymous with
news impartiality and the meaning of the first letter only highlighted this:
independent, new, unbiased [all the words in Russian start with the letter
N].

Today a viewer who has an opportunity to diversify sources of information
would call the channel untruthful, to be most diplomatic.

[Gazprom spokesman Sergey Kupriyanov broadcast on NTV] Ukraine is
continuing to steal gas. But this cannot go on forever, that's the first point,
and sooner or later Ukraine will still have to pay for this, that's the second
point.

[Correspondent] The lack of alternative opinions in making judgments, the
latent pro-government stance and the striking lack of plurality. The Russian
media spare neither money nor airtime on covering a subject that the Russian
media themselves have classified as a dispute between two economic entities.
The nation gets detailed explanations on the pragmatic and market-based
nature of Gazprom's approach and the lack of constructive approach and
lying by the Ukrainian authorities.

However, it is predominantly Yanukovych and Vitrenko [Ukrainian opposition
figures] who speak on behalf of Ukraine for some reason. The main piece of
news after the signing of the deal is that the monopolist will keep selling
gas to Kiev at the price of 230 dollars as it had planned.

The complex scheme that ultimately makes the fuel much cheaper is only
mentioned in passing by the Moscow journalistic stars. Even at the
summing-up conference of [Ukrainian Prime Minister] Yuriy Yekhanurov all
they are interested in is confirmation of their victory.

[Yekhanurov, speaking at a news conference, in Russian] I understand that
the Russian mass media need to report that Ukraine gave in. Write this down:
it gave in - 95 dollars [gas price under the deal signed]. Mr [Gazprom chief
Aleksey] Miller will tell you all the rest very truthfully at news
conferences in Russia [laughter in the room]. I would not like to talk about
all the rest. He has a deputy who is very good at commenting on things.

[Correspondent] The pluralism of the Ukrainian media against this background
appears disadvantageous, but not because of lack of control over the media.
The approaching election forces domestic politicians to take advantage of
the problem as they put electoral interests above state ones.

[Passage omitted: Ukrainian speaker Volodymyr Lytvyn criticizes Ukrainian
politicians for trying to gain dividends ahead of the election; Ukrainian
website editor comments.]

[Correspondent] Experts have already described the Kremlin's media pressure
and the publicity stunts on the Dnieper banks [Kiev] as play with fire. The
temporary political dividends are most likely fraught with yet another
spiral of interethnic tensions.

This is confirmed by pollsters. A notably worsened attitude towards
neighbours has been registered on both sides of the border.

Ukraine is not Russia. This once controversial statement penned by former
President [Leonid] Kuchma raises increasingly less doubt day by day. The
media component of the gas conflict has vividly demonstrated all the
differences between managed democracy and true freedom of speech.

But Kiev continues to depend on Moscow economically and, consequently,
politically. This is well understood in both capitals. Yet another local
battle is over. The conceptual stand-off continues. -30-
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========================================================
10. GAS CRISIS WITH RUSSIA FUELED UKRAINIAN PATRIOTISM,
MAY BOOST ORANGE REVOLUTION LEADER

Mara D. Bellaby, Associated Press, Kiev, Ukraine, Sat, January 7, 2006

KIEV, Ukraine -- At the height of a gas dispute this week, anonymous text
messages zipped across Ukrainians' cell phones calling for a boycott of all
things Russian.

"Remember the Great Famine, Stalin terror ... If you are a Ukrainian,
forward this to friends," one message read.

Russia's threats to leave this nation of 47 million shivering through a cold
winter triggered an outpouring of anti-Russian sentiment and patriotism,
from which President Viktor Yushchenko will likely benefit in March's
parliamentary elections.


"Ukrainians saw the face of the enemy and Russia did everything it could
to make that face terrifying," said Ivan Poltavets, the head of Kiev's
Institute of Economic Research. "But Ukrainians did not get scared. Instead
they closed ranks around the idea of sovereignty and democracy."

Yushchenko, whose popularity has plummeted since his 2004 rise to power,
desperately needed the boost. Some polls had shown his bloc coming in well
behind the Kremlin-backed party that opposed the 2004 Orange Revolution
-- a weak showing that could seriously handicap his remaining four years in
office.

But the complicated agreement that ended the pricing dispute left Kiev
paying nearly twice as much for natural gas, which will take a bite out of
Ukraine's struggling economy and, eventually, people's wallets. Under the
final deal, Ukraine must pay $95 for 1,000 cubic meters of gas, up from $50.

Ukraine's bare-knuckle politics move at a quick pace, making it unclear how
long Yushchenko will be able to capitalize on the crisis at the expense of
opponents who favor closer ties to the Kremlin.

"From a political perspective, it would have been smart to drag things out a
bit," said Ivan Lozowy, president of the Kiev-based Institute of Statehood
and Democracy. "I had never seen anything like this ... it was clearly
heading toward a huge disaster for Russia. The anger was ballooning and the
European Union and the United States were weighing in and not on Russia's
side. But it was settled relatively quickly."

As Russia restricted the flow of gas earlier this week, posters, text
messages and e-mail chain letters circulated in Kiev, recalling Russia's
czarist and Soviet misdeeds and encouraging a boycott of Russian goods.

Television news programs extolled Ukrainians to hang tough and make
sacrifices, and talk shows featured Russia's most jingoistic politicians,
who referred repeatedly to Ukrainians using a slur deeply offensive to many
here -- "khokhly" -- which refers to the appearance of Ukrainian Cossacks
and has come to mean "bumpkins."

The standoff hardened Ukrainians.

"Russia now understands that to bring Ukraine to her knees isn't so easy,"
said Oleksandr Rudakov, 45, a Kiev engineer. "Ukraine is ready to suffer a
bit in the short-term if this will safeguard her independence and
sovereignty."

Prime Minister Yuriy Yekhanurov pledged the population would not be hit
with higher prices during the year's first quarter -- which will get the
country out of the freezing winter months and through the parliamentary
elections.

Ultimately, though, pain is inevitable. Former Prime Minister Yulia
Tymoshenko, who opposed the deal, said it could cost the country $4.5
billion this year -- 16 percent of the national budget.

Yushchenko's main political opponent, Viktor Yanukovych, stayed mum
throughout the dispute -- a silence that analysts said was a telling
indicator of his weak position trying to balance the defense of Ukraine's
interests without offending his one-time political patron, Russia.

Mykhaylo Pohrebinsky, a Kiev-based analyst with ties to the opposition,
predicted the crisis "will even further divide Ukraine into two halves --
the pro-European west and the pro-Russian east." The Russian-speaking east
will blame the conflict on the Orange Revolution team, which has sought to
lessen Moscow's influence here, he said.

"Russia wasn't fighting against the Ukrainian people but against the Orange
hoard that sits in government," said Olga Serdechnaya, 40, a government
worker in the eastern city of Donetsk. "I'm not happy about the situation,
but I understand Russia's motives." -30-
--------------------------------------------------------------------------------------------
AP reporter Yuras Karmanau contributed to this report from Kiev.
-------------------------------------------------------------------------------------------
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11. REASONS BEHIND THE GAS DISPUTE

ANALYSIS & COMMENTARY: Harry Bucknall, Senior Analyst
Aegis Risk Management, London, United Kingdom
Published in Johnson's Russia List 2006-#7, Article 17
Silver Spring, Maryland, Saturday, 7 January 2006

Although a slight oversimplification of events, there were two main
reasons behind the recent gas dispute between Russia and Ukraine.

[1] First, the price hike was about ending (or furthering the end of) the
untenable subsidy system. There is no market reason why Russia should
provide subsidised gas to Ukraine, and the Kremlin is rightly seeking to
end this legacy of the Soviet Union. This is important not just for the
future health of the Russian energy sector, it is a vital part of
liberalising the market as part of Russian WTO accession talks, and
necessary to ensure that the planned offering of shares in Gazprom to
international investors (following the restriction lift) is successful.

New investors will not want Gazprom to provide subsidised gas. In this
context,the move to make Ukraine pay more for its gas is both welcome
and justified. Further, weaning Ukrainian companies off cheap gas may
also have the added benefit of forcing the notoriously wasteful Ukrainian
industry to be more efficient.

[2] Secondly, it is about consolidating control over energy assets. Why?
Because energy is set to be Russia's primary foreign policy tool for the
foreseeable future. This is not the same as imperialism - a word that has
been used in this debate and is overly emotive in this context. The
geo-political reality is that if you want to play at the top table you need
a decent set of cards.

The US has long used military power as one of its main cards - parking
fleets off various parts of the world and aggressively marketing its defence
capability. There are thousands of examples of the latter, but the F-16
deal to Poland of a couple years ago is just one good example.

Russia simply cannot project power in any comparable way to the
US, and it has sensibly settled on energy as its international leverage.

To play this card properly control is needed over the energy assets and
Russia recognizes the truth of Rockefeller's maxim that to have real
control you need to be in charge of supply and distribution (vice
production). The energy card is clearly not as strong if you have to rely
on others for transit. It is crucial to ensure control of the asset up to
the point of delivery - this is the primary purpose behind the North
European Gas Pipeline.

The new deal may not give Gazprom or any other Russian company
control over pipelines in the Ukraine, but it is a step in that direction
and there will be further developments in the future. There is nothing
sinister in Russia seeking to maximize its assets.

What does merit monitoring is the methods employed by RosUkrEnergo
and the bank accounts of those involved with the company. If there are
questionable aspects to the recent deal this is probably the place to look.

The fact that the dispute caused consternation and alarm in many (western)
political and media circles is merely a sad reflection of a bizarrely
stubborn and naïve expectation that Russia should behave according to
"western" standards (whatever they may be). Russia (broadly speaking)
doesn't negotiate the way most Europeans do. It tends to be more direct
and therefore less subtle. Russia turned off the gas because it could.

And here's the added bonus - it was a reminder, if one were needed, that
the world (and in this particular instance Europe) needs Russian gas. There
is a perverse poetry in the fact that it was done two days before
assumption of G8 presidency with energy security on top of the agenda.

Putin neither miscalculated nor underestimated European reaction. He
probably thought the implications of his actions through and concluded he
had nothing in particular to lose.

Provided the Russian President doesn't resort to such tactics on a regular
basis the impact of the recent dispute will be short term and soon
forgotten. And in any event, if it forces the EU to hasten the debate on a
pan European energy grid and supply diversification, so much the better.
------------------------------------------------------------------------------------------
Harry Bucknall, hb@aegisworld.com
------------------------------------------------------------------------------------------
Johnson's Russia List, Silver Spring, MD, davidjohnson@starpower.net
JRL homepage: www.cdi.org/russia/johnson
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12. "TEN COMPLAINTS TO THE AUTHORITIES AND THE
OPPOSITION IN UKRAINE IN THE WAKE OF THE GAS CRISIS"
Ukraine Lost Gas War to Russia Over Lack of Strategy

ANALYSIS & COMMENTARY: By Serhiy Datsyuk
Ukrayinska Pravda web site, Kiev, in Ukrainian 5 Jan 06
BBC Monitoring Service, UK, in English, Sat, Jan 07, 2006

Ukraine has actually lost the gas battle with Russia in terms of wider
strategy, a Ukrainian website has said. Despite government claims of
victory, the Ukrainian elite simply does not understand Russia's game
which is to bring Ukraine back into its sphere of influence, according to
the website.

Ukraine's lack of unity during the crisis and the authorities' lack of
understanding how to implement strategy means there will be more crises
coming from Russia. The era of geopolitics is coming to a close and the
new politics of the future will be based on infrastructure. Ukraine has
advantages in this area and needs to learn to make use of them, the website
concluded.

The following is the text of the article by Serhiy Datsyuk, entitled "Ten
complaints to the authorities and the opposition in Ukraine in the wake of
the gas crisis", published on the Ukrayinska Pravda website on 5 January;
subheadings have been inserted editorially:

In May 2005, in an article entitled "Everything is hanging by a hair" a
prognosis was made concerning two future crises for the Ukrainian
authorities: a crisis of authoritarianism and a crisis of strategic
inadequacy.

As you remember, the crisis of authoritarianism took place over the course
of September to October 2005. We are living through the crisis of
inadequacy right now. This crisis gets deeper the more we read victorious
statements on Ukraine's success in resolving the gas crisis. Since an
understanding of the strategic failure is thus far not visible in either
the Ukrainian authorities or in the so-called current opposition, we
present our thoughts in the form of 10 complaints against the Ukrainian
elite.

[1] Complaint Number One is that the Ukrainian authorities, and somewhat
more the opposition, in principle do not understand the strategic game
played by Russia over the course of the gas crisis. The rhetoric of various
officials and politicians in the opposition shows this unambiguously - "the
gas crisis", "economic pressure" and so on.

It is amusing to read that $95 (here and further, for 1,000 cubic meters of
gas) and the contract with Gazprom is a success for Ukraine.

Humorous not because of the price or the contract, but because of the
people who in making decisions on such a level do not even understand the
rules of the game. If you think that Russia wanted to get $250 for 1,000
cubic meters of gas and you were able to agree on 95, then of course this
is a success.

If you think that Russia made a move worsening its international name in
the sphere of energy security because of $4 billion, which Russia wanted to
get in addition from Ukraine, then you do not understand Russia's strategy.
And if you do not understand what the game is, then it is impossible to win.

Russia's goal is not money for gas, and not economic pressure and not
support for the Ukrainian opposition in the (March 2006 parliamentary)
election. It's goal is to return Ukraine into its sphere of influence even
if it only manages to return two parts - the east of Ukraine and Crimea.

The operational goals are to intercept Ukraine's foreign policy, which
recently has moved significantly to the United States; and to show the
United States and Europe that Ukraine cannot join the WTO, the EU or
NATO on its own, at least not before Russia, by demonstrating economic
instability in Ukraine and its dependence on Russia.

No matter how the "gas crisis" would have played out, Russia achieved
these goals. And so it won the strategic war with Ukraine.

The non-strategic operational actions of Ukraine during the gas crisis were
very easy to see in analysing Russia's proposals regarding the price of
gas. Russia had not only strategic goals about which we still have no idea,
but public compromise goals of a strategic nature as well - that is,
so-called compromise alternatives.

We mean that Russia wanted to get part of our gas transport system in
return for keeping the relatively low price for gas. But Ukraine? Why
didn't Ukraine have its own compromise alternatives?

For example, we could have offered this compromise - Ukraine is ready to
pay even 300 dollars per 1,000 cubic metres of gas, but Russia should give
us the opportunity, via a package of shares, to control that part of the
gas pipeline through which Turkmen gas is transported or a stake in the
North European gas pipeline which would allow Ukraine to influence an
infrastructure of strategic importance to it.

Does Ukraine have any strategic interests in the expansion of
infrastructure? Who should propose them: the National Security and
Defence Council? The government? The president's secretariat?

[2] Complaint Number Two is that the gas crisis is viewed more or less
as a one-off crisis, as such that if it can be regulated then everything with
Russia will be like it was before. That is, not a single time in relations
with Russia was the question raised of reviewing the principles of
economic relations with Russia.

Moreover, there is no centre in Ukraine for making such decisions, one
which would review all relations with Russia as a system - in contrast to
Russia, where there is a dozen of such institutes which in particular
worked for the president of Russia during the gas crisis. Russia will
create more crises of a strategic nature for Ukraine, at least in the
coming three to six months.

That is, there will be repeated crises and the Ukrainian elite will act
just as predictably: the authorities will lose strategically and the
opposition, spouting off other nonsense, will criticize them.

Such a situation being repeated will sooner or later lead to the Ukrainian
authorities' losing even apparent control over the country; that is,
foreign affairs by Ukraine will not be mediated by the Ukrainian
authorities and opposition as is now the case, but be directly managed
by the United States, Russia and lastly, Europe.

And the issue is not one of Ukraine being dependent on Russia in many
areas. The issue is the lack of an elementary inventory of relations with
Russia. They (Ukrainian authorities) were able to pose the task of an
inventory of the (Russian Black Sea) Fleet in Sevastopol because that is on
the surface. But they have not been able to pose the task of an inventory
of the entire system of relations with Russia because Russia has not
started the next crisis yet.

[3] Complaint Number Three is the lack of understanding on the part of the
Ukrainian authorities about the level on which strategic decisions should
be made, for example in the sphere of buying gas. It is Russia which can
allow itself the appearance of Gazprom independently making decisions on
the level of the state, because there the Russian authorities and Gazprom
are twin brothers.

But Ukraine has to act differently - strategic decisions should be taken
only on the level of the state and no Ukrainian corporation - no state
corporation, not even a big one or one authorized to make contracts with
other states - has the right to unilaterally enter contracts of a strategic
nature.

When Russian representatives say they do not know who they are dealing
with in Ukraine, that means the center for making strategic decisions is
non-existent in fact, no matter what the Ukrainian authorities think on
this point.

[4] Complaint Number Four is the closed and non-public nature of relations
in the gas sphere. If everything looks as clear as media say in relation to
achieving the agreement between Ukraine and Russia on 4 January, then why
couldn't they agree sooner? There is no trust in the Ukrainian authorities.
It is clear that the agreements between Ukraine and Russia are made on
secret agreements.

What kind of agreements are these? The gas crisis is forcing Ukrainian
society to demand the publication of all information relating to contracts
and activity of all private and state Ukrainian corporations in the gas
sector without exception. Who is buying gas, how much gas they are buying
and where they are selling it.

The fact that Ukraine was forced, at Russia's demand, to deal with Russia
via the (gas intermediary) Rosukrenergo company and not directly with
Russia, prompts one to suspect the capitulation of the Ukrainian
authorities in the face of renewed corrupt, shadow schemes of trading gas.
How will the gas be mixed, in what proportions, for what price will Ukraine
receive gas and what quality of gas it will receive - Ukraine cannot
control this any more.

[5] Complaint Number Five is that there is no unified system of monitoring
the transport of gas at all stages. When a Russian representative says during
the gas crisis that Ukraine is stealing gas and a Ukrainian representative
says this is not true, and they are both right, then this means there is no
single system for monitoring the transport of gas.

And it turns out that the system of general accounting for the balance of
gas is not enough for Ukraine. While Russia can allow itself this, because
it has a lot of gas and the mess in the accounting system plays in its
favour, since this makes it possible to accuse other countries of stealing,
Ukraine cannot allow itself this.

And the fact that we still have no unified system of monitoring which would
allow both sides to see how much gas is coming, from where it is coming and
where it is going, this is a shame to the Ukrainian authorities who allowed
the situation to get this far.

[6] Complaint Number Six is letting the situation in the information war
with Russia go into free-flight mode and the increase in Russophobe moods
in Ukraine. Ukraine lost the information war with Russia during the gas crisis.

First, no Ukrainian politician was able to get across Ukraine's position in
Russia's information space.

Second, we allowed the escalation of Russophobe moods in Ukraine not only
in the media, but in society, too.

Allow me to quote a mobile telephone text message which obviously I was not
alone in receiving: "Remember gas, Tuzla (tiny island over which Ukraine
and Russia had a bitter row), the terror of the NKVD and the destruction of
the (Cossack) Sich! Don't buy Russian goods! If you are Ukrainian - send
this SMS to your friends".

Third, the Ukrainian authorities did not announce nor adhere to an
information strategy during the gas crisis. That is, the information war
between the countries escalated without any single managing influence
from the Ukrainian authorities.

[7] Complaint Number Seven is the lack of a platform of Ukraine's unity.
Russia is united in its foreign relations, that is, the elite and Russians speak
as one, while Ukrainians do not have any unity at all on issues of
relations with Russia.

Moreover, instead of forming a platform of unity in the country,
representatives of the Ukrainian authorities allowed themselves public
statements which in fact divide the country even further.

The gas crisis showed that the lack of a platform of unity in the country
is more of a threat to the integrity of Ukraine than is a stop in gas
supplies. A platform of unity is what the current authorities were unable
to work out. The authorities offered nothing better than an irksome
national project.

[8] Complaint Number Eight is that the adoption of decisions of a strategic
nature in Ukraine, in both the president's entourage and in the government
are made 1) with inadequate strategy - without using strategy consultants;
2) in an authoritarian manner - via personal influence and a filter of
trusted people to gain access to the president and 3) "behind the scenes"
without attracting a wide circle of experts in the sector and without the
basis of open expert assessment.

Violent resistance to changing the system of decision-making continues,
now by the new, so-called "Orange" authorities. The gas crisis, how it
arose and developed, is in particular the result of an inadequate system of
making decisions.

[9] Complaint Number Nine is the inability and lack of desire on the part
of the Ukrainian authorities to use the crisis in the gas sphere positively.
We are talking about how the gas crisis signals the end of geopolitics as
such. At the very least, this crisis demonstrated that the geopolitical
resources in which Russia has the advantage, are equal to the geo-economic
or infrastructure-political advantages which Ukraine has. With its
developed infrastructure, Ukraine can speak with Russia as an equal.

At the same time, the question of an institute for developing
infrastructure in Ukraine has not been posed. The question of moving to
infrastructure management as a new method of management is not on the
agenda in the government.

Ukraine must get engaged in developing the transport infrastructure on its
territory and convincing Russia of the advantage of transporting energy
resources over its territory. The stratagem is simple - if it turns out
that Ukraine does depend on Russia, then Russia must be just as
dependent on Ukraine so that no-one gains from making crises.

[10] Complaint Number Ten is that setting up a system of implementing
strategy has a very distant relation to the existence of a document entitled
"strategy" - about as much as the existence of the aerospace industry has
to a toy aircraft in the hands of a child.

We are inexpressibly happy that the Ukrainian authorities and opposition
have learned to pronounce the word "st-st-st-strategy". And most of them
think they understand what strategy is, since they simply do not understand
the difference between strategy and implementing strategy.

Setting up a system of implementing strategy should lead to a change in the
system of power in Ukraine and deep changes in the perception of
representatives of the Ukrainian authorities and most likely to serious
personnel changes among the authorities themselves.

The presence of a system of implementing strategy is not a question of
political expedience, it is not "the question of all times" and it is not a
question of saving the president or the government - it is a question of
saving the territorial integrity of the country and its getting out from
under the system of being managed from without.
CONCLUSIONS.
1. Russia is trying to play strategically, even losing money and
international respect in order to return Ukraine to the sphere of its
foreign affairs, blocking the process of its movement towards the EU, the
WTO and NATO. At the same time, Ukraine is playing tactics, accepting
its strategic defeats at the international level as wins, for example in
trading gas.

2. Infrastructure politics has become the dominant trend in the world,
pushing aside geo-politics as the dominating method of policy. Along with
this, Ukraine is not using the dominance of infrapolitics in the world
either to set up its own institute for developing infrastructure and to set
up a new type of infrastructure management within the executive branch
or in the management of infrastructure-related corporations.

3. Ukraine needs to establish a system of strategy in order to realize its
advantages, and defend itself against unexpected crises. A number of
development programmes need to be worked out, and in this way protect
territorial integrity with the prospect of getting out from under the
system of outside management.

4. If the current authorities do not understand this, then a series of
government dismissals or even the impeachment of the president is only
a question of time. -30-
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13. RUSSIA REACTS ANGRILY TO SHARP U.S. CRITICISM OVER
MOSCOW'S CONDUCT IN UKRAINE GAS DISPUTE

Steve Gutterman, AP Worldstream, Moscow, Russia, Friday, Jan 06, 2006

MOSCOW - Russia reacted angrily Friday to U.S. Secretary of State
Condoleezza Rice's sharp criticism of Moscow's conduct in its dispute with
Ukraine over gas prices, saying her comments were baseless.

In pointed statements Thursday, Rice said Moscow's demand that Ukraine
pay more than four times the previous price for its natural gas had an
"obviously political motive," and indicated Russia's behavior showed it was
unprepared to be a responsible energy supplier and participant in the world
economy.

"It is completely unclear upon what these claims are based," the Foreign
Ministry said in a statement. It said Russia was "surprised by the tone" of
the comments from Rice, who said it was "ironic and not good" that Russia
used gas exports to pressure Ukraine just as Moscow was assuming the
rotating presidency of the Group of Eight economic powerhouse nations.

"We cannot agree with the U.S. secretary of state's opinion that Russia's
actions somehow do not correspond to its status as a Group of Eight member
chairing the organization as of Jan. 1," the Foreign Ministry said. It said
the agreements reached with Ukraine to end the dispute "create a firm
foundation for stable, long-term supplies of Russian gas to Europe and are
an important contribution to the energy security of the European continent."

Earlier in the day, Foreign Ministry spokesman Mikhail Kamynin said Russia
viewed the conflict as a bilateral issue and argued that it had behaved
responsibly by confirming its commitments to European consumers of
Russian gas, according to a duty officer at the ministry.

Kamynin said the dispute - which ended with a complicated deal Wednesday
under which Ukraine is to receive a mix of Russian and Central Asian gas at
nearly twice the price it paid for Russian gas last year - was resolved "in
a bilateral format on the basis of mutual interests and market-economy
principles."

Rice said in her comments that "it was not a good week from the point of
view of Russia's demonstrating that it is now prepared to act ... as an
energy supplier in a responsible way."

The ministry called it "strange" that Rice appeared to support Ukraine's
call for a gradual phasing out of the system under which Ukraine bought
gas from Russia at a steep discount.

Moscow's gas-price dispute with Kiev touched two sensitive nerves in
Russia's relations with the United States: Ukraine and energy.

Many analysts saw Russia's price increase demand as punishment for
Ukraine's election of Westward-leaning President Viktor Yushchenko last
year over a Kremlin-backed candidate, after a bitter battle during which
Moscow and Washington accused each other of interference.

Amid U.S. concerns that Russia is backtracking on democracy under
President Vladimir Putin, relations have also been hurt by the lack of
progress in U.S. efforts to secure more involvement in Russian energy
projects and increased deliveries of Russian energy to the West. -30-
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14. RUSSIAN, UKRAINIAN PRESIDENTS TO MEET WEDNESDAY

AP Worldstream, Kiev, Ukraine, Saturday, Jan 07, 2006

KIEV - President Vladimir Putin and Ukrainian President Viktor Yushchenko
are to meet on Wednesday, a week after the resolution of a dispute that led
to a cutoff of Russian natural gas supplies to Ukraine.

The two plan to meet in Astana, the capital of Kazakhstan, on the sidelines
of the inauguration of President Nursultan Nazarbayev, who was re-elected
in December, their offices announced.

Russia cut off natural gas deliveries to Ukraine for three days last week
after Ukraine refused to meet a demanded fourfold price increase.

The dispute was resolved under a complicated arrangement involving
Russian gas being sold through a middleman to Ukraine. But the dispute
underlined the tensions between Russia and Ukraine and raised concerns
in Europe about Russia's reliability as an energy supplier.

Kiev accused Russia of seeking the steep rise to undermine Ukraine's
economy. The Kremlin and Kiev have had a difficult relationship over the
past year, since Yushchenko beat a Kremlin-backed candidate and took
office pledging to move Ukraine into the European Union and NATO.

Patriotic and anti-Russian sentiments rose sharply in Ukraine during the
gas dispute. Yushchenko on Friday said, "We stood up from our knees.
Perhaps to begin to love yourself and respect yourself, you must first
face humiliation."

Yushchenko also said that in the talks with Putin he wants to focus on
constructing new pipelines that could carry gas from Central Asia to
Western markets. -30-
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15. SHUTTING OFF THE GAS WAS A DISASTER FOR RUSSIA,
AND A TRIUMPH FOR UKRAINE

EDITORIAL: Canberra Times, Canberra, Australia, Mon, Jan 09, 2006

IT WAS a Ukrainian triumph, and a Russian foreign-policy disaster.

Ukraine gets cheap supplies of natural gas for five years. Russia loses a
big chunk of the European energy market forever.

The giant Russian natural gas producer Gazprom is effectively an arm of
the Russian state, and its decision to cut off gas supplies to Ukraine on
January 1 was entirely political. Russia continues to supply natural gas at
subsidised prices to obedient parts of the former Soviet Union - Belarus
gets it for only $47 a thousand cubic metres - but the price goes up as
foreign policies diverge.

Georgia and Armenia have to pay $110 for their gas. Moldova, which has
been drifting out of Moscow's orbit, was hit with a demand for $160.
(Moscow cut its gas supply on New Year's Day, too.) Ukraine, under the
former, Kremlin-friendly regime of Viktor Yanukovych, signed a five-year
contract to buy Russian gas for $45 only two years ago - but then came
the ''orange revolution'' of December, 2004, and the price changed.

Last year, Gazprom served notice that the price Ukraine paid for gas would
go up by 400 per cent on January 1.

If Ukrainians were going to be too friendly with the countries of the
European Union, then they would have to pay the same ''full market price''
of $230.

Ukraine, with three years still to run on the existing contract, replied
that it would pay the full market price eventually, but wanted phased
increases to give its energy- dependent heavy industries time to adjust. No,
said Moscow, we want a new agreement by December 31. Either Ukraine
starts paying $230 by the end of March, or it gives Russia full control of
all pipelines crossing its territory (in which case it can go on paying the old
price until the existing contract runs out), or else Russian gas stops
flowing on January 1.

Why the rush? Because parliamentary elections are due in Ukraine in two
months, and the Kremlin wants to punish President Viktor Yushchenko and
his party. If he agrees to a fourfold increase in the price of gas, he
loses. If he gives away Ukraine's pipelines, which carry 88 per cent of
Russia's gas exports to the European Union and entitle Ukraine to take 15
per cent of that gas as a transit fee, he loses. And if Russia cuts off the gas,
he loses.

Just in case Yushchenko decided to tough it out, the Kremlin's strategists
leaned on Turkmenistan to break its Ukrainian contracts, and bought up all
those supplies too. Ukraine buys only one-fifth of its natural gas from
Russia and could do without it long enough to find other sources, but half
its total gas comes through Russia from Turkmenistan. So now Moscow
could cut off 70 per cent of Ukraine's supply, and really bring it to its
knees.

The geniuses in the Kremlin thought of everything - except that almost all
Russia's natural gas exports to the rest of Europe pass through Ukraine. Did
they imagine that the Ukrainian Government would just let its people freeze
in the dark? On January 1, Moscow cut the gas flowing through the Ukrainian
pipelines by 95 million cubic metres a day, the amount that Ukraine normally
imports from Russia and from Turkmenistan.

Kiev stopped siphoning off the amount it normally buys from Russia - but
feigned ignorance of the fact that Moscow had hijacked its contracts with
Turkmenistan, and went on withdrawing that much larger amount. So of
course the pressure in the pipelines dropped drastically, and Russia's
customers in the European Union started running out.

One-fifth of the gas consumed in the EU already comes from Russia, so a
wave of outraged protests hit Moscow. Within 48 hours Gazprom had
restored the normal rate of flow - and by January 4, in a desperate attempt
to repair the damage to Russia's reputation, Moscow signed a new five-
year contract that will provide Ukraine with the same amount of gas that it
used to buy from both Russia and Turkmenistan for $95 a thousand cubic
metres. Nonetheless, the damage to Russian interests has been extreme.

Imported Russian gas is the cheapest energy option for many European
countries, but reliability of supply is a critical issue for the consumers,
and Europeans are now questioning their increasing dependence on Russian
gas. Germany's economy minister, Michael Glos, said on Tuesday that his
country should now rethink its decision to phase out nuclear power.

Britain, facing an inexorable decline in its own North Sea gas reserves, now
wonders aloud about the wisdom of switching to Russian gas. Russia
suddenly looks less like a dependable commercial partner, and more like
an unpredictable, essentially political player.

President Vladimir Putin has persuaded most Russians to accept authoritarian
rule in return for increased prosperity: per capita Russian income is up
from $80 a month five years ago to about $200 today, and the grateful voters
loyally support Putin's party and his policies.

But that relative prosperity at home depends heavily on huge exports of
Russian oil and gas - and he is creating big problems for himself on that
front.

Russian gas is cheaper than other energy alternatives for most EU countries,
but Europeans have not yet locked into that option. There will now be
considerable reluctance to let EU dependence on Russian supplies get any
higher. Putin's foreign-policy strategists are not nearly as clever as they
think they are. -30-
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16. NEW CRIMEAN WAR: HOW UKRAINE SQUARED UP TO MOSCOW
For 200 years, the Black Sea has been a haven for the Russian fleet.
Now, thanks to the dispute over gas, the first salvoes have been
fired in the battle to rid Ukrainian waters of Moscow's presence.
Andrew Osborn reports from the historic port of Sevastopol.

By Andrew Osborn, The Independent Online Edition
London, United Kingdom, Monday, 09 January 2006

Atop one of the highest points in the Black Sea port city of Sevastopol the
white, blue and red Russian flag ripples gently in the Crimean wind. Far
below, much of Russia's Black Sea Fleet bobs up and down in one of the
world's most serendipitous natural harbours.

Welders cling like barnacles to the side of a ship being repaired in a
cavernous dry dock, young sailors smoke on the prows of ships bristling with
rockets, and in the distance one of the fleet's most precious assets, the
missile-cruiser Moskva, treads water on the grey January waves.

It is a scene that has remained broadly unchanged for more than 200 years
since Sevastopol became the home of the Russian fleet in this strategically
vital region, giving Moscow's ships access to the Mediterranean and a warm
water port that never freezes over.

But though Sevastopol in 2006 looks every inch a Russian naval town,
complete with radar stations and pimply Russian sailors clad in greatcoats,
technically it isn't.

In fact it's not even in Russia but in Ukraine and if powerful members of
the Ukrainian establishment get their way the Russian tricolour will soon be
run down the flagpole for the last time and replaced with the blue and
yellow Ukrainian flag.

Indeed the Ukrainian navy already has its own headquarters there.
Sevastopol, one of Russia's most famous naval bases, is under threat and the
first salvoes in the battle to wrest control from Moscow have already been
fired.

More than 30 Russian ships are moored here, with an estimated 14,000
sailors, but for how much longer? The collapse of the USSR in 1991 left the
Soviet Black Sea Fleet, which was largely inherited by Russia, stranded in a
newly independent Ukraine.

That did not pose a problem while Ukraine was ruled by a Moscow-friendly
government. But since Viktor Yushchenko's assumption of the Ukrainian
presidency in 2004 Kiev has tried to distance itself from its former
imperial master and embrace the West instead.

Moscow's dispute with Kiev over gas, with Russia turning off the tap for a
while, stoked anti-Russian feeling. And the fact that Ukraine is making
overtures towards Nato further complicates the Sevastopol situation.
Russia's continued presence is not seen as compatible with the country's
membership of a US-led military alliance.

Pressure on Moscow to get out of Sevastopol has been mounting since Mr
Yushchenko came to power but during the gas crisis that pressure hit gas
mark eight. At the apex of diplomatic hostilities senior Ukrainian
government members reopened the Sevastopol question. It was high time to
review Russia's 20-year lease of the port which expires in 2017, they
argued, with a view to raising the rent from the current $98m a year,
possibly by a factor of four. It was made clear that Ukraine wanted to hike
the price Russia pays for leasing radar stations in the area too and there
was even loose talk of giving the Americans access to those same facilities.

To increase Moscow's discomfort an overtly hostile inventory of the
facilities used by the Black Sea Fleet is under way and Kiev has accused
Russia of illegally occupying some facilities and of illegally sub-letting
others to private businesses.

Kiev's message is clear; Russia is no longer wanted in Sevastopol. In an
interview with Ukrainian media, the Foreign Minister, Boris Tarasyuk, has
said as much. "Tell me, why on earth are there other states' prosecutors'
offices and courts acting on the territory of our state? Why are there
Russian flags waving everywhere? Why are there Russian patrols with
personal authorised arms blocking whole streets, walking about the city?
It's abnormal," he raged.

Moscow's response to such talk has something of the Cold War about it.
Sergei Ivanov, Russia's Defence Minister and one of the powerful Kremlin
officials tipped to succeed Vladimir Putin as president, said any revision
of the 1997 treaty concerning Sevastopol would be illegal, impossible and
"fatal". In comments that prompted media in both countries to refer to the
row as a "New Crimean war", he hinted that such a move would give
Moscow carte blanche to review Ukraine's borders.

Sevastopol is best known in Britain for the Crimean War, which began in
1854. But for Russians Sevastopol occupies more emotional territory, having
been purloined for them by Catherine the Great in the18th century. Russian
defenders held out against the British and French for 349 days in the
Crimean War and during the Second World War resisted the Germans and
Romanians for 250 days, a feat that saw Sevastopol named a Russian hero
city.

"Sevastopol, Sevastopol, beloved of Russian sailors," goes an old song and
during the Soviet era the area was deemed so militarily important that it
was closed to the public and foreigners, a position that did not change
until 1996. Indeed Russia's conviction that Sevastopol is part of Russia was
enhanced by the quintessentially Russian novelist Leo Tolstoy. He was one
of the defenders of Sevastopol during the Crimean War and wrote about his
harrowing experience in his three-part Sevastopol Sketches.

Russians are also convinced that Moscow was cheated out of Sevastopol and
indeed the entire Crimea. In 1954 the Crimea was given to the Ukrainian
Soviet Socialist Republic by the Russian Soviet Socialist Republic. The
occasion was the 300th anniversary of Russia's co-operation with Ukrainian
Cossacks and nobody batted an eyelid since the USSR was regarded as
eternal and one big happy family where citizens' nationality carried little
importance.

Half a century later, feelings are very different and Moscow's Mayor, Yuri
Luzhkov, has suggested that the former Soviet president Nikita Khrushchev
made the decision after a drinking binge.

Russian nationalists want the return of Sevastopol and the Crimea, a
favourite holiday destination, while Ukrainian nationalists want the
Russians out and the area "de-Russified". Modern-day Sevastopol, a city
of almost 400,000 people, feels deeply Russian, however, and even ethnic
Ukrainians here talk of it as being part of Russia, not Ukraine.

Three-quarters of its inhabitants are classified as Russian and an even
higher proportion speak Russian as their first language and have a
rudimentary or no grasp of Ukrainian. Nor are the leaders of the orange
revolution popular in these parts.

During the 2004 presidential election that swept Mr Yushchenko to power,
he and his supporters won just 7 per cent of the vote in Sevastopol. Most
people gave their vote to Viktor Yanukovych, Mr Yushchenko's pro-Russian
rival, who was toppled after his supporters were found guilty of vote
rigging.

Many of Sevastopol's residents are former sailors and are steeped in the
city's unique history. Leonid, a pensioner whose right hand is tattooed with
a large anchor, served in the Soviet navy for all his working life and
although he is Ukrainian he seems ardently pro-Russian. "This is Russian
soil," he says. "Russians fought for this place."

Like many here he is fiercely anti-Nato. When German and American warships
visited last year, locals gathered on the quayside to protest.

Considering Sevastopol and its military inhabitants regarded Nato as enemy
number one for decades, perhaps it is no surprise that anti-Nato feelings
still run high.

That those feelings are encouraged by pro-Moscow forces as a device to
secure Russia's presence here is also clear. In the Sevastopol offices of
the Progressive Socialist Party, an offshoot of the Communist Party, a
poster urges voters not to let Ukraine become a "US colony".

The message is stark. A large hand with Nato tattooed on its knuckles and a
swastika on its fist is pictured protruding from a shirt patterned with the
US flag as it possessively claws at a map of Ukraine with blood dripping
from scary-looking finger nails. Mikhail Pushia, 35, a party activist, says
it would be a terrible mistake for Ukraine to join the Western alliance.
"Yushchenko wants to join Nato so that he can get his hands on credit from
the West. But that money will disappear into his own personal bank
accounts."

Like almost everyone else who lives in Sevastopol there is no doubt in his
mind that the city is Russian. "If they held a referendum today Crimea would
go straight back to Russia. People here regard the Ukrainian language with
hostility. It evokes unpleasant sentiments," he says.

Even members of the Ukrainian police force in Sevastopol said they would
be happy to become part of Russia.

"We would probably be better off as part of Russia," said one officer, who
declined to be named. "Our wages would be higher. At the moment we only get
$120 [£68] a month. You can't live normally on that; only survive." Another
officer argued that it was only politicians who had tried to put up
artificial barriers between Russian-speaking Ukrainians and Russians.

"Here in Sevastopol we are all the same. Russian naval officers are married
to Ukrainians and there is no difference between us except the colour of the
uniforms we wear and who pays our wages. Putin seems like a normal leader
and at least Russia looks like it has a future. I'm not so sure about
Ukraine."

Alexander Chervinsky, 46, an activist for Julia Tymoshenko's Ukrainian
Motherland party cuts a lonely figure as he campaigns ahead of parliamentary
elections on Sevastopol's streets.

He knows that he and his party with their pro-Western views are unlikely to
do well in this part of the country but firmly believes that Ukraine's
future lies in the European Union not with Russia. "It's a battle of
civilisations. Turning back towards Russia is a dead end," he says. Although
Mr Chervinsky may be in the minority in Sevastopol it is a very different
story in Kiev and western Ukraine where distrust of Russia and dislike of
its continued presence on Ukrainian soil is stronger.

Seated at his desk behind a Russian flag, Gennady Basov, 35, chairman of
the Russian Bloc Movement in Sevastopol, complains bitterly about such
anti-Russian sentiment.

He argues that the fleet helps protect the area's Russian-speaking
population from encroaching Ukrainian nationalism. Gloomily he talks of
hundreds of Russian-language schools being shut since Mr Yushchenko
came to power, and of Russian-language advertising being banned.

"The [Russian] fleet is a factor of stability and a bulwark against harsh
Ukrainisation," he argues. "It gives people here a signal that their
compatriots have not abandoned them to their fate." It also provides
around 20,000 local jobs, he adds, and a stable income for local people.

Ukrainian nationalists see things rather differently. Such claims are vastly
exaggerated, they argue. In recent months a nationalist organisation called
the Student Brotherhood has stormed lighthouses and picketed Black Sea
Fleet facilities.

As Ukraine heads for crunch parliamentary elections in March the Sevastopol
issue is bound to come to the fore again.

Russia has already started to fight back. Extra funds have been promised to
towns that host fleet facilities, Russian nationalists have promised to
raise the matter in the Duma - the Russian parliament - and senior Kremlin
officials have been dispatched to the region to rally pro-Russian forces.

Meanwhile construction work at Novorossisk in Russia-proper, a possible
alternative site for the Black Sea Fleet, continues apace. But relocation
would be a last resort, for, at a time when Russia is trying to recapture
some of its greatness from the Soviet era, giving up Sevastopol, the pride
of first the Soviet and now the Russian navy, is just not an option. -30-
-------------------------------------------------------------------------------------------------
LINK: http://news.independent.co.uk/europe/article337401.ece
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[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
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17. THE WEST'S UKRAINE ILLUSION

COMMENTARY: by Anatol Lieven, Senior Research Fellow
New America Foundation in Washington
International Herald Tribune, Neuilly Cedex, France, Thu, 5 Jan 2006

WASHINGTON - With the Russian-Ukrainian gas dispute now settled,
in a murky but apparently satisfactory fashion, it is time to reflect on what
the affair says about the West's relations with Russia and, still more
important, the West's relations with Ukraine.

The reason a serious debate is necessary is that the West's strategy toward
Ukraine has been founded on a bizarre illusion: that Ukraine would leave
Russia's orbit and "join the West," and that Russia would pay for this
process.

Consider the figures: Until the latest price hike for gas, Russia was
supplying Ukraine with a de facto annual energy subsidy estimated by
independent experts at somewhere between $3 billion and $5 billion a year.
That is more than the whole of the European Union's aid in the 14 years
since Ukrainian independence.

As for U.S. aid, last year it stood at a mere $174 million - and this after
all the talk of U.S. admiration and support for Ukraine's Orange Revolution.
Even after the latest price rise, Ukraine will remain greatly favored by
international standards, though now more at the ultimate expense of
Turkmenistan than Russia.

Equally important for the Ukrainian economy have been the remittances sent
back annually by the millions of Ukrainians working legally in Russia. Once
again, contrast Western approaches to this question: It remains extremely
difficult for Ukrainians to gain permits to work legally in Western
countries. When the last German foreign minister, Joschka Fischer, tried to
relax the terms for entry into Germany, the result was an outburst of
chauvinist hysteria about a supposed flood of Ukrainian criminals and
prostitutes.

Recent days have seen a great deal of moralizing in the U.S. and European
news media about Russia using energy as a political tool. It would be better
if the Americans and French in particular turned the question round and
asked themselves whether there would be the slightest possibility of their
countries giving aid on this scale without expecting concrete geopolitical
and economic returns.

The underlying thinking in Brussels and Washington concerning Ukraine is
rather different, with Europeans holding the prize for cynicism and
Americans for recklessness.

Under all the talk about Ukraine's European path, a majority of West
European governments and EU officials privately hope that any real prospect
of Ukrainian membership in the European Union can be postponed virtually
indefinitely - or at least until after Turkish membership, which may come to
the same thing. They are certainly not going to ask their voters to come up
with anything like the massive aid that Ukraine needs in order to reform its
economy along Western lines.

Nor of course is the United States going to take up this burden. Instead, a
growing number of U.S. officials and politicians seem to see early NATO
membership for Ukraine as a cheap alternative, with little economic cost to
the United States, and that little offset by benefits to U.S. arms
manufacturers.

This, however, would mean taking into what remains in effect an anti-Russian
alliance a country which is still deeply entwined with Russia economically,
demographically and culturally; where in the last round of the presidential
elections, 44 percent of the population voted against a Western path and in
favor of alliance with Russia, and where, according to opinion polls, an
overwhelming majority of the population is opposed to NATO membership.

In addition, as events since the Orange Revolution have demonstrated,
Ukraine remains a volatile and unconsolidated democracy, whose political and
business elites remain deeply ambivalent about real economic reform. And a
future world economic crisis, especially one consequent on international
energy sources, could completely redraw both the political and geopolitical
maps of Ukraine.

Meanwhile, unless Russia can somehow also be integrated into the West,
Ukraine's successful move out of the Russian orbit would face Russia with
another set of terrible economic, cultural and geopolitical defeats,
including in the long term the loss of Ukrainian markets for Russian goods.
That does not make Russia's opposition to this process correct, but
certainly understandable, especially to France and America. -30-
-------------------------------------------------------------------------------------------
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18. PRESIDENT PUTIN -- GET YOUR HANDS OFF UKRAINE
The West's true friends, and comrades are Ukraine - not Russia

COMMENTARY: By Christopher Berry-Dee, Co-publisher
Editor, New Criminologist Online Edition, London, UK, Sun, 08 Jan 2006

"One day Russia will stand alone and become destabilised.it is acting out
of fear of the enemies that will surround her. That's why they tried to
block the gas." Yuri Yakimenko. Director of Political Affairs, the
Razumkov Centre.

With the male life expectancy rate, in Russia, plummeting down to
56-years-of-age, all due to chronic unemployment, alcoholism - vodka
consumption is four times the West's at plus 12-litres a year, and this
applies merely to the moderate drinkers - and its bordering countries
becoming more hostile to the Putin regime, Russia is turning in on itself
and employing a new weapon.

Having dumped its nuclear arsenal, along with highly toxic munitions into
various seas, and into the atmosphere - the Chernobyl case in point -
Russia is now using its natural resources - oil and gas - to assert its
dwindling global influence by temporarily halting gas supplies to Ukraine,
and squeezing other EU countries, into the bargain. All a sign of the
present Russian government running scared.

Yet, turning off the gas tap could be Russia's most powerful weapon of
decades past. It is a perfectly legal weapon, one that cannot be retaliated
against, and it would arm-lock the West as never before.

As for the oil - lest us not forget that dozens of US drilling companies are
sucking 'the Black Stuff' out of the ground - because the Russians lack even
the most basic technology to obtain it for themselves - and getting rich
into the bargain - as are the pro-Putin mega-rich oligarch businessmen, and
'New Russians', who bleed this wonderful country dry.

But, the name 'Ukraine' means 'The Edge', or 'The Border', has always been,
an enviable land of riches in an enviable land of riches without natural
defences.

Cossacks, Kaisers, Red Guards, White Guards, Commissars, and Nazis -
they come and go and sometimes they come back again after everyone
thinks they have gone for all time. And, for the Ukraine people - their rustic
life replete with village duck ponds and overloaded horse-drawn carts -
life is pretty unsettling to have Mother Russia next door.

If they wished, the Russians could turn of the gas tap, shut down Ukraine
industries and freeze the Ukraine people in their own homes.

This is the sleety wind of economic reality. So, welcome to the new world
order, where a complacent West has exposed its windpipe to the muddy
boots of Russia and the dusty sandals of the Arab Muslim world - and
does not yet realise just how serious its mistake is.

Of course the US oil and gas drillers care not a jot for the long-term
consequences of Ukraine, nor the West. This weapon doesn't turn any city
into vapour, and nobody, allegedly, dies. This is no H-bomb, but the row
over gas in Ukraine is not just a spat between two neighbours, it IS the
beginning of a Russian campaign to become a world power once again.
Yet the US of A does not give a damn.

There is no doubt that the past, and present Ukraine government is riddled
with corruption thru-and-thru. On a suitably dreary morning, the world was
entranced by the Orange Revolution, in which smiling young people took to
the frozen streets to protest against the evil, corrupt ballot-riggers who
had taken over their country. And, I was there, too.

The loser, Viktor Yanukovich, was portrayed as straightforwardly bad,
unpopular and wrong and supported by Russians. If only the winners, the
poison-scarred Viktor Yushchenko and his then ally, the beautiful Yulia
Tymoshenko, had been as perfect and wonderful - and independent - as
Westerners seemed to believe, as I did. alas this is not so.

There are those who portray Ukraine as a dreary, slushy country, more so
with its over-ambitious plans to join the West, the EEC and EU, bless their
humble souls.

And, this is also a country where it is hard to see where the money, or the
justice will come from in a land where - like Russia - millionaire oligarchs
gamble in kitschy casinos while the poor struggle by on shrivelled pensions,
and the carefully husbanded produce of allotment gardens.

Nevertheless, Ukraine is rich in culture and soil. The people of Ukraine are
among the most hospitable folk on this planet. Generous to a fault, meeting
real Ukraine people is like stepping back into romantic postcard time, and
the country's prizes are the same as ever: black, fertile farmlands,
strategic routes, ports and, of course, the gas and oil of the Caucasus, now
far more important than they have ever been before.

These are increasingly dark times. The West's true friends, and comrades
are Ukraine - not Russia - and it is about the right moment for the West to
show its appreciation of a small country that had the nerve, the spirit and
the foresight to split from Russia, and tread an unknown path, alone. -30-
----------------------------------------------------------------------------------------------
Christopher is co-publisher/editor of TNC. He is one of the world's
best-selling true crime writers, and, is married to Tatiana, a Russian
national. He regards Kiev as his second home. His CV is at:
http://www.newcriminologist.co.uk/author.asp?bio=1281886251
E-mail: christopherdee639@hotmail.com
----------------------------------------------------------------------------------------------
LINK: http://www.newcriminologist.co.uk/news.asp?id=1842280340
----------------------------------------------------------------------------------------------
[return to index] [The Action Ukraine Report (AUR) Monitoring Service]
========================================================
19. FAMILY LIFE: SNAPSHOT: LEAVING HOME, UKRAINE, 1918

By Sue Kruk, The Guardian, London, UK, Saturday, Jan 07, 2006

Fur-clad against the cold, Irena stands between her sisters, outside their
grand family home in Winnica (Vinnitsa) in Ukraine. Look carefully.
Bolshevik soldiers guard the front door in the sunshine. She smiles
stoically. She has just become homeless, for the first - but not the last -
time.

Fifty years on, she reluctantly became my mother in law, dismayed, no
doubt, because I was not Polish, not Catholic. She regarded me as a
cradle-snatcher and a gold-digger. I, in turn, was offended by her
suspicions and intimidated by her blunt speech. Faced with the inevitable,
she accepted me, but the early years were not easy.

In 1972 Irena's husband Zygmunt died suddenly, followed a few months
later by her sister, Zofia. It was only when we found this snapshot among
Zofia's possessions, that Irena allowed herself to lament her many losses.
It all flooded out.

Her father was shot, her mother was left behind in Poland, two sisters
were killed in traffic accidents, her home and her country were lost for
ever. Yet she probably considered herself fortunate compared to many
of her compatriots.

She had lived through two wars, the Warsaw uprising, and forced labour
in Germany, while pregnant. What is more, her beloved husband and her
adored only son had also survived the difficult years of exile in refugee
camps.

Was it any wonder that I appeared a threat to her hard-won security? I
began to understand. This snapshot hints at Irena's courage and feistiness,
which I came to appreciate.

We miss her still - her vivacity, kindness and generosity, her loyalty, her
enthusiasm for history, her fluent yet idiosyncratic English (a cause of
those early misunderstandings), her delicious meals and burnt cheesecake.
Even when a series of strokes cruelly robbed her of her considerable
faculties, her spirit remained intact.

On her final visit to us, she sat in the sun, contentedly singing the
melancholic Ukrainian songs of her childhood. -30-
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========================================================
20. "IN NEED OF COLOURING IN"

BOOK REVIEW: By Bridget Hourican
RE: "Ukraine's Orange Revolution" By Andrew Wilson
Irish Times, Dublin, Ireland, Saturday, Jan 07, 2006

Current Affairs: The image of the revolution in Ukraine was as carefully
orchestrated as a Saatchi campaign, writes Bridget Hourican .

On a recent theatre tour of Minsk, playwright Tom Stoppard came across
a furious dissident, incensed over the world's indifference to Belarus:
"We're not sexy," (bitterly) "Ukraine is sexy".

To Western ears, this is poignant and surreal. There are places where
Ukraine looks sexy? But to former Soviet republics, clamouring for
international attention, Ukraine hit the jackpot.

Last year we were briefly transported to the heady days of 1989. On our
screens, peaceful crowds thronged, braving snow to demand democracy.
It was one of those moments that bolster Western democracies, and after
an unrelieved millennial diet of terrorism, war, torture and lies, we needed it
badly. Suddenly everyone knew where Ukraine was, and the latest revolution
was orange.

Everything was in place to capture the world's hard, restless imagination:
not only peaceful crowds, but colourful personnel. In the government corner:
out-going president Leonid Kuchma, implicated in a foul murder in 2000,
whose voice on secret leaked tapes could be heard making remarks like:
"You should take this [f] judge, hang him by the balls, let him hang for
one night", and his elect Viktor Yanukovych, an ex-convict who couldn't
spell.

In the opposition corner: the other Viktor, Yushchenko, a moderate whose
handsome face was pockmarked by poison, and the glamorous Yuliia
Tymoshenko, thick flaxen peasant plait coiled serpentine around her head.

That plait wasn't arbitrary - previously she tried out Princess Leia-style
sidebuns. As Andrew Wilson shows, the orange revolution's image was as
carefully orchestrated as a Saatchi campaign, although the actual colour was
by default. Other colours - blue, yellow, red, black - had already been
co-opted by nationalists or communists.

The core of this book is the government's electoral fraud, and it makes
quite some reading. Since Kuchma couldn't run again - he'd been president
since 1994 and there was that murder - he attempted constitutional "reform"
to deprive the incoming president of real power. Parliament narrowly
defeated that move, so the authorities looked briefly at creating "directed
chaos" to neuter the election. A few bombs were let off but it was risky and
seemed unnecessary when the authorities were so good at fixing elections.

So they stacked their cards on Yanukovych - reluctantly because he wasn't
the brightest, he'd been imprisoned for GBH, and yes, his Ukrainian was
equal to his Russian - but equally bad. However his image wouldn't matter
much in a one-horse race: Yushchenko was invited to a dacha for boiled
crayfish, and poisoned.

He almost died, his health was wrecked and his looks destroyed, but it
wasn't that smart a move, because it seized the world's attention and was
one of the first steps in sexing the revolution.

Fraud on election day was routine: registering dead people, absentee voting,
repeat voting, fake exit polls, and rigging results. These last two were
necessary because despite all the dead, absentee and repeat voters,
Yushchenko still came in at 53% (according to the only independent poll).

Wilson examines, to reject, two of the accusations levelled at the orange
revolution. He doesn't accept that with Viktor Y and Viktor Y, it was six of
one and half a dozen of the other. That's the argument of those who claim
Republicans/Democrats; Tories/ Labour; FF/FG are all tarred with the same
brush.

It isn't even true in advanced democracies - where it's all about shadings
of grey - it certainly wasn't true of Ukraine, where differences were
conspicuous. Neither does Wilson give quarter to the plus ca change
brigade.

Even if Yushchenko's government doesn't measure up to the extravagant
hopes laid on it, this doesn't detract from the revolution's achievement in
securing confidence in democracy, and setting an example to other former
Soviet republics.

Wilson, who lectures at the University of London, is a leading expert on
Ukraine. He fast-tracked this book to coincide with the anniversary of the
revolution.

Reading it you're always confident he knows what he's talking about, but
you're not always riveted, which is a pity in a story this good. It needs a
lot more scene-setting and local colour. What is badly lacking is a physical
and cultural sense of the country and people.

It's all high politics, and in a country as remote to most as Ukraine,
politics needs grounding. Anyway revolutions, de facto, belong to the
people, so we should hear more about them.What do east Ukrainians like
eating? What's the petty crime rate in west Ukraine? What does the
countryside around Kiev look like? How exactly did people get to
Independence Square? Hitching lifts? Co-opting buses? Who looked
after the kids?

Details like these would build up an idea of the country. Instead we get a
mass of information on politicians, officials and oligarchs - on one page I
counted 10 names, seven of them mentioned for the first time.

Comparisons to Misha Glenny's "The Fall of Yugoslavia" are unfair because
Glenny had all the advantages of reporting on the ground and what happened
was even "sexier", but aren't misplaced because the material is similar -
cataclysmic events in a postcommunist country. Glenny never forgets to tell
you what someone looks like, or whether the landscape is bleak or lush, or
who's running the biggest hotel in town, and what kind of people stay there,
and what they drink.

We need that kind of picture of Ukraine, but, unfortunately, this isn't
it. -30-
---------------------------------------------------------------------------------------------
Bridget Hourican is a critic and journalist who has reported from Eastern
Europe. BOOK: Ukraine's Orange Revolution. By Andrew Wilson,
Yale University Press, 223pp. GBP18.95 LINK: http://www.ireland.com
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