"THE ACTION UKRAINE REPORT - AUR"
An International Newsletter
In-Depth Ukrainian News, Analysis, and Commentary

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

"THE ACTION UKRAINE REPORT - AUR" - Number 495
E. Morgan Williams, Publisher and Editor
morganw@patriot.net, ArtUkraine.com@starpower.net
Washington, D.C. and Kyiv, Ukraine, TUESDAY, May 31, 2005

------INDEX OF ARTICLES------
"Major International News Headlines and Articles"

1. NO BUCKS, NO BOOM!
Entering the Ukrainian market for foreign investors is very complicated.
Investors have difficulty in reaching agreements with local authorities.
By Maria Babenko, Kyiv Weekly, #20 (160)
Business and Socio-Political Weekly
Kyiv, Ukraine, Friday, May 27- June 3, 2005

2. UKRAINE: Q1 DIRECT FOREIGN INVESTMENT SWELLS 8.6%
New Europe, Athens, Greece, Monday, May 30, 2005

3. US EXIMBANK OPENS CREDIT LINE WITH NEDRA BANK FOR FINANCING
DELIVERY OF JOHN DEERE AGRICULTURAL EQUIPMENT TO UKRAINE
Ukrainian News Agency, Kyiv, Ukraine, Monday, May 30, 2005

4. RUSSIAN POLITICIAN REGRETS UKRAINE'S ECONOMIC POLICY
Ukraine's investment climate is deteriorating,
result of mistakes by Yuliya Tymoshenko's government
Interfax news agency, Moscow, Russia, in Russian, 30 May 05
BBC Monitoring Service,UK, in English, Monday, May 30, 2005

5. RUSSIAN LIBERAL ADVISOR TO UKRAINIAN PRESIDENT YUSHCHENKO
BORIS NEMTSOV CRITICIZES UKRAINIAN PRIME MINISTER
YULIYA TYMOSHENKO'S ECONOMIC POLICIES
Warns that Tymoshenko's misguided economic policies
may lead to the failure of the Orange Revolution
"Boris Nemtsov: 'Tymoshenko is now the Kremlin's main friend'"
Interview with Boris Nemtsov by Yevhen Ikhelzon
Segodnya, Kiev, Ukraine, in Russian 26 May 05, p 4
BBC Monitoring Service, UK, in English, Friday, May 27, 2005

6. "PRESUMPTION OF IMMUNITY"
EDITORIAL: Zerkalo Nedeli, Mirror-Weekly, No 20 (548)
International Social Political Weekly
Kyiv, Ukraine, Sat 28 May - 3 June 2005

7. GHOSTLY KILOWATTS
Ukraine's industry is one of the most energy-intensive in the world
Based on GDP five times higher than Poland, two times higher than Russia
By Yevhen Fadeyev, Kyiv Weekly, Issue 15 (155)
Business and Socio-Political Weekly
Kyiv, Ukraine, Friday, April 22-29, 2005

8. UKRAINE PRESIDENT DISCUSSES OIL SUPPLIES IN KAZAKHSTAN
Yushchenko to visit place where Taras Shevchenko held in exile
UT1, Kiev, Ukraine, in Ukrainian 1800 gmt 30 May 05
BBC Monitoring Service, UK, in English, Monday, May 30, 2005

9. UKRAINIAN LEADER IN KAZAKHSTAN BACKS 16 OF 29 PRIORITY
AGREEMENTS FOR SINGLE ECONOMIC SPACE (SES)
Interfax-Kazakhstan news agency, Almaty, in Russian, 30 May 05
BBC Monitoring Service, UK, in English, Monday, May 30, 2005

10. "THE LIE ABOUT LIBERTY"
Uzbekistan has shown former Soviet states that the west
tolerates the repression of peaceful protest in return for oil.
By Nick Paton Walsh, The Guardian
London, United Kingdom, Mon, May 31, 2005

11. OWNERS OF UKRAINIAN STEELWORKS SUE FOR PEACE
OVER CONTROVERSIAL SALE
UNIAN news agency, Kiev, in Ukrainian 0952 gmt 30 May 05
BBC Monitoring Service, UK, in English, Monday, May 30, 2005

12. BEST WAY OUT OF SITUATION INVOLVING KRYVORIZHSTAL'S
PRIVATIZATION IS AN AMICABLE AGREEMENT
Ukrainian News Agency, Kyiv, Ukraine, Monday, May 30, 2005

13. DANES CARRY THEIR PIGS TO UKRAINE'S MARKET
By Volodymyr Obolonsky, The Ukrainian Times
Kyiv, Ukraine, Thursday, May 19, 2005

14. FOREIGN FINANCIAL INSTITUTIONS MOVING TO UKRAINE
French, German, Latvia Banks
By Natalia Sergienko, Kyiv Weekly
Kyiv, Ukraine, Thursday, May 26, 2005

15. UKRAINE SETS UP NATIONAL AIRCRAFT CONSORTIUM
Interfax-Ukraine news agency, Kiev, in Russian, 27 May 05
BBC Monitoring Service, UK, in English, Friday, May 27, 2005

16. MINISTER OF FOREIGN AFFAIRS OF UKRAINE BORYS TARASIUK
SENDS GREETING TO THE UKRAINIAN CONGRESS COMMITTEE
OF AMERICA (UCCA) ON THEIR 65TH ANNIVERSARY
Serhiy Zhykharev, Director, Congress Relations
Ukrainian National Information Service (UNIS)
Washington, D.C., Thursday, May 26, 2005

17. TAJIK PAPER WARNS FOREIGN INTERFERENCE BEHIND
COLOUR REVOLUTIONS IN GEORGIA AND UKRAINE
By A. Muhammadiyev, Tojikiston, Dushanbe, in Tajik 5 May 05
BBC Monitoring Service,UK, in English, Monday, May 30, 2005

18. THOSE WHO'VE GONE TOO FAR
A small group of people rise too high, go too far, assume too much
By Boris Volkhonsky, Columnist, Kommersant
Moscow, Russia, Friday, May 27, 2005

19. $55,000 IN MEDICAL SUPPLIES READIED FOR SHIPMENT TO
UZHGOROD, UKRAINE, FROM CORVALLIS, OREGON
Volunteers sending mammogram machines to Uzhgorod
By Erin Madison, Corvallis Gazette-Times
Corvallis, Oregan, Saturday, May 28, 2005

20. UKRAINIAN AUTOCEPHALOUS ORTHODOX CHURCH OF NORTH &
SOUTH AMERICA AND THE DIASPORA (UAOC-NSAD) SENDS
ITS FIRST MAJOR SHIPMENT OF BASIC NECESSITIES & SUPPLIES
TO ORPHANAGE IN BORZNA, UKRAINE
Archbishop Myroslav, UAOC-NSAD
Cleveland, Ohio, Saturday, May 28, 2005

21. BIG MONEY GOES AROUND LVIV
Hr 50 mn for restoration of Lviv's downtown for forthcoming anniversary
By Andriy Tovstukha, Kyiv Weekly #19 (159)
Business and Socio-Political Weekly
Kyiv, Ukraine, Friday, May 20-27, 2005
===============================================================
1. NO BUCKS, NO BOOM!
Entering the Ukrainian market for foreign investors is very complicated.
Investors have difficulty in reaching agreements with local authorities.

Though foreign investors admit that Ukraine’s retail trade market is highly
promising, they are not in a rush to conquer this niche. They argue that the
risks remain high

By Maria Babenko, Kyiv Weekly, #20 (160)
Business and Socio-Political Weekly
Kyiv, Ukraine, Friday, May 27- June 3, 2005

For the past several years, Ukraine has been rated accordingto retail
investment attractiveness in global ratings for developing markets. Despite
the fact that Ukraine placed 11th on the list in 2004, the country did not
enjoy a major expansion of foreign retail investments.

The Ukrainian mass media has published information on numerous
occasions about the possible emergence on the local market of such
giants as the U.S. Fortune 500 company Wal-Mart, the French networks
Auchan and Carrefour, the British Tesco and others.

Nobody denies the fact that the interest of potential investors is quite
high. "While today there are investments from Austria, Germany, Russia and
Turkey, in the next 2-3 years Scandinavian countries are likely to enter the
market together with France, Israel, Hungary, Poland and the United States,"
says Nadiya Lysenko, Senior Investment Manager at the XXI Century
investment company.

Foreigners are still studying the Ukrainian market and it looks as though
this process will persist for at least another 2-3 years. At the same time,
Russian investors have taken a step further than simply studying
opportunities on the local market to having taken serious action.

However, their ambitious plans have so far not resulted in major achieve-
ments. Indeed, entering the Ukrainian market turned out to be somewhat
painful for them, largely due to the specifics of local competition.

IKEA became one of the first global players that risked going from "words
to action". Industry experts believe that the Swedish company made this
decision, not only because the Ukrainian market looks promising. The path
of IKEA's development in Russia is currently being "hindered" by certain
conflicts with government officials and controlling bodies.

The Swedes began their expansion to Ukraine in the nation's capital and
surrounding territory. The construction of the huge shopping mall and
entertainment center MEGA on the Boryspil highway with an area of 170,000
m2 will cost them US $300 mn. It is worth noting that Ukrainian investors
have not yet risked investing money into such large-scale projects outside
of Kyiv, saying that the average Ukrainian consumer is not yet ready for
out-of-town shopping. Experts say that the local specificity of the market
does not always allow for successfully applying mechanisms tested abroad.

For example, the only major foreign investor on the commercial real estate
market (NCH - the owner of shopping mall Ukraina) found itself caught in a
serious conflict situation with lessees due to an improperly developed
concept and layout for the mall.

The trade union for employees at the mall have accused management of
the company of setting leasing rates too high and have pointed to a low
turnout of potential buyers (5,000-8,000 people per day, not counting the
supermarket) and having ineffective promotion strategy.

"There is demand on the part of foreign investors, but today the mechanism
of entering the Ukrainian market for foreign investors is very complicated,"
Financial Director of Kvadrat Ukraine Ruslan Obukhov commented.

It turns out that the market in Kyiv is difficult because foreign investors
have difficulty reaching understandings with the local authorities. For
example, Ukrainian representative offices of the German company Hit and the
Baltic VP Market closed down for this very reason. VP Market reoriented its
business to more dynamic markets in Romania and Bulgaria.

"The key reasons that VP Market left are the low level of development of the
local market and also the absence of a legal land market," commented
Assistant Director of the Ukrainian Trade Guild V. Boyko. "The company was
unable to purchase large property complexes, because controlling packages
were put up for sale instead. Moreover, the properties were put up for sale
at prices higher than European standards." VP Market also failed to enter
the local market through the acquisition of an existing Ukrainian network.

According to Boyko, representatives of the company did not feel that what
Ukrainian networks consist of - lease agreements, loan agreements with banks
and brands known only in Ukraine - were worthy products. "Investors putting
money into finished real estate will begin to appear on the market when a
supply of property complexes corresponding to western standards appears.

This includes technical equipping, high quality materials, good concept, and
transparency in the movement of money through long-term agreements with
high class lessees and auditing that corresponds to European standards,"
commented Lysenko.

Finally, the issue of the political climate in the country should not be
ruled out. "The parliamentary elections scheduled to take place in the
spring of 2006 will result in a deeper understanding of the political
landscape in the country," says Oleksiy Filimonov, Director of the ASTERA
Group (Russia). "This is when many foreign investors will be making
strategic decisions about entering the Ukrainian retail market. -30-
-------------------------------------------------------------------------------------------------------
LINK: http://www.kyivweekly.com/english
===============================================================
2. UKRAINE: Q1 DIRECT FOREIGN INVESTMENT SWELLS 8.6%

New Europe, Athens, Greece, Monday, May 30, 2005

KIEV -Direct foreign investment in Ukraine's economy increased 8.6 percent
year-on-year to USD 235 million in the first quarter, the country's state
statistics committee reported recently.

Overall accrued direct foreign investment stood at USD 8.797 billion as of
April 1, up 26.6 percent from the same date a year earlier. The main sources
of investment inflow in January-March were the British Virgin Islands (USD
128.4 million), the United States (USD 31.5 million), Cyprus (USD 25.7
million) and Britain USD 18.5 million.

There was USD 85.5 million invested in trading enterprises, USD 62.5 million
in companies involved in real estate, USD 17.9 million in financial
organisations, USD 17.3 million in construction firms, USD 16.8 million in
the extracting industries, USD 16.7 million in the food industry and USD
14.9 million in machine-building.

Investments from Ukraine in the economies of other countries in the first
quarter came to USD 20.4 million, and had reached USD 214.3 million overall
as of April 1. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
3. US EXIMBANK OPENS CREDIT LINE WITH NEDRA BANK FOR FINANCING
DELIVERY OF JOHN DEERE AGRICULTURAL EQUIPMENT TO UKRAINE

Ukrainian News Agency, Kyiv, Ukraine, Monday, May 30, 2005

KYIV - The United States Export-Import Bank (US Eximbank) has opened a
credit line of UAH 7.5 million for the Nadra bank for financing delivery of
John Deere agricultural equipment to Ukraine. The Nadra bank announced
this in a statement.

The credit line was opened for five years. The terms of the credit line have
not been disclosed.

"Delivery of American goods, mainly John Deere agricultural equipment, to
Ukraine as well as certain expenditures arising during importation of the
equipment onto the territory of the country will be financed within the
framework of the credit line," the statement said.

The Nadra bank has been implementing joint projects with the US Eximbank
since 2003.

As Ukrainian News earlier reported, the net assets of the Nadra bank were
valued at UAH 4,060.6 million as of April 1, 2005, when its credit portfolio
amounted to UAH 2,839.5 million and its own capital amounted to UAH 371.9
million. The bank ended the year 2004 with a net profit of UAH 24.649
million.

The main shareholders of the Nadra bank are Spectrum Mediamart Ukraine
Ltd (with 20.27% of its shares), the Agrocom Ukraine company (14.82%), the
Progress company (12.75%), the Konsul-N company (9.51%), the Naftasvit
company (6.42%), the Kontinium-Ukr-Resource company (6.25%), the Western
Petroleum Group (5.66%), the Kontinium-Trust-Company (5.66%), and the
Western Milk Group Trading House (5.34%). The Nadra bank was founded in
1993. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
4. RUSSIAN POLITICIAN REGRETS UKRAINE'S ECONOMIC POLICY
Ukraine's investment climate is deteriorating,
result of mistakes by Yuliya Tymoshenko's government

Interfax news agency, Moscow, Russia, in Russian, 30 May 05
BBC Monitoring Service,UK, in English, Monday, May 30, 2005

MOSCOW - Ukraine's investment climate is deteriorating, which is the result
of mistakes made by Yuliya Tymoshenko's government, Russian politician
Boris Nemtsov, who is an unpaid aide to Ukrainian President Viktor
Yushchenko, has said.

"Sadly, I must say that Ukraine's investment climate is deteriorating.
Capital is leaving the country instead of coming in," Nemtsov said at a news
conference at Interfax today. "The pace of economic growth is slowing down.

It is particularly dangerous that investment is being cut into export-
orientated industries, which are the engine of Ukraine's economy," he
said.

"I think all this is the result of major mistakes made by the Tymoshenko
government. Attempts to manipulate the economy through price fixing have
led to a large-scale energy crisis, which has been overcome thanks to the
president's intervention. Second, this is an extremely unceremonious
attitude towards property," Nemtsov said.

He said investors in the USA, Europe and Russia "are watching developments
in the economy very cautiously". "The country had an opportunity to attract
billions of dollars, in fact investment [into Ukraine's economy] is
practically absent," Nemtsov said.

"Until the authorities say that they uphold the law, that they protect the
rights of property owners, that they will not meddle in the economy, there
will be no money there. I regret this policy, it is greatly damaging to the
Ukrainian people and, as a result, Russia, because failure of the Orange
Revolution is a blow against Russia," Nemtsov said.

He also spoke in favour of closing the criminal case launched in Russia
against Ukrainian Prime Minister Tymoshenko. "I believe it would be correct
to close Tymoshenko's criminal case. If we have neighbourly relations, we
should follow basic rules," Nemtsov said. Asked whether Tymoshenko would
come to Moscow, Nemtsov said: "She will probably come." -30-
===============================================================
5. RUSSIAN LIBERAL ADVISOR TO UKRAINIAN PRESIDENT YUSHCHENKO
BORIS NEMTSOV CRITICIZES UKRAINIAN PRIME MINISTER
YULIYA TYMOSHENKO'S ECONOMIC POLICIES
Warns that Tymoshenko's misguided economic policies
may lead to the failure of the Orange Revolution

"Boris Nemtsov: 'Tymoshenko is now the Kremlin's main friend'"
Interview with Boris Nemtsov by Yevhen Ikhelzon
Segodnya, Kiev, Ukraine, in Russian 26 May 05, p 4
BBC Monitoring Service, UK, in English, Friday, May 27, 2005

Russian liberal politician Boris Nemtsov, who is an adviser to Ukrainian
President Viktor Yushchenko, has warned that Prime Minister Yuliya
Tymoshenko's misguided economic policies may lead to the failure of the
Orange Revolution. He said that the Kremlin is gloating over Tymoshenko's
mistakes, now viewing her as its "friend".

In an interview with a Ukrainian tabloid, Nemtsov ridiculed Tymoshenko's
suggestion that Russian oil companies were involved in a conspiracy to raise
prices. He added that Ukrainian President Viktor Yushchenko took the right
steps to defuse the oil crisis.

The following is the text of the interview with Nemtsov by Yevhen Ikhelzon,
entitled "Boris Nemtsov: 'Tymoshenko is now the Kremlin's main friend'"
carried in the Ukrainian newspaper Segodnya on 26 May; subheadings
inserted editorially:

UKRAINIAN PREMIER UNDER FIRE -----

Recently criticism of the actions of the Ukrainian government and Prime
Minister Yuliya Tymoshenko personally has taken on an international level.

The world's press and economists are sceptical about Mrs Tymoshenko's
attempts to regulate prices on the consumer and fuel markets by
administrative methods, and are dubious that the Ukrainian budget will be
able to meet all its social expenditures. Russian, German and American
experts are also pointing to the fact that Viktor Yushchenko has for the
first time publicly criticized the prime minister:

"Yushchenko, who is usually well known for his lengthy, rather didactic
reprimands, last Thursday gave his temperamental prime minister a verbal
slap in the face," the German Franfurter Allgemeine writes. Yushchenko's
adviser, the well-known Russian opposition liberal Boris Nemtsov, was among
the first to criticize the prime minister's policy. What is more, Mr Nemtsov
is not afraid to speak his mind.

The other day the media reported his pronouncements at a round-table
meeting in Moscow where Viktor Yushchenko's adviser, among other things,
predicted that in the near future Tymoshenko would bring down Ukraine and
recommended that the president consign the prime minister to the opposition.

A Segodnya correspondent contacted Boris Nemtsov on the telephone and
asked him to share his views on what is happening in Ukraine and to comment
on his recent pronouncements in Moscow.

[Ikhelzon] Boris Yefimovich, how specifically might Yuliya Tymoshenko in the
near future bring down Ukraine and when should she be consigned to the
opposition?

[Nemtsov] You must realize that I said nothing of the kind in public. There
is no need to go over idle chit-chat. If we want to jump into bed with one
another - that isn't nice, that isn't pretty. There are elementary ethics, I
can say what I like in my own home and to my friends. These are not public
statements, so I will make no comment on this.

TYMOSHENKIO CAN DO "DAMAGE" -----

[Ikhelzon] Well, OK. But what would you do if you were in Yuliya
Tymoshenko's shoes?

[Nemtsov] To be honest, I would do nothing, nothing at all, and everything
would get better, the economy would grow, people would invest, but there
would be no crude meddling. Money would come in to Ukraine just through
enthusiasm, despite all the chaos and the imperfection of the tax and other
systems.

Well, I would make some popular decisions, like increasing pensions and
child benefits, at least until the elections. Wages would go up, because we
would have the investment. I would travel around the country, meet with the
people and win popularity. I have lots of friends who would have invested
money in the Ukrainian economy immediately after the revolution, but seeing
the government's methods of laying down directives, they stopped short.

Yuliya Tymoshenko is indeed a talented and a very intelligent woman, we
have met and I am aware of this. But if I could quote the example of nuclear
power: you have a peaceful atom but you have a nuclear bomb. She
sometimes does things which cause damage.

[Ikhelzon] When you came to the Maydan [Independence Square in Kiev,
scene of demonstrations] during the "Orange Revolution", you were frequently
seen alongside Yuliya Tymoshenko - were you at the time in favour of her
appointment as prime minister?

[Nemtsov] I wasn't at all interested in this issue; I was simply supporting
Mr Yushchenko.

[Ikhelzon] You are the Ukrainian president's adviser. Do you meet often with
Mr Yushchenko and when did you last have a chat and what was it about?

[Nemtsov] We haven't seen each other personally for a long time, but if the
need arises, then, of course, we will meet. We talk mainly on the telephone.
I won't say what we talk about nor for how long.

NO CONSPIRACY AMONG RUSSIAN OIL TRADERS -----

[Ikhelzon] Do you think there was a conspiracy of Russian oil traders in
relation to Ukraine?

[Nemtsov] That's a lie, an utter lie. Petrol prices in Kiev are the same as
in Moscow - 60 cents, even though Russia is extracting oil. And nobody is
getting hysterical about a conspiracy. Regulation leads to a shortfall and
to a black market. At the same time, of course, one must create a
competitive market.

[Ikhelzon] What else would you have done, what steps would you have
taken to overcome the crisis?

[Nemtsov] I agree with Yushchenko, he did everything correctly. I know
what he said because I was in Kiev at the time. I made some proposals and
[Economics Minister] Serhiy Teryokhin received them. OK, my proposals
regarding free competition were turned down, but those on opening up the
market for foreign petroleum products were taken on board. The point is,
competition is no threat to the Russian companies already operating in
Ukraine.

They are used to working in conditions of competition and they will only
work even better in such conditions. Russian business, whichever way you
look at it, is still run well, it has long since become internationalized,
at least the oil business has, and to accuse it of a conspiracy - this is,
to say the least, improper.

On the other hand, a situation where only three companies are represented
at the petrol stations - is also not right; this is not enough for such a
huge country and we must allow all companies who wish to work in Ukraine
to do so. Once you have a competitive market, prices stabilize. We must
open up the market so that at each crossroads there are five petrol pumps
from different companies.

UKRAINIAN ECONOMY IN DANGER -----

[Ikhelzon] What's your overall view of the situation in Ukraine?

[Nemtsov] It is dramatic, in my view. I believe that there are some dangers,
too. In the first instance there is an attempt at a redistribution of
ownership without any distinct rules. Second, there is an attempt at a
"hands-on management" of the economy and this gives rise to expectations
of inflation. The consequences of wrong economic moves may last for years.

Decisions are taken today, and the people are out of pocket tomorrow and
this can be very hard on them. The euphoria of the revolution is already a
thing of the past. The Financial Times is already making frank comments
about the situation in the Ukrainian economy and experts are already
becoming anxious. Ukrainian society is not yet aware of this, but it soon
will be.

Objectively speaking, the economic situation in Russia is better, but the
prospects are worse, mainly for political reasons. Your main advantage is
getting into Europe and now you are there you must not waste it. I am very
well aware of the situation in Russia and in Ukraine. I haven't seen such
happy faces in the Kremlin for a long time. Yuliya Tymoshenko is already the
main "friend of the Kremlin", they are all smirking maliciously and saying:

"Borya, look what they are doing." You see, if the "Orange Revolution" were
to fail, it would not only be a blow to Ukraine, but also for Russia. The
authoritarian regime which already now exists (in Russia - author's note)
will gloat over any mistake you make. If you are not successful, there will
be no chances for Russia either. It makes me feel bitter. -30-
===============================================================
6. "PRESUMPTION OF IMMUNITY"

EDITORIAL: Zerkalo Nedeli, Mirror-Weekly, No 20 (548)
International Social Political Weekly
Kyiv, Ukraine, Sat 28 May - 3 June 2005

The article "Playing With Fire Around Gasoline", published in the previous
issue, told of a meeting with Russian oil traders, during which Prime
Minister Yulia Tymoshenko disagreed with the President's negative evaluation
of her government's steps to overcome the fuel crisis, and the President
suggested that she resign. Tymoshenko called the information "rumor, gossip,
and informational sabotage" and President Yushchenko called it "old wives'
tales".

In this connection we could refer to a) written confirmations by the sources
of this information; b) a speech by Petro Miroshnikov, who represented the
Kherson Oil Refinery at the meeting, and a comment by Yushchenko's
[Russian] adviser Boris Nemtsov: both confirmed the authenticity of the
information; c) the statements by Yushchenko, Tymoshenko, and their press
secretaries, in which the fact of the dialog described by ZN was not denied.
However, we will refrain from these references for several reasons.

Firstly, it is known to the elite and the overwhelming majority of our
readers which of the two lied.

Secondly, ZN sees one of its tasks as informing the public about the
authorities' "open and transparent activities" and we think that we met it.
Thirdly, the article shook up the Ukrainian "Olympus" and triggered a
serious discussion of corporate problems within the presidential team. This
can be seen from the Prime Minister's story about her long conversation with
the President, which lifted most of the problems. We are glad to have given
a pretext for such an important conversation.

Fourthly, ZN never plays both ends against the middle. If we started
disproving their refutations, they would have to respond to ours, risking
the fragile bonds of their alliance. That is why we thought it best to let
the President and the Prime Minister make their statements on more
important issues, reserving our right to analyze them.

There is something we need to add. The former oppositionists still believe
that freedom of expression means freedom to criticize Kuchma. They either
ignore critical remarks directed at them, or wonder, "Why us?" The freedom
of expression exists in this country in a unique form. Its principle is
simple: "the dog barks, the caravan goes". The authorities simply do not
react to journalists' and experts' remarks, to argumentative criticisms in
the mass media.

It is up to journalists to tell "old wives' tales" from the political
reality, honest authorities from criminals who occupy high posts, morality
from lies about education backgrounds, assurances about cheap meat from
its real market price, the rhetoric about national interests from the policy
that turns Ukraine into a testing ground for Russian oligarchs' business
experiments, promises to create favorable environments for investment in
Ukraine from a chorus of allegations about a black list of enterprises
subject to re-privatization, assurances about the supremacy of law from
colossally numerous facts of its violation.

ZN has always found differences between telltales and real deeds and always
will, because the people have a right to know. We have to point to a
temporary but very dangerous tendency: under all previous political regimes,
the authorities were the main obstacle to the freedom of expression, and now
this freedom is impeded by. society.

Ukrainian citizens, most of whom support the new leadership, do not want
to know the real situation - just because they like this President and this
Prime Minister. Because they still pin great hopes on this leadership.
Because they are afraid to be disillusioned. Because they see no alternative
to these leaders - there is no opposition they could trust. And when the
press draws the public attention to the presence of malignant cells in the
new government's organism, the bulk of citizens prefer to skip such
information.

Only the sober few - perhaps, dozens or thousands - try to convince the
leaders that a correct and early diagnosis is the surest way to keep an
organism functioning. But the remaining dozens or millions have an entirely
different disposition. Sensing it, the authorities are further led to
believe in their exceptionality.

Meeting inadequate or no responses to argumentative criticisms, the mass
media lose their power of influence. That is sure to have a negative effect
on all, sooner or later. The ZN and similar organizations are like animals:
they are always the first to sense an earthquake. Ukrainian history has
proven it many times. And if these sensations are ignored, there will be
inevitable and tragic consequences. No journalist wants to say gloatingly
a few months afterwards, "We warned you!"

"My dear friends," Ukrainian political leaders addressed us when they were
trapped in an information blockade or jailed. Now they call us "saboteurs"
and "gossips". But we have not changed. The President and the Prime
Minister are not our friends and we are not their enemies, just because they
are our President and Prime Minister. They simply have to understand the
difference between a shoulder and a blind eye.

ZN will always support any initiative that meets the national interests,
point to errors, publish alternative proposals, and uncover lies. The ZN
will remain a mirror. And mirrors never lie. -30-
----------------------------------------------------------------------------------------------------------
LINK: http://www.mirror-weekly.com/ie/show/548/50176/
===============================================================
7. GHOSTLY KILOWATTS
Ukraine's industry is one of the most energy-intensive in the world
Based on GDP five times higher than Poland, two times higher than Russia

Ukraine’s dependence on the import of Russian energy resources, which
can be compared to drug addiction, poses a threat to a rise in industrial
production in the country. Meanwhile, only if the state contributes generous
can the “Russian pipeline” be substituted by the energy of renewable
sources.

By Yevhen Fadeyev, Kyiv Weekly, Issue 15 (155)
Business and Socio-Political Weekly
Kyiv, Ukraine, Friday, April 22-29, 2005

Ukraine's industry is one of the most energy-intensive in the world. The
energy consumption in Ukraine's GDP is five times higher than in Poland and
two times higher than that of Russia. Meanwhile, according to the data of
the Razumkov Centre, the self-sustenance of Ukraine with its own energy
resources is as low as 29.3% of the demanded level of consumption. According
to the experts' forecasts, in the next decade Ukraine's economy will
continue to be energy-deficient with 110-140 mn tonnes of conventional fuel
being purchased from abroad.

Judging from the current situation, this fuel will primarily be bought from
Russia. Energy resources currently make up 60% of all Ukrainian import from
Russia. The exhaustion of resources of oil and gas and a jump in their
prices could lead to Ukraine being undersupplied by two thirds the necessary
fuel to cover all its needs.

Theoretically, the situation could be saved by renewable energy sources,
such as sun, water and wind. In many EU countries a lot of attention is
being paid to this latest trend. Even in France, where in the last decades a
strong cult of using atomic energy had been established, experts hope to
receive 20% of the country's energy from renewable sources by the year
2010. Ukraine also has certain chances in this matter.

The average annual potential of sun energy, which can be obtained from
one square meter of Ukrainian territory, is estimated at 500 kilowatt/hour.
Generally speaking, taking into account the territory of the country, this
could provide 3% of all energy consumed in Ukraine. But so far the country
has only one solar station with a capacity of 5 megawatts.

Meanwhile, on the coast of the Black Sea and Azov Sea there are several
wind power stations (Aktashska, Donuzlavska, Sakska, Tarkhankutska and
Novoazovska). So far, these stations and their colleagues in the Carpathians
produce no more than 0.1% of total energy produced in Ukraine. But in the
vicinity of Lake Sivash the wind power station generates 135 gigawatts of
energy. But this energy is truly a luxury item. Meanwhile, the law about
alternative energy adopted last year does not foresee any tax breaks or
preferences and budget subsidies to this industry.

It will take a long time for Ukrainian wind and sun catchers to play a
decisive role in the domestic energy market. For example, western producers
of "alternative" energy needed 20 years to become profitabile. During this
time "solar" kilowatts became 10 times cheaper, while "wind" kilowatts fell
8 times in price, i.e. to US $0.50, which is quite commensurate with the
prices of atomic and heat energy in the U.S.

"With the existing technologies, alternative energy is already becoming
profitable in light of the growing prices of fossil fuels. Testimony to this
is the development of the energy sector in Scandinavian countries.
Meanwhile, all Ukrainian governments have chosen the extensive way of
development and built additional power-generating units at atomic energy
stations," an expert of the Inter-Eko organization Vadym Honcharuk pointed
out to our KW correspondent.

Meanwhile, the introduction of energy-efficient technologies using
traditional fuel looks far more prospective. Besides that, in recent years a
branch of power engineering known as cogeneration, which is the use of gas
simultaneously for generating heat and electricity, has been actively used.

A number of oblenergos have implement several cogeneration projects. The
first of them was at the Zaporizhzhya-based Pivdenniy Power Station, which
was reequipped from an ordinary boiler plant. It increased energy efficiency
by 60-90% and its consumption of gas was cut by 30-40%.

The main advantage of such stations is that the cost of electricity to the
end user is less expensive than the energy generated at thermo-electric
stations, but the construction of a new station is quite a costly venture
with one kilowatt of energy costing US $1,000-1,500. Without taking out
loans or participation in international programs, not many investors will
agree to get involved in such major projects.

Meanwhile, in the woodworking industry energy-efficient projects for the
recycling of waste at production facilities are being introduced. With the
assistance of Dutch investors, wood-burning units with a capacity of 1.5
megawatts and 5 megawatts of energy were installed at a Zhytomyr-based
enterprise. This project allowed for saving on gas and reducing emissions
of carbon dioxide into the air.

Bio-diesel, which is a fuel with admixtures of alcohol from plants, is
another prospective trend for Ukrainian "alternative" energy. The Ministry
of Agrarian Policy developed an entire bio-diesel program, to which
German investors have already begun paying closer attention.

Response
The liquefied gas market still in the shadows

Serhiy Kuyun, Director of the UPEKO consulting company: In the nearest
future, Ukraine could witness the more active use of liquefied and
compressed gas as engine fuel. The main precondition for this is a steady
dynamic in price growth for traditional oil products, such as gas and diesel
fuel. This is a key factor in the popularity of such energy resources as
liquefied and compressed gas, which is particularly high in countries in the
European Union and in a number of other regions of the world.

But due to the outdated norms for setting up stations to sell compressed gas
and a complicated mechanism of getting access to main gas pipelines, which
is an obligatory condition for obtaining compressed gas, this market is
developing at a rather slow pace in Ukraine.

Besides that, the liquefied gas shadow sector is very strongly represented
by gas of a questionable quality sold directly from gas trucks against all
the norms and permits. The shadow sector steals major volumes from legal
retailers of gas and thus cuts into their potential revenues and detracts
from more dynamic growth.

In general, this direction is real and has great prospects, but in order to
enhance its development, the intervention of the state aimed at
strengthening control over the sale of gas and liberalization of technical
norms of the construction of gas stations are imperative." -30-
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LINK: http://www.kyivweekly.com/english
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8. UKRAINE PRESIDENT DISCUSSES OIL SUPPLIES IN KAZAKHSTAN
Yushchenko to visit place where Taras Shevchenko held in exile

UT1, Kiev, Ukraine, in Ukrainian 1800 gmt 30 May 05
BBC Monitoring Service, UK, in English, Monday, May 30, 2005

KYIV - [Presenter] Ukraine and Kazakhstan can step up their relations - to
this end Ukraine is proposing a joint action plan, a road map for 2005-2006.
Ukrainian President Viktor Yushchenko spoke about this in Astana during a
meeting with Kazakh President Nursultan Nazarbayev. Yushchenko said the
main purpose of the visit was to step up cooperation in the oil and gas
sector as well as other fields. Ukraine and Kazakhstan signed six agreements
after the meeting.

[Correspondent] Ukrainian-Kazakh talks lasted for over 5 hours, including a
three-hour long eye-to-eye meeting between the two presidents. Why so long?
Nursultan Nazarbayev explained it by citing an Eastern proverb - "In the
East, the host is a slave to the guest". For his part, Yushchenko said that
the tea served by the hosts was too hot - so they had to wait till it cools
down a bit.

Speaking at a press conference, the Kazakh president said that the oil issue
topped the agenda. Kazakhstan now produces 50m tonnes of oil a year, and
7 per cent of it passes through the Pivdennyy port near Odessa. By 2010,
Kazakhstan plans to double its oil output and sell it to Europe. Ukraine is
interested in making use of the Odessa-Brody pipeline and increasing oil
transit through its territory.

[Nazarbayev, in Russian] Odessa-Brody by itself does not really solve
anything. But it could make it possible to carry our oil to Ukrainian and
Belarusian refineries. But Kazakhstan is interested in extending this oil
pipeline to Plock and the Gdansk, to reach the Baltic Sea. We have stated
that we are ready to take part in the construction of this part of the
pipeline, and in owning a stake in this oil pipeline - we are absolutely
interested in that. We can supply the oil through the Caucasus, through the
Baku-Supsa oil pipeline.

We have also listened to the Ukrainian side's request on another issue -
there's a need to build a stretch of the Dnipropetrovsk pipe to the
Pivdennyy station, 52km. The Kazakh side is ready to fund the construction
provided that it is owned by us or through creating a joint venture. [We are
also ready] to build an oil terminal to which this oil will flow. As we
know, the Odessa refinery is Russian-[owned]. We are interested in buying
this refinery.

[Correspondent] Viktor Yushchenko described today's agreements as unique
and said that it was now up to the two governments to continue the work.

[Yushchenko, in Russian] Both sides are equally interested. Talking about
oil transit through Ukraine's territory, the 52km stretch from Odessa to
Pivdennyy terminal, we believe that the Ukrainian side should get something
on the Kazakh territory [in return] - some oil production rights or other
projects, or we build this pipeline jointly.

[Correspondent] Kazakhstan also wants to buy Ukrainian harvesters and
tractors, and send its specialists to Ukraine for training. Kiev and Astana
will also help each other during WTO entry.

Tomorrow Viktor Yushchenko will visit the Kazakh parliament and the
Shevchenko fort, which is more that 2,500 kilometres from Astana, on the
Caspian Sea. Taras Shrevchenko [19th century Ukrainian poet] was exiled
there. -30- [The Action Ukraine Report Monitoring Service]
===============================================================
9. UKRAINIAN LEADER IN KAZAKHSTAN BACKS 16 OF 29 PRIORITY
AGREEMENTS FOR SINGLE ECONOMIC SPACE (SES)

Interfax-Kazakhstan news agency, Almaty, in Russian, 30 May 05
BBC Monitoring Service, UK, in English, Monday, May 30, 2005

ASTANA - Ukraine is ready to sign 16 of 29 priority agreements on the
formation of a Single Economic Space (SES, which comprises Belarus,
Kazakhstan, Russia and Ukraine), Ukrainian President Viktor Yushchenko
has said.

"Participation in 16 of 29 documents of the first stage has already been
considered and approved at government level. We will either finish work on
the other documents or join their implementation later, directly during the
process," Yushchenko told journalists today at the airport in the Kazakh
capital, where he had arrived on an official visit.

Answering a question on Ukraine's participation in the formation of the SES,
Yushchenko stressed that his country welcomed "all initiatives that help
create an economic space that would ensure contacts in the field of
developing customs, investment, fiscal, budget and other relations".
"Of course, not everything is acceptable to Kazakhstan and Ukraine, but
this does not mean that we should not participate in this process (in the
creation of the SES)," the Ukrainian president said. -30-
===============================================================
10. THE LIE ABOUT LIBERTY
Uzbekistan has shown former Soviet states that the west
tolerates the repression of peaceful protest in return for oil.

By Nick Paton Walsh, The Guardian
London, United Kingdom, Mon, May 31, 2005

The Kyrgyz official stood in his office and surveyed the angry crowds
circling the presidential administration below. "Akayev will not shoot his
own people," he said, accurately predicting the decision by Askar Akayev,
the former Kyrgyz president, to flee the building and country on March 24
rather than shoot the few thousand protesters who went on to loot his
palatial White House.

Yet the halo that has since adorned Mr Akayev, generally the least brutal of
central Asia's dictators, has not stopped his continued exile in Moscow,
where he watches the wealth of his former fiefdom being redistributed among
the remnants of its elite. One can only imagine his chagrin when, six weeks
later across the border in neighbouring Uzbekistan, President Karimov gave
the former Soviet Union's remaining authoritarians a textbook lesson in
Stalinist repression: shoot them down and shut the doors; and soon the world
will forget.

The brutal massacre of hundreds of civilians in Andijan is already beginning
to fade from international consciousness. Islam Karimov's regime has
efficiently prevented any transparent investigation of the town's fate.
Germany, France, Nato, the EU, US and UN have all called for an independent
international investigation. Mr Karimov has said Uzbekistan does not need to
be "terrorised" by such requests. A veteran of 14 years of brutality, he
appears to be sleeping well.

Jack Straw's insistence on an inquiry has not stopped the EU from continuing
its aid packages to Uzbekistan. In truth, Europe has little leverage on a
country with bigger, less sensitive friends. On Wednesday, Mr Karimov went
to China, a nation practised in suppressing both Muslims and protest.
Beijing gave him the requisite assurance that he did the right thing in
suppressing the "separatism, terrorism and extremism" represented by the
Andijan uprising, before striking a deal to prospect for oil in the central
Asian state.

In this visit, Mr Karimov has astutely reminded his other ally, Washington,
of its competitor in the region. The White House, which took six days to
condemn a crackdown it initially said was in part against "terrorists", has
too much at stake to get squeamish about Andijan. Washington appears to
fear the possibility of Islamic insurgency in the region more than the
consequences of the Karimov regime's long-term suppression of a country of
26 million. Uzbekistan - strengthened by $50.6m in US aid last year, a fifth
of which was for "security and law enforcement" - remains the dominant,
US-friendly hardman neighbour of every other central Asian state, a useful
linchpin for a threadbare and volatile region.

While the Pentagon has said it will be "more cautious" in its use of a vital
military base in Khanabad, and Condoleezza Rice has said the aid might
be reviewed, that appears to be just about it. It has instead fallen to the
US Senator John McCain, after a visit to Tashkent, to brand the events a
"massacre" yesterday. Mr Karimov is intent on keeping the media out - the
Guardian has been waiting a fortnight longer than usual for a visa - as mass
arrests ensure this crackdown cannot snowball into a full-scale revolt.

Soon other former Soviet republics will have to decide whether to take a
leaf from Mr Karimov's freshly penned textbook. The White House's
"beacons of liberty" rhetoric has fomented dreams of - and even plans for -
revolution in the oil giants of Azerbaijan and Kazakhstan, both expecting
elections by the end of the year that the government will characteristically
try to fix.

The events in Georgia, Ukraine and Kyrgyzstan had sent shivers through the
body politic of both countries, causing the Kazakh president, Nursultan
Nazarbayev, to ban protests during election time, to shut opposition papers
and to let his police beat youth protesters wearing orange, the colour of
Ukraine's revolution. In a coup de grace for both irony and free speech in
the country, yesterday an opposition figure went on trial for slander after
he accused Mr Nazarbayev's daughter, Dariga, of illegally creating a media
monopoly, allegations she denies.

On the other side of the Caspian, Azerbaijan's president, Ilham Aliev - his
father's dynastic successor - regularly sends in riot troops to batter
protesters. Pro-democracy revolutions are a lux ury when geopolitical issues
such as hydrocarbons are at stake. Last Wednesday's opening of the
Baku-Tbilisi-Ceyhan (BTC) pipeline - set to bring oil from the Azerbaijani
Caspian and eventually Kazakhstan to European and American markets -
helps spell out Washington's key principles in the region.

Mr Aliev felt comfortable enough in his relationship with Washington to ban
a demonstration planned for the previous Saturday - protesting for free
parliamentary elections this November - so as not to spoil the atmosphere
for Wednesday's ceremony. When the protest went ahead all the same, he
sent in the riot police, who hit some demonstrators with truncheons and made
100 arrests.

The Norwegian ambassador to Baku, Steinar Gil, whose vociferous criticism
of human-rights abuses, despite his country's strategic investment in the
BTC, is fast turning him into an Azerbaijani Craig Murray, was a lone voice
among diplomats when he condemned the Aliev regime's "crude violence".
The US embassy said it "regretted" that the right to assemble freely had
been violated.

After Andijan, in the former Soviet Union at least, a state that shoots dead
hundreds of peaceful protesters can no longer expect to become an
international pariah. Its lesson will be apparent by the end of the year.
When the protesters gather in November in Baku and in December in Almaty,
Mr Aliev and Mr Nazarbayev could only better their Uzbek counterpart's
performance by digging the mass graves before their troops take aim.
----------------------------------------------------------------------------------------------------------------
Nick Paton Walsh is the Guardian's Moscow correspondent
(nick.walsh@guardian.co.uk)
===============================================================
11. OWNERS OF UKRAINIAN STEELWORKS SUE FOR PEACE
OVER CONTROVERSIAL SALE

UNIAN news agency, Kiev, in Ukrainian 0952 gmt 30 May 05
BBC Monitoring Service, UK, in English, Monday, May 30, 2005

KIEV - A consortium that purchased Ukraine's largest steelworks in a
controversial privatization tender last year has written to the authorities,
who have pledged to reverse the sale, proposing an amicable settlement of
the dispute. Investment Metallurgy Union, which is controlled by Ukrainian
tycoons Viktor Pinchuk and Rinat Akhmetov, proposes to set up an interagency
working group to consider the privatization and conclude a "peace agreement"
acceptable to the state and investors.

The following is an excerpt from a report by Ukrainian news agency UNIAN:

KIEV - The Investment Metallurgy Union consortium has sent a written
proposal to the Cabinet of Ministers, the president and Industrial Group [a
Ukrainian corporation that was one of the unsuccessful bidders in the
Kryvorizhstal tender] to conclude a peace agreement over Kryvorizhstal.

In particular, Investment Metallurgy Union proposes to create an interagency
working group to resolve issues arising from the privatization of
Kryvorizhstal with the involvement of the responsible state bodies and
representatives of the buyer.

According to the text of the proposal obtained by UNIAN, "This issue may be
resolved by concluding a peace agreement whose conditions will be accepted
both by the state and by the investor." "We believe that resolving the issue
in this way will be most effective and expedient for the interests of the
company, society and the state, and will help to improve Ukraine's
investment image," the proposal states.

The proposal was sent to the Cabinet of Ministers, the presidential
administration [presumably, the state secretariat] and Industrial Group
today.

The Kiev economic court on 22 April upheld the suit brought by Industrial
Group and the Prosecutor-General's Office and declared the privatization of
Kryvorizhstal illegal. The court refused to consider a counter suit brought
by Investment Metallurgy Union. -30-
===============================================================
12. BEST WAY OUT OF SITUATION INVOLVING KRYVORIZHSTAL'S
PRIVATIZATION IS AN AMICABLE AGREEMENT

Ukrainian News Agency, Kyiv, Ukraine, Monday, May 30, 2005

KYIV - Experts believe that conclusion of an amicable agreement between
the Cabinet of Ministers and the consortium called the Investment and
Metallurgical Union will be the best way out of the situation involving the
privatization of the Kryvorizhstal metallurgical plant (Dnipropetrovsk
region).

"...Both sides - the government and the owners of Kryvorizhstal - are in
search of any type of a compromise that would, in addition, enable the
government to safe political face," said Ihor Burakovskyi, the director of
the Institute of Economic Research and Political Consultations.
According to him, the review of the results of the plant's privatization has
now reached a dead end.

"We do not have a single court decision, there are no evaluations by
independent audit companies that could say that more money could have
been earned from the privatization and that the government lost as a
result," he said.

Meanwhile, Kost Bondarenko, a political scientist with the Center for
Studying Public Processes, says that parties to conflicts in developed
economies use all possible options to resolve the conflicts before involving
the courts. "Courts very frequently postpone their decisions specifically if
a possibility of resolving an issue peacefully emerges during a court
battle," he said. Bondarenko added that a peace agreement should provide for
interference by some "arbitrator," who could be President Viktor Yuschenko.

As Ukrainian News earlier reported, the Investment and Metallurgical Union
has proposed that the Cabinet of Ministers and the Industrial Group
consortium reach agreement on resolving the issue of privatization of the
Kryvorizhstal ore mining and metallurgical plant. The proposal to conclude
an amicable agreement was also sent to Yuschenko.

The Investment and Metallurgical Union consortium announced plans on May 27
to conclude an amicable agreement with the Cabinet of Ministers on resolving
the issue of privatization of Kryvorizhstal. On April 22, the Kyiv economic
court declared the State Property Fund's sale of 93.02% of the shares in the
Kryvorizhstal metallurgical plant to the consortium called Investment and
Metallurgical Union.

The Pecherskyi district court on April 21 canceled its February 17 decision
that canceled the declaration of the privatization of 93.02% of
Kryvorizhstal legal. In accordance with the Pecherskyi district court's
ruling of April 21, the court reinstated the validity of the December 2004
decision of the Supreme Court to uphold lawfulness of the privatization of
Kryvorizhstal.

The State Property Fund sold 93.02% of the shares in Kryvorizhstal to the
Investment and Metallurgical Union for UAH 4.260 billion (about USD 800
million) in June 2004. The starting price of the 93.02% stake was UAH 3.8
billion.

The Industrial Group (controlled by the Donetsk-based Donbas Industrial
Union corporation), which was the second company allowed to bid for the
stake, offered UAH 4 billion. The System Capital Management company
(Donetsk) controls 56.25% of the Investment and Metallurgical Union.
===============================================================
13. DANES CARRY THEIR PIGS TO UKRAINE'S MARKET

By Volodymyr Obolonsky, The Ukrainian Times
Kyiv, Ukraine, Thursday, May 19, 2005

KYIV - A Danish company has supplied the pig farm Prikarpatsky with
171 sows. After it has heavily invested in the repair and reconstruction
of Prikarpatsky, the company plans to bring there another 3,000 sows
this year.

The Danish owner of the pig farm, which is based in the Ivano-Frankivsk
region, contemplates increasing the total number of pedigreed pigs to
5,000, 7,000 and 12,000 in 2006, 2007 and 2008 respectively.

Currently, it builds a mixed feed mill. The foreign intends to fatten
240,000 pigs every year. To provide a feed for the animals, the Danes
are going to take a lease of 10,000-12,000 hectares of land in the
Ivano-Frankivsk region. -30-
===============================================================
14. FOREIGN FINANCIAL INSTITUTIONS MOVING TO UKRAINE
French, German, Latvia Banks

By Natalia Sergienko, Kyiv Weekly
Business and Socio-Political Weekly
Kyiv, Ukraine, Thursday, May 26, 2005

KYIV - The number of foreign financial structures in Ukraine is on the rise.
Over the past month, several foreign banks have announced plans for opening
a representative office or branch here. Local banking experts anticipate the
new foreign banks will show interest in the acquisition of Ukrainian banks.
There will also be talk about providing loan resources and in larger volumes
than previously.

Moreover, it is not just the newest European banks that plan to "open shop"
in Kyiv.

Indeed, the French BNP Paribas S.A., to which the National Bank of Ukraine
gave permission to open a local branch last week, is the largest French bank
with structural subdivisions in over 85 countries around the world. The
total assets of the BNP Paribas group as of January 1, 2004 totaled 783 bn
euro.

The German Commerzbank is one of the largest banks in Germany. Its
president, Claus Peter Mueller, announced last week the bank's desire to
open a branch in Ukraine (N.B. a representative office of the bank has been
operating in Kyiv for several years now). At present, this financial
structure services over 20% of foreign economic relations between Ukraine
and Germany.

Be that as it may, Ukraine's parliamentarians have not yet passed the NBU
bill permitting the opening of subsidiaries of foreign banks in the country.
For this reason, it can be safely predicted that the Germans will only be
able to carry out their plans by the end of 2005.

Meanwhile, Baltic banks also have plans of expanding their presence in
Ukraine. Two Latvian banks announced their plans last week. Regionala
Investiciju Banka (Regional Investment Bank) plans to open its first
representative office in Kyiv, while Parex Banka will open a branch in
Dnipropetrovsk. While RIB is considered in its native country to be a
medium-sized bank, Parex Banka is considered one of the largest in Latvia.

It suffices to say that the latter has assets exceeding 1.5 bn euro and that
it is represented in 10 countries around the world, including Great Britain,
Germany, Sweden, Japan and Russia. The Latvian giant also has the affiliates
AP Anlage und Privatbank in Switzerland and Parex Bankas in Lithuania.
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LINK: http://www.kyivweekly.com/english
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15. UKRAINE SETS UP NATIONAL AIRCRAFT CONSORTIUM

Interfax-Ukraine news agency, Kiev, in Russian, 27 May 05
BBC Monitoring Service, UK, in English, Friday, May 27, 2005

KIEV - Ukrainian President Viktor Yushchenko has signed a decree setting
up the Antonov national research and production consortium, the director-
general of the Kharkiv state aviation company, Pavlo Naumenko, said
today at a ceremony marking the 75-year anniversary of the Kharkiv national
airspace university, the press service of the Kharkiv Region state
administration said.

Apart from the Kharkiv aviation company, the consortium will include the
Antonov design bureau and the Kiev-based Aviant plant, Naumenko said.

However, the Antonov design bureau is opposing the consortium in this
format. Its employees said in a statement received by Interfax-Ukraine that
the consortium, which includes the Antonov bureau, the Kharkiv aviation
plant, Aviant, the No 410 aircraft maintenance plant and the Ukrainian
aviation design institute, will lead to a division and disintegration of the
Antonov design bureau and a collapse of the whole industry.

Antonov design bureau director Petro Balabuyev resigned on 18 May
because he did not agree with the plan to set up a state aircraft
consortium. The official presidential web site has not reported about the
decree yet. -30- [The Action Ukraine Report Monitoring Service]
==========================================================
16. MINISTER OF FOREIGN AFFAIRS OF UKRAINE BORYS TARASIUK
SENDS GREETING TO THE UKRAINIAN CONGRESS COMMITTEE
OF AMERICA (UCCA) ON THEIR 65TH ANNIVERSARY

Serhiy Zhykharev, Director, Congress Relations
Ukrainian National Information Service (UNIS)
Washington, D.C., Thursday, May 26, 2005

GREETINGS: From the Minister of Foreign
Affairs of Ukraine Borys Tarasiuk
On the Occasion of the 65th Anniversary of the
Ukrainian Congress Committee of America

Dear Friends!

I sincerely congratulate the Ukrainian Congress Committee of America on
the occasion of its glorious Jubilee - 65th anniversary, and on behalf of
the entire Government of Ukraine I thank you for your support, sincere
determination and decisive action in promoting the interests of Ukraine
within the international community as well as assisting democratic
development in our state.

Today, the history of our nation begins with a fresh start. Ukraine's pride
and happiness rests in the fact that its people are now the authors of their
own history. And so we depend on your continued support in promoting an
understanding within the United States and Europe of the bright new spirit
emanating from Ukraine; the spirit which has united us, and during our most
decisive moment inspired our nation to rise up in defense of freedom and
democracy. Every person should strive to enhance the glory and greatness
of their Homeland in the world.

Maidan has stirred within the hearts of Ukraine's citizens an immense
life-giving force; and now is the time for all Ukrainian hearts to beat as
one. This revolution is not the final stage in Ukraine's age-old struggle
for freedom, but rather a first step along this path.

I would like to reiterate the words of our President Viktor Yushchenko,
which were made during his visit to the United States: "Devote the next two
years of your life to Ukraine and we will change it for the better!" Every
dollar of American investment, every politician who is no longer indifferent
to the fate of Ukraine, every Member of Congress, in whose heart an orange
flame has been ignited, can be your contribution to the fulfillment of our
Forefathers' dream.

Through the united efforts of all Ukrainians, in the Homeland as well as
throughout the world, we will be able to strengthen Ukraine's independence,
return it to itse proper place in the community of free, democratic states,
and realize the hopes and dreams of our wise and proud people.

Sincerely yours, Borys Tarasiuk
Minister of Foreign Affairs of Ukraine
===============================================================
17. TAJIK PAPER WARNS FOREIGN INTERFERENCE BEHIND
COLOUR REVOLUTIONS IN GEORGIA AND UKRAINE

By A. Muhammadiyev, Tojikiston, Dushanbe, in Tajik 5 May 05
BBC Monitoring Service,UK, in English, Monday, May 30, 2005

The recent colour revolutions in Georgia and Ukraine were orchestrated by
foreign countries whose interference is set to continue in Central Asia, an
article in the Tajik newspaper Tojikiston has said. Interference in internal
affairs is effected through nongovernmental organizations which target young
people, the article said.

The following is an excerpt from the article by A.Muhammadiyev published on
5 May, subheadings inserted editorially:

Given the latest developments in Kyrgyzstan, which have been taking place by
special "instruction" from abroad, the new phenomena of "xenophilia" (loving
strangers - the opposite of xenophobia - author) and "Westernization" have
emerged.

The political developments in Georgia, Ukraine and in neighbouring
Kyrgyzstan in particular have clearly shown that the superpowers have
started to use any pretext to implement their plans to bring about "colour
revolutions", for example by promoting democratic reforms and "assistance"
to establish what is called a "free" society in the Central Asian region.

But interference in the internal affairs of independent countries has not
yet been completed with the events in Georgia, Ukraine and Kyrgyzstan: such
an approach is likely to continue in other countries as well. [Passage
omitted: The author says he considers it necessary to publish his opinion
and inform his compatriots of such plots]

Observations show that while may countries round the world are providing
economic and humanitarian assistance to the Central Asian countries,
including Tajikistan, some eastern and western countries pay much more
attention to strengthening their position and influence in the region.

One of the many ways to attain this goal is direct and covert interference
in the process of political developments in the CIS countries through
governmental agencies, various international organizations and NGOs. In
this way they have succeeded in their plans to overthrow the legitimate
governments of many of the CIS countries under cover of such organizations.
Today one can find a lot of information about their real activities.

Young people targeted -----

In organizing recent anti-government coups in CIS countries the "foreign
sympathisers" have mainly relied upon young people. Since the political and
ideological mindset of the older generation is already rigid, so to speak,
and is difficult to change, the orchestrators of the various "revolutions"
have now mainly targeted young people. Because young minds are fresh and
impressionable, it is in fact relatively easy to turn them to the necessary
orientation.

Therefore representatives of foreign organizations try first to spread the
ideas of "democracy", "freedom of speech and the individual" amongst young
people by means of special training courses, meetings and interviews, and
then invite them to their countries under various pretexts and with the help
of knowledgeable experts brainwash them with the purpose of "training" them
and "broadening their views".

The analysis of events in Georgia, Ukraine and Kyrgyzstan showed that the
"covert" activities of some international nongovernmental organizations are
mainly carried out this way. They establish long-term relations with the
objects of their attention the poor strata of society, parties and
movements, opposition media etc through bilateral assistance projects.

In order to win their trust the heads of foreign organizations make skilful
use of "greenbacks", in other words the "keys to all doors". Most foreign
organizations mainly involve young people to implement such projects. They
pay more attention to those who are talented and have an interest in
politics and give them grants.

When selection them, first of all they take into account applications from
those who have already graduated from influential foreign universities or
wish to do so, and invite talented young people for paid visits abroad. It
should be mentioned that bring about coups they use different means and
methods which take account of national characteristics, peculiarities,
temperament and the interests and visions of young people, separately in
each country.

[Passages omitted: Election campaigns in Georgia, Ukraine and Kyrgyzstan
used to bring about "revolutions"; Freedom House and other organizations
allegedly sponsored colour revolutions, including with financial assistance;
foreign organizations allegedly manipulated local media to their will in
Georgia and Ukraine to promote certain candidates known to foreign
governments]

Specific eastern characteristics -----

Analysis of the progress of political developments in Kyrgyzstan during the
first elections and re-runs has shown that the plan designed by the special
agencies of foreign countries to seize the legitimate government failed. It
could never become a "colour revolution" but rather turned into a
demonstration by a limited and uncontrolled bunch of criminals and
prisoners.

In Kyrgyzstan the foreigners have dismissed the oriental characteristics,
habits and customs; perhaps they may not know that revolutions in the East
will inevitably get mixed up with military conflict and blood revenge. And
the transition period from "revolution" to peaceful life takes a long time,
troubled by complex social and economic issues. Thus the experience of the
"colour revolutions" of Georgia and Ukraine is not closely applicable to the
East.

Experts and political scientists believe that the seizure of government in
Georgia and Ukraine was carried out according to similar plans and proved
the remarkable outcome of the foreigners' conspiracy. This "success" has
been doubled with the events in neighbouring Kyrgyzstan, from which the
orchestrators have derived fresh inspiration and are again preparing for new
"colour" revolutions.

[Passages omitted: author's warning about the "destructive" activities of
some international organizations; law-enforcement agencies must heed the
"unlawful" activities of these organizations; we have friendly relations
with some foreign countries, but young people must beware of some
foreigners' deceit] -30- [The Action Ukraine Report Monitoring Service]
===============================================================
18. THOSE WHO'VE GONE TOO FAR
A small group of people rise too high, go too far, assume too much

By Boris Volkhonsky, Columnist, Kommersant
Moscow, Russia, Friday, May 27, 2005

The main mistake made by the ex-leaders of the countries of "colour"
revolutions was not that they had oppressed their people. Quite on the
contrary, Ukraine under Leonid Kuchma, Georgia under Eduard
Shevarnadze and even Kyrgyzstan under Askar Akaev were quite
democratic states (compared to other former USSR countries) with
political parties, more or less independent mass media and some
institutions of civil society.

The main mistake was of a different kind. Former Ukrainian, Georgian and
Kyrgyz rulers upset the balance of elites, the power being concentrated in
the hands of one clan among others deprived of it (that's what we call
Family in the contemporary Russian history).

The experience of any communities, let it be a kindergarten or a mafia clan,
shows that when appetites of one person or a small group of people rise
too high, all other people unite and take actions. Some go to the teacher,
others clash and kill the opponents who went too far.

The same is in the politics. "A revolutionary upsurge of working people"
was once some spontaneous force that experienced leader made use of,
the way a yachtsman uses the wind, and a surfing-rider uses the surf.

Everyone was against the clan that had assumed too much. Opposition
was often led by those who had earlier been in office but had been ousted
as a result of inter-clan fights.

If we look at the present leaders, we will see that people who could have
opposed each other under other circumstances became allies. Mikhail
Saakashvili and Zurab Zhavia, Viktor Yushchenko and Yulia Tymoshenko,
Kurmanbek Bakiev and Felix Kulov. The gap of contradictions between
some of them is as wide as that between each of them and prior authorities.
Besides, "second players" of these pairs may have as well claimed the
leading role.

But they stepped aside. Many foresaw here the future split. But in spite of
all evident indications that the predictions would hold true, the ringing
clique remains in fact united. Zurab Zhavania's team is still in office
afte his death; the public bickering between Viktor Yushchenko and Yulia
Tymosheko did not prevent their announcement of running for the 2006
parliamentary elections together.

All this testifies to one fact. Seemingly unnatural unions of such
different politicians reveal an ever-increasing understanding of political
elites that a time has come to share powers and keep the political groups
from rising above others. Otherwise, all those hurt will sooner or later
create their own coalition, and the country's current leaders will turn
into the heads of Families, like those they had once so vehemently
otherthrown from the pedestal. -30-
===============================================================
19 $55,000 IN MEDICAL SUPPLIES READIED FOR SHIPMENT TO
UZHGOROD, UKRAINE, FROM CORVALLIS, OREGON
Volunteers sending mammogram machines to Uzhgorod

By Erin Madison, Corvallis Gazette-Times
Corvallis, Oregan, Saturday, May 28, 2005

CORVALLIS - Computers, desks, chairs, wheelchairs, dental supplies,
rolls of carpet and three mammogram machines were all getting packed
into a 40-foot container Saturday that will be sent to Uzhgorod, Ukraine,
Corvallis's sister city,

The main goal of the shipment, being sent by the Corvallis Sister Cities
Association, is to equip a new mammography center in Uzhgorod. However,
there are also supplies to help a physical therapy clinic, the local
orphanage and a dental clinic.

The mammography center would be the first of its kind in Transcarpathia,
a region in western Ukraine, said Alice Rampton, one of the sister cities
shipment organizers.

The Uzhgorod hospital currently has one mammogram unit, but it's not used
for early detection, Rampton said. "It's used to say how big the lump is,"
she said.

The three machines the organization is sending are about five years old,
but they're still like new, said Mark Rampton, a sister cities board member.
"The secret to breast cancer is catching it early," said mamographer
Kathleen Kendall, who was helping pack up all the supplies.

Three machines should make for a fairly decent-sized clinic for a city of
130,000 - the population Uzhgorod, Kendall said. The mammography clinics
in Corvallis and Albany each have three machines. In all, the shipment is
worth about $55,000, and almost all the supplies came to the organization
as donations The U.S. State Department pays the shipping costs.

This is the fifth shipment the Corvallis organization has sent to Uzhgorod.
They've sent more than 300,000 pounds of medical equipment, and many
of their shipments have won international awards. "I think part of it is we
just don't dump and run," Alice Rampton said.

A group of volunteers goes to the Ukraine with every shipment to help get
things set up. In the past, the organization has sent enough equipment to
start a physical therapy clinic and a dental clinic in the orphanage.
They've also sent supplies for the orphanage.

"We go back every year and we see the stuff," said Rampton, who's taken
about 10 trips to the Ukraine. This will probably be the last shipment, she
said. The organization will now probably focus on training people to use the
supplies that are already there and do upkeep on them. -30-
==============================================================
20. UKRAINIAN AUTOCEPHALOUS ORTHODOX CHURCH OF NORTH &
SOUTH AMERICA AND THE DIASPORA (UAOC-NSAD) SENDS
ITS FIRST MAJOR SHIPMENT OF BASIC NECESSITIES & SUPPLIES
TO ORPHANAGE IN BORZNA, UKRAINE

Archbishop Myroslav, UAOC-NSAD
Cleveland, Ohio, Saturday, May 28, 2005

CLEVELAND, Ohio – The Ukrainian Autocephalous Orthodox Church of
North & South America and the Diaspora (UAOC-NSAD) will be sending
its first shipment of approximately two full pallets of essential supplies
to an orphanage in Borzna, Ukraine, with the blessing of His Beatitude,
Metropolitan MEFODIY, Primate of the UAOC worldwide.

The Church was introduced to this orphanage through one of the bishops who
has been very active in ministering to the orphanages in a variety of ways.

After working on a collaboration effort with Big Family Charity, a nonprofit
organization in Ukraine [http://adopt.kiev.ua] , the Church Hierarchy felt
that this was an important ministry to engage in on a major level,
especially after reading and directly hearing about the children and the
conditions they are forced to live in.

According to Big Family Charity, the Borzna orphanage is home to just under
200 children between the ages of 5 and 17. The buildings in which the
children live, learn, eat are in sad state of disrepair. Indoor toilets are
non-existent, the food budget is below any standard for nutritious eating,
teaching supplies are few, and properly fitting clothes and shoes are
lacking. This orphanage has been the victim of previous poor management
and a severe lack of funding.

This effort is being led by the newly-elected Coadjutor Archbishop Myroslav
Steczak Kniespeck of the UAOC-NSAD. Vladyka Myroslav shared, "I never
thought I could imagine, let alone hear firsthand, about such harsh living
conditions. To have no running water, a small outhouse for 200 children, no
basic medicines, understaffing…it makes me wonder if these innocent
children are more like inmates than the precious youth that they are.”

“This is a great opportunity for our Church to provide for the basic needs
of these tender orphans who, God willing, will become our future. I cannot
express the satisfaction I feel knowing that we are able to provide for
these very basic necessities. So many of the items we are sending are taken
for granted here in the United States. Through this ministry we are able to
change lives and offer promise of a future.”

On May 28, Vladyka Myroslav blessed a sampling of the shipment, weighing
a little over one-third of a ton, as it was being prepared to leave for
Ukraine. The boxes of supplies contain much-needed bar soap, toothpaste,
toothbrushes, bandages, socks, first aid supplies, school supplies, toilet
paper, bath towels and other items needed for basic daily living.

Metropolitan Michael Javchak Champion, Primate of the UAOC-NSAD said,
"I am very pleased that our church is able to reach out and contribute to
the needs of our young people in Ukraine who are materially less fortunate
than ourselves. By providing for the daily necessities of the orphans, we
are
both following the Gospel mandate to take care of the basic human rights of
others (Mt. 25: 31-46), and practicing the 'corporal works of mercy' which
the church has always entrusted us to do."

The UAOC-NSAD also has a vested interest in 16 children, ranging in age from
9 to 17 years old. The Church directly sponsors these children by providing
for as many of their individual needs as possible, including clothing,
personal items, hygiene kits, school supplies, birthday gifts and the start
of a college fund for each. The Church communicates with each of the
children directly through letter writing and package deliveries.

Bishop Bohdan, Vicar of Kyiv for the UAOC in Ukraine, wrote “We are so happy
to be able to share in the work of mercy together with the other members of
our communion in sharing the love and compassion of Jesus Christ to those
who are in need. May His great blessing be upon you and grant you many
years in this service to God’s people.

Archbishop Myroslav continued, “This awesome new ministry not only helps
those who have serious needs, but allows our Church in the Diaspora to have
a direct ministry to the youth in our Motherland. These children are the
future of Ukraine and the world. To think that a mere one-third ton of
supplies can offer a lifetime of gratitude from the hearts of these
children.”

The Church welcomes support and participation from everyone. The biggest
needs are children's clothes and basic necessities, like toilet paper,
toothbrushes, toothpaste, simple school supplies, etc..

For more information about this project, or if you are interested in
supporting this incredible ministry, please contact Archbishop Myroslav at
vladykamyroslav@uaoc.org. General tax-deductible financial contributions
for upcoming shipments to this and other orphanages in Ukraine can be
made [by going to the website http://www.uaoc.org/borzna] and using PayPal
by clicking on the Donate Now button below. -30-
------------------------------------------------------------------------------------------------------------------
Contact: Archbishop Myroslav, UAOC-NSAD
Phone: (888) 521-6705, Fax: (888) 423-0765
E-mail: vladykamyroslav@uaoc.org
===================================================================
21. BIG MONEY GOES AROUND LVIV
Hr 50 mn for restoration of Lviv's downtown for forthcoming anniversary

>From the very start, the preparations for the celebration of the 750th
anniversary of the founding of Lviv next year have been replete with
scandal, mainly related to financing of the project. Lviv authorities
explained that financing from the national budget was the reason for
the delay in preparations for the anniversary. Now that they have the
funds, they seem to have no idea how to dispose of them effectively
and are trying to hide their helplessness under the veil of democracy

By Andriy Tovstukha, Kyiv Weekly #19 (159)
Kyiv, Ukraine, Friday, May 20-27, 2005

The Ukrainian parliament recently allocated Hr 50 mn for the restoration of
Lviv's downtown area within the framework of the city's preparation for the
forthcoming anniversary. However, the long awaited allocation of funds was
such a headspinner for representatives of the local authorities that they
cannot reach an agreement amongst themselves on how to spend the money.

To be specific, the city officials cannot seem to decide which monuments
should be restored first.

The reason for the dispute is the list of architectural objects subject to
restoration adopted by the city council last year. The fact is that the
document was not well thought out and was hence brought up for review.
Adjustments to the document were accompanied by yet another scandal.

Specifically, certain deputies on the city council insisted on allocating
funds from the received sum to compile a list of the facades of buildings in
downtown Lviv. Others suggested the restoration of the City Hall and
spending the remaining money for drafting a plan for the city's development.

Meanwhile, certain deputies insisted on shortening the list of buildings to
be restored. In many cases the debates looked absolutely absurd. For
example, some deputies accused the city's mayor Lyubomyr Bunyak, and the
management of the UkrZakhidProectRestavratsiya company, of allegedly
having intentions of restoring the fortifications on the Vysokiy Zamok hill.

There might have been less tension around the issue of restoring the
historical sites in Lviv had the deputies made concerted efforts to make the
contents of the document clear in order to avoid further misinterpretations.

To find a solution to the problem, the city authorities decided to go public
in search of the truth. Although the public hearings did not really help
soothe tension with the residents of Lviv, they did have a certain positive
effect. Public hearings once again demonstrated that local officials work
inefficiently and that there is a serious conflict between the executive and
legislative branches of city government.

For example, although Lviv was included in the UNESCO World Cultural
Heritage List in 1998, to this day it does not have a long-term development
program for completing stage-by-stage restoration of the historical part of
the city. Officials made an attempt to explain that the absence of such a
document was due to the constant lack of money for drafting it.

In the meantime, according to information our KW correspondent received at
UkrZakhidProektRestavratsiya, "The Lutsk city authorities found the money
for developing such a program and the problem with restoration of the city's
architectural monuments had been resolved long ago." Interestingly enough,
it turns out that Lviv officials do not actually have any information on the
real state of the architectural monuments in the city.

They were also unable to name even an approximate sum needed for
completing the restoration of certain architectural monuments, such as the
St. George Cathedral, which has been under reconstruction for several years
now.

In light of this, certain independent experts have suggested that eventually
the preparations for the anniversary will most likely result in the facades
of the city's buildings simply being painted over as it was done previously
on several occasions prior to the official visits of various international
delegations to the city.

Expert opinion Mykola Haida, Head of the Department for the Preservation
of Historical Sites in Lviv: "It is rather difficult to work without a
municipal program for the city's development regulating restoration works.
Moreover, we do not have much time left before the anniversary, though hasty
renovations could have several negative consequences.

For example, the restoration of Rynok Square includes the replacement of
underground communication equipment and the relaying of cobblestone. The
time remaining allows for completing the work but it leaves no chance for
archeologists to conduct their research in this section of town. We do not
want Rynok Square to have the same fate as Rosiyska Street, where recently
the remains of ancient towers were buried under the soil during the hasty
construction of a tramline and archeologists did not have time to examine
them properly.

Mykola Bevz, Chairman of the Department of Architectural Restoration and
Reconstruction at Lviv National Polytechnical University: "It is impossible
to complete the renovation of the architectural monument at 9 Rynok Square
in several months, since it is a violation of the current law in effect.
Also, it is impossible to rebuild one of the school buildings in the city's
downtown area, which is an architectural monument having several elements
of 17th century fortifications.

Experts should examine this building thoroughly and then plan the
reconstruction works. Without such an inspection, the monuments will be
damaged. It would be better to spend money on the development of the tourism
infrastructure. The fact is that at the moment there are no decent parking
lots in the city. Meanwhile, tourists are at risk of being robbed or mugged.
Moreover, where else in Europe is there a place where cars prevent tourist
groups from visiting historical sites? -30-
-----------------------------------------------------------------------------------------------------------
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