Welcome to the U.S.-Ukraine Business Council


By Roman Olearchyk in Kiev, Financial Times, London, UK, Sat, July 11 2009

International Monetary Fund (IMF), Washington, D.C., Fri, July 10, 2009

EU to Propose Rules to Help Countries Deal with Disruptions
By Alesandro Torello, The Wall Street Journal, NY, NY, Mon, July 13, 2009

Experts say Obama stood up for Ukraine’s sovereignty.
Oksana Faryna, Staff Writer, Kyiv Post, Kyiv, Ukraine, Fri, July 10, 2009  
Analysis & Commentary: By Chrystia Freeland
Financial Times's United States managing editor.
Financial Times, London, UK, Saturday July 11 2009

By Roman Olearchyk in Kiev, Financial Times, London, UK, Sat, July 11 2009

KIEV - An International Monetary Fund mission visiting Ukraine said yesterday it would recommend approval of a additional $3.3bn in aid, while downgrading its annual growth forecast for one of the world's most recession-battered economies.

Ceyla Pazarbasioglu, IMF mission chief to Ukraine, said Kiev could expect the third tranche from a $16.4bn ( Euro11.7bn, £10.1bn) standby loan granted last autumn within four weeks, pending approval by the fund's board.

The fresh cash also hangs on adoption of legislation to reform Ukraine's bank sector, a challenge given that the country's parliament has been paralysed in bitter political rivalries.

Referring to a disastrous 20-per-cent contraction in gross domestic product in the first quarter of 2009, Ms Pazarbasioglu said the fund had downgraded annual growth expectations for Ukraine from 8 per cent to 14 per cent.

"These revisions mainly reflect the first quarter. Looking forward, we hope there will be a return to growth," she said, adding that government and central bank policies had "allowed the country to manage the crisis, bringing stability to its financial system".

The global economic recession has severely cut domestic consumption and demand for steel, Kiev's top export.

The country's finances are currently stretched to the limit. With a 40 per cent market share, European banks are watching Kiev closely after fuelling a lending boom that went bust, and fear that its troubles could spill over.

Russia has urged Brussels to help Ukraine finance natural gas payments, threatening to cut off flow - a move that could disrupt supplies to Europe - if Kiev's bills are not paid on time.

Yulia Tymoshenko, prime minister, said fresh IMF funds would help "minimise losses during the crisis period".

The IMF agreed to accept a larger budget deficit of 6 per cent rather than 4 per cent. "We have been flexible in this difficult period, and will support Ukraine as long as good policies continue to be implemented," Ms Pazarbasioglu said.

In return, Ms Tymoshenko agreed to "unpopular measures", cutting budget expenditure and balancing the finances of a cash-strapped state gas company by gradually raising tariffs on households each quarter, to market levels.

Politically, however, this is a risky move ahead of a January 2010 presidential election in which Ms Tymoshenko is a leading contender.

Referring to poisonous political rivalries that have complicated Ukraine's handling of the recession, Ms Pazarbasioglu called for "consensus".
Ukraine's currency plunged 40 per cent last autumn in the wake of the global financial crisis, rattling banks and other lenders. The weaker currency has helped exporters and equalised Kiev's trade balance.

However, unemployment has doubled, leaving 1m jobless. Ukraine's 46m citizens are economically squeezed and disillusioned with their leadership, but have remained largely calm.

LINK: http://www.ft.com/cms/s/0/475be960-6db1-11de-8b19-00144feabdc0.html?nclick_check=1

International Monetary Fund (IMF), Washington, D.C., Fri, July 10, 2009

WASHINGTON- An International Monetary Fund (IMF) mission led by Ms. Ceyla Pazarbasioglu visited Kyiv during June 24-July 10 for discussions on the second review under the Stand-By Arrangement (SBA) with Ukraine.

At the conclusion of the visit, Ms. Pazarbasioglu issued the following statement today:

“The IMF mission today reached staff-level agreement with the Ukrainian authorities on the conclusion of the second review under the SBA. The authorities’ Letter of Intent will now be submitted to IMF Management with a view to consideration by the IMF Executive Board by early August.

"The completion of the review by the Executive Board would release a tranche of SDR 2.125 billion (about US$3.3 billion), pending the completion of prior actions.

“Macroeconomic and financial policies in Ukraine have been broadly on track. The end-May quantitative performance criteria on base money, net international reserves, and the general government balance were met.

"The authorities have made good progress in the resolution of the systemic problem banks and in preparing associated legislative amendments.

Parliamentary passage of the amendments designed to strengthen the bank resolution process is required for the completion of the second review.

“Financial stress has eased but, as in other countries of the region, the economic downturn is more pronounced than expected. As a result of the much sharper-than-expected loss of output in the first quarter, real GDP is now expected to contract by 14 percent in 2009 against 8 percent at the time of the first review.

"The larger contraction contributes to a rapid improvement of the current account, but further weakens government revenue. Developments in inflation have been better than expected.

“Against this background, the mission revised the general government deficit target in 2009 from 4 to 6 percent of GDP, in addition to a Naftogaz deficit of 2.6 percent of GDP. To achieve this, the authorities have committed to corrective fiscal measures in 2009.

"They have committed to quarterly increases in gas tariffs, complemented by an effective social safety net, as well as to measures to eliminate the structural imbalances of Naftogaz finances and improvements in the governance of the company.

“Going forward, it is critical that the authorities take all necessary measures—including during the run up to the presidential elections—to keep fiscal developments in line with program targets. It is also crucial to achieve progress on the tax and pension reforms announced for 2010. These reforms will promote medium-term fiscal sustainability and help the economy emerge from the crisis.

“The mission noted that monetary and financial sector policies are broadly appropriate. In particular, the implementation of the bank recapitalization and restructuring program is progressing as planned. The authorities have committed to resolving systemic problem banks swiftly and to strengthen the financial sustainability of two state banks. Measures need to be taken to bolster the independence of the National Bank of Ukraine’s (NBU).

"The independent review of the NBU’s provisions of refinancing credit and foreign currency to banks in the fourth quarter 2008 was concluded. The preliminary results suggest that the NBU followed approved procedures and authorization policies in conducting these operations.

 “The successful implementation of the policy package will require a strong national consensus and commitment on all political levels. Ukraine’s economy is at a crossroads and determined implementation of policy measures will help the country return to sustainable growth. The IMF will continue to assist the authorities in adapting to the challenging global conditions.”

LINK: http://www.imf.org/external/np/sec/pr/2009/pr09259.htm
EU to Propose Rules to Help Countries Deal with Disruptions
By Alesandro Torello, The Wall Street Journal, NY, NY, Mon, July 13, 2009

The European Commission will propose this week rules to increase the European Union's preparedness for natural-gas shortages, as a potential crisis between Ukraine and Russia risks affecting European supplies in the winter.

The proposals come months before they were expected, as new friction between Russia and Ukraine over natural-gas payments suggests there may be a repeat of January's crisis.

Each EU government will have to prepare a "preventive action plan" and an "emergency plan" to make sure they are ready to face a possible supply disruption, according to a draft of the new rules. The rules would empower the commission to request changes to these national plans if it deems them "not effective" or not compatible with one another, according to the draft, which could still change before it is made public.

The commission also will be able to declare an EU-wide emergency, and would set targets to ensure that supplies are guaranteed. Within three years of the new rules coming into force, EU countries would have to make sure their infrastructure "has the capacity to deliver the necessary volumes of gas to satisfy total gas demand ... in the event of a disruption of the largest infrastructure during any period of sixty days," the draft says.

The European Parliament and the 27 EU governments will have to back the commission's proposal before it becomes law. Despite the urgency, there is a good chance the rules won't be approved before next year, with hard negotiations starting only in September, one official involved in the talks said. Some parts of the proposal are likely to be controversial, as governments might find them too intrusive, diplomats said.

Europe imports a quarter of its natural gas from Russia and 80% of that flows through Ukraine, which is facing an economic crisis and struggled to pay its natural-gas bill for June.

NOTE: Write to Alessandro Torello at alessandro.torello@dowjones.com

LINK: http://online.wsj.com/article/SB124744147851029919.html

Experts say Obama stood up for Ukraine’s sovereignty.

Oksana Faryna, Staff Writer, Kyiv Post, Kyiv, Ukraine, Fri, July 10, 2009 
KYIV - Even though U.S. President Barack Obama publicly mentioned Ukraine just once during his July 6-8 visit to Moscow, the reference was exactly what the nation wanted to hear – mostly likely to the chagrin of his Russian hosts.

“State sovereignty must be a cornerstone of international order,” Obama told graduating students of the New Economic School in Moscow. “Just as all states should have the right to choose their leaders, states must have the right to borders that are secure, and to their own foreign policies … That’s why we must apply this principle to all nations – and that includes nations like Georgia and Ukraine.”

Obama’s university speech on July 7 was not broadcast by the top state-controlled TV channels in Russia. Kremlin leaders have claimed former Soviet republics such as Ukraine as part of their privileged sphere of influence and have also waged a relentless anti-American campaign in the news media.

The U.S. president also undoubtedly irritated Russian leaders by defending every nation’s right to join the NATO military alliance, a prospect vehemently opposed by Russian President Dmitry Medvedev and Prime Minister Vladimir Putin.

Moreover, Obama gave short shrift to Putin – meeting with him only two hours over breakfast on July 7 – and made sure to carve out time with Kremlin opponents and members of civil society. Obama also acknowledged American-Russian differences over a proposed missile defense shield in Eastern Europe.

“Ukraine should be satisfied,” said Anders Aslund, senior fellow at the Peterson Institute for International Economics in Washington, D.C.

“Indeed, President Obama stated publicly and clearly all the things that are important for Ukraine: sovereignty, territorial integrity and the right to pursue an independent foreign policy. Obama’s stand on Ukraine in Moscow was as clear and positive as anybody could ask for. Ukraine plays an important role in U.S. politics and no U.S. president is likely to play down Ukraine.”

Volodymyr Fesenko, chairman of the Kyiv-based Penta Center for Applied Political Studies, said that while Ukraine took a backseat to discussions on nuclear-arms reductions and greater cooperation on Afghanistan, the nation was not forgotten by either side.

“There were soft warnings from the American president to his Russian colleagues that it’s better not to create problems on the borders,” Fesenko said. “There were hints that it is essential not to allow anarchy in neighboring countries and additional conflicts. It was a signal that America is not indifferent to this.”

Before Obama’s visit there had been fears that his desire to reset ties with the Kremlin may lead to a lessening of support for Ukraine’s democracy or Euro-Atlantic integration ambitions.
“Obama has made clear that Ukraine is not a bargaining chip in the U.S.-Russia relationship,” Adrian Karatnycky, senior fellow with the Atlantic Council of the United States. Karatnycky said that, by reasserting key principles of autonomy, meeting the opposition and civil society in Russia, Obama made clear that he won’t abandon his principles for the sake of cooperation with Russia.

That doesn’t mean that NATO membership will come anytime soon – if ever – for Ukraine, which remains deeply divided over the prospect. “Entering NATO may be postponed for five years and that would be a big concession to Russia,” said Yuriy Shcherbak, Ukraine’s former Ambassador to the United States.

Shcherbak also welcomed Obama’s defense of Ukraine’s sovereignty. “It is a very essential signal,” Shcherbak said. “Obama clearly showed that the United States won’t treat positively Russia’s attempts to dominate post-Soviet space and, especially, to impose on Ukraine any of its models or demands. After this visit, if Russia wants to [improve its relationship] with the United States, it must operate more carefully in post-Soviet space.”

Shcherbak also thinks that – in contrast to the scant public references – Ukraine “was mentioned dozens times in the closed part of negotiations. These talks were not public, but soon we’ll find out what they were about.”

Especially gratifying, Shcherbak said, is that U.S. Vice President Joseph Biden will come to Ukraine later this month and “hopefully will clarify to Ukrainian leaders what was going on in Moscow and what is the American government’s position.” It may also become more clear what concrete leverage Washington may use against a Russian leadership that less than a year ago clashed in a bloody war with Georgia, another pro-Western ally on post-Soviet turf.

The success of young, yet still fragile, post-Soviet democracies such as Ukraine and Georgia is crucial for America’s larger geopolitical aims.

Karatnycky said that Ukraine’s democratic progress “is seen by many in the U.S. and Europe as a potential cultural and political example to Russia of a Slavic state that can develop prosperity and democratic institutions. That is why its success is so essential to European leaders and to Obama. The U.S. is interested in the Europeanization of Russia, not the Eurasianization of Ukraine.”

Explaining the pivotal role of Ukraine in global security, Fesenko referred to Zbigniew Brzezinski, the Polish-born former American national security adviser to U.S. President Jimmy Carter from 1977-1981.

“Brzezinski wrote that the keys of Russian empire revival or, vice-versa, to its disintegration lay in Kyiv,” Fesenko said. “If Ukraine takes part in any new integration projects in post-Soviet space, then there is a great possibility of a powerful imperial formation. If Kyiv does not participate in such projects, they have no chance to succeed.”

President Victor Yushchenko, in comments on July 7, hoped for the best. “Ukraine hopes that it won’t become the third side, through which other countries will make compromises to reach their interests.”

LINK: http://www.kyivpost.com/nation/45038

Analysis & Commentary: by Chrystia Freeland
Financial Times's United States managing editor.
Financial Times, London, UK, Saturday July 11 2009

Imagine Jeremy Paxman being forced by an authoritarian crackdown on the media to flee London for Dublin, and begin a new career as a prime-time presenter in Ireland.

A decade ago, it would have been equally preposterous for Russians to conceive of Moscow’s TV news stars – who, thanks to the youth of their country’s democracy, tended to be more influential and admired than their western counterparts – having to abandon jobs in the Imperial City
and seek work in one of the former Soviet republics.

The big problem with the Russian media seemed to be too much pluralism and too few standards, not too little freedom. And the country’s democracy, while chaotic and unruly, appeared to be one of the great accomplishments of the Yeltsin era. Moreover, even the most liberal, least chauvinist Muscovite would never have dreamed of exchanging the cosmopolitan opportunities of the capital for the backwater cities of the ex-Soviet Union.

That’s why I was a little surprised, a couple of months ago, as I settled into my seat for the hour-long flight from Moscow to Kiev, to see Yevgeny Kisiliev, the television anchor who was the face of the Yeltsin revolution, sitting across the aisle. And I was astonished when I learnt the purpose of his trip: Kisiliev, who had been Russia’s most influential TV journalist, was commuting to his new job as an anchor in Ukraine.

“Travelling to Ukraine is like going back in a time machine to the 1990s – they have real politics there,” Kisiliev told me enthusiastically. With his trademark thatch of thick, extravagantly boyish butterscotch hair and full moustache, Kisiliev still looked every bit the TV celebrity.

And with his Hugo Boss glasses and chunky steel wristwatch, he met the dress code of a cabin filled with Gucci-clad women who looked like they were auditioning for a James Bond movie and their wannabe-oligarch boyfriends.

Kisiliev explained that on his weekly Moscow radio show – he has been forced off regular television – he could only interview political analysts, since the politicians themselves refuse to appear. Independent journalism has been so marginalised in Russia, he said, that “even the press secretaries don’t like to talk to us any more”.

In Kiev, by contrast, politicians not only come on his show, they answer their own mobile phones. “Working in Ukraine allows me to be a true political journalist,” Kisiliev said. “In Russia, there is no open political debate any more. The authorities are hermetically sealed, we can just hypothesise about the discussion going on inside. I call it the black box. Here [in Ukraine] you have access to tonnes of information, to almost any politician.”

The story of the calculated and ruthless erosion of media freedom in Vladimir Putin’s Russia is a familiar one – beginning with the exile and expropriation of the media tycoons and descending to the almost routine killings of journalists, including most famously Anna Politkovskaya. Ukraine, meanwhile, is known for an unexpectedly robust national insistence on democracy, which propelled the success of the Orange Revolution.

And so while Russia has moved away from democracy, its neighbour – which many Russians claim as a cultural and historic twin – has moved towards it. That divergence is one big cause of the fraught relations between the world’s two largest Slavic nations – and it could be a key to whether Russia’s current soft authoritarianism is a relatively brief setback on the difficult road to democracy or the country’s new status quo.

Meanwhile, no one embodies the story of the divergent political paths of the two biggest former Soviet states more vividly than the journalists who reported on – and participated in – the rise of Russian democracy. And who now, as that democracy has collapsed, have found themselves forced to defect south, to
Ukraine’s resurgent culture of pluralism.

Kisiliev’s weekly news show has only been on air since the beginning of the year, but when our flight landed in Kiev, I saw he had already made an impact: one of the border guards was a fan, and he whisked Kisiliev, his two producers and me, clinging to their coat-tails, to the front of the passport queue.

Uniformed officials in the former Soviet Union aren’t known to be either charmers or news junkies, so Kisiliev’s warm welcome began to answer one of my immediate questions about his new gig: how were Ukrainians responding to the appearance of Russia’s most famous TV newsman on their screens?

Tension with Russia, after all, is the dominant fact of Ukrainian political life and, during a week in Ukraine this spring, I saw signs that at a popular level, too, Ukrainians were beginning to define themselves by their opposition to their former suzerain. My favourite example was the T-shirt I spotted on the flight from Kiev back to New York. Making a reference to the one-hour time difference between Ukraine and western Russia, it read: “Wake Up Ukraine! The Muscovite has already been up for an hour”.

Kisiliev says he and the owners of his new network had had the same reservations. “There were some doubts, fears that my arrival here would not be well-received. I do an analytical show, with commentary and opinion, and for a foreign journalist to do this, people worried it would look bad.”
Those worries were misplaced. For one thing, Kisiliev said, the Ukrainian political scene is “so open, it is not that hard to learn it”.

Nor has language been much of a barrier. Most of the country is fluidly bilingual, especially in its public life. Kisiliev’s show, like debate in the Ukrainian parliament, is conducted in Ukrainian and Russian. He speaks Russian and his guests speak whichever language they prefer. When they opt for Ukrainian, he understands “90 to 95 per cent”; “I practise Ukrainian every day,” he said.

Nor are people suspicious that Kisiliev is in Kiev to advance Moscow’s political agenda. If his being forced off the airwaves by the Putin regime didn’t put paid to that possibility, hostile relations between his new station’s owners and the Russian government would: TVi, the start-up channel he appears on, is a private venture owned 50 per cent by Vladimir Gusinsky, the flamboyant Russian media oligarch who was forced into exile in 2001, and 50 per cent by Konstantin Kagalovsky, a fellow exile and former business partner of jailed oil baron Mikhail Khodorkovsky.

“Everyone here knows perfectly well that the current owners of the channel can in no way be seen as representatives of the Russian government,” Kisiliev explained. Kagalovsky agreed: “I haven’t been to Russia for five years. Gusinsky has criminal charges against him in Russia. No one will worry that this channel is advocating the Kremlin line.”

Later, when the mobile phone of one of the channel’s exiled Russian executives rang, I got a sense of how strong the team’s animosity towards Russia’s current rulers is. I noticed an image flash on to the phone’s screen, set to appear every time it rings – a photo of the Russian prime minister with the words “Fuck Putin!” superimposed on top.

I didn’t have a chance to examine Kisiliev’s mobile phone, but the story of his career over the past decade is also the story of Putin’s step-by-step suffocation of independent broadcasting in Russia. Kisiliev launched his flagship news analysis show, Itogi (Conclusions) on January 5 1992, 10 days after the dissolution of the Soviet Union. The programme, broadcast on NTV, reigned as Russia’s premier political TV show until early 2001, when Putin, a year into his presidency, began to tighten control over the airwaves.

Putin’s first target was NTV, an independent media company founded by Gusinsky. The Kremlin’s de facto expropriation of the group was accomplished via Gazprom, the state-controlled energy giant, and co-operative courts. On the weekend of April 14, after weeks of public struggle, the company’s new owners installed their own security guards at the station and Kisiliev and his colleagues were locked out.

They initially found refuge at TV-6, a smaller channel owned by Russia’s remaining media tycoon, Boris Berezovsky. But by the beginning of 2002, TV-6 had also been closed down as the Kremlin turned its guns on Putin’s king-maker.

Desperate to remain on air, Kisiliev and his team of NTV refugees continued to work at a reconstituted TV-6 (called TV-S), this time backed by a group of more compliant businessmen. Kisiliev now believes that the resurrected TV-6 was “a political project by the authorities to say, ‘See, there are no problems, the NTV journalists are still working’,” and, with hindsight, he regrets helping to build that Potemkin village. By June 2003, the new TV-6’s backers had stopped financing the station and “it quietly died”.

Next Kisiliev became editor of the Moscow News newspaper, which had been purchased by oil tycoon Mikhail Khodorkovsky. But Khodorkovsky was arrested on October 25 2003, having chosen to stay in Russia and fight accusations of fraud, embezzlement and tax evasion, rather than flee as Gusinsky and Berezovsky had done. (Still in jail, Khodorkovsky this summer faces fresh charges that could prolong his term.)

With two former employers in exile, and one imprisoned, Kisiliev spent a couple of years as a freelance print journalist. Eventually, he was invited to anchor a show on Ekho Moskvy, the Gusinsky-supported independent radio station that, along with a few small-circulation newspapers, the Kremlin tolerates. Marginalised in Moscow, Kisiliev found himself following the two owners of his new TV station to Ukraine.

“They thought the media market would develop here and they could do journalism, which they can’t in Russia,” Kisiliev said. They also thought Ukraine’s intensely politicised culture, and the close connections between business and politics, offered an opportunity to make money.

Its owners hope TVi will be broadcast throughout Ukraine by the autumn, but at the moment it is available free to air only in half-a-dozen eastern and southern cities. For now, Kisiliev is able to build a national presence by making guest appearances on the television show of another Yeltsin-era Russian media star who has re-established himself in Kiev: Savik Shuster.

Shuster, whose family in Soviet times emigrated from Lithuania to Israel and then Canada, became a fixture on the Moscow media scene in the 1990s, working at Radio Liberty, which moved from the dissident fringes to the mainstream as the country flipped from authoritarianism to democracy.

When Gusinsky lost control of NTV, Shuster was offered a job by the channel’s new, Kremlin-backed owners and, ironically, it was he who replaced Kisiliev as the channel’s dominant political journalist.

But after Putin was re-elected to a second presidential term, Shuster, like Kisiliev, found himself forced off the air. “They told me it was because the audience was too old,” Shuster recalled over espressos at Pantagruel, one of Kiev’s most popular Italian restaurants. He is dressed more like an archetypal intellectual than a TV personality, in black sweater, jeans and rimless, rectangular glasses. “I said that was a blatant lie – the truth was the Kremlin could no longer afford an open, live show.”

He lingered in Moscow for a year. Then came the Orange Revolution. When Ukraine’s democrats won that struggle, Shuster was amused to learn that his friend, Boris Nemtsov, a former provincial governor and deputy prime minister who had joined Russia’s rag-tag political opposition, had become an adviser to Viktor Yushchenko, the new Ukrainian president.

“I decided to go and make some fun of him,” Shuster said. “I planned to say to him, ‘Boris, you finally found a place in politics, but it is in the wrong country!’ But when I came into his office, I saw he was in a very good mood and I said, ‘Boris, maybe I, too, should go to Ukraine’.”

A few months later, he was living in the Ukrainian capital, studying Ukrainian and working again as a broadcaster. Like Kisiliev, he was reminded by the mood in Ukraine of Russia during the Yeltsin era: “The atmosphere was very good. It resembled Moscow in the 1990s – a lot of energy, many smiles.”

Shuster’s political talk shows became an instant hit. But in time, Shuster, who had become one of the country’s most influential broadcasters, started to feel “political pressure” from his new bosses. As in Russia in the chaotic 1990s, business and politics are closely intertwined in Ukraine: many of the country’s oligarchs own media companies, which they are not shy about using to advance their political and commercial interests.

To ensure his independence, Shuster formed his own television production company and now sells his show with a “political non-interference clause” to a channel controlled by Rinat Akhmetov, the country’s richest man.

Shuster shares Kisiliev’s bemusement that the uneven progress of democratic change in the former Soviet Union has landed him in Kiev. “It really is funny,” he told me. “Sometimes I don’t believe it myself.”

The Russian media stars and media barons who have found themselves washed ashore in Ukraine have a perspective on the political evolution of the two Slavic states, and on their relationship, which is different not only from what you hear in Moscow, but also from conventional wisdom in Washington or Europe.

The Kremlin sees Ukraine’s diverse and messy political culture as an exploitable weakness – and many Ukrainians and their western supporters despairingly agree. But, in separate conversations, the Russian journalistic refugees all argued that Ukraine’s regional divisions were the essential underpinning of its democracy, and the chief reason the country had diverged from Russia’s neo-authoritarian path.

“I don’t idealise the Ukrainian political class,” Kisiliev told me. “There are as many cynical, corrupt politicians here who would spit on democratic values as in Russia. But Ukraine’s good fortune is that, because of history, culture and geography, Ukraine is divided into a few big regions, each of which has its own culture and politics.

These are also the zones of influence of various financial groups. None of those groups has the financial or electoral power to monopolise power – which happened in Russia, where Gazprom and the St Petersburg Chekists [the cabal of former KGB officers associated with Putin] usurped all political power.”

Central to this view of diversity as a fuel for democracy is the exiles’ confidence that all of Ukraine’s elites – including the Russian-speaking eastern ones – are committed to Ukrainian statehood. “The idea of a pro-Russian line in Ukrainian politics is a myth – they are all pro-Ukrainian now,” Kagalovsky said.

Yet in the Kremlin, that “myth” is at the heart of policy towards Ukraine. Moscow takes as its starting point the idea that the two countries occupy a connected, if not common, cultural and social space. From there it is a short step to the Putin regime’s conviction that the two countries’ political paths should likewise run in parallel.

Kiev’s Russian media exiles don’t deny the cultural commonalities – without them, their easy migration to Ukraine would not have been possible. But they believe that politically and socially, the two countries are growing apart. According to Igor Malashenko, who ran Gusinsky’s media empire at its height and is now a “senior counsellor” at TVi: “There’s been a continental divide in recent years and Ukraine and Russia have split – far more than they understand in Moscow.”

Shuster concurs. In the Soviet era, he said, “in Kiev it was a dream to get to Moscow.” But, petro-wealth notwithstanding, he believes that the appeal of the Russian metropolis is dimming: “Putin’s politics is killing a lot of creativity and Moscow is becoming less attractive for Ukrainians.”

And what do ordinary Russians think about Ukraine? Malashenko, one of the masterminds of Boris Yeltsin’s re-election in 1996, who now divides his time between homes in New York and Spain, says most Russians don’t give Ukraine much thought one way or the other: “This [nostalgia for Ukraine] is mostly invented by official propagandists.”

But he and the other Russians agreed Ukraine has become a focus of the Kremlin’s malevolent gaze. Shuster said: “They are always looking for an enemy number one, which is very ordinary for an authoritarian regime. Today that enemy is Ukraine.”

If you are Putin, that enmity makes sense. “If Ukraine succeeds as a democracy, then it shows that authoritarianism is not the only model,” says Shuster. And the Kremlin’s worries have a paranoid, geopolitical taint: according to Malashenko, it genuinely believes the Orange Revolution was a US-backed plot, not an indigenous uprising. “Their fear is that this CIA operation will be repeated in Russia. That is why Putin doesn’t see the Russian opposition as a real opposition, but rather as a fifth column.”

If Ukraine is the model the Kremlin most fears, isn’t the reappearance of Russia’s silenced TV news stars on television channels to the south – and on websites accessible to any Russian – magnifying their concerns? The Lithuanian-born Shuster, who has no business or personal connections left in Russia, thinks so. Putin, he says, is afraid of him and of Kisiliev, and “he should be”.

Kisiliev, who still shuttles between Kiev and Moscow, is more cautious: “This programme isn’t an effort to jab a needle into the bottom of any Russian leader, despite my sceptical attitude towards many of them.”

Watching Kisiliev and Shuster at work in their well-appointed television studios, sparring with politicians, I do feel like I’m back in the chaotic and corrupt but also open and pluralistic Russia of the 1990s. And that tableau vivant makes it easier to imagine that today’s repressive Russian political order is just a detour on what once felt like an inevitable march towards European-style democracy: after all, these are Russian television stars working freely in Russian in a city an hour’s flight from Moscow.

This vision of Ukraine as representing an alternative, democratic path for Russia is the flipside of the Kremlin’s insistence on the cultural and historic bonds between the two states. But just as they deny the existence of a pro-Russian faction in Ukraine, these professional exiles are dubious about what for them would be the more welcome notion: that Ukrainian democracy foreshadows a change of course in Russia.

“If there is a political transformation in Russia, it will not be towards democracy,” Shuster said. “They have lost the foundation for a democratic transformation. They have decided to build power by looking for supporters among the intolerant. I think a fascist dictatorship is more likely than Nemtsov or Kasparov or Kasyanov [the democratic opposition leaders] coming to power.”

When I raised the possibility of a revival of Russian democracy over lunch with Kisiliev and Malashenko the next day, their reaction was even more categorical. Malashenko is normally a courtly man, and he seemed to have settled into his nearly decade-long, affluent exile as if to the manor born: he has published books of his photography, walks several miles a day and tells me he takes great pleasure in planning family holidays in Europe.

But when I listed the similarities between the Ukrainian middle-class protestors who won democracy in the Orange Revolution and their Russian cousins, and compared the fragilities of former Ukrainian president Leonid Kuchma’s soft authoritarianism with those of the Putin-Medvedev regime, Malashenko erupted.

In 2000 and 2001, he said angrily, Vladimir Gusinsky felt Russian democracy could not be undermined, and persuaded Malashenko he could win the mounting confrontation with Putin; after all, Gusinsky had triumphed in a similar stand-off with the hardline faction in Yeltsin’s court in the mid-1990s. “I knew Gusinsky was wrong and I told him so,” Malashenko said now, “but I let him overrule me.”

Malashenko wishes that he and Gusinsky had, like the more pliant oligarchs, found a way to do a deal with Putin and continue working in Russia, the country Malashenko loves best.

In Kiev, he shouted at me: “It is because I listened to people like you that we are living the life we are now living!”

A television venture in democratic Ukraine, and homes in Manhattan and southern Spain, are no substitute, it seems, for the power, the money and the Machiavellian excitement of treading the corridors of the Kremlin.

LINK: http://www.ft.com/cms/s/2/b227a87a-6c20-11de-9320-00144feabdc0.html