US-Ukraine Business Council

Ukrainian News Agency, Kyiv, Ukraine, Wed, December 17, 2008

12. FITCH EXPECTS WORSENING OF SOLVENCY OF UKRAINIAN FUEL & ENERGY SECTOR IN 2009
Ukrainian News Agency, Kyiv, Ukraine, Friday, December 19, 2008

13. TRADE IN UKRAINE'S TROUBLED HVRYNIA DRYING UP AMID CRISIS
Peter Apps, Reuters, London, UK, Friday, December 19, 2008

14. EXPERTS SEE NO ADEQUATE FOREX POLICY AT NATIONAL BANK OF UKRAINE

Hope Hryvnia Will Stabilize At UAH 7.5-9.0 By 2009

Ukrainian News Agency, Kyiv, Ukraine, Tuesday, December 16, 2008

15. UKRAINIAN AGRARIAN CONFEDERATION FOR EXTENDING MORATORIUM ON FARMLAND SALES

Dmytro Kuzmin, Ukrainian News, Kyiv, Ukraine, Friday, December 19, 2008

16. CAMPARI BUYS UKRAINE'S ODESSA WINE COMPANY, ARGENTINA SPIRITS BUSINESS SABIA
By Armorel Kenna, Bloomberg, New York, NY, Friday, December 19, 2008

17. NEW RADIATION MONITORING SYSTEM INSTALLED AT BORYSPIL AIRPORT
Cooperation between the United States, Canada and Ukraine

Interfax Ukraine, Kyiv, Ukraine, Monday, December 8, 2008

18. WORLD BANK PRESCRIBES RECOVERY ACTIONS FOR UKRAINE
Martin Raiser: next year will be difficult for Ukraine and we are prepared to provide support

Interview by Natalia Bilousova, with Martin Raiser, World Bank Director for Ukraine
The Day Weekly Digest in English #39, Kyiv, Ukraine, Tuesday, 9 December 2008

19. RUSSIA BLOCKS UKRAINE UN FAMINE-GENOCIDE RESOLUTION AGAIN

ITAR-TASS, Moscow, Russia, Friday, December 19, 2008

20. UN AGAIN REFUSES TO INCLUDE UKRAINE FAMINE IN SESSION AGENDA
RIA Novosti, Moscow, Russia, Friday, December 19, 2008

21. OFFICIAL SAYS RUSSIAN FSB ARCHIVES HAVE NO PROOF

THAT 1930s FAMINE WAS GENOCIDE AGAINST UKRAINIANS

Interfax Ukraine, Kyiv, Ukraine, Thursday, 18 December, 2008

22. RUSSIAN SPY AGENCY OFFICER DENIES UKRAINE'S GENOCIDE CLAIM

Reuters, Moscow, Russia, Thursday, December 18, 2008

23. NEWLY ELECTED UKRAINIAN SPEAKER LYTVYN INTERVIEWED ON RUSSIAN TV

Holodomor: "I am categorically against bringing this topic into the dimension of ethnocide."

Rossiya TV, Moscow, Russia in Russian 1700 gmt 14 Dec 08
BBC Monitoring Service, UK, in English, Sunday, December 14, 2008

24. WHY THEY [THE RUSSIANS] DO NOT WANT TO SEE US,

OR HISTORY ON THE SERVICE OF AN IMPERIAL POLICY

The Russians and the Holodomor, their hard ideological line and distorted historical realities.

By Volodymyr Serhiichuk, Professor and Doctor of History
The Day Weekly Digest in English, Kyiv, Ukraine, Tuesday, December 16, 2008

25. HOLODOMOR IS UKRAINE'S NEVER-ENDING TRAUMA

Commentary & Analysis: By Irena Chalupa

Radio Free Europe/Radio Liberty (RFE/RL) Prague, Czech Republic, Dec 09, 2008

26. UKRAINE, A POST-GENOCIDAL SOCIETY
Ukraine's famine survivors still bear the emotional scars.

By Iryna Shtogrin, Radio Free Europe/Radio Liberty (RFE/RL)

Prague, Czech Republic, Monday, December 08, 2008

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1 . UNITED STATES-UKRAINE CHARTER ON STRATEGIC PARTNERSHIP

Bureau of European and Eurasian Affairs, U.S. Department of State

Washington, DC, Friday, December 19, 2008

PREAMBLE

The United States of America and Ukraine:

Affirm the importance of our relationship as friends and strategic partners. We intend to deepen our partnership to the benefit of both nations and expand our cooperation across a broad spectrum of mutual priorities.

Emphasize that this cooperation between our two democracies is based on shared values and interests. These include expanding democracy and economic freedom, protecting security and territorial integrity, strengthening the rule of law, and supporting innovation and technological advances.

Stress our mutual desire to strengthen our relationship across the economic, political, diplomatic, cultural, and security fields.

Confirm the importance of the security assurances described in the Trilateral Statement by the Presidents of the U.S., Russian Federation and Ukraine of January 14, 1994, and the Budapest Memorandum on Security Assurances in connection with Ukraine’s accession to the Treaty on the Non-Proliferation of Nuclear Weapons of December 5, 1994.

Affirm the Priorities for U.S.-Ukraine Cooperation (Road Map) signed on March 31, 2008 and the commitments to a strategic partnership made by Presidents Bush and Yushchenko on April 4, 2005.

Section I: Principles of Cooperation

This Charter is based on core principles and beliefs shared by both sides:

Support for each other’s sovereignty, independence, territorial integrity and inviolability of borders constitutes the foundation of our bilateral relations.

Our friendship comes from mutual understanding and appreciation for the shared belief that democracy is the chief guarantor of security, prosperity and freedom.

Cooperation between democracies on defense and security is essential to respond effectively to threats to peace and security.

A strong, independent and democratic Ukraine, capable of responsible self-defense, contributes to the security and prosperity not only of all the people of Ukraine, but of a Europe whole, free and at peace.

Section II: Defense and Security Cooperation

The United States and Ukraine share a vital interest in a strong, independent, and democratic Ukraine. Deepening Ukraine’s integration into Euro-Atlantic institutions is a mutual priority. We plan to undertake a program of enhanced security cooperation intended to increase Ukrainian capabilities and to strengthen Ukraine’s candidacy for NATO membership.

Guided by the April 3, 2008 Bucharest Summit Declaration of the NATO North Atlantic Council and the April 4, 2008 Joint Statement of the NATO-Ukraine Commission, which affirmed that Ukraine will become a member of NATO.

Recognizing the persistence of threats to global peace and stability, the United States and Ukraine intend to expand the scope of their ongoing programs of cooperation and assistance on defense and security issues to defeat these threats and to promote peace and stability. A defense and security cooperation partnership between the United States and Ukraine is of benefit to both nations and the region.

Working within the framework of the NATO-Ukraine Commission, our goal is to gain agreement on a structured plan to increase interoperability and coordination of capabilities between NATO and Ukraine, including via enhanced training and equipment for Ukrainian armed forces.

Acknowledging the growing threat posed by the proliferation of weapons of mass destruction, the United States and Ukraine pledge to combat such proliferation of weapons of mass destruction and dangerous technologies through adherence to international nonproliferation standards and effective enforcement and strengthening of export controls.

Section III: Economic, Trade and Energy Cooperation

The United States and Ukraine intend to expand cooperation to enhance job creation and economic growth, support economic reform and liberalization, develop a business climate supportive of trade and investment and improve market access for goods and services. Recognizing that trade is essential for global economic growth, development, freedom and prosperity, the United States and Ukraine support the following initiatives:

Welcoming Ukraine’s accession to the World Trade Organization on May 16, 2008, the parties held the first U.S.-Ukraine Trade and Investment Council meeting on October 2, 2008 in Kyiv. As discussed at the meeting, the United States continues to support Ukraine’s efforts to implement its WTO commitments.

Other areas in which we plan to accelerate our efforts include expanding market access, resolving outstanding disputes and promoting intellectual property rights. Acknowledging the importance of increased investment to economic growth and development, the United States supports Ukraine’s efforts to enhance investor protections.

Recognizing the importance of a well functioning energy sector, the parties intend to work closely together on rehabilitating and modernizing the capacity of Ukraine’s gas transit infrastructure and diversify and secure Ukraine’s sources of nuclear fuel making Ukraine less dependent on foreign sources of nuclear fuel and nuclear fuel storage.

Following the Roadmap of Priorities for U.S.-Ukraine Cooperation, the United States and Ukraine intend to launch the work of the Bilateral Energy Security Working Group. Consistent with the U.S.-EU Summit Declaration of June 10, 2008, the United States and Ukraine intend to enhance a trilateral dialogue with the European Union on enhanced energy security.

Actively developing cooperation with Ukraine’s regions, including Crimea, the United States supports Ukraine’s plan to promote security, democracy and prosperity through expanded economic development, energy conservation, food security, and good governance initiatives. The United States and Ukraine also intend to cooperate in the area of public-private partnerships in regions of Ukraine aimed at supporting small and medium enterprises.

Section IV: Strengthening Democracy

Strengthening the rule of law, promoting reform of the legal system and of law enforcement structures and combating corruption are all of key importance to the well being of Ukraine. We intend to work together to support reform, democracy, tolerance and respect for all communities.

The United States and Ukraine will enhance their cooperation on efforts to strengthen the judiciary, increasing professionalism, transparency and independence as well as improving legal education and improved access to justice for all Ukrainians.

Through enhanced law enforcement and judicial branch relationships, the United States and Ukraine plan to address common transnational criminal threats such as terrorism, organized crime, trafficking in persons and narcotics, money laundering, and cyber crime.

Recognizing the importance of combating corruption, the United States and Ukraine intend to increase cooperation that will expand media and public monitoring of anti-corruption efforts; enforce ethical standards by establishing internal investigation units; and streamline the government regulatory process.

The United States and Ukraine plan to work together to promote reform in Ukraine’s legislative processes through increased transparency, heightened accountability through citizen and media access, and expanded public information about the work of Ukraine’s parliament.

Recognizing the importance of harmonizing Ukraine’s criminal justice system with European and other international standards, we plan to work together more intensely on issues of key importance, including the adoption of a Criminal Procedure Code compliant with Council of Europe standards.

The United States plans to provide Ukraine with further technical assistance to support Ukraine’s efforts through government and judicial authorities to combat human trafficking, including strengthening witness protection.

The United States supports increased assistance to strengthen democracy building and good governance in order to build upon Ukraine’s political progress and commitment to democratic development.

Section V: Increasing People-to-People and Cultural Exchanges

The United States and Ukraine share a desire to increase our people-to-people contacts and enhance our cultural, educational and professional exchange programs that promote democracy and democratic values and increase mutual understanding.

Recognizing the vital importance of increased contact between the people of the United States and Ukraine, both sides intend to promote further cultural and social exchanges and activities through initiatives such as the Fulbright program, Future Leaders Exchange Program (FLEX), Undergraduate Exchange (UGRAD), Legislative Education and Practice (LEAP), the International Visitor Leadership Program, the English Language Teaching and Learning Program and the Open World Program.

Stressing the necessity of innovation and dynamism to the future of our two countries, the United States and Ukraine intend to promote increased cooperation in higher education and scientific research. The United States will facilitate these exchanges consistent with U.S. laws and procedures so that qualified individuals in cultural, educational and scientific activities are given the opportunity to participate.

Our two countries will continue to cooperate closely to promote remembrance and increased public awareness of the 1932-33 Great Famine (Holodomor) in Ukraine.

Ukraine welcomes the United States’ intention to establish an American diplomatic presence (American Presence Post) in Simferopol.

Signed at Washington, D.C. on December 19, 2008.

For the United States of America:

Condoleezza Rice
Secretary of State

For Ukraine:
Volodymyr Ogryzko
Minister of Foreign Affairs

LINK: http://www.state.gov/p/eur/rls/or/113366.htm#

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2. U.S.-UKRAINE CHARTER ON STRATEGIC PARTNERSHIP CONFIRMS

GUARANTEES OF UKRAINE'S SECURITY, SAYS U.S. AMBASSADOR

Interfax Ukraine News, Kyiv, Ukraine, Saturday, December 20, 2008

KYIV - The U.S.-Ukraine Charter on Strategic Partnership signed in Washington on December 19 confirms guarantees of Ukraine's security, U.S. Ambassador to Ukraine William Taylor has said.

The first section of the charter says that the support for each other's sovereignty, independence, territorial integrity and inviolability of borders constitutes the foundation of the bilateral relations, he said in an interview with the Mirror of the Week Newspaper, while commenting on the key clauses of the Washington Charter.

He said that the new document confirms the importance of the security assurances described in the Trilateral Statement by the Presidents of the U.S., Russian Federation and Ukraine of January 14, 1994, and the Budapest Memorandum on Security Assurances in connection with Ukraine's accession to the Treaty on the Non-Proliferation of Nuclear Weapons of December 5, 1994.

When asked, whether the Charter stipulates for the military assistance of the United States in case of the violation of Ukraine's borders by another state, Taylor said "No." The Charter doesn't oblige any of the parties to provide the military assistance, he said adding that guarantees of such kind are subject to approval by the Congress.

At the same time, he stressed that the Washington Charter does envisage the reaction of the United States to the possible violation of Ukrainian borders.
"The Charter once again confirms the principles of the Budapest memorandum: if the borders are violated, we will meet and discuss our further steps," the ambassador said.

According to Taylor, the second section of the charter is dedicated to defense and security cooperation. The both countries are interested in a strong, independent, and democratic Ukraine. Deepening of Ukraine's integration into Euro-Atlantic institutions is a mutual priority. This section affirms that Ukraine will become a NATO member, the ambassador said.

The goal of working within the framework of the NATO-Ukraine Commission is to gain agreement on a structured plan to increase interoperability and coordination of capabilities between NATO and Ukraine, including via enhanced training and equipment for Ukrainian armed forces, Taylor said.

He also said that the defense agencies of the two states were negotiating the categories of equipment to be supplied to Ukraine. No final decision has been taken yet, Taylor said adding that Ukrainian Defense Minister Yuriy Yekhanurov and US Defense Secretary Robert Gates were discussing the transition of one to three U.S. naval frigates to Ukraine.

The third section of the Charter sets out the guidelines for trade and energy cooperation, the fourth one is dedicated to strengthening democracy, and the fourth section stipulates for increasing people-to-people and cultural exchanges.

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3. UKRAINE, U.S. INTEND TO EXPAND COOPERATION IN

ENERGY SECURITY, SAYS AMB WILLIAM TAYLOR

Interfax Ukraine News, Kyiv, Ukraine, Saturday, December 20, 2008

KYIV - The U.S.-Ukraine Charter on Strategic Partnership signed in Washington on December 19 stipulates for expanding the bilateral cooperation in energy security, U.S. Ambassador to Ukraine William Taylor has said.

"Here we intend to expand the existing format of cooperation and to develop the trilateral dialog of the United States, Ukraine and the European Union," the Ambassador said. He also said about the plans of launching the Ukrainian-U.S. working group on energy security. U.S. Senator Richard Lugar will lead the American part of the group.

While commenting on the recent statement by Lugar on the Echo of Moscow radio, Taylor stressed that the senator didn't say that Ukraine is currently siphoning gas. He said that Russians accused Ukraine of stealing gas three years ago and called for the talks to solve such problems, the diplomat explained.

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4. U.S. PLANNING TO OPEN DIPLOMATIC POST IN CRIMEA

Interfax Ukraine News, Kyiv, Ukraine, Saturday, December 20, 2008

WASHINGTON - The United States plans to open a diplomatic post in Simferopol, Crimea, U.S. State Department Spokesman Sean McCormack said at a briefing in Washington on Friday.

He said the administration plans to set up a so-called American Presence Post in the Crimean capital, which would include one or two U.S. diplomats and engage in a wide range of political and cultural activities. The timeframes for the opening of the U.S. post in Simferopol hasn't been defined yet, McCormack said adding that it will not have a status of consulate.
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U.S.-Ukraine Business Council (USUBC): http://www.usubc.org

Promoting U.S.-Ukraine business relations & investment since 1995.

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5. U.S. AND UKRAINE STRENGTHEN TIES WITH NEW SECURITY AGREEMENT
The agreement promises enhanced U.S. support for Ukraine's military

By Heather Maher, Radio Free Europe/Radio Liberty (RFE/RL)

Prague, Czech Republic, Saturday, December 20, 2008

WASHINGTON -- Since Russia's war against Georgia this past August, the United States and Ukraine have been exploring ways to strengthen cooperation in an attempt to refute Moscow's claim to a sphere of influence along its borders.

On December 19, the two governments signed a new strategic partnership deal intended to show Moscow that Washington is committed to eventual NATO membership for Ukraine.

The agreement signed in Washington by U.S. Secretary of State Condoleezza Rice and Ukrainian Foreign Minister Volodymyr Ogryzko is nonbinding, but it mentions broad areas of cooperation, including economic development and defense. It also contains promises to enhance the United States' training and equipping of Ukraine's military through NATO.

Deputy U.S. Assistant Secretary of State David Merkel said the new agreement is meant to "break Moscow's narrative that it has laid out markers saying that the direction has to be reversed, the direction of U.S. involvement has to be blunted.”

The agreement also includes a statement by Ukraine welcoming the U.S. intention to open a new "diplomatic presence" on the Crimean peninsula, the Ukrainian region where Russia's Black Sea fleet is based.

State Department spokesman Sean McCormack said the United States is "considering opening an American presence post in the Crimean capital of Simferopol to expand...exchanges and promote mutual understanding between the United States and the Crimean region."

Most of the 2 million residents of Crimea are ethnic Russians. Although Russian officials have denied claims that Moscow is a threat to Ukraine's sovereignty, its move against Georgia in August has elevated fears of a separatist movement on the peninsula. Russia's lease on its Soviet-era naval base in Sevastopol runs out in 2017, and Ukraine says it will not be extended.

BACKING KYIV
The new U.S.-Ukrainian agreement is a sign that the United States is trying to shore up Ukraine's position in the standoff.

Olexander Sushko, of Kyiv's Center for Peace, Conversion, and Foreign Policy, said the document was necessary because Ukraine is years away from becoming a member of NATO. Because the United States has lobbied so hard, without success, for Ukraine to be given a Membership Action Plan (MAP), Sushko said a new strategic partnership was the next best thing it could offer.

"This document has more of symbolic weight than any serious security guarantees, Sushko said. “The signing of the document is a reaction of two countries, Ukraine and the U.S., to a certain slow-down in the process of Ukraine's NATO integration, in the sense that in the next several years Ukraine will not become NATO member. Because of this it was necessary to demonstrate a reaction on a bilateral level, to signal that the two sides have a serious bilateral interest in each other."

For all its promises, though, the new U.S. document cannot replace the collective security guarantees that NATO offers, Sushko warns.

"It is not a substitute for a collective security treaty. For example, the U.S. has a bilateral security treaty with South Korea. It is very different in nature. It is a treaty which carries serious security commitments,” he said. “Ukraine cannot hope for the same type of 'special' relations which formed between the U.S. and South Korea as a result of the circumstances in 1940-1950s, after the war, when this treaty came to life.... We are talking about a different level of commitment and a different level of political will to protect Ukraine, using U.S. political or military might."

President George W. Bush leaves office on January 20, and State Department officials were not clear whether a decision would be made about the Crimean post before he leaves, or if it would fall to his successor, President-elect Barack Obama. (RFE/RL's Ukrainian Service contributed to this report.)

LINK: http://www.rferl.org:80/content/US_And_Ukraine_Strengthen_Ties_With_New_Security_Agreement/1361877.html

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6. U.S. AMBASSADOR TAYLOR ADVOCATES AGAINST POLITICIZATION

OF UKRAINIAN-RUSSIAN GAS NEGOTIATIONS

Ukrainian News Agency, Kyiv, Ukraine, Friday, December 19, 2008

KYIV - U.S. Ambassador to Ukraine William Taylor advocates against politicization of the Ukrainian-Russian gas negotiations. Taylor told this to Ukrainian News. "I don't know whether there is political implication here. I don't know this. I hope this is just a commercial dispute and politics won't be engaged," he said. Taylor said gas supplies to Ukraine and Europe is commerce and politics is inappropriate here.

Also, Taylor voiced hope that Russia's Gazprom and the Naftohaz Ukrainy national oil and gas company will arrive at an agreement on gas supplies.
According to the Ambassador, cutting of gas supplies to Ukraine is not a solution to the situation if Gazprom and Naftohaz Ukrainy fail to sign a gas contract.

"If they fail to agree the questions between them, a correct solution to this is not Russia's cutting gas supplies to Ukraine and Europe. A correct solution is to settle the dispute in court," Taylor said.

According to the Ambassador, what is happening in the gas relations between Ukraine and Russia is a commercial dispute among three entities: Naftohaz Ukrainy, Gazprom, and RosUkrEnergo.

"This is a commercial dispute... This is a business for courts... These economic entities should go to court if they cannot reach an agreement. Let a court decide what should be done," Taylor said. He added that most contracts define which of international courts should consider disputes.

As Ukrainian News earlier reported, the Naftohaz Ukrainy national joint-stock company on December 17 transferred nearly USD 800 million to the RosUkrEnergo Company as payment of its debt for natural gas.

The RosUkrEnergo Company has said the debt of Naftohaz Ukrainy after the transaction is nearly USD 2 billion together with sanctions. Since 2005, the Ukrainian-Russian gas negotiations on supplies for the following years are accompanied by statements from Russia about Ukraine's gas debts and demands on urgent redemption of the debts.

In 2006, the RosUkrEnergo Company made a statement of this sort in August - ahead of the change of the government in Ukraine (the RosUkrEnergo Company wanted Naftohaz Ukrainy to redeem USD 372 million for supplied gas). In 2007, when the government was headed by Party of Regions leader Viktor Yanukovych, the RosUkrEnergo Company said ahead of the negotiations that the debt was USD 1.3 billion.

In 2008, the RosUkrEnergo Company said during negotiations the debt of Naftohaz Ukrainy was USD 2.4 billion. In 2008, Ukraine imports natural gas at a price of USD 179.5 per 1,000 cubic meters.
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7. U.S.-UKRAINIAN MILITARIES WORK TO BRING REGIONAL PEACE, STABILITY

By Gerry J. Gilmore, American Forces Press Service, Washington, D.C., Fri, Dec 19, 2008

WASHINGTON, D.C. - American and Ukrainian defense leaders are working together to assist Ukraine in its quest to develop modern, democratically managed armed forces, a senior U.S. military officer said here yesterday.

The two-day U.S.-Ukraine Bilateral Defense Consultations played a large role in that endeavor, said Army Lt. Col. Gary D. Espinas, who works in international security affairs in the Office of the Undersecretary of Defense for Policy.

The annual U.S.-Ukraine meetings constitute a high-level forum, Espinas said, in which senior officials from both countries can discuss key aspects of their defense relationship. Michael Coulter, principal deputy assistant secretary of defense for International Security Affairs, and Valerii Ivashchenko, acting first deputy defense minister and head of the Ukrainian delegation, attended this year’s conference.

Ukraine is an eastern European country of about 46 million people. It declared independence in 1991 following the dissolution of the Soviet Union. The Ukrainian government has plans to downsize its armed forces while modernizing its military’s force structure, Espinas said. Another part of Ukraine’s military modernization program, he said, includes the establishment of professional, all-volunteer armed forces.

“Our support of their defense-reform efforts and Ukraine’s aspirations for NATO membership and interoperability with NATO forces all take place in the context of supporting a key partner” in the region, said Espinas, the country director for Ukraine, Belarus and the Black Sea for international security affairs’ European and NATO policy directorate.

Ukraine is the only non-NATO country participating in all NATO operations, Espinas said, noting Ukrainian troops are engaged in missions in Afghanistan and Iraq. Ukrainian troops also participate in United Nations peacekeeping missions, such as in Kosovo in the Balkans.

“Ukraine is a key partner of the United States and a key player in regional security, and it underscores the importance of having a professional military that is interoperable with NATO and capable of meeting their country’s needs,” Espinas said.

American military officials interface with their Ukrainian counterparts at several levels, from the Ministry of Defense, to the General Staff, down to individual units, Espinas said.

“We have advisors helping them with their efforts to develop a professional noncommissioned officer corps. We have Ukrainian officers coming to our military schools. We are working closely at the general staff and tactical level, as well,” Espinas said. Ukrainian, U.S., and some other nations’ armed forces also participate in combined military exercises, he said.

Some Ukrainian officers attend U.S. military schools, such as the Army War College in Carlisle, Pa., Espinas said. The War College prepares selected senior officers and civilians for increased rank and responsibilities.

“They can see -- up close and personal -- how we operate, and that has an effect when these officers graduate from our schools [and] go back to their armed forces to later become key leaders,” Espinas said. Two Ukrainian officers who had attended the Army War College later attained general-officer rank, he said.

“So, there’s a very robust set of activities,” Espinas said, “all of which support Ukraine’s strategic goals of advancing their Euro-Atlantic integration and developing interoperability with NATO.” The annual bilateral meetings are held in turn in Washington, California and Ukraine.

Ukraine participates with the California National Guard in the State Partnership Program. Ukrainian military members have traveled to California to participate in disaster-relief exercises with the Guard, and California Guardsmen have deployed to Ukraine for anti-terror exercises.

LINK: http://www.defenselink.mil/news/newsarticle.aspx?id=52398

FOOTNOTE: The Aerospace and Defense Industry Committee of the U.S.-Ukraine Business Council (USUBC), www.usubc.org, hosted a luncheon in Washington, D.C. on Tuesday, December 16th for members of the Ukraine and U.S. military who were involved in the Bilateral Defense Consultations. Around 30 persons attended the luncheon. U.S. companies in attendance included American Continental Group, AnaCom Inc., Boeing, DRS-Technical Services, General Dynamics, Harris, Lockheed Martin, Northrop Grumman, and Sweet Analysis Services Inc. (SASI).
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8. UKRAINE APPROVES IMPORT DUTY RATES REGARDING WTO COMMITMENTS

Ukrainian News Agency, Kyiv, Ukraine, Wed, December 17, 2008

KYIV - The Verkhovna Rada (Parliament) of Ukraine has approved the rates of import duties in keeping with Ukraine’s commitments undertaken in its accession to the World Trade Organization, and with regard for President Viktor Yuschenko’s proposals. The bill on the whole was backed by 233 MPs.

Particularly, the Rada withdrew from the law the paragraph preserving until January 1, 2009 the old rates of import duties on some commodity positions (particularly, meat, alcohol and non-alcohol beverages, cocoa powder and chocolate, automobiles). On June 3, the Rada set the rates of import duties in keeping with Ukraine’s WTO commitments.

Particularly, amendments were made to the law of the customs tariff concerning restoration of import duty rates set by the tariff table for 2008, which is an integral part of the protocol on Ukraine’s entry in the World Trade Organization.

The final provisions of the document provide for putting it into effect on January 1, 2009, except for the import duties on commodity groups 01 — 24, which took force on the day of Ukraine’s entry in the WTO, except for milk, diary products and wine-making materials.

The document also contains the provisions providing for correction of import duty rates on certain goods, and specification of some commodity subcategories at the national level.

As Ukrainian News reported, on June 20, Yuschenko vetoed the import duty rates set in keeping with Ukraine’s WTO commitments, saying that was a gross violation of international agreements. Ukraine became a WTO member on May 16.

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9. UKRAINE'S ENERGY POLICY STUCK IN SOVIET PERIOD, SAYS US AMBASSADOR

Interfax, Kyiv, Ukraine, Tuesday, December 9, 2008

Ukraine's energy policy is stuck in Soviet times, U.S. ambassador to Ukraine William B. Taylor said during the second "Black Sea and Caspian Region and European Energy Security" forum held in Kyiv, according to the Dzerkalo Tyzhnia newspaper.

"The Soviet approach is the reason for the difficulties in the Ukrainian energy sector, he said. He said that among these difficulties are problems with management, a conflict of interests, a lack of funds,problems with price formation and multi-level price system for energy in Ukraine,which is unjustifiable.

He said that the balance of interests,the increase in the prices of energy and simultaneously an efficient energy saving program are required to achieve

Ukraine's goal of entering the European energy community.

Taylor said that political will and joint efforts of the president,premier and parliament are required to face today's challenges. "If Ukraine achieves all of these things,this would be a contribution to the energy security of the region and Europe," he said.

By Ben Aris, BNE (businessneweurope), Berlin, Germany, Sat, Dec 20, 2008

Ukraine will have a harder time of it in 2009 than any other country in the region. It enters the year in recession and the prospects for growth in the second half of the year depend heavily on what happens to the global economy.

In general, the economy remains more resistant to external shocks, as it is relatively well diversified by Eastern European standards and the large consumer base helps. However, public finances are in mess and monetary policy is weak. The banking system was also teetering on the brink of collapse in late 2008 when the National Bank of Ukraine had to resort to administrative measures to prevent bank runs and a total meltdown.

The crisis was feeding through into the retail sector by the end of 2008 as retail turnover fell by 1.1% in November after growing by 16% the month before, bringing a consumer boom that has been running for years to an end.

An emergency $16.5bn loan from the International Monetary Fund (IMF), of which $4.5bn was already disbursed before the end of 2008, saved Ukraine's bacon during the worst of the instability.

Still, the outlook for the second half of 2009 is rosier and Ukraine has made a lot of progress in recent years. "By many measures, Ukraine is currently much more immune to cyclical shocks: foreign exchange reserves have increased substantially, foreign capital increased its share on the local financial market (which is now well capitalized and profitable), the fiscal system has a strong budget code (with defined roles and responsibilities in the budget process) and the [World Trade Organisation] has liberalized external trade," Maryan Zablotskyy, macroeconomist at Erste Bank Ukraine, points out.

Ukraine's economic policy is weak both fiscal and monetary wise. On the one hand, the state budget has had a good balancing influence on fiscal policy - since 2000, the average budget deficit has stood at just 0.75% of GDP.

However, budget planning was only conducted for one year, which meant that the government has tended to increase spending in nominal terms during times when steel prices and growth were increasing and this tends to amplify the economic cycle and the impact of steel price volatility on the economy. Consequently, the sudden plummeting of steel prices in the current crisis caught the government off guard.

ECONOMIC FORECAST
Ukraine will see the sharpest slowdown of all the countries in Eastern Europe in 2009. The cabinet released its macroeconomic forecast for 2009, projecting real GDP growth of just 0.4% on year.

These numbers are based on the Economy Ministry's optimistic scenario and assume an improvement in foreign demand and effectiveness of the government's anti-crisis measures. Earlier, the ministry announced an estimated 5% GDP decline based on the pessimistic scenario, which the ministry has not released.

Dragon has a bit more pessimistic scenario, with GDP declining by either 0.7% in case of a fast global recovery, or by 4%, in a more pessimistic case. Fitch forecasts a contraction in Ukraine's real GDP in 2009 by 3.5%. Erste analysts project a recession of 2.5% of GDP in 2009, with economic growth returning only in the second half of 2009.

"Despite clearly having very strong international support, it will take some time to sort out the imbalances. Still, as the political sphere is now united by a foreign anchor (International Monetary Fund loan), we believe that there is a good chance that Ukraine might finally start implementing the reforms that it did not do for 10 years,” says UBS.

If it does, the medium term looks good: "GDP growth will return to its potential growth of 5-6% in 2010, while inflation is likely to come down to a single-digit figure," conclude Erste analysts.

Ukraine had the highest rate of inflation in Europe in 2008, but the crisis was a blessing in that it at least helped slow to 22.3% in November the galloping price rises. "We consider the government's one-digit inflation forecast much less realistic as the hryvnia's sharp depreciation will put significant pressure on domestic prices. We currently expect inflation in Ukraine to rise by 14.2% on year (base case) or 16.9% on year (pessimistic case) in 2009," says Dragon

INFLATION FORECASTS

Government 9.5%
Dragon 14.2% (base) - 16.9% (pessimistic)
Fitch 17.5%
Foyil Securities 14.5%

DEVALUATION
Ukraine is vulnerable to external shocks to its currency as nearly 50% of total lending in Ukraine is in foreign currency. After spending more than $7.5bn – 20% of its reserves – to support the hryvnia in October and November, the NBU lowered both its official rate repeatedly, and its interbank intervention rate to finally unify them both at the IMF’s behest.

The hryvnia lost nearly 60% of its value from its high in May 2008 of UAH4.5/USD as a result of the crisis. By the end of December the currency had probably oversold and was trading at UAH8.2/USD, at which point the government said it would stabilize.

The optimal level of the UAH/USD will depend on steel prices and Erste analysts project the optimum level to be around UAH7 per dollar, which suggests the currency has overshot at UAH8/USD. However, ultimately the value of the currency will depend on where steel prices settle.

In order to remove some of this unpredictability from the public finances, one of the strings the IMF has attached to its loan is the government must set up a UAH40bn stabilisation fund that can be used to issue stabilisation loans and bail out banks. The fund will be maintained in the future partly from privatisation receipts and the whole privatisation programme has been put back on the agenda for 2009.

The average exchange rate in 2009 will be UAH7.30/USD, according to the government. However, the currency will be affected by Ukraine’s unpaid gas debts to Russia and the price it has to pay for gas imports.

However, the really big change is the current crisis has effectively smashed the foreign currency trading band inside which the NBU has kept the hryvnia more or less constant at about UAH5/USD for most of the last five years.

CURRENT ACCOUNT DEFICIT
The government is hoping to reduce the current account deficit in 2009 as a result of the devaluation. "I hope that a fall in fuel prices, a very moderate rise in gas prices and the exchange rate will bring a zero or a deficit of the current account at 1-2% [of GDP]," Deputy Governor of the National Bank of Ukraine Oleksandr Savchenko said in December.

Fitch estimates the current account deficit will rise to $4.5bn, while the total foreign debt that needs to be paid in 2009 is $45.6bn, equivalent to 157% of Ukraine's international hard currency reserves. Andrew Colquhoun, the director of sovereigns group at Fitch Ratings, said that clearly Ukraine will not be able to meet these payments unless it can raise some external financing.

With steel exports falling and the compensatory inflow of foreign direct investment (FDI) also slowing, balancing the current account has become a major challenge going forward. FDI in Ukraine in 2008 is projected at $8bn-9bn and in 2009 at over $5bn, said the NBU's Oleksandr Savchenko.

BANKS
Ukraine’s fast growing bank sector came close to collapse and the rescue measures are likely to have far reaching consequences on the whole sector.
"The government received the right to borrow money in foreign currency on the local market and use government bonds to buy troubled banks [as part of its new crisis powers].

"These, alongside the increase in the state fund guarantee for deposits from UAH50,000 to UAH150,000 (covering 99% of individual accounts) and the increase in refinancing activities by the NBU are meant to secure overall banking system stability, which is likely to go through a period of large-scale evolutionary changes," say analysts at Erste.

"The IMF and Ukraine have effectively agreed on driving further consolidation in the banking sector. Even with minimum capital requirements twice those in Europe, Ukraine has some 170 banks, a number that could fall by as much as 30% in 2009 and 2010."

An attempt to rescue the troubled Prominvestbank seems to have failed and is likely to be nationalised. The whole sector should enter a period of consolidation running into 2009.

EQUITY
After equity prices rose 136% in 2007, the Ukrainian equity market lost nearly 80% in 2008, wiping out all the gains for the last several years in the process. By the start of 2009, Ukraine was one of the cheapest markets in the world in terms of P/E ratios. Only Russia is cheaper.

"Ukraine’s premiums over Russia are justified in our view, as the Ukrainian economy is to a large extent hedged against decreasing commodity prices," explain analysts at Galt & Taggart. "The country is a large net importer of hydrocarbons, which impact directly on production costs for energy-intensive Ukrainian industries. We believe any potential natural gas price hike in 2009 is more likely to be symbolic.

Despite Gazprom’s fear-mongering rhetoric, reference prices are falling and Ukraine holds the transit and storage keys to the bulk of Russian gas exports to Europe. In addition, a bottom-up inspection offers a number of national champions like Enakievo Steel and Ukrsotsbank, among others, which have some of the lowest valuations in their Eastern European peer groups."

But comparisons to Russia are of limited value due to the vast difference in the size of the markets. Daily trading volumes on the Russian markets are in the billions of dollars whereas in Ukraine the volumes have crashed from between $30m-60m down to about $1m a day as of the end of 2008. Such tiny liquidity makes prices extremely susceptible to shocks.

"Given the liquidity and volatility issues are likely to plague the Ukrainian market until the world finds answers to the financial upheaval, we recommend investors look at shares traded abroad, namely London and Warsaw. Liquidity on those markets remains better than on the local market due to stricter disclosure requirements, better market infrastructure and the presence of 'quality' long-term investors. For all intents and purposes, the Ukrainian agricultural sector is represented only on foreign bourses and we see the sector as a solid performer in uncertain times," says G&T.

LINK: http://businessneweurope.eu:80/story1415/UKRAINE_2009_tough_times_ahead

U.S.-Ukraine Business Council (USUBC) www.usubc.org.

Promoting U.S.-Ukraine business & investment relations since 1995.

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11. IMF LOWERS FORECAST FOR UKRAINE'S 2009 GDP

GROWTH RATE FROM 2.5% TO MINUS 5%

Ukrainian News Agency, Kyiv, Ukraine, Wed, December 17, 2008

KYIV - The International Monetary Fund has lowered the forecast for Ukraine's GDP in 2009 from 2.5% growth rate to a 5% decline. Roman Zhukovskyi, the head of the Presidential Secretariat's department of socioeconomic development, announced this at a news briefing.

"The IMF has updated its forecast, and we received [information] two days ago that they were doing an update and that they already had a figure (-5%)," Zhukovskyi said. According to Zhukovskyi, the International Monetary Fund said that the position of the Economics Ministry was among the factors that influenced the revision.

As Ukrainian News earlier reported, in early October the International Monetary Fund lowered its forecast December-on-December inflation rate in Ukraine in 2009 from 13.4% to 14.7%, its forecast average annual inflation rate from 15.7% to 18.8%, and its forecast GDP growth rate from 4.25 to 2.5%.

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12. FITCH EXPECTS WORSENING OF SOLVENCY OF

UKRAINIAN FUEL & ENERGY SECTOR IN 2009

Ukrainian News Agency, Kyiv, Ukraine, Friday, December 19, 2008

KYIV - The Fitch international rating agency has predicted worsening of the solvency of the Ukrainian fuel and energy sector in 2009. Ukrainian News learned this from a statement by the rating agency.

"Fitch Ratings says today in a new report that the credit outlook for the Ukrainian energy and utility sector during 2009 is negative," the statement reads.
According to Fitch, the outlook is negative because of a funding crisis in the state-controlled power generation sector, downward pressure on regulated tariffs due to a severe recession, restricted access to bank lending and debt capital markets, and continued turmoil at the Naftohaz Ukrainy national oil and gas company.

The report assesses the impact of a major shortfall in power generation investment, which has not materialised despite rising tariffs.

"This critical lack of investment is likely to forestall market liberalisation and generate erratic electricity sector policy. Fitch expects an economic recession in Ukraine in 2009 to drive down power demand, providing only temporary respite to falling capacity reserve margins," the statement reads.
According to Fitch, the risks of liquidity and refinancing risk to remain high for the Ukrainian energy and utility sector through most of 2009, as foreign banks and markets remain effectively closed to Ukrainian issuers.

Any energy companies with foreign currency denominated debt but largely hryvnia-based earnings will experience particular difficulty due to a currency crisis affecting the hryvnia that has led to restrictions in the availability of foreign exchange, according to Fitch.

In the opinion of Fitch, the Naftohaz Ukrainy national oil and gas company will continue to confront major challenges in 2009, including a lack of transparency, potentially insufficient state subsidisation for its loss-making residential business, higher import prices, accumulating gas payables and restricted access to external financing.

Meantime, Fitch continues to view the Naftohaz Ukrainy national oil and gas company as an important strategic asset for the Ukrainian government and factors state support into the company's rating.

Ukrainian energy and utility entities rated by Fitch include the Naftohaz Ukrainy national oil and gas company and Donbas Fuel and Energy Company (DTEK, Donetsk) Holdings Limited.

As Ukrainian News earlier reported, Fitch in October 2008 downgraded Naftohaz Ukrainy's foreign currency and national currency rating from B+ to B.
In September 2008, Fitch confirmed the rating of the Donbas Fuel and Energy Company: the long-term B+ rating, the short-term B rating, and AA-(ukr) on the national scale and improved the outlook for ratings of the corporation from stable to positive.

Peter Apps, Reuters, London, UK, Friday, December 19, 2008

LONDON - Trade in Ukraine`s troubled hvrynia looked to be drying up on Friday with banks reporting no demand after the currency slumped in value and the central bank tightened capital controls amid a deepening economic crisis.

After hitting historic lows in consecutive sessions, the hryvnia recovered on Friday, supported by central bank auctions of dollars, a spike in the overnight refinancing rates and stability in the neighbouring Russian rouble.

The Reuters conversational dealing system quote for the currency in local trade showed the hryvnia up 10.6 percent at 8.05 to the dollar but demand was almost non-existent. At 1500 GMT, the system had not recorded any new prices since 1216 GMT -- although traders said occasional deals were being done.

The unit has lost roughly half its value to the dollar since June, much of it in the last few days when it fell to a record low beyond 9.5. Liquidity in general across central and eastern European currencies has fallen sharply, with investors seeing the region as particularly exposed to the global financial crisis.

But after the collapse of Iceland, Ukraine is seen as the most likely next casualty despite an International Monetary Fund bailout. Analysts say the plight of Ukraine -- suffering slumping steel prices, local banking problems and now a threatened cutting of Russian gas supply in the New Year -- is not as severe as Iceland, which had banking debts several times the size of its gross domestic product.

But the demise in trade in its currency does bear some resemblance to the fate suffered by the Icelandic crown in September, when it likewise became practically impossible to exchange in international markets. "It is not as bad as Iceland but it is close," said Lars Christensen, head of emerging markets research at Danske Bank in Copenhagen.

"No one wants to take any risks on the currency. But overall the situation with liquidity across Central and Eastern Europe is very, very bad."
Ukraine had been intervening to hold its currency higher but after hemorrhaging reserves and getting a $16.5 billion IMF deal, it has let the unit slide.

"The IMF plan called for a greater flexibility in the exchange rate and in a sense they are going back to that," said emerging markets currency strategist Elizabeth Gruie at BNP Paribas.

International banks cannot trade the hrvynia except in the local market through local subsidiaries, and trade in the international non-deliverable forward (NDF) market -- in which they can trade -- looked to have dried up as well. There were no forward trades from international banks showing on the Reuters system on Friday.

"For the last three days, everyone has been looking for the right hand side (the sell side)," said a trader at a bank in London, adding that the occasional trade was going through but only driven by the needs of clients generally keen to ditch their positions.

Hope Hryvnia Will Stabilize At UAH 7.5-9.0 By 2009

Ukrainian News Agency, Kyiv, Ukraine, Tuesday, December 16, 2008

KYIV - Experts of economics have branded as inadequate and unsystematic the forex policy of the National Bank of Ukraine, and hope that the hryvnia will stabilize at between UAH 7.5/USD and UAH 9.0/USD by the end of 2008.

"The main problem is absence of any clearly defined strategy of the National Bank, as its separate steps do not fall into a single strategy. The absence of this strategy increases uncertainty in the market and fuels panic of part of the population and the business. The absence of a single strategy is inadequate policy of the National Bank of Ukraine," said Oleksandr Zholud, an expert of the International Center of Perspective Studies.

He expressed careful hopes that the hryvnia will revaluate slightly by the end of 2008 and will stabilize at about UAH 7.5/USD. "Although the devaluation of the hryvnia is underway to the level of UAH 8/USD, I expect that we will have the forex rate of about UAH 7.5/USD1. Today there is pressure from importers that must close their contracts by the new year and they are buying foreign currency at present.

"If the National Bank intervenes on the interbank forex market without limiting the value of sold foreign currency, I think the situation will change within the next two weeks and we will return to the exchange rate of UAH 7.5/USD," Zholud said. In the opinion of Zholud, the hryvnia exchange rate will be about UAH 8/USD by the end of 2009.

Dmytro Boyarchuk, the head of the Case Ukraine Center for Social and Economic Research, has branded the steps of the National Bank of Ukraine on the forex market as inconsequent. "The inconsequence is seen in the actions of the National Bank. At first, billions of dollars were sold to stabilize the situation, and now the NBU carries out an exemplary liberal policy and there are almost no interventions on the interbank forex market. The devaluation of this kind is a threatening tendency. As far as I understand no currency in the world devaluated so deeply because of the crisis," the expert said.

Boyarchuk believes the hryvnia exchange rate will stabilize within UAH 8.0-9.0/USD by the end of 2008. "I believe there must be a balance at UAH 8.0-9.0/USD. We expected the National Bank of Ukraine would be smoothing the fluctuations on the forex market, but it has left the market at present and observes what is happening there," he said.

In the opinion of Vasyl Yurchyshyn, the director of economic programs at the Razumkov Center, the National Bank of Ukraine has lost control of the situation on the forex market.

"There was an uncertain policy of the National Bank, and it remains uncertain. We have heard not so long ago that UAH 7.40-7.50/USD is the level the National Bank will maintain. But we see what happens in reality. The National Bank of Ukraine has lost control, orientation. It does not employ required instruments and it does not watch how its decisions are observed," he said.

Yurchyshyn did not give its forecast about the further development of the situation with the hryvnia exchange rate. He only said that the devaluation trends have become of unpredictable character.

As Ukrainian News earlier reported, the hryvnia exchange rate on December 16 dropped by another 30 kopecks on the interbank forex market after the drop of 30 kopecks on December 15 to the historic minimum of UAH 8.35/USD 1. The National Bank of Ukraine sold dollars at UAH 7.66/USD1 but only satisfying bids of clients and import contracts with presence of customs declarations.
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15. UKRAINIAN AGRARIAN CONFEDERATION FOR

EXTENDING MORATORIUM ON FARMLAND SALES

Dmytro Kuzmin, Ukrainian News, Kyiv, Ukraine, Friday, December 19, 2008

KYIV - The Ukrainian Agrarian Confederation stands for extending the validity of the moratorium on sale of lands designated for agricultural purposes, Confederation President Leonid Kozachenko has announced at a press conference. "We never stood on this position but now we thinks the land moratorium should be extended," he said.

The Confederation was forced to take hold of this stance by the hard financial condition in which agrarians have found themselves, most of whom are eligible to repay loans in hard currency, because of sharp and deep devaluation of the national currency, Kozachenko stressed.

He marked that amidst current conditions absolute majority of farmers are not able to return these credits, so the prior task is to prolong the term of these liabilities, and the Confederation appeals for the Cabinet of Ministers and the National Bank of Ukraine to take measures to achieve this goal.

Confederation President also pointed to the extraordinary high level of corruption in the land market and added that about a half of costs of projects at this market account for the corrupt component.

As Ukrainian News earlier reported, President Viktor Yuschenko predicts concord by all the parliamentary political forces for abolition of the moratorium on sales of agricultural lands beginning from 2009.

The Verkhovna Rada extended the moratorium on sale of agricultural land on January 4, 2008, until legislation regulating the land market is adopted.
Ukraine has over 60 million hectares of lands, including 41.8 million hectares of agricultural lands (out of which 33 million hectares is arable lands).
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16. CAMPARI BUYS UKRAINE'S ODESSA WINE COMPANY, ARGENTINA SPIRITS BUSINESS SABIA

By Armorel Kenna, Bloomberg, New York, NY, Friday, December 19, 2008

NEW YORK - Davide Campari-Milano SpA, the Italian distiller known for its bittersweet red aperitif, agreed to buy a Ukrainian wine company and an Argentine spirits business, continuing its expansion in emerging markets.

Campari paid $18 million for a 99 percent stake in Odessa, and $4.2 million for 70 percent of Argentina’s Sabia SA, in which it’s assuming $3.4 million of financial debt, the Milan- based company said in a stock-exchange statement today.

The Italian beverage maker said it expects to complete the acquisition of Odessa’s production plant and range of sparkling wines in early 2009 and will make the acquisition in cash. Campari completed the acquisition of the stake in Sabia on Nov. 28.

The acquisitions of Odessa and Sabia follow Campari’s purchase of Mexico’s Destiladora San Nicolas SA de CV and the creation of a wines and spirits venture with the Jubilant Group in India, the company said. (To contact the reporter on this story: Armorel Kenna in Milan at akenna@bloomberg.net.)

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17. NEW RADIATION MONITORING SYSTEM INSTALLED AT BORYSPIL AIRPORT
Cooperation between the United States, Canada and Ukraine

Interfax Ukraine, Kyiv, Ukraine, Monday, December 8, 2008

KYIV - A modern radiation monitoring system is being installed at Boryspil airport (Kyiv) as a result of cooperation between the State Border Service
of Ukraine, the U.S. Department of Energy and Canada's ministry of foreign affairs and international trade under the Second Line of Defense program.

"Cooperation between State Border Service of Ukraine and its U.S. partners on fulfilling mutual projects in fighting illegal immigration, the spread of
weapons of mass destruction, terrorism, and illegal drugs can serve as an example of effective international cooperation", said the Head of State Border Service of Ukraine Mykola Lytvyn.

According to him, $2 million has been spent on the program. The system itself is composed of the stationary radiation monitoring equipment (portal
monitors), computer and communication equipment, defense systems and engineering constructions. The Second Line of Defense program has been

operating since 2005.

The National Nuclear Security Administration (NNSA) of the U.S. Department of Energy works with the governments of other countries to install special
equipment at border crossing points in airports, marine ports and other areas to prevent the smuggling of nuclear and radioactive materials. According to U.S. Ambassador in Ukraine William Taylor, equipment has been placed at 230 border crossing checkpoints globally under this program.

In his turn, Lytvyn said that similar systems were placed at 5 checkpoints on the Ukraine-Moldova border in 2007. In 2009, the equipment is to be
installed in the ports of Odesa and Illichevsk.

According to him, agreement has been reached to place 70 similar systems at the international checkpoints along the border. "I say this is another good example of international cooperation in restricting the spread of illegal nuclear and radioactive elements," Taylor said, speaking to Lytvyn.

Following a presentation ceremony for the equipment, a protocol on restricting the spread of illegal nuclear and radioactive elements was signed between the board of the State Border Service of Ukraine and the U.S. Department of Energy. Lytvyn signed the document on behalf of Ukraine, while Kenneth Baker, Principal Assistant Deputy Administrator for the NNSA's Office of Defense Nuclear Nonproliferation, signed on behalf of the United States.

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18. WORLD BANK PRESCRIBES RECOVERY ACTIONS FOR UKRAINE
Martin Raiser: next year will be difficult for Ukraine and we are prepared to provide support

Interview by Natalia Bilousova, with Martin Raiser, World Bank Director for Ukraine
The Day Weekly Digest in English #39, Kyiv, Ukraine, Tuesday, 9 December 2008

The Ukrainian economy needs a prescription to overcome the crisis in its principal sectors. Troubles in the banking, building, steel-making, and chemical sectors is only the tip of the iceberg that is moving towards this country from the West. In these conditions, financial, technological and consultative assistance from international institutions is very important for the solution of these problems.

Martin RAISER, World Bank Director for Ukraine, Belarus and Moldova, told The Day about the measures the World Bank is preparing to help Ukraine overcome the negative economic trend.

Would you comment on the program package that the World Bank has drawn up to provide Ukraine assistance in offsetting the negative consequences of the economic crisis?

[Martin Raiser] “We are going to work in three directions.

[1] The first is to support structural reforms by way of offering development policy loans to the government. We recently signed a protocol on this issue with the government and are expecting our Board of Directors to make a decision on allocating $500 million before the end of 2008.

“Incidentally, the process of structural reforms in Ukraine is still going on. Very many targets have not yet been reached, and we hope that the development policy loan program will be continued in the future.

[2] “The second direction is to support rehabilitation of the banking sector. It is too early to speak about the scope of funding here. But I can confirm that we will be implementing this idea together with the Ministry of Finance, the National Bank of Ukraine, our colleagues from the IMF and the EBRD, and other donors. It will take some time to do this work.

[3] “The third direction is investments in the infrastructure (certain projects are to be carried out as part of the bank’s Country Partnership Strategy for Ukraine in 2008-2011: improvement of highways and railroads, power-generation projects, etc.).

"I believe two loans will be made available in the nearest future: a $400-million loan for modernizing the Kyiv-Kharkiv road and the other for upgrading the Znamianka-Dzhankoi railroad. The value of the latter has not yet been finally set, but I can say it will a handsome amount.

[1] “Now Ukraine should (and it can) redistribute budgetary resources more effectively. A year ago we prepared a major review of state finances management, which comprises a number of proposals that can be of use today. This is especially true of more rational redistribution of social security resources.

[2] Second, Ukraine should pay more attention to protecting infrastructure investment projects. International experience shows that this approach allows the country to ride out the crises faster and further develop.”

What do you suggest as far as budgetary funds distribution is concerned and what do you advise the government to take into account in the 2009 draft budget?

[Martin Raiser] “I will not enumerate everything, but I can give an example. Ukraine has two good targeted cash transfers: one is being given to the poorest families and the other to families with one breadwinner. We have analyzed the two schemes and concluded that 70 percent of the first scheme’s money and more than 50 percent of the second really goes to the poor. If you compare this with the effectiveness of all the other social transfers, it is a big difference.

"The average effectiveness of social transfers in 2007 was no more than 20-25 percent. This means that only 25 percent of all the budgetary social transfers really reach the people who need governmental aid. In other words, if not very effective programs are folded up, this will release more funds for more effective ones. This will make it possible to save budgetary money and give it to the people who really need it.”

Which of the budgetary programs do you think are ineffective?

[Martin Raiser] “In the social sphere, a lot of privileges are being granted to enable people to pay for the utilities and education, but you should reconsider the number of people who really need state-sponsored exemptions. The most glaring example is privileges granted to members of parliament. I think there a lot of MPs who cannot be called low-income individuals. This can be the beginning. Of course, this step alone will not raise a sufficient amount to fund indispensable schemes, but it will be a signal.”

To what extent is Ukraine interested in receiving other financial instruments from the World Bank group, such as guarantees?

[Martin Raiser] “The World Bank group has the Multilateral Investment Guarantee Agency (MIGA, which insures the private sector against political risks - Ed.) which has already furnished guarantees to Raiffeisenbank and Ukrsotsbank. Ukraine is one of the MIGA’s most important clients in the world. And it is absolutely right, considering the current situation, and we will continue working in this direction. World Bank guarantees are now especially important for the financial sector and may be of use for the manufacturing industries.”

Are only international parent banks’ subsidiaries eligible for such guarantees?

[Martin Raiser] “They are eligible above all because their parent banks submit proposals to the MIGA. But this does not rule out the possibility that a purely Ukrainian entity can also apply to the MIGA.”

Do you think it is a good idea to nationalize problem banks?

[Martin Raiser] “This is only one aspect of banking sector rehabilitation. The National Bank is now checking up the banking sector, and we will clearly know which of the banks do or do not need additional capital. As for nationalization, I think it is, above all, bank owners who should be interested in protecting their organizations. We would like a bank to be rehabilitated at the expense of its owner. But if, for some reason, the latter cannot do so, this will raise the question of which bank is to be bailed out.

"If the banks are part of a system, their collapse may cause problems for the entire banking sector. If this is the case, the state can be motivated to protect its financial system by providing these banks with additional capital. But if the banks are not part of a system, what’s the use of nationalization? It is far easier to cut their number and save the deposits via a deposit guarantee fund or some other instruments.”

You mentioned restructuring the banking system. How long can this last?

[Martin Raiser] “It is difficult to forecast. But it is obvious that this cannot be done in one or two months. One must first finish the checkup and only then draw conclusions.”

This country must pay off several billion worth of foreign debts in 2009, including sovereign and corporate debts. Can this be done without problems in the conditions of a credit crunch?

[Martin Raiser] “The question of foreign debts is a question of investors’ trust in Ukraine. Naturally, if all the investors choose to go, this will create problems. But I do not see this kind of tendencies on the Ukrainian market because many investors know: it is profitable to do business in Ukraine, for there is still an opportunity to make money.

The main thing is that there should be a macroeconomic program, a plan of structural reforms, and political will-and all this is being really implemented, as was agreed upon with our IMF colleagues. This helps to increase the refunding of banks and, hence, to reduce the so-called funding gap. All you have to do is take the measures stipulated by the anti-crisis program and the memorandum.”

The president said that the 2009 budget is going to be the most difficult to form and fulfill over the past 8 to 10 years. Is the World Bank prepared to offer Ukraine a loan again in case of a budget deficit?

[Martin Raiser] “If the fiscal policy is well-considered and the overall economic picture fits in with the framework outlined by the IMF memorandum, the World Bank will be prepared to allot funds for the budget. But if they begin to promise to allocate the budgetary money to all, without taking into account whether these resources are available, and to pin hopes on World Bank funds alone, this will be unrealistic. We are aware that the next year will be difficult for Ukraine, and we are prepared to provide support. But we will be doing this within the framework of a well-balanced economic policy.”

Will you name the principal macroeconomic targets for 2009?

[Martin Raiser] “It is too early to speak about this because the situation is not all too clear. I would like to say that our vision of macroeconomic dynamics in this country by and large coincides with IMF forecasts, but we will make our forecasts public later this year.”

Do you share the view that overcoming the crisis in the Ukrainian economy will depend on overcoming the budgetary crisis?

[Martin Raiser] “I would put it differently. Ukraine is not a poor country and the Ukrainian budget is not poor, either. There is simply an opportunity to utilize its resources more effectively. Of course, it is much more difficult to do so in the conditions of an economic mess than when everything is all right. So I do not see a budgetary crisis but, on the contrary, I can see some levers for protecting effective budgetary programs by way of resource waste reduction.”

Can you confirm or deny that in your budgetary recommendations to the government you suggest reducing governmental support to offset the cost of imported gas for the public utilities sector?

[Martin Raiser] “The whole question is what you mean by support. We would like utility rates for individual consumers and public service facilities to increase gradually — within two years-to the level of gas market price. This step will improve the financial state of these facilities, but it will also require support on the central, as well as local, level. Besides, the populace should understand that people all over the world pay for the real cost of energy. Why has it been different in Ukraine all this time?”

Is it really worthwhile to do this right now, when unemployment and wages are expected to rise and to drop, respectively?

[Martin Raiser] “It is, naturally, difficult to do so, but you cannot avoid this. The resulting profits will also allow Naftohaz Ukrainy to repay the loans it had taken and to improve the quality of its utility services. This was done in 2006, when the average pay was lower than today, and this decision has not been canceled. As a matter of fact, you can no longer delay increasing utility charges.”

Do you think it would be a good idea to revise not only the utility rates but also the selection criteria for low-income individuals?

[Martin Raiser] “This is why we are speaking about target-oriented subsidies. We are to aid, first of all, the poorest individuals. Let us get back to the scheme intended for the poorest. If you take 20 percent of the poorest Ukrainians, only three percent of this category are involved in the low-income family scheme. The state should look at this very category. And when these people obtain governmental aid and there still are resources left in the budget, one can begin to consider individuals with higher incomes.”

Why do you think that the existing anti-crisis mechanisms are working very poorly?

[Martin Raiser] “It is too early to discuss this. I emphasize that one should first bring all the required mechanisms into play and only then see. But if they are not being utilized, if everything is always being blocked, if everybody has a plan that is ‘better’ than the other ones, then, of course, it will be unclear which plan is to be really implemented. This kind of approach will not make it easier to combat the crisis.”

In other words, you mean that we are talking more than we are doing?

[Martin Raiser] “You said it, not I. There is an anti-crisis program and a memorandum signed with the IMF. You should fulfill the latter, and I think there will be a result.”

[Martin Raiser]What is your attitude to the view that a floating exchange rate will be able to solve the balance of payments problem but, at the same time, will cause inflation and speculative actions on the currency market?

[Martin Raiser] “Devaluation is important for setting a true rate of the hryvnia. Ukraine needs improved competitiveness, and a currency policy can help here. The rate should be regulated by means of a tough monetary policy supported by fiscal measures. One should also set the criteria of refunding in the banking system. This can and must be done.

"In my opinion, a more flexible rate is the only tool to absorb the international shock. This will not necessarily stir inflation and speculation. The main thing is that it should be clear to all market players what policy the National Bank is pursuing — then everything will be all right. It is a question of renewed trust in the actions of the National Bank and the government.”

What should the National Bank do to restore the trust of people and banks?

[Martin Raiser] “It is better to ask private businessmen about this. It seems to me it is the question of communication, explanation, access to information, and consistency in actions.”

What kind of negative effect will devaluation have on the number of problem assets in the banking portfolio?

[Martin Raiser] “Naturally, it will have a certain effect. This is why we are also working on banking sector rehabilitation schemes in order to see how strong this impact may be and how to react to this.”

What protection mechanism should be devised for the banking clients who are already paying an increased loan interest rate and, at the same time, see their profits dwindling?

[Martin Raiser] “International experience shows: if a good client wants to defer paying the interest, there is such a thing as voluntary restructuring of the loan. To this end, the National Bank should adopt certain standards which would encourage banks to do so.”

What do you think are the ways of redistributing fiscal expenses in order to alleviate the social consequences of the crisis?

[Martin Raiser] “I have already named some. I can add to this a more target-oriented nature of social security and increased investments in the infrastructure aimed at creating new jobs and increasing the demand for domestic resources, such as metal.”

Some people also say we can introduce progressive taxes on the income earned by natural persons.

[Martin Raiser] “I do not know what immediate effect this will produce. I am not sure that there are many people for whom income tax is a great problem. Other taxes are more important.”

The point is that the funds saved from tax reduction can be utilized for paying increased loan interest rates or increased utility charges.

[Martin Raiser] “But will the rich people pay if the tax goes up? I think there should be a different approach. One should think over introducing a system for more precise assessment of the incomes of natural persons. In this case your tax administration should apply some indirect methods: you should declare not only your official incomes but also the ownership of a car, an apartment, etc.

"Then all this is checked up and it is clear whether you paid the whole necessary amount or just a part of it. So if you improve your income declaration system, you will be able to collect more taxes than you do now.”

Will the reduction of the National Bank’s discount rate help renew crediting? If so, why?

[Martin Raiser] “No, the reduction of the National Bank’s discount rate will not help solve the crediting problem. This will only weaken the monetary policy and increase monetary liquidity. And where does this liquidity go? It goes to the stock market, not to investments. Therefore, one should strengthen the monetary policy in order to keep up the rate of currencies.”

Can an enhanced Ukrainian-Russian trade potential be a more or less effective factor in overcoming the crisis in the national economy?

[Martin Raiser] “It is good and convenient to increase trade with Russia, but we should think why this potential is not being fully tapped. If there are infrastructure-related or bureaucratic obstacles, they should be removed. On the other hand, there are proposals on establishing a single Russian-Ukrainian economic space. To implement this project, Ukraine should raise its tariffs to the level of Russian ones. But this may cause problems with the WTO.”

In other words, it is impossible to establish a single economic space because...

[Martin Raiser] “Well, this is not ruled out, but there are certain WTO restrictions and requirements. It seems to me that the best way out of the crisis for Ukraine is expansion of trade with not only Russia but also with all countries of the world. Ukraine is now a WTO member and should develop this potential. Russia is one of the most attractive partners, but there are also countries of Europe, the Middle East, etc.”

Is the government doing the right thing by helping big business ride out the crisis, quite to the detriment of small and medium business?

[Martin Raiser] “You are right. We should speak now about reforms for small and medium business in order to improve the overall business climate. As far as I know, a number of laws have been drawn up, which are expected to be supported in parliament by the entrepreneurship committee.

"It is about licensing certain types of [business] activity, reducing the number of permits, and reducing the minimum capital, which will allow people to create new companies and jobs. These laws will remove the bureaucratic barriers we have been talking about for ten years. You just have to remove these barriers, and this will speed up riding out the crisis.”

Can the failure to pass the law on public procurement jeopardize the Euro-2012 projects?

[Martin Raiser] “This law is a must. And the sooner it is passed, the better. We have been working on its text together with the Ministry of Economics, and we support the agreed-upon version of the law, which we think is in line with international standards. The failure to pass the law may well thwart the effective utilization of all state resources.

"And if we are saying today that the state now lacks sufficient resources to assist low-income individuals and the country does not yet have a law on public procurement regulation, which annually consumes about 7 percent of the GDP, then you can make a conclusion yourselves.”

LINK: http://www.day.kiev.ua/258299/

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19. RUSSIA BLOCKS UKRAINE UN FAMINE-GENOCIDE RESOLUTION AGAIN

ITAR-TASS, Moscow, Russia, Friday, December 19, 2008

UNITED NATIONS - Russia blocked Ukraine-initiated UN resolution claiming Holodomor in the Soviet Union in early 1930s was famine-genocide aimed against Ukrainians, rather than a common tragedy of many nations in the country.

“We succeeded to bloc the inclusion of the item into the agenda of the current UN General Assembly,” Russian Ambassador to the United Nations Vitaly Churkin said on Thursday, adding the United States and Great Britain backed the Ukrainian motion, which “ended in nothing.”

Churkin said Russian representatives were active in explaining the history of Holodomor to foreign partners. As a result, nine EU countries did not sign the Ukrainian declaration, although “EU members usually act in a consolidated manner”, according to Churkin. “An overwhelming majority supported the Russian position,” the ambassador said.

He described the Ukrainian initiative to portray Holodomor as genocide against Ukrainians as “an attempt to sow mistrust and hostility between the Russians and Ukrainians. We have a common past and the famine in the ‘30s hit not only Ukraine. Therefore, we (Russia) do not plan to apologize and call it genocide,” he said.

LINK: http://www.itar-tass.com/eng/level2.html?NewsID=13398904&PageNum=0

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20. UN AGAIN REFUSES TO INCLUDE UKRAINE FAMINE IN SESSION AGENDA

RIA Novosti, Moscow, Russia, Friday, December 19, 2008

UNITED NATIONS - The United Nations General Assembly has refused for the second time this year to include discussions on Ukraine's 1932-1933 famine, which Kiev wants recognized as an act of genocide, in the agenda of the current UN session.

In late 2006 Ukraine's parliament recognized the Stalin-era famine known as Holodomor as an act of genocide by the Soviet authorities, but Russia has
consistently rejected Ukraine's interpretation of events.

Russia's UN ambassador, Vitaly Churkin, said after the decision: "this campaign has ended, and ended with nothing." He said Russia had voted against Ukraine's attempts to introduce the issue to the agenda of the 63rd UN General Assembly session, as it did at the session in July.

After the refusal, Ukraine circulated a declaration among the UN members, which according to Churkin was signed by 32 out of 192 member states.

Russia says the famine cannot be considered an act targeting Ukrainians, as millions of people from different ethnic groups lost their lives in various
territories across the Soviet Union - in the North Caucasus, the Volga region, central Russia, Kazakhstan, west Siberia, and the south Urals.

"The Ukrainian government has declared this to be an act of genocide against the Ukrainian people, and is politicizing this issue. We take this as an attempt to bring distrust and hostility into our relations, and to spark a dispute between the peoples of Ukraine and Russia," the Russian diplomat said.

Historians' estimates as to the number of victims in Ukraine during the famine, caused by forced collectivization, vary greatly, ranging from 2 million to 14 million.

Speaking at a ceremony to unveil a memorial in a village in western Ukraine, one of the areas hardest hit by the famine, President Viktor Yushchenko said
last month that "Ukraine does not blame any nation or state for the great famine," but that the "totalitarian Communist regime" was responsible.

LINK: http://en.rian.ru/world/20081219/118939994.html

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21. OFFICIAL SAYS RUSSIAN FSB ARCHIVES HAVE NO PROOF

THAT 1930s FAMINE WAS GENOCIDE AGAINST UKRAINIANS

Interfax Ukraine, Kyiv, Ukraine, Thursday, 18 December, 2008

MOSCOW - The Russian Federal Security Service (FSB) archives do not contain any documents that could suggest that Ukrainian people might have been subject to genocide during the famine in the southern part of the Soviet Union in the 1930s, Gen. Vasily Khristoforov, head of the FSB registration and archives department, said in an interview with Interfax on Thursday.

"Researchers, and not only Russian ones, have proven incontrovertibly that famine did take place in the USSR in 1932-1933. Yes, it did, but not only in Ukraine. Archive documents show undeniably that there was no purposeful genocide against Ukrainian people. We have not found a single instruction that would have even hinted about purposeful genocide against Ukrainian people," Khristoforov said.

A large amount of FSB archive documents related to this problem have been handed over to Russian and foreign researchers, Khristoforov said. All these documents have been published, he said.

"The Holodomor [the definition given in Ukraine to the 1932-1933 famine in the former USSR] is a Ukrainian invention. Ukraine is trying to prove that the 1930s famine was an act of genocide the Stalin leadership committed against Ukrainians," he said.

Khristoforov argued that, while the situation in the Soviet agricultural sector in the late 1920s and early 1930s was difficult, people suffered not only in Ukraine but also in Kazakhstan, the Volga area, the Krasnodar territory, and the North Caucasus.

"I am against attempts to gamble on the numbers of the victims. Ukraine has been inflating the number of these casualties from year to year. This is at least incorrect," Khristoforov said.

Reuters, Moscow, Russia, Thursday, December 18, 2008

MOSCOW - A general in Russia's intelligence agency has dismissed as an "invention" Ukraine's call for recognition of a 1930s famine as genocide after Kyiv urged the Kremlin to join in commemorations for millions of dead.

The row over the "Holodomor", or famine of 1932-33, in which historians believe 7.5 million died, is one of many pitting the Kremlin against Kyiv's pro-Western leaders swept to power by mass Orange Revolution rallies in 2004.

Russian President Dmitry Medvedev stayed away from ceremonies to mark the 75th anniversary of the calamity last month and accused Ukrainian President Viktor Yushchenko of distorting history for political gain.

The two ex-Soviet states are also at odds over payment for Russian gas supplies and Kyiv's drive to secure NATO membership.

"The Holodomor is a Ukrainian invention," General Vasily Khristoforov, head of registration and archives department at the Federal Security Service (FSB), told the Interfax news agency. "Ukraine is trying to prove that the 1930s famine was an act of genocide the Stalinist leadership committed against Ukrainians.

"Archive documents show undeniably that there was no deliberate genocide against the Ukrainian people. We have not found a single directive that would have even hinted about deliberate genocide against the Ukrainian people."

Researchers, Khristoforov told the agency, had proven beyond all doubt that a famine in the late 1920s and 1930s did grip various southern Soviet regions.
"Yes, it did, but not only in Ukraine," he said.

Many of the darkest secrets from the Soviet era remain in the archives of the FSB, the main successor to the KGB intelligence service that played a central role in Moscow's efforts to enforce the communist system.

About a dozen countries have recognized the Holodomor, one of three famines to hit Ukraine last century, as genocide.

Addressing a gathering last month at the opening of a monument to the famine, Yushchenko denied any suggestion Russia was to blame for the famine. But he called on Moscow to denounce Stalinism and join in commemorations for the dead.

Millions were left to starve in their homes throughout Ukraine as Soviet authorities trying to bring independent farmers to their knees imposed impossible harvest quotas and requisitioned grain and livestock. Soviet authorities denied for decades that the famine had even occurred.

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U.S.-Ukraine Business Council (USUBC): http://www.usubc.org

Promoting U.S.-Ukraine business investments since 1995.

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23. NEWLY ELECTED UKRAINIAN SPEAKER LYTVYN INTERVIEWED ON RUSSIAN TV

Holodomor: "I am categorically against bringing this topic into the dimension of ethnocide."

Rossiya TV, Moscow, Russia in Russian 1700 gmt 14 Dec 08
BBC Monitoring Service, UK, in English, Sunday, December 14, 2008

The newly elected Ukrainian parliament speaker, Volodymyr Lytvyn, was interviewed on state-owned Russian television channel Rossiya's "Vesti Nedeli" news and current affairs programme on 14 December. Lytvyn answered questions on the current political situation in Ukraine and Russian-Ukrainian relations. How do you feel being elected speaker for the second time?

"Let me tell you frankly, it is quite difficult, because there is an attempt today to break up the parliament and take Ukraine to elections in the conditions of the deepening crisis," Lytvyn said.When will the collation agreement be signed?

"The document [on setting up a coalition of Yulia Tymoshenko Bloc, Our Ukraine-People's Self-Defence and the Lytvyn Bloc] has been ready for a long time. The problem is that, as I learnt today, the president of Ukraine does not support the creation of the coalition," Lytvyn said.

"I had a long meeting and conversation with the president. Very regrettably, the standoff between the president and the prime minister is quite tense, and society, the country and people remain hostages to this standoff", he added.

PARLIAMENTARY PROBE INTO UKRAINIAN ARMS SUPPLIES TO GEORGIA

"The [parliament's] conciliatory council has decided to recommend the Ukraine's Supreme Council to consider the report of the investigative commission next week, on Friday, in order to set the record straight on the matter. This decision, in essence, was supported by representatives of all factions. I think this will bring clarity. I am deeply convinced that everything should be done today to establish a normal dialogue between Ukraine and Russia", Lytvyn said.Ban on Russian TV channels

"Obviously, my attitude to this is negative. There can be no ambiguity about it. I believe that people should have the possibility to receive comprehensive information in which they are interested and draw relevant conclusions. Therefore, especially in the conditions of a crisis, when there is no bread, and people feel that their rights are being infringed in the information space too, this creates a sort of cumulative negative charge. I am categorically against this.

This issue has already been raised. I think that we will thoroughly study this issue at the level of Ukraine's Supreme Council and we will offer our recommendations", Lytvyn said.

HOLODOMOR

"I am categorically against splits that will not leave Ukraine unaffected, I mean splits with Russia in religious matters as well. As regards the topic of Holodomor [the famine of 1932-33] as such, I am categorically against bringing this topic into the dimension of ethnocide. What is being done in Ukraine with respect to this topic is intended for export. I think it would be important for politicians to listen to scientists. The manner in which this topic is being bumped up in Ukraine, it is turning into a farce", Lytvyn said.

Will you run for president? "I do not see grounds to raise the issue of an early presidential election in the political context today", Lytvyn said. "A headache should be treated when one has it. We shall see how it works out", he added.

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24. WHY THEY [THE RUSSIANS] DO NOT WANT TO SEE US,

OR HISTORY ON THE SERVICE OF AN IMPERIAL POLICY

The Russians and the Holodomor, their hard ideological line and distorted historical realities.

By Volodymyr Serhiichuk, Professor and Doctor of History
The Day Weekly Digest in English, Kyiv, Ukraine, Tuesday, December 16, 2008

Once Empress Catherine II felt she was sitting firmly on the Russian throne, she immediately instructed Prince Viazemsky to take a number of certain steps to force Ukrainians “to get Russified in a delicate way” as soon as possible. Just a hundred years later Russia’s interior minister Valuyev considered it necessary to persuade the entire world that “there were not, are not and cannot be” any Ukrainians.

I recalled this when I read the book "The 1932-1933 Famine: a Tragedy of the Russian Countryside" by the Penza-based professor of history Viktor Kondrashin, which was recently published in Moscow.

This author, who decided to study the 1932-1933 famine in the Volga, Don and Kuban regions, failed to see there the Ukrainians who were the main grain-growing trail-blazers at least in the two last areas: “The Russians, Mordvins, Tatars, Ingushes, and other peoples lived then and are living now in the above-mentioned regions of Russia.

At the same time, this study puts emphasis on the Russian population of the Volga, Don and Kuban areas because, historically, it was they who were involved in grain production and, therefore, became the primary object of Stalin’s forced collectivization” (p. 51 in Russian).

Why Kondrashin wants to convince the readers that there were no Ukrainians in these regions from the very beginning of cultivation and farming and does not consider them “historically involved in grain production” becomes clear from the panegyric that the author dedicates to himself in his own book: “V. V. Kondrashin actively opposes in the media and scholarly publications, including foreign ones, the idea of Ukrainian historians and politicians about ‘genocide of the Ukrainian people by the 1932-1933 Holodomor.’ He concludes in his publication son this matter that the 1932-1933 famine is a common tragedy of all the USSR peoples and this tragedy should unite, not disunite, the peoples” (p. 29, Russ.).

Given this self-assessment of the author, it is small wonder why he did not consider it necessary to mention Ukrainians among the main agricultural ethnoses in the Volga, Don and Kuban regions. But they really lived there. According to the 1926 census, Ukrainians prevailed, for example, in all the 40 Kuban villages (stanitsas) founded by the first Zaporozhian Cossack resettlers in the late 18th century: Baturynska (5,034 Ukrainians out of the total 7,086 residents), Berezanska (9,297 and 10,443, respectively), Briukhovetska (9,698 and 12,466), Vasiurynska (9,142 and 10,443), Vyshestebliivska (2,400 and 3,251), Dinska (10, 316 and 12,525), Diadkivska (6,665 and 7,324), Ivanivska (12,983 and 14,209), Irkliivska (5,884 and 6,473), Kanivska (13,878 and 17,248), Kalnibolotska (8,606 and 10,998), Katerynynska (11,824 and 13,391), Kisliakivska (11, 416 and 13, 112), Konelivska (7,824 and 8,7121), Korenivska (9,313 and 15,548), Krylivska (8,146 and 9,427), Kushchivska (9,364 and 11,865), Medvedivska (15,222 and 18,146), Nezamaivska (10,150 and 12,133), Pashkivska (14,166 and 18,000), Pereyaslavska (7,552 and 8,781), Plastunivska (10,528 and 12,375), Platnyrivska (11,628 and 13,925), Poltavska (10,985 and 14,306), Popovychivska (7,762 and 10,715), Rogivska (10,806 and 12,475), Sergiivska (4,127 and 4,714), Starodereviankivska (6,529 and 7,230), Starodzhereliivska (5,158 and 5,413), Starokorsunska (10,477 and 12,273), Staroleushkivska (5,857 and 6,521), Staromenska (19,736 and 22,604), Staromyshastivska (8,171 and 9,826), Staronyzhchestebliivska (11,356 and 12,273), Starotytarivska (8,552 and 9,536), Staroshcherbynivska (14,453 and 17,001), Tymashevska (8,961 and 12,112), Umanska (17,008 and 20,727), and Shkurynska (8,864 and 9,749).

On the whole, there were 915,450 Ukrainians in Kuban and 3,106,852 in the Northern Caucasus. So we find it difficult to understand the famine in these villages as a tragedy of “the Russian countryside” alone. All the more so that Kondrashin names such Kuban districts as Yeysky, Kanovsky, Kjorenivskt, Krasnodarsky, Staromensky and Kursavsky in the Stavropol region as ones that make part of the “especially affected” areas of the Northern Caucasus.

Of course, this is also presented as a tragedy of the Russian countryside. However, the 1926 census recorded 74,037 Ukrainians and 23,568 Russians in Yesky district; 45,451 and 8,130, respectively, in Kanivsky; 76,422 and 36,939 in Korenivsky; 103,8312 and 18,086 in Kraskodarsky; 65,488 and 9,583 in Staromensky; and 57,665 and 8,767 in Kursavsky district.

After all, we are also not indifferent to the destiny of the 35,115 Ukrainians in the Kondrashin-quoted Armavisrsky district and the 11,514 in Kurganinsky district, where the Russians numerically prevailed at the time.

Similar facts of ethnic Ukrainian enclaves during the 1932-1933 Holodomor can also be traced in the Don and Volga regions. In the latter, there were 49 percent of our ethnos in Kapustin Yar district, 51.9 in Yelansky, 69.3 in Kotovsky, 72.4 in Kranoyarsky, 74.9 in Pokrovsky, 79.3 in Samiylivsky, 81 in Mykolayivsky, and almost 90 in Vladirirsky district.

According to the 1926 census, the Lower Volga region alone was populated by 600,000 people who continued to identify themselves as Ukrainians. Some of them did not even speak Russian, which is proved by the following fact: failure to meet the planned targets of grain harvest in 1929 in Dubynsky district was explained by the fact that “Ukrainian slogans on grain procurement were apprehended in the district executive committee, and Russian-language placards were sent to the Ukrainians.”

As for the Ukrainian population in the Don region, there was also a large number of areas, where our people made up the absolute majority. This was especially the case in some Taganrog districts. And the 1932-1933 Holodomor took a heavy toll of all these Ukrainians.

But we should admit that the Kuban Ukrainians were the first to suffer from this horror. And we cannot help recalling the village of Poltavska whose population favored the development of their native culture and where there was the first All-Russian Ukrainian Teacher-Training School. Its population was the first to be deported to the north, its houses were given to Red Army Cossack veterans, and it was renamed Krasnoarmeyska so that nothing betrayed its Ukrainian origin.

The second Ukrainian village in Kuban that suffered the same tragedy was Umanska. After the deportation, it was renamed Leningradska.
Incidentally, we could not find similar Kremlin instructions with respect to Russia’s non-black-soil area which also failed to meet the grain procurement targets.

Indeed, this did not repeat on a mass scale in Soviet Ukraine because in many cases there was nobody to deport: entire villages had died out. There are documents that prove that a great number of Russians and Belarusians were brought to hundreds of the famine-ravaged Ukrainian villages.

As for the “black boards,” they were introduced not only in Kuban, Don, the Central Black Soil Region, the Volga basin and the Ukrainian SSR but also in Northern Kazakhstan on the republican leadership’s initiative. But if we look at the list of the villages that suffered this kind of punishment, we will see at once that they were predominantly populated with Ukrainian peasants.

For example, such villages in Ust-Kamenogorsk or Fedorivsky districts were mostly Ukrainian because the Ukrainians were the principal grain producers in this region. For instance, the 1926 census showed that out of the 28,302 residents of the Fedorivsky district 25,408 were Ukrainians.

When you read the Penza historian Kondrashin’s book, you can see clearly that he tries, above all, to serve the current political interests of Russia, which consist in the refusal to recognize the 1932-1933 Holodomor as genocide of the Ukrainian people: “We do not support the opinion of Ukrainian politicians and historians about the national genocide in Ukraine by means of the 1932-1933 famine.

Nor do we agree with their definition of ‘holodomor’ as an action organized by the Stalinist regime inn order to exterminate millions of Ukrainian residents... We do not share the Ukrainian side’s position because no documents have been found, which would say that Stalin’s regime intended to eliminate the Ukrainian people.”

This raises a question to Kondrashin: and what about the directive documents on stopping the Ukrainization in the areas densely populated by Ukrainians (nothing of the kind was done against other nations in 1932-1933)? Do they not prove that Stalin’s regime aimed to exterminate, at least spiritually, millions of Ukrainians?

And the fact that the 1939 census showed that the Ukrainian population of what is now Krasnodar Territory had diminished by 1,437,151 people in comparison to 1926? Does it not make the historian Kondrashin think that there was a carefully-orchestrated strike against the Ukrainian nation?

And the VKP Central Committee and USSR Council of People’s Commissars resolution of January 22, 1933, on forbidding only Ukrainian and Kuban peasants to go to other regions in search of bread? Does this not prove that Ukrainians were deliberately left to starve to death? Then how should we interpret the following comment of Kondrashin: “What can be called direct organization of the famine are draconian directives of Stalin-Molotov on the prevention of spontaneous migration of peasants, which kept them locked in the starving villages and doomed them to death by starvation. It is for this reason that the 1932-1933 famine can be considered a manmade famine, and this famine is one of the gravest crimes of Stalin” (p. 376, Russ.).

In our opinion, only after reading a large number of documents that prove the genocide of Ukrainians could Kondrashin write, perhaps subconsciously, the following: “The famine helped Stalin liquidate what he considered a potential opposition to his regime in Ukraine, which could become political, rather than cultural, and rely on the peasantry. There are some facts that prove this, including those in the third volume of the documentary collection Tragedy of the Soviet Countryside devoted to the holodomor, which describes the activities of GPU organs in the Ukrainian countryside” (p. 242, Russ.).

Pressing the argument of the absence of concrete documents on pre-planned extermination of Ukrainians, Kondrashin refers us to the International Commission of Jurists which allegedly concluded that “it is not in a position to confirm the existence of a premeditated plan to organize famine in Ukraine in order to ensure the success of Moscow’s policies” (p. 18, Russ.).

Unfortunately, Kondrashin did not quote the next lines of this documents, which say: “However, most of the commission members believe that even if the Soviet authorities did not actually plan the famine, they apparently took advantage of this famine to force [the populace] to accept the policy they resisted.”

Besides, the International Commission of Jurists with the Swedish professor Jacob Sundberg at the head (and without a single Ukrainian, incidentally) also made this conclusion: “Although there is no direct evidence that the 1932-1933 famine was systemically masterminded to break the Ukrainian nation once and for all, most of the commission members believe that Soviet officials deliberately used this famine to pursue their policy of denationalizing Ukraine.”

It should be stressed that Prof. Kondrashin hushes up the fact that the Soviet government furnished no archival documents to this commission and refused altogether to cooperate with it, organizing protest letters against its activities on the part of communist historians. Nor does the monograph’s author cites the commission’s findings that show, on the basis of open censuses in 1926 and 1939, certain demographic changes in the USSR population.

The truth is that while the population increased by 16 percent in the USSR, by 28 percent in the Russian Federation, by 11.2 percent in Belarus over the aforesaid period, it dropped by 9.9 percent in the Ukrainian SSR. This provided ample grounds for well-known jurists in various countries to recognize the 1932-1933 Holodomor as a deliberate strike on Ukrainians.

We cannot bypass one more cardinal question that Kondrashin touched upon in his book. Admitting that “the mindless collectivization and excessive state procurement targets ruined Kazakh animal and land husbanders, caused a mass-scale migration to China and the famine-related death of hundreds of thousands of Kazakhstan residents,” this author claims: “at the same time, Kazakh academics did not follow in the footsteps of their Ukrainian colleagues and are treating the 1932-1933 tragedy in line with the approaches of Russian researchers” (p. 27, Russ.).

At the same time, Kondrashin himself points out that Kazakhs were allowed to settle and set up collective farms, say, in the Volga region during the Holodomor. For example, there were 81 economic entities with 391 people in Sorochinsky district, Middle Volga region (p. 188, Russ.).

In other words, Kazakhs were not forbidden to look for food outside their republic. This is proved, incidentally, by dozens of archival materials found in Kazakhstan. It is only with respect to the famine-stricken Ukrainian population that the regime would issue draconian, to quote Kondrashin, directives that deprived it of a possibility to flee from death to the neighboring regions.

Prof. Kondrashin tries to persuade us several times that no concrete documents have been found. But this is not a sound argument because Moscow also tried to persuade us 20 years ago that there were no secret supplements to the Molotov-Ribbentrop pact on dividing the spheres of influence in Europe, signed in the Kremlin on August 23, 1939. Then these documents were found.

It is quite obvious that Nikita Khrushchev’s announcement at the CPSU 20th Congress that Stalin intended to deport all Ukrainians to Siberia will also find documentary proof some day. After all, why do Kondrashin and other Russian historians not ascribe to this kind of documents Stalin’s telegram to CK KP(b)U Mendel Khatayevich, dated November 8, 1932, saying that “the Politburo is now considering the question of how to bring the Ukrainian peasant down to his knees?”

Russian authors keep saying that the Holodomor tragedy should unite, not disunite, peoples. But this will only occur when they abandon the hard ideological line and admit historical realities.

LINK: http://www.day.kiev.ua/261924/

COMMENTARY & ANALYSIS: By Irena Chalupa

Radio Free Europe/Radio Liberty (RFE/RL) Prague, Czech Republic, Dec 09, 2008

In many ways, Kyiv is a city of contrasts. On one boulevard you will encounter a rather squat, red granite statue of Lenin, his right hand aloft pointing to the proverbial better tomorrow that, thankfully, after 70 years finally became yesterday. The authorities refuse to dismantle the statue, claiming it has "historic" value. That's the communist touch.

Walk a few blocks down to a short, gray, treeless street called Passage and you will be assaulted by ostentatious conspicuous consumption: Gucci, Louis Vuitton, Bottega Veneta, Bally, Ferragamo. That's the nouveau riche, oligarchic touch.

Up the hill from these two telling spots stands a small -- and until, last week, the only -- monument to the victims of the 1932-33 famine in Ukraine. It was erected in 1993.

Together these three points in Ukraine's capital create a kind of historic Bermuda Triangle into which things disappear and people forget. Lenin gave birth to the people who created the famine; luxury goods should make everyone forget the deprivations of the Soviet past and the pain of famine. But today almost 50 million Ukrainians somehow remain held hostage by one, two, or all three of these points of reference.

Ukraine's current president, Viktor Yushchenko, has made remembering the famine a cornerstone of his presidency. In 2006, the parliament passed a law recognizing the famine as an act of genocide against the Ukrainian people. Yushchenko went to great lengths to ensure that this year's 75th anniversary of the famine be commemorated on a national level. Foreign leaders participated in the commemorations; conferences were held; memorials unveiled, candles lit, and the names of the dead remembered.

In a particularly moving sign of solemnity, the president and the prime minister even suspended their endless bickering for a day to participate in the unveiling of the new memorial complex in the capital.

DEATH OF A NATIONAL IDENTITY
And yet large swathes of Ukraine remain deeply ambivalent about the famine. Eastern and southeastern Ukraine -- where the famine took its greatest toll -- even today, when the facts about the famine are widely publicized and accessible, has the fewest memorials. The first attempts to commemorate the victims took place very far away from Ukraine in fact; Canadian-Ukrainians erected the first famine memorial in 1989 in Edmonton.

The late historian James Mace, who joined the famine project at the Harvard Ukrainian Research Institute and collected material for Robert Conquest's seminal work "The Harvest of Sorrow," called Ukraine a post-genocidal society.

Becoming a famine expert in his own right, Mace made Ukraine his adopted homeland. He believed that what Ukrainians call Holodomor (murder by hunger), maimed Ukraine to such an extent that it created a discontinuity in the normal development of the Ukrainian people.

In the former Warsaw Pact countries, the collapse of communism brought about a restoration of a previous independence. But in Ukraine, the Ukrainian nation -- as a community possessing a clear sense of its identity, history, and cultural values -- remained a national minority in its own country even after independence.

The damage from the Soviet legacy was such that Ukrainians lacked a broad consensus concerning their future. All that remained were the surviving structures of Soviet Ukraine. The country was no longer a Ukrainian Soviet republic, but it was also not a Ukrainian Ukraine, in the sense in which Poland is Polish or the Czech Republic is Czech.

The orchestrated famine wiped out millions of nationally conscious Ukrainians. Whether or not one accepts that the famine was genocide, there is little doubt that it was targeted against Ukrainian nationalism, against Ukrainian-ness. Mykola Khvylovy, one of the most popular and talented writers of the period and a committed communist, shot himself in helpless protest.

The creative engine of a people was destroyed, slowing down and distorting nation building for decades. The Soviet regime prevented families and individuals from processing both personal and national grief. For more than 50 years, Ukraine could not address this trauma openly.

Ukrainian society, however, was soon to experience new shocks: the purges of 1937-38, war, Nazi occupation and the Holocaust, Soviet reconquest, and the 1946-47 famine. The scars of the Holodomor are overlaid by those of these other tragedies. Yet, under the consequences of these repeated blows, traces of the 1932-33 famine are unmistakable.

Without taking it into account, for instance, it is impossible to account for the much weaker -- compared to what happened in 1914-22 -- Ukrainian national movement that arose in the great upheaval of World War II. Western Ukraine, which in 1933 was not part of the USSR, is not surprisingly the exception.

What does it mean to be Ukrainian today? What is Ukraine? What is the Ukrainian idea? Former President Leonid Kuchma at one time created quite an angry backlash by stating that the Ukrainian idea had not worked in Ukraine.

If a country called Ukraine endlessly convenes conferences on self-identity, if pundits pontificate ad nauseum on "project Ukraine," if Ukrainians themselves can't define their identity or their values, then one can safely admit that the country has something of an identity crisis.

Is it important to have the world acknowledge the Ukrainian famine as an act of genocide? For the Ukrainian state, yes. But will such recognition help the country itself? Will it ease the effects of the famine trauma? Will it steer Ukrainian society onto a path of self-awareness?

Will it compel the eastern Ukrainian citizen, who is descended from the ethnic Russians who were resettled into the towns and villages emptied by the famine, feel a connection to this country?

Will it give the inhabitants of the more than 13,000 towns and villages that died in 1932-33 a voice and a name? And, most importantly, will today's diverse Ukrainians, who aren't particularly eager to listen to the stories of their painful past, hear those voices?

It seems to me that James Mace was on to something. The famine is not an only an event in Ukraine's past -- it is an event in its present and its future.

NOTE: Irena Chalupa is the director of RFE/RL's Ukrainian Service. The views expressed in this commentary are the author's own and do not necessarily reflect those of RFE/RL

LINK: http://www.rferl.org/content/Holodomor_Is_Ukraines_NeverEnding_Trauma/1357818.html

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26. UKRAINE, A POST-GENOCIDAL SOCIETY
Ukraine's famine survivors still bear the emotional scars.

By Iryna Shtogrin, Radio Free Europe/Radio Liberty (RFE/RL)

Prague, Czech Republic, Monday, December 08, 2008

Distrust of government and future uncertainty are just two of the most conspicuous features of the post-genocidal syndrome that psychologists have identified in modern Ukrainians some 75 years after the famine of 1932-33.

On a more intimate level, famine survivors still value every breadcrumb, and their descendants greet guests with tables overloaded with a variety of dishes. In one form or another, Ukrainians will universally impress on each other the importance of "having something to eat."

Doctors describe a number of symptoms of post-genocidal syndrome that are unconnected to the trauma directly, but which can still seriously undermine the sufferer's health. Victims feel pain in places that are not supposed to hurt and experience nightmares and hidden anxieties that steal their ability to laugh and enjoy life.

Taras Vozniak, the editor of "Ji" magazine, has described the experience as "such a trauma that for people who survived it is very difficult to remember what happened." He compares it to the effects of rape: "[Victims] don't want to testify, or to remember. They want to erase the tragedy from their memory."

Having survived a famine that was brought about by the policies of the Soviet government, Ukrainians now question the very notion of government. They have -- if not fear -- then a feeling of permanent uncertainty about the future. Under each shift in political direction or change of political leaders, Ukrainians rush to buy the necessary essentials. Just in case.

The memory of their ancestors -- who were robbed of food by their own people on orders from the Kremlin -- forces many Ukrainians always to keep something for a "black day" and never truly reveal themselves fully, even to close acquaintances.

That same instinct compels Ukrainians to stockpile food, and to invite anyone who stops by their home to sit down for a meal. Ukrainians tend to rely on themselves, living by their wits and soothing themselves with the eternal saying, "God willing."

Academician Myroslav Popovych survived the famine and believes that other survivors can never really forget. He says, "conditions then were such that all people who belong to that generation carry this taint." But he also asserts that "personality always wins out in the end -- I wouldn't say that I have become more obedient or completely focused on earthly problems."

But the most important thing that Ukrainians carry from these terrible times is a complete revulsion toward totalitarian regimes.

"Ukrainians still lack a political culture because of their history, but we have a huge drive toward liberty," Popovych says. "I don't know whether you can call this famine memory, but it is certainly a total aversion to totalitarian mentality."

Ukrainian society is highly individualistic, partly because its history has incorporated the terrible experience of death and survival of famine. Old notions such as "my home is my castle" and "I'm my own boss" have hampered the formation of civil society and a genuine national elite in Ukraine.

At the same time, this attitude turns the average Ukrainian into a libertarian. They view even the slightest attempt by politicians to elevate themselves with sarcasm, and they sense the slightest false note in officials' speeches about their "love of the people" and their promises to solve the problems of average citizens.

One must remember that, aside from the natural psychological reaction to survived horrors, Ukrainians for decades were not allowed to speak about the famine -- it could have cost them not only their liberty but also their lives.

Former dissident and political prisoner Yevhen Sverstiuk recalls seeing fear in countrymen's eyes when he asked them about the 1932-33 famine even after perestroika. People asked whether they would be executed. Many said they still feared being punished for speaking out. That despite the fact that they'd been invited by the village council to speak on the subject, and the entire project soliciting their views had been authorized by the regional government.

Philosopher Yevhen Sverstiuk believes that the time has come when Ukrainians can cry over their painful experiences. They can process the past by talking about the famine, identifying all the villages where people died, naming all of the victims, and taking steps toward closure.

After crying out their trauma, people should wipe their tears and get to work, says Sverstiuk. Otherwise, they risk the danger of becoming spiritual beggars. The world values the brave. By telling the truth, and overcoming their fear, Ukrainians overcome their inferiority complexes.

Writer Ivan Dziuba calls the famine a blow to Ukraine's future. And the only way to fight back is to free oneself of this heavy burden of genetic memory by revealing the entire truth.

The late American researcher James Mace began the process by defining Ukraine as a post-genocidal society. Mace believed Ukraine would be incapable of further development until the entire truth of the famine was told.

That idea has been confirmed by the experiences of other nations that suffered similar traumas, defeats, and the burden of penance. Society returns to successful development through awareness, and acceptance of its national memory and history.

The best that the current government in Kyiv can do to commemorate those killed by famine is to create the conditions so that all Ukrainians could feel certain and security. Little is required in order to achieve this -- just respect for human rights, abiding by the rule of law, and hard work.

NOTE: Iryna Shtogrin is a correspondent with RFE/RL's Ukrainian Service. The views expressed in this commentary are the author's own and do not necessarily reflect those of RFE/RL.

LINK: http://www.rferl.org/Content/commentary_Ukraine_Postgenocidal_Society/1357424.html

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