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

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

"THE ACTION UKRAINE REPORT - AUR" - Number 542
Mr. E. Morgan Williams, Publisher and Editor
Washington, D.C. and Kyiv, Ukraine, WEDNESDAY, August 17, 2005

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

1. PIPELINE TO TROUBLE
Ukraine and pipeline from Iran to Western Europe
COMMENTARY AND ANALYSIS: By Ilan Berman
Wall Street Journal Europe, Fri, August 12, 2005

2. MEETING ON IRAN'S GAS EXPORT TO EUROPE VIA UKRAINE
Iran, Ukraine, Armenia, Georgia and Russia may meet in September
IRNA web site, Tehran, Iran, Tue, 16 Aug 05

3. CONSORTIUM TO EVALUATE ODESSA-BRODY TO PLOTSK
IN POLAND PIPELINE PROJECT
New Europe, Athens, Greece, Mon, August 15, 2005

4. UKRAINE TO DEVELOP BUSINESS PLANS FOR CONSTRUCTION OF
HIGH-TECH OIL REFINERY AND EXTENSION OF ODESSA-BRODY
PIPELINE TO PLOCK (POLAND) BY END OF THE YEAR
UNIAN news agency, Kiev, in Ukrainian 1200 gmt 15 Aug 05
BBC Monitoring Service, UK, in English, Mon, Aug 15, 2005

5. YUKOS DEMISE INCREASES RISKS TO RUSSIA'S NEIGHBORS
Makes their search for energy security ever more difficult
PRESENTATION: by Keith C. Smith, Senior Associate
Europe Program, Center for Strategic and International Studies (CSIS)
Vilnius Energy Security Forum, Vilnius, Lithuania, Thu, July 21, 2005

6. FORMER UKRAINIAN GAS CHIEF BOYKO SAYS PRIME MINISTER
TYMOSHENKO TO BLAME FOR GAS SUPPLY DISPUTES WITH RUSSIA
UT1, Kiev, in Ukrainian 1505 gmt 16 Aug 05
BBC Monitoring Service, UK, in English, Tue, Aug 16, 2005

7. UKRAINIAN FOREIGN MINISTER TARASYUK DISCUSSES WTO BID
WITH U.S. SECRETARY OF COMMERCE CARLOS GUTIERREZ
UNIAN news agency, Kiev, in Ukrainian 1218 gmt 14 Aug 05
BBC Monitoring Service, UK, in English, Sun, Aug 14, 2005

8. NATIONAL BANK OF UKRAINE (NBU): BETWEEN
INFLATION DEVIL AND LIBERALIZATION SEA
IMF puts CPI inflation at 15% ytd in 2005, and so does Rada chief
ANALYSIS: by Roman Bryl, Ukraine Analyst
IntelliNews - Ukraine This Week
Kyiv, Ukraine, Monday, August 15, 2005

9. UKRAINE'S HRYVNA SOARS AGAINST DOLLAR
Reuters, Kiev, Ukraine, Monday, August 15, 2005

10. DESTITUE NORTH CRIMEA PROVINCE NEEDS FOREIGN INVESTMENT
German company is the only major employer in Armiansk
New Europe, Athens, Greece, Mon, August 15, 2005

11. DURING PRIVATIZATION OF KRYVORIZHSTAL AND OTHER
ENTERPRISES PRINCIPLES OF TRANSPARENCY, OPENNESS AND
COMPETITIVENESS WERE VIOLATED, ROMAN ZVARYCH BELIEVES
By Larysa Kozik, Ukrinform, Kyiv, Ukraine, Tue, August 16, 2005

12. UKRAINIAN-BRITISH JV BEGINS CONSTRUCTION OF A PIG-BREEDING
COMPLEX IN KYIV REGION FOR 30,000 HEAD
New facility will cost around USD $4 million
Ukrainian News Agency, Kyiv, Ukraine, Tue, August 16, 2005

13. UKRAINE AGRICULTURAL CONCERN TO BUY GERMAN HOLMER
BEET HARVESTORS FOR WORK IN CHERKASY REGION
Ukrainian News Agency, Kyiv, Ukraine, August 15, 2005

14. GERMANY'S SAINT-GOBAIN OBERLAND COMPANY AUTHORIZED TO
PURCHASE OVER 50% OF CUSTOM-MADE BOTTLE AND JAR MFG
Ukrainian News Agency, Kyiv, Ukraine, Mon, August 15, 2005

15. TAIWAN-BASED FOXCONN COMPANY STARTS BUSINESS TO
MANUFACTURE COMPUTER PARTS IN KHARKIV
By Volodymyr Fomenko, Ukrinform, Kharkiv, Ukraine, Sat, August 13, 2005

16. METRO UKRAINE OPENS SHOPPING MALL IN DONETSK
Ukrainian News Agency, Kyiv, Ukraine, Tue, August 16, 2005

17. UKRAINE'S ECONOMIC POLICIES REQUIRE SERIOUS REVAMPING
LETTER-TO-THE-EDITOR: By Walter Prochorenko
Paramus, New Jersey, Tue, August 16, 2005
Subject: Re: Deliso Article, AUR#541 Aug 15, Article 22
The Action Ukraine Report (AUR), Number 542, Article 17
Washington, D.C., Wednesday, August 17, 2005

18. AMERICAN FELT BOOTS, DRUGGED ORANGES
AND OTHER HOLLYWOOD SCRIPTS
COMMENTARY: By Adrian J. Erlinger
http://leopolis.blogspot.com
Washington, D.C., Monday, 15 August 2005

19 ROMANIA FILES DOCUMENTS WITH INTERNATIONAL COURT OF
JUSTICE REGARDING BLACK SEA BORDER DISPUTE WITH UKRAINE
AP Worldstream, Romania, Tuesday, Aug 16, 2005

20. ROMANIA: AN OIL FORTUNE BOUND IN RED TAPE
U.S. Investor Becomes Entangled On Romania's Thorny Path to Open Markets
By Terence O'Hara, Washington Post Staff Writer
The Washington Post, Washington, D.C.
Tuesday, August 16, 2005; Page D01

21. UKRAINE, 14 YEARS LATER........
STATEMENT: Ukrainian Congress Committee of America (UCCA)
Washington, D.C., Tuesday, August 16, 2005

22. UKRAINE: YUSHCHENKO ENCOURAGES CREATION OF FUND
FOR ARCHAEOLOGICAL RESEARCH AND RESTORATION AT
THE ANCIENT CITY OF TAURIC CHERSONESE
Ukrainian News Service, Kyiv, Ukraine, Tue, August 16, 2005

23. "YULIYA TYMOSHENKO - THE MILLION DOLLAR WOMAN?
ANALYSIS AND COMMENTARY: By Leonid Amchuk
Ukrayinska Pravda website, Kiev, in Ukrainian 15 Aug 05
BBC Monitoring Service, UK, in English, Monday, August 15, 2005
=============================================================
1. PIPELINE TO TROUBLE
Iran's gas export to Europe via Ukraine

COMMENTARY AND ANALYSIS: By Ilan Berman
Wall Street Journal Europe, Fri, August 12, 2005

Ever since December 2004, when populist opposition candidate Viktor
Yushchenko unseated then-Prime Minister (and Kremlin favorite) Viktor
Yanukovych to claim Kiev's top political office, Ukraine has emerged as
a model for democratic transformation in the "post-Soviet space."

But just eight months into its tenure, Mr. Yushchenko's young government is
heading into dangerous diplomatic waters. In late July, Ukraine's
state-owned Naftogaz Ukrainy inked a landmark memorandum of under-
standing with the Iranian government.

Under the accord, initialed by Naftogaz Chairman Alexei Ivchenko and Iranian
Deputy Oil Minister Hadi Nejad-Hosseinian, Ukraine has pledged to construct
a transit gas pipeline from Iran to Western Europe, with preliminary talks
on the project slated to begin next month.

The deal comes on the heels of largely unnoticed consultations in Tehran
between Ukraine's National Security and Defense Council Secretary, Petro
Poroshenko, and top Iranian officials, including Iran's new hard-line
President Mahmoud Ahmadinejad, and positions Kiev as a major energy
partner for Tehran.

The reasons for this cooperation are logical. Today, Ukraine remains deeply
dependent on the Kremlin's good graces, with 90% of its oil supplies, 80%
of its natural gas and 100% of its nuclear fuel coming from Russia. In the
past, the pro-Kremlin regime of Leonid Kuchma found this state of affairs
acceptable. To its credit, the Yushchenko government does not.

In recent weeks, top officials in Kiev have declared repeatedly that energy
independence from Russia constitutes a top national priority. As part of
this effort, Kiev has latched onto a novel idea: energy cooperation with
Iran.

Ukrainian Prime Minister Yulia Tymoshenko herself has unequivocally
backed the Iran-Ukraine pipeline project as a key facet of Kiev's efforts to
reduce its current corrosive dependence on Russia. "Only in this way will
we get truly diversified energy deliveries," Ms. Tymoshenko told reporters
in the wake of the Naftogaz accord.

But in hitching its energy star to the Islamic Republic, Ukraine runs the
risk of endangering the new diplomatic and economic bonds it has begun to
build with Washington in the wake of the Orange Revolution. Iran is steadily
emerging as America's cardinal strategic challenge in the post-Saddam
Middle East.

Tehran's ayatollahs have made no secret of their desire for an offensive
nuclear capability, and are making serious progress toward that goal --
despite the best diplomatic efforts of the U.S. and the EU-3: Germany,
France and Britain.

The Iranian regime remains the world's leading state sponsor of terrorism,
enabling the activities of radical groups such as Hezbollah, Hamas and the
Palestinian Islamic Jihad, as well as segments of the insurgency in Iraq.

And officials in Washington are becoming aware of the fact that Tehran has
unexpectedly emerged as a major beneficiary of the war on terror. Over the
past year-and-a-half, thanks to the skyrocketing world energy costs
generated by political instability in the Middle East, it has gleaned tens
of billions of dollars in excess revenue -- money that can be used by the
Iranian regime to fuel both its nuclear ambitions and its foreign
troublemaking.

The proposed pipeline through Ukraine would make all of these matters
much worse. Such a project is bound to expand European energy
dependence on the Islamic Republic, thereby diminishing Europe's
resistance to the idea of a nuclear Iran and both its incentive and its
ability to prevent such a development.

It also provides a new, and potentially significant, source of funding for
Tehran's strategic programs, exponentially accelerating Iran's atomic drive
and its development of longer-range ballistic missiles.

Most of all, the Naftogaz project positions Ukraine squarely on the wrong
side of the looming showdown between Washington and Tehran. In their
quest for a measure of independence from Russia's energy machinations,
officials in Kiev should think carefully about whether that is a place they
would like to be. -30- [The Action Ukraine Report Monitoring Service]
---------------------------------------------------------------------------------------------------------
Mr. Berman is vice president for policy at the American Foreign Policy
Council in Washington and the author of "Tehran Rising: Iran's Challenge
to the United States," due out later this month from Rowman & Littlefield
Publishers. Contact: berman@afpc.org.
=============================================================
2. MEETING ON IRAN'S GAS EXPORT TO EUROPE VIA UKRAINE
Iran, Ukraine, Armenia, Georgia and Russia may meet in September

IRNA web site, Tehran, Iran, Tue, 16 Aug 05

TEHRAN - Deputy Oil Minister for International Affairs Seyyed Mohammad
Hadi Nezhadhoseynian said here Tuesday [16 August] hoped that the five-
partite meeting of Iran, Ukraine, Armenia, Georgia and Russia on export of
gas from Iran to Europe via Ukraine will be held by September. He told IRNA
that Russia's approval of the project will expedite the process.

Stressing that the Europeans are in dire need of Iran's gas, he added that
guarantee for future supply of energy is of great importance to Europe and
that they are both interested in and need to import gas from Iran.

"Given that China, India and Pakistan are among Iran's gas clients and keen
to bolster relations with the country, if other consumers of gas do not
proceed in time they may face a shortage of gas available for export. Turkey
is currently the only importer of gas from Iran and transfer of gas to
Europe via this country is one of the options on the agenda.

Turkey's recent reaction to the issue and its intention to purchase gas from
Iran and sell it to Europe directly, is not acceptable to Iran, since
another option would be to transfer it via Ukraine," he added.

Nezhadhoseynian noted that Turkey cannot insist on following such a
procedure in order to become a member of European Union, since it is not
supported by EU.

Concerning export of gas from Iran to Europe via Ukraine it should be said
that a cooperation agreement has recently been inked to the effect between
the two states, but that the volume of the gas to be transferred via this
route has not been distinguished yet.

Ukraine has proposed two pipeline routes to Iran for transfer of gas: one is
Iran-Armenia-Georgia-Russia-Ukraine-Europe and the other is Iran-Armenia-
Georgia-Black Sea-Ukraine-Europe. The expenses of each of the two
suggested routes have been assessed by Ukrainian sources at 10 billion
dollars. -30- [The Action Ukraine Report Monitoring Service]
=============================================================
3. CONSORTIUM TO EVALUATE ODESSA-BRODY TO PLOTSK
IN POLAND PIPELINE PROJECT

New Europe, Athens, Greece, Mon, August 15, 2005

ATHENS - A consortium of three companies SWECO PIC from Finland,
ILF GmbH of Germany and KANTOR from Greece will evaluate the study
for extending the Odessa-Brody pipeline to Plotsk in Poland, it was reported
last week.

Interfax reported that European Commission had signed a contract and will
allocate about two million Euro for the study as part of its Interstate Oil
and Gas Transport to Europe (INOGATE) programme. The consortium won
a tender on consultation support for technical, economic, financial and
legal issues in developing the Odessa-Brody-Plotsk oil transport system.

To meet with EU environmental standards the consortium has to work 15
months with Ukrtransnafta and International Pipeline Company Sarmatia to
develop the legal and financial mechanisms to ensure a transparent and
profitable corridor.

The creation of an oil transport corridor from the Black Sea to Ukraine and
Poland is a key infrastructure project in the context of EU policy in
Ukraine and will strengthen integration of EU and Ukrainian energy
infrastructure, the EC office said. Ukrtransnafta and Polish oil transport
monopoly Przedsiebiorstwo Eksploatacji Rurociagow Naftowych Przyjazn
SA (PERN) will construct the Brody-Plotsk branch of about 490km.

The joint venture will draft project estimates, raises investment and
provides construction work. The Brody-Plotsk branch of the pipeline may
cost 500 million Euro to build, Polish experts say. The project will take
three to four years to complete under favourable conditions. -30-
=============================================================
4. UKRAINE TO DEVELOP BUSINESS PLANS FOR CONSTRUCTION OF
HIGH-TECH OIL REFINERY AND EXTENSION OF ODESSA-BRODY
PIPELINE TO PLOCK (POLAND) BY END OF THE YEAR

UNIAN news agency, Kiev, in Ukrainian 1200 gmt 15 Aug 05
BBC Monitoring Service, UK, in English, Mon, Aug 15, 2005

KYIV - The Ukrainian Cabinet of Ministers has instructed the Fuel and
Energy Ministry to draft and submit for consideration business plans for
construction of a high-tech oil refinery and completion of construction of
the Odessa-Brody oil pipeline to Plock (Poland) by December 2005.

This is said in the plan for additional measures to fulfil the Cabinet of
Ministers "Towards People" programme in the second half of 2005, which
was approved by cabinet resolution No 733 dated 10 August. The text of
the resolution was posted on the government's web site today.

The document says that the building of an oil refinery and of the
Brody-Plock section of the oil pipeline will make possible the effective use
of the Odessa-Brody oil pipeline by using its capabilities to the maximum
extent. This will also help diversify sources to provide Ukraine with oil
and petroleum products.

In early August the European Commission awarded a contract to complete
technical, economic and legal feasibility studies for continuing the
construction of the Odessa-Brody oil pipeline to the Polish city of Plock to
a consortium which consists of three European companies: SWECO PIC
(Finland), ILF GmbH (Germany) and KANTOR (Greece). [Passage omitted:
project background] -30- [The Action Ukraine Report Monitoring Service]
=============================================================
5. YUKOS DEMISE INCREASES RISKS TO RUSSIA'S NEIGHBORS
Makes their search for energy security ever more difficult

PRESENTATION: by Keith C. Smith, Senior Associate
Europe Program, Center for Strategic and International Studies (CSIS)
Vilnius Energy Security Forum, Vilnius, Lithuania, Thu, July 21, 2005

The systematic destruction of YUKOS Oil Company has had a profoundly
negative effect on energy sector investment inside of Russia. The result of
this is a considerable slowdown in the country's GDP growth rate.

The Putin Government proceeded with a dubious and widely publicized legal
case against Yukos, even though it became obvious at least a year ago that
going ahead with the company's breakup would damage the country's
investment climate.

The clear signal from the Kremlin was that Russia's state-controlled energy
sector will even more than before be used as an instrument of the
government's foreign security policy. Therefore, for neighboring states
dependent on Russian energy imports, the demise of Yukos and the shift
toward more Russian state control only makes their search for energy
security ever more difficult.

Influential elements in the Kremlin are currently hard at work trying to
prevent the sale of Yukos assets in Lithuania to buyers not under Russian
government control. They obviously would prefer the assets, such as
Mazeikai, Butinge and the pipelines, to be owned by a Russian state-owned
company rather than a real private Russian firm or a Western company.

This highlights the security risks of selling a majority, or in some cases,
even a minority share, of energy infrastructure to a Russian state-owned or
state-controlled company. For the governments in Lithuania, Latvia,
Slovakia and Hungary who had sold strategic energy assets to Yukos, this is
particularly worrisome.

In 2002, Lithuanians, Slovaks and Hungarians had every reason to expect that
the increasingly Western style management of privately-owned Yukos would
use its newly purchased energy assets in their countries to conduct business
in
accordance with transparent, market-oriented standards. And Yukos did this.
In Lithuania, for instance, Yukos operated in a transparent manner and was a
business success both for Yukos itself and for the Lithuanians.

Yukos had become the poster child for a Russian multinational company that
was operating according to transparent Western standards, posing little or
no threat to the national security interests of partner countries. As a
genuine private Russian company, the Yukos owners had discovered that the
company's value increased markedly by opening its books to public scrutiny
and by hiring experienced Western business managers. No one disputes
that the destruction of Yukos resulted in the collapse of the most open,
transparent Russian energy company engaged in international commerce.

Unfortunately, it was the very success of Yukos as a private company that
led to it being taken over by government-connected groups in Russia. They
wanted to use the country's considerable energy resources as leverage to
influence the foreign and domestic policies of its neighbors.

These individual, who come from the state's intelligence and business
sectors, were also determined to benefit financially from the transfer of
Yukos assets to business entities controlled by them selves. The role of
the siloviki, and particularly the siloviki-controlled Rosneft Company, in
the destruction and seizure of Yukos assets, is now well understood by
Russian and non-Russian observers of Russia's energy sector.

Countries that cooperated with Yukos, in the belief that they were dealing
with a modern, profit-oriented, non-political company, are now left
wondering about how to deal with the Kremlin's efforts to assert control
over Yukos' overseas holdings, such as those in Lithuania. The Kremlin's
renewed determination to reassert control over Russia's raw materials
parallels the systematic weakening of democratic structures in Russia
itself.

It is no coincidence that the confiscation of Yukos and the re-centralized
control of the energy sector come at the same time as there is increasing
nationalism in Russia. This trend was on sharp display in Moscow on the
60th anniversary celebration of the end of WWII. The growing display of
nationalism by Russian youth groups, such as Nashi, is particularly
disturbing, especially since much of their financial backing is believed to
come from Russia's state-owned energy companies.

The Kremlin's determination to take control of Yukos assets in neighboring
states highlights the dangers of dependency on Russian oil and gas imports,
particularly when it is combined with domination and/or monopoly of the
energy infrastructure and energy markets in the same importing countries.

The dependency of the Baltic States on Russian oil and gas is increasingly
a result of their rapid growth in GDP and improved living standards. Even
though energy efficiency is slowly increasing in the importing states,
brought on in part by the movement away from heavy industry, overall energy
demand continues to rise. GDP growth rates in the Baltic States, in Poland
and Ukraine, for example, are at least double those in Western Europe, and
energy demand in these new democracies is increasing by about one-third
the rate of GDP.

With world oil prices at the $60 a barrel level, and with increased Russian
equity control over oil and gas facilities in the region, we are seeing some
spectacular increases in the price of Russian gas, in particular, to the
Baltic States. In Ukraine, Gazprom has indicated that it intends to triple
natural gas prices.

At the same time, Russia has contracted to purchase all of the exportable
gas from Turkmenistan as of 2007, at a price of less than half of what it
sells its own gas to the West. This will leave countries in Central Europe
with fewer options to purchase gas from non-Russian sources, thereby
increasing Gazprom's already considerable economic and political power
in the region.

Tighter EU environmental standards will force the Baltic States to take
measures that will only increase their energy dependence on Russia.
Closing nuclear power plants, converting from shale oil, peat and coal to
natural gas will create greater demand for energy imports, giving Russian
state companies even more political leverage in the region.

Unfortunately, the hard reality is that for Central Europe, there are few
alternatives sources to Russian oil and gas imports in the next five years.
The alternative measures will have to come from within the importing
nations.

Incredibly, grieving over the loss of the Soviet Union and its military and
political power, is currently in vogue in Russia. This may explain in part
the desire of some political leaders to re-establish Russian influence over
the immediate neighborhood. Public opinion polling in Russia and recent
statements by some officials also reflect the view by many people that the
country is being encircled by hostile Western forces that are interfering in
"Russia's sphere of influence," even if Western support is limited to
promoting free and fair elections. Political commentators in Russia seem
to focus on the alleged danger to Russia of the "colored revolutions" in
Georgia, Ukraine and in Central Asia.

The speeches of certain Duma members often reflect a disturbing
combination of nationalism and paranoia, and a continued resentment
toward the West over what they interpret to be Russia's relative decline
in power after 1991.

The zero-sum mentality within the Russian Government, including the security
services, and even in much of the private sector, will obviously take years
to change. Meanwhile, the state-owned or controlled energy companies in
Russia will continue to be instruments of the country's foreign and security
policies.

Opinion polling in Russia confirms the startling fact that the Baltic States
are considered by many Russians today to be the primary enemies of
Russia. Therefore, Lithuanians, Latvians and Estonians should be wary of
the increasing influence in their countries of Russia's state-owned energy
sector. Energy dependency should be considered a vital national security
issue in the three Baltic States.

Unfortunately, the EU is currently consumed with restructuring issues, and
some of the larger EU states are willing to look the other way at corrupt
and politically-motivated Russian business practices that threaten the
sovereignty of other EU states. German and French support for the undersea
Baltic gas pipeline is a good case in point. The project is being promoted
for purely political reasons, and support for the pipeline by large EU
members only undercuts the economic interests of EU states such as
Poland and Latvia.

Greater transparency, open audits, the rule of law and real privatization in
the Russian energy market will not take place in the next few years. In
countering the negative aspects of Russia's energy policies in Central
Europe, we should not expect help anytime soon from the Russian side.

Many of us hope that the negative effects that the Yukos demise has had on
Russia and on Russia's image abroad will insulate the alliance of TNK/BP,
and companies such as Sibneft from political pressures from the siloviki and
their supporters. Today, they remain the only true "independents" among the
large companies in Russia.

Meanwhile, the question is how to make the risks of energy dependency on
Russia more manageable.

Blocking Russia's politicization of energy trading, and reducing the
dependence of Central Europe on Russian supplies is contingent on
significant and rapid changes in governance in the importing countries.

Too often, there is a serious lack of clear and enforceable commercial law,
there is corruption in the governmental bureaucracy, and there is a low
degree of transparency in the political/industrial complex.

Political campaign financing in the importing countries needs to be made
more transparent, so that foreign controlled companies will be unable to
influence elections and government policies. The domestic media should be
more aggressive in investigative reporting regarding the issue of energy
dependence and the challenges that arise from a concentration of both raw
material supply and ownership of national energy facilities in companies
under the control of the Russian Government.

The press should encourage a debate about the types of companies that are
allowed to dominate local markets. Which foreign energy companies are
really "independents" and which companies are clear instruments of Russian
foreign and security policies. A greater distinction between private and
public companies should be made. The media should generate greater
discussion about possible corrupt relationships between local elites and
Russian energy companies.

Importing countries that are members of the EU should press the EU
Commission to insist that Russia sign the Energy Charter, which opens up
energy transportation to domestic and international competition. For
example, Transneft should be required to give up its monopoly position in
the oil transport sector and Gazprom in the gas transport sector, as a
condition to joining the WTO.

DG TREN and member governments should investigate the effects of so-
called independent companies that are established by Gazprom and Lukoil
in importing states for the purpose of financially supporting local business
or political interests.

New EU members should play a greater role in the EU-Russian energy
dialogue. Up to now, the more significant dialogue with the Kremlin has come
from governmental leaders in Berlin, Paris and Rome. Their attention has
focused mainly on acquiring additional Russian oil and gas supplies, with
little emphasis placed on increased transparency or the transformation of
Russian state companies into private, competitive, business-oriented
industries.

The EU should oversee and encourage the rapid completion of regional
energy projects such as the Nordic-Baltic power grid, the Polish-Lithuanian
power bridge, the Norwegian/Danish gas pipeline to Poland and extending
existing pipelines to Germany onward to Poland and the Baltic States.

The Baltic States could push for an EU-initiated dialogue between the
Kazakhs and Western energy companies, in order to find incentives that
would increase the commercial attractiveness of completing a pipeline
system carrying Caspian crude from the Black Sea to Europe via Ukraine,
Poland and Slovakia.

Governments such as the U.S., Japan, Germany and the Scandinavians
should share with the Baltic States free of charge, the results of their
research and development work on energy efficiency, alternative energy
sources and increased recovery and storage.

Most importantly, the Baltic States should to identify domestic roadblocks
to Western investment in the energy sector. In some cases, this will
require breaking up local monopolies.

At the same time, the scramble of major Western governments for increased
Russian energy supplies has sent the wrong signal to Russian authorities.
The message has been that "you" can do pretty much do what you want in
Central Europe as long as "you" continue to increase exports of oil and gas.

Instead, the message to the Kremlin should be that we want open, commercial
business relations with Russia's energy companies, just as we would with our
more traditional friends and allies. The EU not only needs to have an
improved energy dialogue with Russia, it should also be more active in
trying to understand the energy needs and problems of the new member states.

I would repeat that with the demise of Yukos, it is more important than ever
to distinguish between private Russian companies that operate through
transparent, ethical business practices, and those that are instruments of
Russian state policy.

Russia's use of its energy exports to influence policy in the Baltic States
goes back as far as 1990. Today, with an even greater degree of Russian
ownership of strategic energy assets in the three countries, the challenges
are greater than ever before. Confronting this challenge will require a
high degree of political will and regional cooperation. Decisions in the
Baltic States regarding energy policy should be reached after open political
debate and transparent negotiations with all of the potential partners.

Finally, I should add that energy dependency on Russia is not in itself a
bad thing as long as it is based on transparent commercially-based business
transactions, rather than on political considerations. For example, over
the past 25 years, the U.S. has become increasingly dependent on oil and
as imports. But its energy related transactions are open, commercial and
non-threatening to the political values of buyers and sellers.

We may have to wait for at least two more generations to come to power in
order for Russia to shake off the old "win-lose" concept of doing business
that is the hallmark of much of the country's political class. In the long
run, I feel confident that Russia will develop into a "normal" European
state, with more privatized energy companies that play by transparent
business standards. Unfortunately, the number of these companies will
remain less than a handful for the foreseeable future. -30-
----------------------------------------------------------------------------------------------------------
NOTE: Keith C. Smith is a senior associate in the Europe Program at
CSIS. A retired Foreign Service officer, Keith served as US Ambassador
to Lithuania between 1997 and 2000. We appreciate Richard W. Murphy
Senior Associate, CSIS, for sending us a copy of the Smith presentation
and recommending its publication in The Action Ukraine Report (AUR).
Contact: ksmith@csis.org, www.csis.org.
=============================================================
6. FORMER UKRAINIAN GAS CHIEF BOYKO SAYS PRIME MINISTER
TYMOSHENKO TO BLAME FOR GAS SUPPLY DISPUTES WITH RUSSIA

UT1, Kiev, in Ukrainian 1505 gmt 16 Aug 05
BBC Monitoring Service, UK, in English, Tue, Aug 16, 2005

KYIV - Yuriy Boyko, the leader of the Republican Party of Ukraine and former
head of state oil and gas company Naftohaz Ukrayiny, has said that there are
no grounds for problems with Russia's Gazprom over gas supplies and
blamed recent disputes on Prime Minister Yuliya Tymoshenko.

Speaking during a studio interview on UT1's In Focus programme, Boyko
said, "The only reason for the conflict with Russia and the worsening
situation with gas is the position of the prime minister who is taking a
firm
position towards Russia in order to pursue her personal business interests
involving the corporation United Energy Systems of Ukraine (UESU) and
its debts to the Russian Defence Ministry."

Boyko said that UESU, a gas trading firm run by Tymoshenko in the 1990s,
owed 408m dollars to the Russian Defence Ministry. He said that in February
2004, the Russian government held a special meeting to decide what to do
about this debt.

Boyko also dismissed allegations by Oleksandr Turchynov, the head of the
Security Service of Ukraine, that non-transparent contracts with
intermediary companies for transit of Turkmen gas signed by Naftohaz under
his leadership had cost the budget 1bn dollars.

"Speaking of [transit operators] Eural Trans Gas and RosUkrEnergo, their
task was to deliver gas to Ukraine via Uzbekistan, Kazakhstan and Russia,
and they fulfilled this task," he said. "We received the gas on time and it
was the cheapest."

Boyko insisted that all mutual obligations between Ukraine and Russia were
being fulfilled. "As regards Russia, the situation with the gas balance is
completely transparent," he said.

Boyko said that the biggest threat to Ukraine's gas supplies this winter
comes not from Russia but from Turkmenistan. He said that Turkmen
President Saparmyrat Nyyazow's accusations in June that Ukraine was
cheating on its barter payments for gas deliveries in the first half of 2005
should be a warning for "all society".

"We received gas from Turkmenistan and did not deliver any goods, and now it
is necessary to settle the goods deliveries," he said. "Otherwise at the end
of September, beginning of October there were will be more harsh statements
from Turkmenistan and very tough negotiations on prices for next year." -30-
=============================================================
7. UKRAINIAN FOREIGN MINISTER TARASYUK DISCUSSES WTO BID
WITH U.S. SECRETARY OF COMMERCE CARLOS GUTIERREZ

UNIAN news agency, Kiev, in Ukrainian 1218 gmt 14 Aug 05
BBC Monitoring Service, UK, in English, Sun, Aug 14, 2005

KIEV - US Secretary of Commerce Carlos Gutierrez has urged Ukraine
to settle issues which still hamper Ukraine's accession to the WTO. The
spokesman of the Ukrainian Foreign Ministry, Vasyl Filipchuk, said that
Gutierrez met Tarasyuk, who is on an official visit to Kyrgyzstan, today.

Gutierrez praised the progress Ukraine has made in terms of meeting
the WTO requirements, particularly in improving the protection of
intellectual property in Ukraine.

Tarasyuk emphasized that it is especially important to finalize the
bilateral protocol on the access of goods and services to the markers of
the two states as part of Ukraine's WTO bid. Tarasyuk also noted the
importance of granting Ukraine market economy status.

Tarasyuk and Gutierrez agreed to continue the dialogue between the US
Administration and the Ukrainian cabinet to settle the aforementioned
issues. -30- [The Action Ukraine Report (AUR) Monitoring Service]
=============================================================
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=============================================================
8. NATIONAL BANK OF UKRAINE (NBU): BETWEEN
INFLATION DEVIL AND LIBERALIZATION SEA
IMF puts CPI inflation at 15% ytd in 2005, and so does Rada chief

ANALYSIS: by Roman Bryl, Ukraine Analyst
IntelliNews - Ukraine This Week
Kyiv, Ukraine, Monday, August 15, 2005

Verkhovna Rada speaker Vladimir Lytvin during his meeting with
representatives of Kherson shipbuilding yard on Aug 12 made a harsh
declaration that the real level of consumer inflation exceeds 2-fold data of
state statistics committee (SSC).

According to Lytvin, inflation makes up 15% ytd whereas SSC in the
beginning of August put it at just 6.7% y/y in Jan-Jul. Such a declaration
by the speaker may be regarded as a political move, taking into
consideration the informal start of March 2006 parliament election
campaign.

But there is one thing that gives extra credence to Lytvin's words. Speaking
actual real inflation, the speaker just repeated a conclusion of the IMF
mission that worked in Ukraine on Jul 25 - Aug 2. After examining the
current economic and financial situation, the mission named two major
problems.

They are the decline of GDP growth from 12% y/y at the beginning of the
year to 4% y/y in Jul 2005, and the rising inflation. IMF declared inflation
is main problem of the Ukrainian economy.

NBU's FX interventions trigger increase of monetary base ---

IMF's statement caused broad reverberations, first of all among participants
of the local FX market. The latter stated the currency policy of National
Bank of Ukraine (NBU) had created all preconditions for inflation
acceleration. We should note that NBU keeps a ban on arbitrage
transactions, i.e. banks during one day can only buy or sell foreign
currency.

At the same time, banks are forbidden to exceed the purchase or sale
volumes that are indicated in the list which banks must fill and transfer to
NBU before trading.

Banks tried hard to meet currency exchange demands of its clients and at
the same time make transactions for its own needs. The major clients of
Ukrainian banks that possess large amounts of foreign currency are
exporters traditionally accounting for the largest part of the country's
GDP.

Thus, on the FX market supply in most cases exceeded demand. NBU
attempted to prevent FX oversupply in interbank trades via every day
interventions (buying up excess FX). Only in Jul 2005, NBU bought USD
397.3mn. Since year-start, purchases made up USD 5bn. The interventions
helped banks to keep a stable UAH/USD rate of 5.05 during the last few
months.

But by buying FX surpluses, NBU spurred increase of the monetary base.
Over Feb- Jul, the indicator soared UAH 10.6bn (19.3%) to UAH 65.5bn
(almost USD 13bn).

By not participating in interbank trades on
Aug 8-9, NBU causes near-panic among market players -----

IMF criticized the monetary base upsurge and NBU's interventions. This
caused government to pressure NBU to clean up its act. We cannot say for
sure what kind of pressure government put on NBU, but on Aug 8-9 the bank
did not purchase as usual FX surpluses in interbank trades.

This led to a near-panic on the market because of uncontrolled oversupply
of USD. According to some dealers, UAH/USD rate on these days
strengthened as far as 4.60. Banks rushed to sell USD at any rate because
they had obligations toward their clients. In their turn, clients needed UAH
to make current payments.

As a result, on Aug 8 the UAH/USD rate on the interbank market reached a
5-year high at 4.99. This was very unfavorable for exporters, who lost part
of their earnings due to a weaker USD.

NBU raises interest rate from 9% to 9.5% to curb inflation -----

On Wednesday, Aug 9 NBU made several steps to calm down market players.
FIRST the bank took part in interbank trades, but bought only FX revenues of
exporting companies. It was reported that the bank acquired USD 80-100mn
during this day. Moreover [SECOND] the NBU raised the refinancing rate by
0.5pps to 9.5% from 9%. The rate was kept at 7% since Dec 2002.

Then [THIRD] the NBU raised it by 0.5pps to 7.5% in Jun 2004, by 0.5pps to
8% in Oct 2004, and by another 1pp to 9% in Nov 2004. According to NBU's
head of FX reserves department Mykola Melnichuk, the bank intends to take
measures to prevent sharp fluctuations of the UAH/USD rate.

Dealers interpreted the move more as NBU's desire to show it would become
more active on the FX market rather than a real anti-inflation measure.
Indeed, the bank resumed active purchases of foreign currency (but only from
exporters). The UAH/USD reached 4.98 on Aug 12.

Also, [FOURTH] on Aug 9 NBU released a decree saying that from Sep 1
reserve rates on demand and time deposits of corporates and individuals in
local and foreign currency would be raised by 1pp from 7% to 8%. This should
the increase the cost of credit resources. According to Aval Bank's
president Alexander Derkach in the nearest future there would no longer be
loans extended at 15% in UAH and 11% in USD.

Still, Derkach predicts the rise of banks' interest rates will not happen
before end-year. We think banks can still raise rates earlier than year,
albeit significant administrative pressure may be applied. We are quite
negative about rather rough methods used by NBU.

NBU plans to liberalize currency market,
but possibly not until Mar 2006 general elections -----

Nevertheless NBU made the first moves to restrain inflation. Still, they are
not enough to solve the problems. Representatives of Ukrainian banks started
to appeal to NBU to liberalize the FX market. FIRST, they want NBU to cancel
the 1.5% duty to state pension fund levied on FX transactions. SECOND and
most importantly, banks want NBU to allow arbitrage transactions making it
possible for banks to both sell and buy foreign currency during one day.

NBU very quickly responded to these appeals. First NBU deputy chairman
Anatoly Shapovalov confirmed on Aug 11 the bank generally supports the idea
of FX liberalization. Shapovalov said in an interview to Kommersant-Ukraine
daily newspaper that NBU would reduce its presence on the interbank market.

Shapovalov argued that it is necessary, because FX trade rules were set up
in 1999 to prevent a possible financial crisis related to the 1998 Russian
banking collapse. We must remark that these rules are quite outdated now.

Unfortunately, Shapovalov did not unveil when NBU would make first steps to
liberalize the market. He said a free market can cause financial disparities
due to wider FX rate fluctuations. In any case, we do not expect NBU to make
serious moves toward liberalization until the Mar 2006 parliamentary vote.

Moreover, NBU reps, including Shapovalov, head of the group of NBU's
advisers Valery Litvitsky, and others declare the bank will not change the
UAH/USD rate in the nearest future. Commercial banks share the view that
NBU will keep the FX rate unchanged till year-end. For example, Pravex-
Bank's VP Denis Bass speaking to Interfax said the official UAH/USD rate
will stay at about 5.05. We should note that it would depend to a great
extent on global FX trends.

In our view, the recent UA appreciation can indeed slow down inflation.
However, exporters can suffer from a stronger domestic currency. That would
further trim GDP growth. Authorities might then decide to increase money
supply administratively, having taken on significant social obligations
after last year's turbulent presidential election. The boost to money supply
and income growth can spur inflation, undermining NBU's efforts.
=============================================================
9. UKRAINE'S HRYVNA SOARS AGAINST DOLLAR

Reuters, Kiev, Ukraine, Monday, August 15, 2005

KIEV -- Ukraine's Central Bank intervened again on the currency market it
closely controls on Monday, buying dollars at 4.98 hryvnas, the same rate
as Friday.

The bank intervened four days in a row last week, in effect allowing the
hryvna to drift slowly upward after it broke through the barrier of 5 to the
dollar. It bought the U.S. currency at 4.99 on Thursday and 4.98 on Friday.
The hryvna is at its highest level since 1999.

For weeks, the bank tried to hold the rate at 5.01 after engineering a three
percent rise in its value in a single day, undermining confidence in the
market. -30- [The Action Ukraine Report Monitoring Service]
=============================================================
10. DESTITUTE NORTH CRIMEA PROVINCE NEEDS FOREIGN INVESTMENT
German company is the only major employer in Armiansk

New Europe, Athens, Greece, Mon, August 15, 2005

Ukraine is not a rich country, and one of the poorest parts of it is
Armiansk. Times are tough for just about every one here - even foreign
investors pumping a cool USD 150 million into the destitute north Crimea
province.

A German company called RSJ Erste Beteiligungsgesellschaft is, for
practical purposes, the only major employer in this dusty city of some
40,000.

In contrast to Ukraine's booming metropolises, with skylines jammed with
construction cranes and goods and services quite comparable with Central
Europe, Armiansk appears unchanged from the downfall of the Soviet Union.

Buildings are ugly Soviet-era high-rises built of concrete panels sealed
with tar. At the highway turn-off to one of RSJ's Ukraine projects, a
chemicals factory called Krymsoda, a shabby store offers only fizzy water,
candies, canned foods, and liquor. The selection familiar to any Ukrainian:
it's what food shops offered during the days of hyperinflation in the early
1990s.

"We don't have anything here except the Germans (investors), without them
there is no honest work in Armiansk at all," Deutsche Presse-Agentur (dpa)
quoted Vadim Kononov, a young man hanging out in front of the store, as
saying. "And now the powers-that-be are against the Germans."

Vadim's opinion is doubly worrying one for Ukraine's new government, which
wants badly to attract foreign investment, and faces national parliamentary
elections next March.

The main issue of the campaign is already clear, and quite simple: how much
do average Ukrainians think their well-being improved since the Ukraine's
Orange Revolution? "For us things got worse," Kononov said. "The 'Orangists'
came to power and now they want our Crimean factories."

RSJ's top man in Ukraine, Briton Robert Shetler-Jones, has an opinion at
root quite similar to Kononov's. He is, of course, more polite than Kononov
when commenting on the ongoing legal problems faced by RSJ's other
Ukrainian project, a plant for processing low- grade titanium called
Krymskii Titan.

"We have experienced increased, and in our opinion unjustified, legal
pressure on our Ukrainian businesses," he said. "We think this is
inappropriate." It is a testament to Shetler-Jones' experience in the
region, dating back to the early 1990s that, unlike most large-scale foreign
investments in Ukraine, both Krymskii Titan and Krymsoda are visibly
functioning businesses.

Company officials in air-conditioned conference rooms rattle off statistics,
generally confirmed by independent industry analysts, showing RSJ's
investments are solidly profitable, and give work to nearly 10,000
Ukrainians.

Pay in the Crimean plants - and unemployment is higher in Crimea than
almost any other part of Ukraine - averages about USD 200 a month. That's
more than enough to support a typical Crimean family.

Both plants - though in places still equipped with lathes dating back to the
Second World War - are spick and span, and in obvious working order, the
news agency reported. Workers said they appreciated Shetler-Jones' efforts.
"We have to work hard but management treats people decently," said welder
Antonina Sereda. "The pay is fair, and I don't want any one taking it from
me."

The threat, Shetler-Jones says, is a series of legal challenges to RSJ's
Ukrainian businesses, among them suits contesting rental agreements for
raw materials needed to feed Krymsky Titan, punitive inspections by tax
officials, and a possible listing of one or both of the state-owned firms
for privatisation by the Ukrainian government.

An RSJ court defeat, anywhere, could shut the business down, putting the
USD 150 million of foreign investment in jeopardy, and Sereda and thousands
of others out of work.

In recent months the Ukrainian media has fingered Ukrainian Prime Minister
Julia Timoshenko as being behind Shetler-Jone's problems.
Some reports claim Timoshenko has allegedly allied with Russian oligarchs
wanting to take over the Crimean mills.

Others allege her government is playing to the populist vote: Krymsoda and
Krymsky Titan are successful Ukrainian big businesses, meaning - in the mind
of the average Ukrainian voter - someone, somewhere cut a deal to keep the
state-owned companies' profits in private pockets.

Shetler-Jones makes clear he believes his business is on the up-and-up, that
he paid a fair market price to buy into the two plants, and that they
operate legally. Timoshenko's office did not respond to a request for
comment. What is clear is that Shetler-Jones' legal hassles, and Sereda's
worries, no matter their source, are a big headache for Ukrainian President
Viktor Yushchenko.

"My goal is to make Ukraine a better place for foreign investors than it is
for them at home," Yushchenko said last month. "But this will require work
and members of the government looking beyond the next election."

"Frankly, I don't see things changing (in the Ukraine investment
environment) until the March elections," Shetler-Jones said. "I just hope I
can keep my job," Sereda said. "I am a mother and my family depends on it."
=============================================================
11. DURING PRIVATIZATION OF KRYVORIZHSTAL AND OTHER
ENTERPRISES PRINCIPLES OF TRANSPARENCY, OPENNESS AND
COMPETITIVENESS WERE VIOLATED, ROMAN ZVARYCH BELIEVES

By Larysa Kozik, Ukrinform, Kyiv, Ukraine, Tue, August 16, 2005

KYIV - The Justice Ministry has a legal support with regard to illegally
privatized objects, to return state enterprises to the state, Justice
Minister Roman Zvarych informed journalists during a press conference. He
commented on discussions, existing around court rulings with regard to the
Kryvorizhstal and the Nikopol Ferro Alloy Works.

Roman Zvarych underscored that the Justice Ministry considers that during
privatization of those enterprises there was a severe violation of acting
legislation, primarily of such principles as transparency, openness and
competitiveness.

In particular, a sale-purchase agreement on the Kryvorizhstal was concluded
not following 75 days since information was announced, but following 30
days, which made it impossible to create a competition around sale of the
enterprise, the Justice Minister believes. He also said that during
privatization of the Nikopol Ferro Alloy Works this norm was also violated
and a number of other violations were made.

In particular, a control packet of shares 50 percent + 1 was divided into 25
percent and 25 percent + 1, which is inadmissible, Roman Zvarych
underscored. Also, inadmissible restrictions were established with regard
to natural persons, who would be entitled to purchase the enterprise: only
those persons were allowed to participate in the tender who were engaged
in similar matters in the course of three years.

The Justice Minister explained why the state expressed a distrust toward the
previous panel of judges, who had to consider a case concerning the Nikopol
Ferro Alloy Works. The main thing is that all judges examined exclusively
cases about bankruptcy and they never considered cases about illegal
privatization.

Roman Zvarych also emphasized that the state has to return to former
investors the funds, which were spent by them. Due to this reason, in the
Minister's opinion, it is necessary to again display shares of those
enterprises for sale. -30- [The Action Ukraine Report Monitoring Service]
=============================================================
12. UKRAINIAN-BRITISH JV BEGINS CONSTRUCTION OF A PIG-BREEDING
COMPLEX IN KYIV REGION FOR 30,000 HEAD
New facility will cost around USD $4 million

Ukrainian News Agency, Kyiv, Ukraine, Tue, August 16, 2005

KYIV - Nyva Pereiaslavschyny, a Ukrainian-British joint venture agricultural
enterprise, has begun construction of a pig-breeding complex in the village
of Pereiaslavske (Pereiaslav-Khmelnytskyi district, Kyiv region) for 30,000
heads.

Oleksandr Mostypan, the owner of the Nyva Pereiaslavschyny limited liability
company, disclosed this to journalists in Pereiaslavske. The complex
together with equipment and bringing in of the livestock from Denmark will
cost nearly UAH 35 million.

Mostypan noted that Nyva Pereiaslavschyny invested part of its own funds in
the construction of the pig-breeding complex and the other part constitutes
a credit of UAH 20 million that was given by the Aval Bank at annual rate of
17%.

The construction of the pig-breeding complex is slated to finish in the
summer of 2006. The first meat will go on sale in September 2006.

The pig-breeding complex envisages the nurturing and fattening of 30,000
pigs a year with the aim of selling 2,400 tons of meat.
The technology of the Danish firm ACOfunk was taken as the basis for the
technology and fattening in the pig-breeding complex.

The main building of the complex is designed from quickly erected structures
of the Svitlovodsk-based Dniproenerhobudproekt factory.

Mostypan said that Nyva Pereiaslavschyny plans to build 5 more of such
pig-breeding complexes in the coming 5 years.

The Nyva Pereiaslavschyny agricultural enterprise owns over 9,500 hectares
of land, as well as the Pereiaslavskyi Experimental Grain Production Plant,
which has storage capacity of 50,000 tons of grain yearly and produces
100,000 tons of mixed feed per year.

Nyva Pereiaslavschyny plans to gather 55,000-60,000 tons of grain crop
harvest in this year, which is sufficient for providing the 5 pig-breeding
complexes with forage.

As Ukrainian News has reported, the Agricultural Policy Ministry forecasts
growth in the number of pig heads to 10 million heads by 2007.
The pig livestock increased in July by 2.1% or 148,300 heads over June
and it totaled 7,076,500 heads as of August 1. -30-
=============================================================
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=============================================================
13. UKRAINE AGRICULTURAL CONCERN TO BUY GERMAN HOLMER
BEET HARVESTORS FOR WORK IN CHERKASY REGION

Ukrainian News Agency, Kyiv, Ukraine, August 15, 2005

KYIV - UkrSibbank, one of ten largest banks of Ukraine, has opened a EURO
1.03 million line of credit for Agrarian-Investment Union (Kyiv) to finance
the purchase of beet harvesting machinery in Germany. The loan is granted
for five years under EURIBOR+4.5% of yearly interest within the credit line
opened by HypoVereinsbank.

The Agrarian-Investment Union is going to spend the funds to buy German beet
harvesters HOLMER for the work in the area of beet production in the area of
the Palmyrskyi sugar refinery (village of Voznesenske of Cherkasy region).

"The purchase of these harvesters will increase the effectiveness of sugar
beet harvesting and will reduct expenses. The around the clock work of the
harvesters provides for the high economic effectiveness of harvesting. On
the average, each harvester gathers crops from up to 750-800 hectares per
season," the bank's statement reads. The overall cost of the project is EUR
1.2 million.

As Ukrainian News reported, as of July 1, 2005, UkrSibbank's net assets
totaled UAH 7,184.85 million, whereas its credit portfolio was UAH 5,396.31
million and equity UAH 755.36 million.

The bank finished 2004 with a net profit of UAH 39.48 million. According to
the Agency for Development of the Stock Market's Infrastructure, as of
January 15, 2005, the Ukrainian Metallurgical Company (Kharkiv) owned
50.1% of the bank's shares.

A total of 40% in Agrarian-Investment Union Ltd. are held by resident
individual Serhii Fedorenko, 30% by Oleksandr Fedorenko, 30% by Viktoria
Stryzhenko. -30- [The Action Ukraine Report Monitoring Service]
=============================================================
14. GERMANY'S SAINT-GOBAIN OBERLAND COMPANY AUTHORIZED TO
PURCHASE OVER 50% OF CUSTOM-MADE BOTTLE AND JAR MFG

Ukrainian News Agency, Kyiv, Ukraine, Mon, August 15, 2005

KYIV - The Antimonopoly Committee of Ukraine has authorized Germany's
Saint-Gobain Oberland AG to acquire over 50% of the shares in
Consumers-Sklo-Zoria (Rivne region), a closed joint-stock society. The
Ukrainian enterprise produces custom-made bottles and jars for the leading
liquor and food producers in Ukraine and Russia.

According to the statement, Saint-Gobain Oberland AG specializes in
production of goods made of any type of glass and related goods as well
as in development and sale of equipment for the glass industry.

As Ukrainian News earlier reported, Consumers-Sklo-Zoria was created in
January 1997 by the corporation called Consumers Packaging Inc. (Canada),
the European Bank for Reconstruction and Development, and the Zoria
agricultural firm (Rivne region).

The European Bank for Reconstruction and Development owned of 79.7% of
the shares in Consumers-Sklo-Zoria while the Zoria agricultural firm owned
20.293% as of September 2003. Consumers-Sklo-Zoria finished 2003 with
net profits of UAH 5.427 million. Its net revenues increased by 15.2% in
2003 to UAH 94.095 million, compared with 2002. -30-
=============================================================
15. TAIWAN-BASED FOXCONN COMPANY STARTS BUSINESS TO
MANUFACTURE COMPUTER PARTS IN KHARKIV

By Volodymyr Fomenko, Ukrinform, Kharkiv, Ukraine, Sat, August 13, 2005

KHARKIV - The Taiwan-based FoxConn has started implementing an over
150 M. USD project to launch the manufacture of completing parts for
computers in Kharkiv.

The company's project will be the first foreign investment in the industrial
zone ROHAN, Governor Arseniy Avakov told journalists. -30-
=============================================================
16. METRO UKRAINE OPENS SHOPPING MALL IN DONETSK

Ukrainian News Agency, Kyiv, Ukraine, Tue, August 16, 2005

KYIV - The Metro Cash & Carry Ukraine company, which is a branch of the
German Metro Group, has opened a shopping mall in Leninskyi district of
Donetsk. The company made the statement, a copy of which is available
to Ukrainian News.

According to it, overall investment in the purchase of a land plot (6.8
hectares), construction and equipping of the mall totaled EUR 16 million.
The area of the mall exceeds 14,000 square meters, including 9,000
square meters of trading area and a parking lot for 600 vehicles. The new
shopping mall will provide for more than 350 jobs.

"Next year we plan to open our second mall in Donetsk, which will be timed
to our third anniversary," said director of Metro Cash & Carry Ukraine Axel
Hluchy.

As Ukrainian News reported earlier, Metro Cash & Carry Ukraine started
construction of wholesale trade center in Leninskyi district of Donetsk in
April. Metro Cash & Carry is an international leader of wholesale trade
operating on self-service principle. Over 500 of its stores operate in 28
countries of the world. Its turnover reached EUR 26.4 billion in 2004.

As Ukrainian News reported, Metro Group is one of the largest international
trading groups, the turnover of which in 2003 totaled EUR 53.6 billion.
Metro Group has 475 shops in 26 countries with more than 72,000
employees.

Metro Cash & Carry Ukraine, which is the subdivision of Metro Group, plans
to invest UAH 1.5 billion in the construction of wholesale trade centers in
Ukraine. Investments in the construction of trade centers in Ukraine in 2004
run in to UAH 0.5 billion. By the end of 2005, Metro is planning to open
trade centers in Donetsk, Zaporizhia, Odesa and Lviv. Particularly, the
company plans to build two centers in Lviv region in 2005. -30-
=============================================================
17. UKRAINE'S ECONOMIC POLICIES REQUIRE SERIOUS REVAMPING

LETTER-TO-THE-EDITOR: By Walter Prochorenko
Paramus, New Jersey, Tue, August 16, 2005
Subject: Re: Deliso Article, AUR#541 Aug 15, Article 22
The Action Ukraine Report (AUR), Number 542, Article 17
Washington, D.C., Wednesday, August 17, 2005

Dear Morgan,

Kudos for the exceptional piece by Christopher Deliso in his
"REVOLUTION INDUSTRY, PHASE 2: UKRAINE'S SUMMER OF
DISCONTENT", in "THE ACTION UKRAINE REPORT - AUR" -
Number 541. Although Mr. Deliso, by his own admission, was silent for
the past 10 months, his commentaries are probably more important now
than they were when the euphoria of the revolution veiled what was still to
come when the dust settled.

Mr. Deliso's analysis again confirms the dire need for Western consulting
support in Ukraine's move toward a true market economy. The actions
and policies of both the President and the Prime Minister, although
dialectically opposed in form, confirm that they still have the Soviet era
mentality which must be tempered with Western style market economic
experience before true reform as mandated by the people's Orange
Revolution takes hold.

Neither Prime Minister's Tymoshenko's autocratic and "central-government-
style" policies and decrees nor President Yushchenko's laissez-faire
approach toward his family's and friends' transgressions will win the hearts
and support of the populace once gasoline prices reach astronomical
proportions and the cold of the winter season sets in. It is quite evident
that something needs to be done to stimulate the economy and to kick-start
the businesses that are still waiting on the sidelines.

The recent establishment of the "Ukrainian Center for Facilitating Foreign
Investments" is a step in the right direction but considering most of the
members composing this group it seems hardly enough to provide the type
of "outside" and objective overview of what is required to bring a critical
and constructive approach to the problems that exist. Members that are
already working in Ukraine or that can have a direct impact from the
Center's recommendations would be hard pressed to give an objective
imprimatur to matters that can affect their position.

Ukraine's economic policies require some serious revamping particularly
in the areas of privatization (and perhaps re-nationalization), re-emerging
cronyism and nepotism, taxation, free-market economics, and dealing with
the oligarchs and criminals of the previous era. These issues need to be
addressed quickly, effectively, with firm determination, and a unified/
uniform strategy. Accomplishing this with the present day managerial
structure will be very hard to do.

Ukraine's government should therefore take a hard look at Poland's evidently
effective strategy of inviting and utilizing its Polish Diaspora to assist
in implementing its internal policies based on the Diaspora's experiences
and western education. If Ukraine is indeed serious about joining the EU,
it should take examples and guidance from countries that have already
achieved this goal.

Best Regards,
Walter Prochorenko, PhD.
-----------------------------------------------------------------------------------------------------------
Walter Prochorenko is a businessman who spent over 8 years in Ukraine
in private enterprise which included consulting, real estate development,
business appraisals for banking interests, and construction. He has just
finished a doctorate in International Business with his main area of
research: business in Ukraine. E-Mail: prowalt@yahoo.com
=============================================================
18. AMERICAN FELT BOOTS, DRUGGED ORANGES
AND OTHER HOLLYWOOD SCRIPTS

COMMENTARY: By Adrian J. Erlinger
http://leopolis.blogspot.com
Washington, D.C., Monday, 15 August 2005

RE: Revolution Industry, Phase 2: Ukraine's Summer of Discontent
by Christopher Deliso

Christopher Deliso deliberately did not write anything about Ukraine's
"Orange Revolution" when it was going down 10 months ago. But for those of
us who were writing about the Orange Revolution, or simply witnessing it, we
experienced a historical event that marked a momentous change in a corrupt
country struggling to shake off the post-Soviet yoke of Leonid Kuchma.

During the spontaneous protests of November 2004, the Western media
unwittingly represented events in Ukraine in a black versus white dichotomy.
For the most part, coverage was targeted for the American audience to
simplify events in a country last covered when Oksana Bayul won an Olympic
medal or when Chernobyl blew up. Events in Ukraine were portrayed through
orange-colored glasses: a battle between “freedom” and “tyranny,” the
“pro-Western” candidate versus the “pro-Russian” one.

Instead of a domestic political issue, the 2004 presidential election in
Ukraine were interpreted as a geopolitical battle on the Grand Chessboard.
Ukraine was a pawn in the game between West and East. Ultimately, the
electoral victory of Viktor Yushchenko in late December 2004 was interpreted
as the triumph of the “free world” over the Russian autocratic order.

On the ground, things are always more complicated. Even during political
upheaval (or revolution), domestic politics is not as exciting as the Clash
of Civilizations. As a result of such Western (and Russian) coverage,
articles occasionally crop up now and again from disgruntled commentators
who continue to “challenge” the Orange Revolution—and for good measure
America’s role in the events—to prop up their own ideological underpinnings.
Such commentary seeks to expose undiscovered “truths” and lurid details
about Ukraine’s Orange Revolution, regurgitating the same simplistic
paradigms that the Western and Russian media presented. For some odd
reason, Ukraine’s Orange Revolution is compared to the war in Iraq.

The new government must account for its actions and observers must keep
them in check. Unwarranted cynicism, however, continues to discredit the
truth about the Orange Revolution of autumn 2004. Because of gross ignorance
and misunderstanding, supporters of the Orange Revolution who braved
freezing temperatures for weeks are still cast as tools of the West.

Nonviolent action against mass vote fraud played out like a “bad Hollywood
movie…scripted, funded and produced in America.” For Ukrainians, the
Orange Revolution was a socio-spiritual transformation of Ukraine; for Mr.
Deliso it was a “non-event.”

No one can completely deny US involvement in financially and logistically
supporting Ukrainian nascent civil society and other institutions. One piece
of "American propaganda" that I collected was a brochure paid for by the
Ukrainian Congress Committee of America. Without mentioning any of the
candidates’ names, the leaflets encourage Ukrainians to go out and vote. Not
one speck of orange appeared on the leaflet. When people are in the streets,
enjoying free rock concerts, supporting democracy and hoping for a better
life, it could mean only one thing – America is involved. George W. Bush (or
George Soros, take your pick) forced those kids to dance on Khreshchatyk.

It is so unreal it has to be planned and scripted. The plot, however,
thickens into science fiction. “American intervention” evokes images of CIA
agents deploying hryvnias to the tent cities while US Army commandos in full
fatigues administer hot tea and food to the demonstrators. Operation
Enduring Orange. Reading Mr. Deliso’s piece, I’m sure he would have agreed
with Lyudmilla Yanukovych when she remarked that the Americans provided
felt boots to the protesters and were being fed drugged oranges.

According to Professor Taras Kuzio of George Washington University in
Washington, D.C. “Most Orange Revolutionaries traveled to Kyiv voluntarily,
although a small number of hard-core activists were paid travel expenses.
This was not the case for Yanukovych voters, who were dispatched to Kyiv in
an organized operation. One indicator of the manufactured Yanukovych faction
was the dried military meals that the Ministry of Defense illegally ‘sold’
at a cost of 300,000 hryvni ($61,000) to the Yanukovych voters who journeyed
to Kyiv” (Eurasia Daily Monitor, Volume 2, Number 156). Other observers who
witnessed the Orange Revolution would unanimously agree with Dr. Kuzio’s
assessment.

Even though Mr. Deliso believes that “a massive Western media and PR
bombardment perpetuated the fraud,” he ironically cites speculative and
poorly interpreted Western media sources of Ukrainian political and economic
developments. An op-ed from the Guardian shows “proof” of American
intervention in the Orange Revolution. Articles from the Telegraph and the
anti-everything Antiwar.com (a publication which never once discussed the
peaceful nature of the Orange Revolution protests) “prove” that Yushchenko
was not poisoned. A Washington Post snippet indicates that Tymoshenko
favors reprivatization of Krivorizhstal; Mr. Deliso’s assessment is that the
once rabid nationalist Tymoshenko “has gone Soviet” in her economic
policies.

As the media drew polarized dichotomies during the Orange Revolution,
similar assessments of the current Ukrainian leadership continue.
Tymoshenko’s economic policy may appear to be “Soviet,” but are in reality
are more populist than socialist: around 67% of Ukrainians believe that
privatization of the 1990s was taken unjust manner, with only 9% believing
the opposite (Ukrains’ka Pravda, 5 July 2005). An election is coming up
soon, after all. For those who study Soviet-era Ukraine, comparing
Tymoshenko to, say Shcherbitsky, is unbearable. In the post-Orange order,
Yushchenko and Tymoshenko are suddenly bitter enemies. The actions of
one spoiled brat Andriy signify a revolution betrayed for millions: “After
only 8 months, Revolution Industry Phase 2 has set in, with the growing
public discontent towards the government's policies, chief of all its
economic ones, feeding the dialectic of endless infighting and political
turmoil.”

If the Orange Revolution was a “non-event,” how could today’s political
landscape possibly be in a state of “political turmoil?” As far as “growing
public discontent towards the government’s policies,” only the March 2006
parliamentary elections will adequately show that Ukrainians are committed
to the Yushchenko government.

Concerning Andryi, Viktor Yushchenko's wealth was well known during the
Orange Revolution; after all, he was head of the National Bank and a former
Prime Minister. At the time of the Orange Revolution, Yushchenko's financial
status mattered little to voters and they did not elect him upon the basis
of
wealth, or a lack thereof. They chose him over twice-convicted felon Viktor
Yanukovich, among other reasons.

So then why did the Orange Revolution take place?

Simple. Election fraud. In a recent survey conducted by the Kyiv-based
Democratic Initiatives, 59% of Yushchenko voters pointed to election fraud
as the main reason for protesting during November and December. A mere
30% took to the streets to express their support for Yushchenko's candidacy.

Misguided assessments fail to separate the Orange Revolution from the
current political order of Yushchenko and Tymoshenko. Ukrainians have not
been duped by an American stooge. Angry that their votes were stolen, they
succeeded in sweeping away the Kuchma-Yanukovych legacy.

Observers of Ukraine, including myself, warmly welcome criticism of the
Yushchenko government as long it gives credit where credit is due. The
ideological subtext of Mr. Deliso’s article, however, is that the US is so
big, bad, and nasty it just HAD to have manipulated the Ukrainian popular
movement against fraudulent elections. The old stereotypes of the 1990s
reemerge: How can a land crippled by poverty, mail order brides,
prostitution, and Chernobyl possibly stand up on its own feet without
America intervening?

This is not only insulting to the intellect of Americans, but it is
insulting to Ukrainians who stood on Maydan, who risked their jobs for
supporting Yushchenko, who faced intimidation, beatings and arrest
because they believed in democracy. By trying to prove that the Orange
Revolution is one more example a grand US Imperialist Conspiracy one
ignores the significance of the Ukrainian Orange Revolution. If
Yushchenko’s policies fail, the Orange Revolution attests to the fact that
Ukraine is not beyond helping itself in the future. -30-
------------------------------------------------------------------------------------------------------
Adrian Erlinger is an international affairs writer in Washington, D.C. and
runs http://leopolis.blogspot.com/, ajperlinger@hotmail.com.
=============================================================
19. ROMANIA FILES DOCUMENTS WITH INTERNATIONAL COURT OF
JUSTICE REGARDING BLACK SEA BORDER DISPUTE WITH UKRAINE

AP Worldstream, Romania, Tuesday, Aug 16, 2005

Romania said Tuesday it had filed documents with the International Court of
Justice to support its suit asking the court to resolve its Black Sea border
dispute with Ukraine.

The two former communist countries have been wrangling for years over the
boundary line in the oil-rich sea. In September, Romania filed the suit
asking the United Nations' highest court to intervene and demarcate the
border, saying bilateral talks were leading nowhere.

The Foreign Ministry said Tuesday it had detailed Romania's position in the
report filed with the court in The Hague, Netherlands. The report includes
"a presentation of the juridical reasons of the demarcation option proposed"
by Romania, the ministry said. It would not give further details, saying the
report was confidential.

Ukraine is expected to file its own report in coming months, after which the
court is to start the hearings in the case. Border disputes brought to the
court, also called the World Court, normally take several years to be
resolved. The court arbitrates between assenting U.N. member states, and
its rulings are final and binding.

Romania and Ukraine signed a treaty in 1997 agreeing to negotiate a border
settlement, but the discovery of major oil and gas deposits in the mid-1990s
prompted arguments over access to areas in the Black Sea.

In 1995, Ukraine protested that Romania was seizing Ukrainian territory in
the sea. Ukraine built structures on "Serpents Island," a rocky isle, to
strengthen its claim. -30- [The Action Ukraine Report Monitoring Service]
=============================================================
16. ROMANIA: AN OIL FORTUNE BOUND IN RED TAPE
U.S. Investor Becomes Entangled On Romania's Thorny Path to Open Markets

By Terence O'Hara, Washington Post Staff Writer
The Washington Post, Washington, D.C.
Tuesday, August 16, 2005; Page D01

G. Philip Stephenson does not cut the figure of an Eastern European oil
baron, clashing with formerly communist security officials over the legality
of his budding empire.

Stephenson is a talkative, Texas-bred lawyer and former U.S. Treasury
official who in the past four years has tried, with some success, to create
a personal fortune from the privatization of Romania's oil industry. But his
success has drawn the attention of Romanian prosecutors and demonstrated
the potential and pitfalls of private investment in developing economies in
Eastern Europe.

Last year, he and Dinu Patriciu, his Romanian partner in Rompetrol Group NV,
that country's second-largest oil company, became the targets of a criminal
investigation in Bucharest. Patriciu has spent a day in jail, and Stephenson
has been publicly identified as a target of the investigation.

The story of how Stephenson became a target of Romanian anti-corruption
officials began in Washington 13 years ago. The mixing of politics and money
in the 1990s gave rise to a number of private investment partnerships
here -- Carlyle Group being the most prominent -- that helped change
Washington careers and fortunes.

Stephenson, a native of Houston and a Harvard law graduate, moved to
Washington in the late 1980s to work as a corporate lawyer for the
Republican-connected law firm Baker Botts LLP. When George H.W. Bush
was elected president, he spent 18 months at the Treasury Department's
Office of International Affairs. That job gave Stephenson a close look at
the rapidly evolving economies of Eastern Europe.

When Bush was voted out of office, Stephenson did what many political
appointees in Washington did in the 1990s: He used his Washington
contacts and experience to launch a private equity fund.

He raised money from friends and associates -- including Carlyle Group's
Edward J. Mathias; Ed Rogers, a White House official in the senior Bush's
administration; former U.S. ambassador to Germany Richard R. Burt; and
several large institutional investors. Rogers's and Burt's Republican
lobbying firm, Barbour Griffith & Rogers LLC, is working for Rompetrol.

The result was International Equity Partners LP, a private equity fund to
buy private companies in India and Romania. By 1998, he had raised $20
million to invest in Romania and Moldova. In 1997, Burt introduced
Stephenson to Patriciu, a former member of the Romanian parliament who
had begun investing in Romanian privatization efforts. Patriciu became a
partner in the fund.

After the collapse of the communist regime in Romania in 1989, the economy
and government began a fitful and sometimes chaotic process of privatization
of state-owned industries.

"It was blood-in-the-streets time," Stephenson said of the mid-1990s. "But
there was opportunity everywhere if you could stomach it."

Mathias, who has no business relationship with Stephenson now, remembers
him as "very smart, very enterprising and very willing to take on risk."

Prosecutors in Romania allege Stephenson and Patriciu evaded taxes and
illegally profited from the privatization of Rompetrol. No charges have been
filed. Patriciu and Stephenson say the investigation is a sham, triggered by
their refusal to buy refineries owned by well-connected Romanian
businessmen. The controversy has drawn the attention of officials
considering whether to admit Romania into the European Union pact and
has drawn statements of concern from the U.S. State Department.

Last month, Stephenson, deputy chief executive and 20 percent owner of
Rompetrol, was in Washington visiting old friends in government and out.
In those conversations and in meetings with reporters, he is trying to draw
international attention to his situation, thereby persuading Romanian
prosecutors to, as he puts it, "do the right thing and finish up this
trumped-up investigation."

"We want a fair, open, transparent and expeditious process," said
Rompetrol's attorney, Obie L. Moore, a Bucharest-based lawyer for the
international firm Salans. "Otherwise, if we don't, Romanian reality could
drastically change."

For Stephenson, the case took a disturbing turn in May when his partner,
Rompetrol chief executive and 80 percent owner Patriciu, was arrested and
taken into custody for 24 hours before a court denied a prosecutor's request
to detain him for 30 days. News of the arrest hammered the stock of
Rompetrol's main publicly traded subsidiary. It has since recovered.

"Virtually all of my personal wealth is tied up in this company," Stephenson
said. He estimated his stake in Rompetrol at about $100 million on paper.
"The stakes for me in this are just about everything."

Rompetrol was privatized in 1993, and Patriciu bought control of it in 1998.
Stephenson's Romania fund bought a minority stake for $3 million in 2000,
the last of three investments made by the fund. Stephenson left his private
equity fund in 2001 to join Rompetrol full time. He moved to Romania in
December of that year.

In 2002, International Equity Partners sold its stake in Rompetrol to a
European investor -- for a profit, Stephenson said. Patriciu and Stephenson
bought 100 percent control of Rompetrol's holding company late last year.

Rompetrol in 1999 began buying Romania's state-owned oil-mining
and -refining assets, using cash from its existing business, foreign equity
investments and borrowing. In 2001, it bought the government's stake in
Romania's largest oil refinery, Petromidia, for about $50 million.
Petromidia drove much of the company's subsequent financial success.

The company revamped operations at the refinery and invested significantly
in its expansion. By last year, Rompetrol had $1.1 billion in revenue and
was profitable. It began trading publicly in April 2004 with a market value
of about $500 million. By the end of this year, it will have 300 filling
stations in Romania.

But the Petromidia deal's success drew the attention of the government.
Government officials say Rompetrol did not live up to its commitments when
it bought the Petromidia refinery and did not pay all the taxes it owed, in
effect ripping off the Romanian government.

In a recent interview, Stephenson chalked up the criminal investigation to
private competitors -- "the Romanian oil mafia," in his words -- who wanted
Rompetrol to buy their companies at inflated prices. "They threatened to
ruin us by releasing damaging information to the government," he said.

One of his competitors also owns a Bucharest newspaper that has kept up
a steady stream of stories accusing Rompetrol of illegality, he said.

He cited an official finding by Romania's ministry of privatization that
Rompetrol is in compliance with its privatization agreement for Petromidia.
Stephenson said that by accusing the company of failing to pay taxes,
prosecutors are seeking to criminalize a contract dispute that has largely
been resolved.

"It's as if they are saying, 'Thanks for fixing our broken refinery and
putting in all that money and technology and sweat for four years, but now
that it is a moneymaker, we would like it back,' " he said.

Rompetrol is also getting support from other foreign investors in Romania.
And in June the U.S. State Department asked the Romanian government
"to observe due process, to be open and objective" in its handling of the
Rompetrol case.

Rompetrol last month filed a grievance against the government, claiming that
its conduct violated a treaty between Romania and the Netherlands, where
Rompetrol is incorporated. If a settlement can't be reached in 90 days,
Rompetrol has the right to demand World Bank arbitration.

Romanian Embassy officials in Washington and the Ministry of Justice in
Bucharest did not respond to phone calls and e-mails.

In June, Romanian President Traian Basescu, who campaigned on a strong
anti-corruption platform, criticized foreign pressure to hold back on the
anti-corruption work there, saying such efforts are essential for Romania to
enter the European Union by 2007.

"If political parties, business lobby groups and the media rise against
state institutions trying to deal with major corruption, thus hindering
lawful actions of these institutions, then E.U. integration will certainly
remain just a dream," he said, according to press reports.

Stephenson said Rompetrol's case has some similarities to that of Yukos,
the private Russian oil company that oil executive Mikhail Khodorkovsky
bought on the cheap in the 1990s, only to be sentenced to nine years in a
Russian prison earlier this year. But, he added, Romania is not like Russia.

"In five years here, I've never been personally threatened," Stephenson
said. "Your opponents may write bad things about you and convince the
government to investigate you, but there's no business killings there."

He also expressed confidence that he and Rompetrol will be cleared of
any wrongdoing. The company has publicly responded in detail to all of
the government's charges. "Transparency is our ally," Stephenson said.
=============================================================
21. UKRAINE, 14 YEARS LATER........

STATEMENT: Ukrainian Congress Committee of America (UCCA)
Washington, D.C., Tuesday, August 16, 2005

We will always remember the sense of euphoria that every Ukrainian felt in
his heart on August 24, 1991, when Ukraine declared its independence and
embarked on the road towards democratic reform. We will also never forget
the elation and joy of the successful Orange Revolution last year. The world
watched intently as the Ukrainian people rose up against corruption and
injustice to claim their right to self-determination.

We understand that the road that lies ahead is not without obstacles, but
this year, the Ukrainian people everywhere will celebrate the fourteenth
anniversary of Ukraine's independence and look back at the progress
Ukraine has made with pride and hopeful anticipation for a bright future.

Ukraine has accomplished much in the past fourteen years. Ukraine has
overcome serious economic problems and set its economy on a course of
rapid growth. Last November, the Ukrainian nation resolutely stated its
intention to continue market reforms and take the necessary steps towards
integration into the EuroAtlantic community.

The current democratic government of Ukraine has held true to the course
outlined during the recent presidential campaign. The recent Orange
Revolution has given impetus to the development of a true civil society,
one whose voice is heeded by the government. The future holds many
opportunities for Ukraine.

Our community must take an active part in the upcoming March 2006
Parliamentary elections to ensure that they are conducted in a free and fair
manner. We must continue to cooperate with the non-governmental sector
in order to encourage further democratic growth in all sectors of society.

We must also help to encourage private and foreign investment in Ukraine,
as it is vital to the development of Ukraine's economy.

As we celebrate the fourteenth anniversary of Ukraine's independence, let
us continue to work diligently for the benefit of Ukraine and the Ukrainian
American community.

Our community should continue to assist our brethren in Ukraine to help
fulfill the aspirations of our forefathers; to secure an independent,
democratic Ukraine that can take its rightful place among the nations of the
free world.

On the occasion of the fourteenth anniversary of Ukrainian independence,
the Ukrainian Congress Committee of America sends its warmest greetings
to all Ukrainians, both in Ukraine and beyond its borders. Let us be unified
in our efforts to secure a better future for the Ukrainian nation.

"TOGETHER WE ARE MANY - WE WILL NOT BE DEFEATED!"

On behalf of the UCCA Executive Board,
Michael Sawkiw, Jr., President
Maria Duplak, Executive Secretary
=============================================================
22. UKRAINE: YUSHCHENKO ENCOURAGES CREATION OF FUND
FOR ARCHAEOLOGICAL RESEARCH AND RESTORATION AT
THE ANCIENT CITY OF TAURIC CHERSONESE

Ukrainian News Service, Kyiv, Ukraine, Tue, August 16, 2005

President Viktor Yuschenko is initiating the creation of the Friends of
Chersonese Fund for research studying the Tauric Chersonese national
reserve. The presidential press service disclosed this in a statement.

According to the statement, besides research studying of the reserve,
the objective for creation of the fund is also to carry out up-to-date
excavations of this unique historical facility, and also to hold
exhibitions.

Yuschenko also notes that the issue of using state-of-the-art methods for
restoration and preservation of historical findings deserves a separate
attention. Yuschenko proposed to create a research council, which should
work out the conception for creating a museum reserve according to
modern requirements.

Yuschenko stressed the need to carry out work relating to the fight against
"black" archaeology, and he also called on the local business elite to
support the idea of rehabilitating Chersonese and research works.
Yuschenko also noted that the conduct of research works on the territory
of the reserve ought to be enhanced.

An archeological museum was founded on the territory of the ancient city
Tauric Chersonese in 1892, and it has been turned in our days into a major
research and culture institution - the Tauric Chersonese National Reserve.
=============================================================
23. "YULIYA TYMOSHENKO - THE MILLION DOLLAR WOMAN?

ANALYSIS AND COMMENTARY: By Leonid Amchuk
Ukrayinska Pravda website, Kiev, in Ukrainian 15 Aug 05
BBC Monitoring Service, UK, in English, Monday, August 15, 2005

KYIV - Prime Minister Yuliya Tymoshenko's taste for luxury outfits is at
odds with her declared income, a Ukrainian web site has alleged.

In an article titled "Yuliya Tymoshenko - the million dollar woman?"
published on the Ukrayinska Pravda web site, Leonid Amchuk writes,
"Yuliya Tymoshenko is probably the poorest person in the world who
wears Louis Vuitton clothing in everyday life."

Amchuk calculates the cost of a number of Louis Vuitton outfits and
accessories that Tymoshenko has been seen wearing during public
engagements this year at 31,620 dollars. He goes on to compare this figure
with Tymoshenko's declared income for 2004 of 12,400 dollars and her
earnings this year as prime minister of 3,500 dollars a month since June,
and 600 dollars previously.

Amchuk points out that Tymoshenko has said that she owns no shares and
has 900 hryvnyas (under 200 dollars) in her bank account. He also doubts
that her husband could pay for her outfits, since Tymoshenko has said that
he has just started up an agricultural business.

"A love of fine clothes has confirmed what many suspected but nobody has
proved, that Tymoshenko is living beyond her means," he concludes.

Leonid Amchuk is the pseudonym of Ukrayinska Pravda journalist Serhiy
Leshchenko, who recently published a series of articles describing the
extravagant lifestyle of President Viktor Yushchenko's son, Andriy. -30-
=============================================================
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