US-Ukraine Business Council

Cbonds News, St. Petersburg, Russia, Tuesday, September 9, 2008

12. UKRAINE STRONGLY FEELS GLOBAL CRISIS SAYS NBU COUNCIL HEAD PETRO POROSHENKO
UkrInform - Ukraine News, Kyiv, Ukraine, September 11, 2008

13. EXPANDING TRADE AND TRAVEL BETWEEN THE U.S. AND UKRAINE

Ukraine's Civil Aviation Safety Assessment

U.S.-Ukraine Business Council (USUBC), Washington, D.C., Tue, Sep 9, 2008

14. AEROSVIT UKRAINIAN AIRLINES SUFFERS RAIDER ATTACK

By Jim Davis, Business Ukraine magazine, Kyiv, Ukraine, Monday, September 8, 2008

15. AEROSVIT REQUESTS HELP TO PROTECT AGAINST ILLEGAL SEIZURE AND RAIDER ATTACKS

Issues letter asking for protection of airline & its employees from illegal interference into the company's activity

U.S.-Ukraine Business Council (USUBC), Washington, D.C., Tuesday, September 9, 2008

16. PM TYMOSHENKO, U.S. ASSN'T SEC OF STATE DAN FRIED DISCUSS UKRAINE'S INTEGRATION WITH NATO
Ukrainian News - on-line, Ukrainian News Agency, Kyiv, Ukraine, Thursday, September 11, 2008

17. PM TYMOSHENKO SAYS COLLABORATION CLAIMS ARE 'COMICAL'

Roman Olearchyk in Kiev, Financial Times, London, United Kingdom, Mon, Sep 8 2008

18. VANCO HAS NO INTEREST IN INVOLVING RUSSIANS IN UKRAINE PROJECT

Letter-to-the-Editor: From Mr Gene Van Dyke, Founder and President,
Vanco Energy Company, Houston, TX, US, Financial Times, London, UK, Fri, Sep 12 2008

19. EU PLEDGES TO STRENGTHEN ECONOMIC AND POLITICAL LINKS TO UKRAINE

bne Ukraine Daily List, Berlin, Germany, Wed, September 10, 2008

20. EU KEEPS DOOR HALF-OPEN FOR UKRAINE

Euro Activ, Brussels, Belgium, Wednesday 10 September 2008

21. RUSSIA'S WESTERN NEIGHBOURS: UKRAINE COMES TO THE FOREFRONT
An already fragile Ukraine has been made a lot more nervous by Russia’s war with Georgia - and it is not alone

The Economist print edition, London, UK, Thursday, September 11, 2008

22. RUSSIA SLAMS 'UNFRIENDLY' UKRAINE
Agence France Presse, Moscow, Russia, Thursday, September 11, 2008

23. EU PLEDGES CLOSER TIES TO KIEV IN CAUTIOUS MOVE

By David Gauthier-Villars, The Wall Street Journal, New York, September 10, 2008; Page A9

24. THE NEXT CRISIS COULD TAKE PLACE IN UKRAINE

Analysis & Commentary: By F. Stephen Larrabee

Corporate Chair in European Security at the RAND Corporation

Japan Times, Tokyo, Japan, Monday, September 8, 2008

25. RUSSIA'S NEXT TARGET COULD BE UKRAINE

Opinion: By Leon Aron, The Wall Street Journal, NY, NY, Wed, September 10, 2008; Page A15

26. AN ANALYTICAL DIARY OF THE DEFEATS AND VICTORIES OF THE UKRAINIAN STATE

A collection of major works by noted US historian James Mace, exposed the genocide of 1932-1933
By Nadia Tysiachna, The Day, and Natalia Dziubenko-Mace

The Day Weekly Digest, Kyiv, Ukraine, Tuesday, September 9, 2008

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1 . UKRAINE POSSESSES SIGNIFICANT UNTAPPED AGRICULTURAL POTENTIAL

UN food agency says high food prices spur expansion in Eastern European crops

UN News Centre, New York, New York, Thursday, September 11, 2008

NEW YORK - A senior United Nations food agency official today predicted a bumper harvest of cereal crops in Russia and Ukraine for this ear and said the region possesses significant untapped agricultural potential.

Rising food prices have led to an expansion of land used for agriculture in the two countries, with an increase of 2.4 million hectares to 33.8 million
hectares of soil sown with wheat, according to the UN Food and Agriculture Organization (FAO).

In Russia alone, aggregate grain area - wheat, course grains and rice - is forecast at nearly 46 million hectares for the 2008 harvest, which is 2.6 million more than in 2007.

"This clearly shows that higher prices can be an opportunity for the farming community," said Charles Riemenschneider, Director of FAO's Investment
Centre, at the opening of the two-day meeting in Paris on agricultural developments in the region.

Earlier this year FAO and the European Bank of Reconstruction and Development (EBRD) highlighted that as much as 13 million hectares of unused
farmland lay idle in Eastern Europe and the Commonwealth of Independent States (CIS) - 12 of the 15 former Soviet republics.

According to FAO figures, this land is already being exploited, with an aggregate production of wheat in the European CIS countries set to rise to more than 73 million tonnes in 2008, some 13 per cent more than the successful harvest of 2007.

"In March we discussed opportunities for enhancing agricultural output, and we can see from these figures that benefits are already materializing that could make a real difference on world markets," said Mr. Riemenschneider.

"Both countries [Russia and Ukraine] have significant exportable cereal surpluses, but more long-term investment is needed to ensure that this supply

LINK: http://www.un.org/apps/news/story.asp?NewsID=28012&Cr=Food&Cr1=Crisis

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2. RUSSIA, UKRAINE SET TO SIGNIFICANTLY EXPAND AGRICULTURAL OUTPUT

The Associated Press, Paris, France, Thursday, September 11, 2008

PARIS: Russia and Ukraine are set to significantly expand their agricultural plantings this year as higher prices for commodities such as wheat, coarse grains and rice spur farmers to expand their plantings, the U.N. Food and Agriculture Organization said Thursday.

Aggregate output of wheat in the European members of the Commonwealth of Independent States, a loose alliance of ex-Soviet nations, is forecast to rise 13 percent this year to 73 million tons, the FAO said in a statement. The FAO and World Bank are taking part in meetings in Paris this week on financing farming in eastern Europe and Central Asia.

Russia and Ukraine will expand their wheat plantings this year by 2.4 million hectares (5.9 million acres) to 33.8 million hectares (83.5 million acres). In Russia alone, total plantings of all grains is expected to reach 46 million hectares (113 million acres) this year, 2.6 million hectares more than in 2007, the FAO said.

The FAO is organizing a two-day meeting in Paris to discuss the agricultural potential of countries in central and eastern Europe, the Caucasus and Central Asia.

Lured by soaring food prices, corporations — both domestic and foreign — have been snapping up land in southern Russia's fertile "black earth" region, replacing inefficient Soviet-style collective farming with modern farming techniques and economies of scale. Russian government officials recently announced plans to transform the country into the world's leading grain exporter within five years.

High oil prices, changing diets, urbanization, expanding populations, flawed trade policies, extreme weather, growth in biofuel production and speculation have sent food prices soaring worldwide, trigging protests from Africa to Asia and raising fears that millions more will suffer malnutrition.

Internationally, overall food prices have risen 83 percent in three years, according to the World Bank. Part of the increase is the result of adverse weather in major grain-producing regions, with spillover effects on crops and livestock competing for the same land.

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3. DUPONT SAYS EASTERN EUROPE AGRICULTURE GROWTH REMAINS STRONG

Dow Jones, London, UK, Thursday, September 11, 2008

LONDON - Eastern Europe's agriculture industry has strong growth potential, which will help meet the world's rising food needs, a DuPont Co. (DD) executive told Dow Jones Thursday. "It's absolutely an exciting area of the world for agriculture," said Jim Borel, DuPont's group vice president of crop protection and seed on the region. "Our seed and crop protection business is growing nicely."

Dupont's crop protection business in eastern Europe has risen 15%-35% over the last couple of years. "Often times the general agriculture market in eastern European region is rising faster than other parts of the world," said Borel. Farmers in eastern Europe are "very hungry for new technology and ready to adopt it," added Borel.

FARMERS IN ROMANIA AND UKRAINE WERE OUT FRONT
When DuPont recently rolled out the new insecticide Rynaxypyr, farmers in Romania and Ukraine were some of the first to start using it. Just last month DuPont's seed business Pioneer Hi-Bred, opened a new EUR1.5 million to EUR2 million research facility in Hungary.

In recent years investors have been attracted to eastern Europe, seeking cheap farm ground, especially after last season's rise to record high grain prices.

Pioneer has been involved in eastern Europe for more than 30 years, but Borel said agriculture interest in the area really picked-up in the 1990s. There hasn't really been a surge in investment, but rather a continuation, said Borel.

Most eyes have been on the Commonwealth of Independent States, where many fields were left fallow following the fall of the Soviet Union.

In Russia and Ukraine as much as 13 million hectares could be returned to production, according to estimates by the European Bank for Reconstruction and Development and the U.N.'s Food and Agriculture Organization.

Already in the 2008-09 season, aided by favorable growing weather, grain production in Russia and Ukraine is up 22% on the year at a combined 134 million tons, according to the International Grains Council. And as fields become more conditioned and increased technology is used, yields are expected to rise.

UKRAINE CORN YIELDS ARE ABOUT 40% OF THOSE IN THE U.S.

Ukraine corn yields are about 40% of those in the U.S., and by increasing them to even half of U.S. yields, about another 1.5 million tons could be harvested, according to Borel. National U.S. corn yields in 2007 were 151.1 bushels per acre. "Production potential is there," he said.

Before the world produced food surpluses, now stocks are low and food demand is growing, he added. "The opportunity is real and the need is there," said Borel. Current challenges include some lingering Soviet era government and business systems and the need to protect intellectual property. "But we see progress in those areas," said Borel.

Source: Lisa Kallal, Dow Jones Newswires; (4420) 7842 9415; lisa.kallal@dowjones.com

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4. UKRAINE IN THE WTO: AGRICULTURAL BUSINESS PERSPECTIVES

AgriNews, APK-Inform, Dnipropetrovsk, Ukraine, Thursday, September 11, 2008

KYIV - The international conference "Ukraine in WTO: Business Perspectives" will be held November 27-28 2008 [Thursday-Friday] in Kyiv (Ukraine). The event is devoted to this year Ukraine's WTO accession, new business opportunities available for foreign investors, and experience exchange between the Ukrainian and EU agricultural companies.

Organized by: "Eurobusiness Advisory" www.euroadvisory.co.uk and the "Ukrainian Agrarian Confederation" www.agroconf.org.

Supported by the Ministry of Economy of Ukraine, Royal Agricultural Society of England, and other organizations. Amongst confirmed speakers a number of senior Ukrainian and foreign governmental officials and executives from agrarian organizations/companies, including:
- Deputy Minister of Economy of Ukraine
- Deputy Minister of Agrarian Policy of Ukraine
- Deputy General Director of WTO Secretariat
- First Deputy Head of the State Customs Service of Ukraine
- President of the Ukrainian Agrarian Confederation
- President of the Czech Agrarian Chamber
- President of the Polish National Council of Agricultural Chambers
- Vice-President of the British National Farmers Union, and many others.

Detailed information about the conference and programme can be found at: www.ua-wto.com. To enquire about sponsorship or media partnership please contact: Eurobusiness Advisory, London, UK; Tel: +44(0)2071833585; Fax:+44(0)2071993694; E-mail: admin@ua-wto.com; Website: www.euroadvisory.co.uk

LINK: http://www.agrimarket.info/showart.php?id=63259

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

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

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5. TOEPFER INTERNATIONAL (UKRAINE) GRAIN COMPANY SIGNS SECOND

MEMORANDUM OF COOPERATION WITH UKRAINIAN FLOUR PRODUCERS

Alfred C. Toepfer International Ukraine, Kyiv, Ukraine, Tuesday, August 19, 2008

KYIV - Managing Director of “Alfred C. Toepfer International (Ukraine)” Bjoern Stendel, the President of CJSC "Holding" "T and S" Vladimir Slabovskiy, the First Deputy Head of the Board CJSC “Ukrzernoprom” Yevgeniy Leng and the Managing Director of “Khmelnitsk Mlyn” Ltd. Vasiliy Barilyuk today signed a memorandum of cooperation in Kyiv.

This is the second agreement of cooperation between Ukrainian enterprises and an international grain trading company. The main aim of the agreement is to provide Ukrainian producers with the grain at the stable prices and financing under acceptable terms. Taking into account the experience of their colleagues, one more large Ukrainian company “Khmelnitsk Mlyn” Ltd. decided to join the signing of the Memorandum.

According to the document, during the next marketing year "Alfred C. Toepfer International (Ukraine)" will deliver grain for CJSC "Holding "T and S", CJSC “Ukrzernoprom”, “Khmelnitsk Mlyn” Ltd. in accordance with a preliminary developed plan, terms of financing and flexible delivery schedule, that are mentioned in the additional agreements. Thus, during 2008-2009 marketing year CJSC "Holding "T and S" is planning to purchase 20 thousand tons of the grain, “Khmelnitsk Mlyn” Ltd. – 20 thousand tons of the grain.

The grain trader is obliged to coordinate with the customers the place and conditions of the grain storage during the period of the agreement validity. The sum of the contracts includes grain, grain storage, financing expenditures and income of the supplier. Besides, taking into account the previous experience, the buyer has the right to increase the amount of the grain supply.

Last year CJSC "Holding "T and S"` purchased 35 thousand tons of the grain for its production needs instead of planned 25 thousand tons of the grain. “Alfred C. Toepfer International (Ukraine)” supplied Ukrainian enterprises with 415 thousand tons of the grain last year.

As experience showed last year, cooperation between Ukrainian enterprises and the international grain trading company are mutually profitable for all the parties. Favorable financing terms are proposed to the Ukrainian producers, which are impossible to be provided by the banks and the other financial institutions.

Besides, the supply of the enterprises by the main products and flexible schedules depends on their production needs. On the other part, “Alfred C. Toepfer International (Ukraine)” will continue the stable work within Ukraine during the next grain year, supplying Ukrainian companies with the grain, creating the stable conditions on the flour and bread market.

FOOTNOTE: U.S. agricultural company Archer Daniels Midland (ADM) is a very large shareholder in Alfred C. Toepfer International, headquartered in Hamburg, Germany. ADM is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.

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6. UKRAINE RAISES GRAIN FORECAST TO 48.7 MILLION TONS

Will export 22.6 million tonnes of grain in 2008/2009 compared to 3.7 million tonnes in the 2007/2008 year.

Interfax - Food & Agriculture, Kyiv, Ukraine, Wednesday, September 10, 2008

KYIV - Ukraine expects to harvest 48.7 million tonnes of grain this year,the Agriculture Ministry said on August 25. The previous forecast had been for a harvest in the 43 million-45 million tonne range.

Ukraine will export 22.6 million tonnes of grain in the current agricultural year,compared with 3.7 million tonnes in the 2007/2008 year, Agriculture Minister Yuriy Melnik said. Ukraine exported 1.5 million tonnes of grain in August and 3.2 million since the beginning of the agricultural year (July 1).

Ukraine will consume 26.5 million tonnes of grain domestically,including 6 million tonnes for food products,of which 5.3 million tonnes for bakery products,and 2.9 million tonnes for seed. The reserve for the future agricultural year will be 5.6 million tonnes.

The Cabinet is discussing establishment of a minimum price of 816 hryvni per tonne for wheat exports (4.8435 hryvni/$1), which includes VAT refund, Prime Minister Yulia Tymoshenko said at a government session. "If we set a price of 816 hryvni per tonne,that will be a serious basis for the agricultural sector," she said.

The sector plans to sow 8.8 million ha for the winter crop,including 6.5 million ha of wheat,0.5 million ha of rye,0.7 million ha of barley,Melnik said. Ukraine sowed 8 million ha for the winter crop in 2008,16% more than in 2007.

Ukraine had harvested 42.6 million tonnes of grain and grain legumes (bunker weight) from 12.337 million ha as of August 21,double the figure for the same day last year. The average yield was 34.5 centners/ha,up from 20.6 centners/ha a year earlier.

The harvest totaled 26.596 million tonnes of wheat from 7 million ha (37.9 centners/ha),13.354 million tonnes of barley from 4.166 million ha (32.1 centners/ha) and 1.038 million tonnes of rye from 0.455 million ha (22.8 centners/ha).

Ukraine harvested just 29.3 million tonnes of grain (including corn) after processing in 2007,14.5% less than in 2006. Rising prices prompted the government to restrict exports,which resulted in virtually zero exports for several months.

In the January 1-April 30 period,the Cabinet set a quota of 1.2 million tonnes on grain exports,but subsequently canceled the corn quota and raised the quota by 1 million tonnes for wheat and by 0.5 million tonnes for barley. Ukraine has capacity to ship 26 million tonnes of grain a year.

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7. UKRAINE'S GDP GROWTH PUSHED UP BY AGRICULTURE: CONCORDE CAPITAL

Large 2008 harvest helps compensate for slowdown in industrial growth

Interfax Ukraine Economic, Kyiv, Ukraine, Monday, September 8, 2008

KYIV - The pace of growth of Ukraine's GDP has accelerated mainly thanks to a rise in agricultural output, according to a press release of Kyiv-based Concorde Capital Investment Company, referring to an analytical survey drawn up by analysts Andriy Parkhomenko, Polina Khomenko and Kostiantyn Fisun.

"In July, Ukraine's GDP reached the highest level over the year, at 7.3% compared to July 2007. The pace of GDP growth increased mainly due to a rise in agricultural output. Over the seven months of 2008, agricultural production grew by 10.6% year-over-year, while in H1 2008 a 0.3% fall was registered.

Thus, the large 2008 harvest allowed agriculture to compensate for the slowdown in industrial growth, which was 7.3% in seven months," the experts said.

The experts said that the growth in investment in the agricultural sector in H1 2008 was 45.3%, while the total growth of investment in the fixed capital of economic sectors in H1 2008 slowed to 8.2% year-over-year, due to high inflation and tougher crediting conditions.

"The largest impact of these factors was seen in the processing industry: the growth of investment in the sector in H1 2008 was only 0.2%. This low indicator in the sector could mean a further slowing in its development in the medium-term outlook," the analysts said.

The experts said that in July 2008, for the first time in more than in two years, deflation had been seen in Ukraine. Prices fell by 0.5% compared to June, which was due to a seasonal fall in the price of foodstuff products by 1.3%, mainly vegetables and fruit.

According to a forecast of Concorde Capital analysts, inflation in Ukraine in 2008 will be 21%. Concorde Capital increases its forecast for a rise in industrial prices from 33% to 40% in 2008, and the GDP deflator index from 25.5% to 31%.

The investment company also increased its GDP forecast for 2008 from $194 billion to $202.4 billion. Concorde Capital retained its forecast for the dollar exchange rate for late 2008 at UAH 4.95/$1, saying seasonal demand for the currency over the past four months would weaken the hryvnia.

The company's analysts expect that grain exports in 2008 will be worth $4.4 billion, which is almost five times more year-over-year, and this would help cut Ukraine's deficit in the balance of payments to 4.3% of GDP in 2008.
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8. LARGE INCREASE IN GRAIN COMBINE IMPORTS PREDICTED FOR 2009-2015

Grain harvester imports in Ukraine are already up by 3.6 times

Ukrainian News Agency, Kyiv, Ukraine, Tuesday, September 9, 2008

KYIV - The director general of a large Kyiv-based agricultural supply company, Amaco Ukraine, Vitalii Skotsyk forecasts a large increase of imports of grain combines to Ukraine in 2009-2015. 'We expect the sales of this machinery in Ukraine to considerably grow year after year for at least five-seven years,' he said.

Skotsyk also said that in January-August 2008, Ukraine imported 2,884 grain combines exceeding the year 2007 import indicator by 3.6 times. At the same time, Skotsyk pointed to lack of the developed system of grain combine servicing in Ukraine.

The director general said that before the harvesting campaign of 2008 Ukraine had about 47,000 combines, most of which had significant operation period.

'This year, Ukraine launched the harvesting with 47,000 grain combines, of which, 80% were machines, whose operational period was 15-20 years,' he said. He said that this resulted in low quality indicators of the harvested grain.

'One of the problems we harvested low-quality grain is that the harvesting should last for 10-14 days, but we harvest for 1.5-2 months. Thus, the quality does not meet our expectations,' Skotsyk said. In particular, he said that according to forecasts of the Agriculture Policy Ministry, only 11% of the wheat will be bread wheat.

As Ukrainian News earlier reported, Amaco Ukraine is engaged in sale of imported farm machinery and spare parts to it. By September 5, farm enterprises harvested 43.475 million tons of crops.

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9. KPMG JOINS U.S.-UKRAINE BUSINESS COUNCIL (USUBC)

KPMG-Ukraine Opens New Office in Donetsk

U.S.-Ukraine Business Council (USUBC), Washington, D.C., June, 2008

WASHINGTON, D.C. - The executive committee of the U.S.-Ukraine Business Council (USUBC), on behalf of the entire membership, is most pleased to announce that KPMG has been approved for USUBC membership.

KPMG is a global network of professional firms providing audit, tax and advisory services. KPMG operates in 148 countries and have more than 113,000 professionals working in member firms around the world.

KPMG-Ukraine Ltd. is a company incorporated under the Laws of Ukraine and a member firm of the KPMG network of independent member firms

affiliated with KPMG International, a Swiss cooperative.

Mason Tokarz is the Managing Partner of KPMG-Ukraine Ltd. According to Morgan Williams, SigmaBleyzer, who serves as president of USUBC, Tokarz will represent KPMG on the USUBC board of directors (www.usubc.org.)

KPMG IN UKRAINE

As a member firm of one of the world's leading professional services organizations, KPMG in Ukraine brings clients technical skills, solid practical experience and wide industry and sector knowledge which provide clients with a competitive edge over their competitors. Their goal is to help clients not only compete, but become marketplace leaders.

KPMG in Ukraine has established multi-disciplinary teams of Ukrainian and expatriate professionals which provide focused services to Ukrainian and
international clients. They apply a rigorous approach to assist their clients in defining their business or investment objectives and then work with them to
achieve those objectives.

The following are some of the potential benefits KPMG provides to their clients in Ukraine: (1) understanding of the local business environment; (2) industry-specific focus; (3) broad based experience (4) combined delivery teams; (5) tangible return on investment (6) well-established assessment and implementation methodologies; (7) flexibility to match client culture; (8) access to KPMG's global resources.

KPMG OPENS OFFICE IN DONETSK
On May 22, 2008 KPMG in Ukraine announced the opening of its office in Donetsk. With their business expanding rapidly across Ukraine, KPMG felt is was important to have the resources in the right place at the right time to meet the needs of their clients.

Mason Tokarz, Managing Partner, KPMG in Ukraine, said: "The Donetsk region is home to some of the largest and most recognized companies in Ukraine. It has a dynamic local economy, and is attracting considerable interest from investors all over the world. Our decision to open the office in Donetsk is aimed to better serve our existing clients in the area, and to develop relationships with potential clients in the region of Donbass".

Anna Parkhomenko, who will direct the team in the new office, stated: "We are looking forward to the launch of our new team in Donetsk, which consists of professionals at various levels with various specialized skills.

"The team is excited about the opportunities arising as a result of the opening in Donetsk. At KPMG, we are committed to contributing as much as possible

to the development of the business environment in this important region of Ukraine". For more information about KPMG-Ukraine click on: www.kpmg.kiev.ua.

Warsaw Business Journal, Warsaw, Poland, Wed, September 10, 2008

WARSAW - LLC Commercial Bank Financial Initiative, one of the largest banks in Ukraine, belonging to billionaire Oleg Bachmatiuk, was to take the final step towards being listed on the Warsaw Stock Exchange this Thursday

This was the day when representatives of the company planned to sign an investment agreement, on the basis of which shares in the bank would be transferred to NFI Magna Polonia in exchange for shares in the fund.

However, this will not take place as the Prime Minister of Ukraine, Yulia Tymoshenko, has effectively blocked the transaction. "The political chaos in Ukraine, conflict in Georgia and the global break down in the banking sector are making the execution of the plans difficult.

It is harder to get past the legal procedures and receive funding for the bank. These are issues which are not under our control," said supervisory board member of Commercial Bank Financial Initiative, Tadeusz Piętka.

Source: Puls Biznesu (A.K.), From Warsaw Business Journal
http://www.wbj.pl/article-42489-ukrainian-pm-blocks-wse-bank-listing.html?typ=wbj

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

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

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11. UKRAINIAN BANKS FACE HIGH RISKS, POTENTIAL ECONOMIC AND POLITICAL INSTABILITY SAYS S&P

Cbonds News, St. Petersburg, Russia, Tuesday, September 9, 2008

PARIS - Standard & Poor's Ratings Services continues to view the Ukrainian banking system as high risk according to a report "Bank Industry Risk Analysis: Ukrainian Banks Operating With High Risks And Vulnerability To Tough Macroeconomic Landscape," published yesterday on Ratings Direct.

"Ukrainian banks remain highly vulnerable to potential shocks due to rapid, untested loan growth in recent years, amid macroeconomic and political uncertainty," said Standard & Poor's credit analyst Ekaterina Trofimova.

"Also burdening the sector are still-substantial single-name and industry concentrations, significant dollarization of operations, questions on enforcement of credit rights, insufficiently robust underwriting practices and risk management, as well as regulatory and supervisory responses lagging behind market developments."

In a global context, we consider the banking sector in Ukraine (foreign currency B+/Stable/B, local currency BB-/Stable/B, Ukraine national scale uaAA/--/--) to be high risk.

UKRAINE IN GROUP 10, THE WEAKEST IN S&P BANKING INDUSTRY COUNTRY RISK ASSESSMENT

We place the system in Group 10, the weakest in our Banking Industry Country Risk Assessment (BICRA) rankings, which reflect the strengths and weaknesses of a country's banking system relative to those of other countries. Similarly ranked banking systems include Venezuela, Jamaica, and Bolivia.

"Despite political turbulence and inflationary pressures, strong macroeconomic growth so far has supported the banking sector's development and credit standing while partly mitigating still-high business and credit risks for domestic banks," said Ms. Trofimova. "The gradual strengthening and increasing transparency of domestic companies, alongside growing personal wealth and banks' ongoing business diversification, has fueled the system's positive expansion."

"The system's rapid loan growth and sharply increasing debt leverage in a still unstable credit environment with questionable risk management practices could be piling up problems for the future and make the system vulnerable to a potentially severe market correction, especially in real estate and construction," said Ms. Trofimova.

Deposit growth has risen briskly in the past few years but has not kept pace with credit growth; banks are consequently increasingly refinancing themselves abroad. Although fragmented, foreign capital and debt have continued flowing in, benefiting from increased foreign bank ownership (43% of banking sector assets at midyear 2008 compared with less than 20% in the early 2000s).

"Strategic foreign investors cannot fully eliminate still-high credit risks and potential market downturns, but they are expected to take the lead in avoiding a hard landing," added Ms. Trofimova. Their growing role is particularly important in the context of a still fragile regulatory framework in Ukraine.

In terms of potential extraordinary state support to private-sector banks, Standard & Poor's classifies Ukraine as "supportive" (see "Criteria:External Support Key In Rating Private Sector Banks Worldwide," published Feb.27, 2007, on Ratings Direct), providing no rating uplift for private-sector banks.

In a time of crisis, the authorities are likely to increase supervision and regulation of troubled entities, but in our opinion they would provide only limited financial support for domestically owned banks--even those with large market shares--and only as a last resort.
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12. UKRAINE STRONGLY FEELS GLOBAL CRISIS SAYS NBU COUNCIL HEAD PETRO POROSHENKO

UkrInform - Ukraine News, Kyiv, Ukraine, September 11, 2008

KYIV - The Ukrainian economy felt in a full measure the impact of all factors of global instability, crisis of stability supports, fight of the biggest powers for political and economic influence zones.

National Bank of Ukraine (NBU) Council Chair Petro Poroshenko announced this during the 18th Business Forum in Poland on the 2007 - 2008 financial crisis, its reasons and after effects, the influence on Central European economy, Poroshenko's press service reported.

In his words, Ukraine has one of the most open economies in the world by the level of domestic market protection. Thus, he noted a proportionate increase
in the impact of negative developments in the global economy on the national economy of Ukraine.

In the first place, the NBU council head says, that is inflation having reached Europe's greatest scope in Ukraine. The negative foreign trade balance is also rapidly growing. Global trends as well tell on Ukrainian stock market, getting stronger against the background of domestic policy and economy problems.

Reduction of some industries' output, including construction, also corresponds to the global tendencies, Poroshenko added. Permanent political crisis in this country, he noted, plays maybe the most devastating role in building up negative processes in Ukrainian economy.

Crisis is not adding confidence to business environment, but also scares away investors, calling in question legislative reforms the Ukrainian economy needs so badly.

"I am deep sure that, due to extremely negative political environment, it is vitally important to consolidate the leading political forces around the key tasks of stabilizing economic development and creation of favorable conditions to guarantee its new quality, implementation of priority structural reforms in order to approach the Copenhagen criteria of membership in the European Union. Ukraine has a good potential to be further developed rather than

squandered away," the central bank council head underscored.
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13. EXPANDING TRADE AND TRAVEL BETWEEN THE U.S. AND UKRAINE

Ukraine's Civil Aviation Safety Assessment

U.S.-Ukraine Business Council (USUBC), Washington, D.C., Tuesday, September 9, 2008

WASHINGTON - In June 2005, the United States Federal Aviation Administration (“FAA”) conducted a safety assessment of the Ukrainian State Aviation Administration (“SAA”) - the governmental authority that regulates and oversees civil aviation in Ukraine.

The FAA found that Ukraine's SAA was not in compliance with ICAO standards for oversight of its airline industry. As a result, the FAA downgraded SAA’s capability to Category II from Category I, according to Morgan Williams, SigmaBleyzer, who serves as president of the U.S.-Ukraine Business

Council (USUBC).

Under U.S. regulations, the Ukrainian airline serving the U.S. - AeroSvit Ukrainian Airlines - was allowed to continue to operate its flight from Kyiv to New York, but was not permitted to expand operations to the United States until the SAA addressed the discrepancies. In addition, no other Ukrainian airline may operate to the U.S. until Category I status is achieved.

As a result, travel and trade between the two countries is now limited. AeroSvit has indicated an interest in expanding the number of flights to New York and also in adding a non-stop flight to Chicago.

Following the downgrade to Category II, the SAA applied to the U.S. Trade and Development Agency (“TDA”) for assistance. A TDA grant was awarded to the SAA in 2006 and a U.S. contractor was selected to help SAA comply with international safety standards and return to Category I status.

The contractor provided the SAA in Kyiv a detailed action plan recommending specific steps for addressing the discrepancies and provided on-site support. However, progress has been particularly slow due to various governmental reorganizations.

U.S.-UKRAINE TRADE AND TRAVEL
President George Bush traveled to Ukraine in April 2008, as a demonstration of political support for its leaders. In June, Secretary of Commerce Gutierrez signed a Trade and Investment Cooperation Agreement with his Ukrainian counterpart in the Ministry of Economy, Bohdan Danylyshyn.

The agreement established the U.S.-Ukraine Council on Trade and Investment (“Council”), comprised of government officials. Among other things, the Council is charged with “identifying opportunities for expanding trade and investment…and identify and work to remove impediments to trade and investment between the Parties….” The U.S. Trade Representative’s Office (USTR) chairs the U.S. delegation.

U.S.-UKRAINE BUSINESS COUNCIL (USUBC) PROPOSAL
The new U.S.-Ukraine Council on Trade and Investment will meet in Kyiv for the first time in early October, USUBC president Williams said.

In light of the new Council’s mandate to “work to remove impediments to trade,” the U.S.-Ukraine Business Council (USUBC) proposes and recommends to the U.S. delegation - with the support of the U.S. FAA - that they raise this issue and impress upon the Ukrainian delegation the importance of their addressing the discrepancies found by the FAA so that Ukraine may reclaim Category I status as soon as possible.

Growth in aviation is directly tied to economic development. Addressing the discrepancies and reclaiming Category I status by the SAA will enable Ukrainian airlines to operate at higher levels to the United States and - with a large Ukrainian population in the U.S. and expanded interest from the U.S. business community - to expand trade and travel between the two countries.

USUBC makes this proposal fully appreciating that aviation safety is paramount and must not be compromised for any reason.

By Jim Davis, Business Ukraine magazine, Kyiv, Ukraine, Monday, September 8, 2008

In today’s Ukraine the culture of corporate raiding is alive and well, with the latest incident occurring on August 27 when Aerosvit Ukrainian Airlines officials claim they fell victim to a particularly aggressive assault on the company’s main administrative offices on Shevchenko Boulevard in Kyiv.

The available evidence suggests that the attack may have been the work of a disgruntled minority stockholder, using a questionable court order from a distant oblast and a group of thuggish young attackers, all of whom are thought to be from Dnipropetrovsk.

SENDING IN THE HIRED MUSCLE

“We really don’t know at this point whether this attack was the work of a minority shareholder, one of our competitors or a combination of the two. What we do know is that a group of young men, obviously chosen for their ability to intimidate, forced their way into our offices with the apparent purpose of breaking up a supervisory board meeting. They were brandishing copies of a court order from a court in Kherson Oblast that had not previously been served officially on the company,” Yevhen Treskunov, deputy CEO of Aerosvit, told Business Ukraine.

According to Aerosvit sources, about 20 persons forcibly entered the company’s administrative offices on August 27 with the apparent intent of gaining control with the use of the questionable court order. In the process, the intruders alleged injured security personnel, broke down security doors, began to enter offices and in general attempted a take-over of the company premises, Aerosvit claimed.

However, once it became clear to the interlopers that their take-over attempt would be strongly resisted and police had been summoned, many of the raider group began departing just as rapidly as they had arrived. However, some of the attackers were arrested and are now in police custody. Investigation thus far suggests that those who attempted the takeover included some with criminal records.

While Aerosvit chose to make no further comment regarding the source of the raider attack and apparent attempted corporate take-over, other airline industry sources told Business Ukraine that they believe the attack is indeed the work of a disgruntled minority stockholder.

The disagreement is said to have been simmering for some time and centres on a minority shareholder, a Kyiv businessperson who is believed to own about 5% of company shares, who disagrees with certain corporate decisions regarding ways to raise additional funds needed by the airline.

Aerosvit has made it clear that the attack and the questionable court order will be strongly rebuffed and that measures have already been taken to strengthen the security of all company facilities and properties. The airline states that it has called on the government to make good on its promises of greater support for businesses in opposing attempted illegal takeovers.

A petition from Aerosvit’s acting CEO Kostadin Botev to the Cabinet of Ministers commission against raider attacks asks the government “…to protect the airline and its employees from illegal interference into the transportation company’s activity caused by the “Bureau” Ltd. side and to apply appropriate measures to unblock the situation and punish those causing it.”

A BAD TIME FOR INTERNAL BATTLES

Aerosvit officials say that the attack comes at an extremely inopportune time. “Aerosvit and all commercial airlines are under immense pressure because of the never-ending escalation of fuel prices. We are not officially Ukraine’s flag carrier, but in many of the countries that we serve, we are the only Ukrainian company that enters the consciousness of local officials and businesspersons. Our route system extends on one end to New York and Toronto and on the other to Beijing and Delhi.

"In other times, this would have been less of a problem, but today these routes are extremely expensive to serve. We do not want to limit our long-haul services and in fact would like to expand. However, anything that distracts us from our main mission of running a first-class international airline is not in anyone’s best interests,” Mr. Treskunov said.

Treskunov pointed to Aerosvit’s position in acquiring new aircraft as an example of the harsh realities that all modern Ukrainian airlines face. “We have orders in place with Boeing for delivery of new aircraft. However, because of the long lead time in getting delivery, we do not expect to receive these new and more fuel efficient aircraft until 2011 and 2012.

“In the meantime, we have to make periodic payments to Boeing on these aircraft on a strict schedule. Not only that, the market for new aircraft is so tight that Boeing is able to maintain extremely strict policies on payments. For example, if we miss making a payment to Boeing by one day, we are removed from the current delivery schedule and placed at the end of the priority list.”

LINK: http://www.businessukraine.com.ua/attempted-airline-hijacking

FOOTNOTE: AeroSvit Ukrainian Airlines is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.

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15. AEROSVIT REQUESTS HELP TO PROTECT AGAINST ILLEGAL SEIZURE AND RAIDER ATTACKS

Issues letter asking for protection of airline & its employees from illegal interference into the company's activity

U.S.-Ukraine Business Council (USUBC), Washington, D.C., Tuesday, September 9, 2008

WASHINGTON, D.C. -.The following letter was sent by AeroSvit Ukrainian Airlines, a member of the U.S.-Ukraine Business Council (USUBC), to the Inter-departmental Commission for the issues of opposition to Raider attacks, describing the attack which took place, with a request to protect AeroSvit from raider attacks that could be repeated.

AeroSvit is the only Ukrainian carrier that flies non-stop to the United States. The AeroSvit flight goes roundtrip from Kyiv to New York to Kyiv. The letter below is an informal translation in English and is published with the approval of AeroSvit, the president of the U.S.-Ukraine Business Council (USUBC), Morgan Williams, said on Tuesday.

27th August, 2008

Inter-departmental Commission

On the issues of opposition to illegal seizure and Raider attacks
12/2, Grushevskogo str.,
Kyiv 01008

Declarant: CJSC "AEROSVIT AIRLINES"
08324 Kyiv area., Boryspil region, s.Gora
Postal address:
Boryspil SIA, Boryspil-7,
Kyiv region 08307

APPEAL
to Stambula N.V. actions - judge of Komsomolsky regional court of Kherson,
Skal'ka S.Y. - CEO of "Bureau" Ltd., Sokolov G.O. - state executor of state executive service of Boryspil state regional Administration of Justice as of assistance in possible Raider Attack (seizure) of AEROSVIT AIRLINES.

Closed joint stock company "AEROSVIT AIRLINES" asks to promptly intervene in the situation which occurred and involved Komsomolsky regional court officials (judge Stambula N.V.), CEO of "Bureau" Ltd Skal'ko S.Y. and officials from state executive services of Boryspil state regional Administration of Justice (senior state executor Sokolov G.O.).

On 27th of August a group of young fellows up to 20 persons, some of them showing passes indicating "Bureau" seal, entered administrative office of CJSC "AEROSVIT AIRLINES" in Kyiv at 58-a Shevchenka Blvd., caused physical injuries to security, broke down the doors of check-point, crashed the windows and started rushing into the cabinets of Airline's employees. Police was immediately called to the place of occurrence.

Before the arrival of operational group the majority of mentioned guys left the building in accordance with Skal'ko S.Y. instructions. Appropriate protocol was composed by Shevchenkivsky Regional Administration of State Administration of MIA (Ministry of Internal Affaires) in Kyiv where Airline's message on the crime performed is currently under examination.

Besides, according to some mass-media messages, among persons, who tried to enter the administrative office at 58-a Shevchenka Blvd. on that day, there was state executor from executive authority of Boryspil state regional Administration of Justice Sokolov G.O. It should be mentioned, that administrative building at 58-a Shevchenka Blvd. is situated in the borders of administrative territorial unit other than territory of Boryspil region, in other words, exceeding of the official duties was seen in state executor's actions.

Moreover, according to the information being checked, Komsomolsky regional court of Kherson (judge Stambula N.V.) according to the claim of "Bureau" Ltd issued a consent to ban Supervisory Board Meeting of Closed joint stock company "AEROSVIT AIRLINES" on 27th of August, interdiction for General Stakeholders Assembly, prohibition for registrar of CJSC "AEROSVIT AIRLINES" to perform registration of stakeholders to participate in the Assembly.

Furthermore, the same Komsomolsky regional court of Kherson, as appeared later, on 31st of July 2008, without appropriate notification to participants of court session about time and date of sitting of the court and with violating rights within the jurisdiction, decision to satisfy "Bureau" Ltd claim to stakeholder of CJSC "AEROSVIT AIRLINES" about restriction for action was issued.

Considering the above mentioned circumstances, CJSC "AEROSVIT AIRLINES" claims that "Bureau" Ltd possesses not more than 5% share from total amount of statute stock/capital in CJSC "AEROSVIT AIRLINES" which according to existing legislation and CJSC "AEROSVIT AIRLINES" Statute doesn't grant "Bureau" Ltd. rights to block the actions of CJSC "AEROSVIT AIRLINES" management, all the more using force. Following the existing legislation disputes between the stakeholders on company's management or performance, should be addressed at the place of company's location.

The Supreme Court of Ukraine in the General conclusion of court practices as of 01.01.2004 (concerning the actions carried out to satisfy the claim by way of banning the general assembly) mentioned, that the restriction to hold General Assembly in fact paralyzes the work of the supreme body of the joint-stock company and is illegal interference into economic activity of the company.

Events happened on 27th of August in the administrative office of CJSC "AEROSVIT AIRLINES" followed by acts of force, together with working out illegal decisions against CJSC "AEROSVIT AIRLINES" and in the interest of "Bureau" Ltd., and against stakes registrar in the regions of Ukraine, are aimed at blocking the activity of management and destabilization of company's work and can be classified as raider attack.

Considering the above mentioned CJSC "AEROSVIT AIRLINES" asks to protect the Airline and its employees from illegal interference into the transportation company's activity caused by "Bureau" Ltd. side and to apply appropriate measures to unblock the situation and punish those causing it.

Sincerely,
/s/

Kostadin Botev
Acting CEO

LINK to AeroSvit website: www.aerosvit.com

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16. PM TYMOSHENKO, U.S. ASSN'T SEC OF STATE FRIED DISCUSS UKRAINE'S INTEGRATION WITH NATO

Ukrainian News - on-line, Ukrainian News Agency, Kyiv, Ukraine, Thursday, September 11, 2008

KYIV - Prime Minister Yulia Tymoshenko and U.S. Assistant Secretary [of State] for European and Eurasian Affairs, Daniel Fried, on Thursday discussed Ukraine's integration with North Atlantic Treaty Organization (NATO). Ukrainian News learned this from a statement of the press department of the Secretariat of the Cabinet of Ministers.

Tymoshenko and Fried also discussed matters of the Ukraine-U.S. cooperation and a question of the national security. As Ukrainian News earlier reported,
the Security Service of Ukraine on September 4 launched an information campaign to facilitate the awareness of Ukrainian citizens about NATO.

On April 3, the Bucharest NATO summit decided to postpone the consideration of a question of the NATO Membership Action Plan for Ukraine and Georgia until December 2008.
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17. PM TYMOSHENKO SAYS COLLABORATION CLAIMS ARE 'COMICAL'

Roman Olearchyk in Kiev, Financial Times, London, United Kingdom, Mon, Sep 8 2008

KIEV - Yulia Tymoshenko, Ukraine's prime minister, has accused Viktor Yushchenko, the country's president, of jeopardising both bilateral relations with Russia and western integration initiatives by labelling her a Kremlin conspirator during the collapse of their coalition last week.

In an interview with the Financial Times Ms Tymoshenko hit back at allegations that she had sided with Russia and was weak in her support for Georgia during last month's conflict between the two countries. She accused Mr Yushchenko of tarnishing her image in an attempt to score points with voters ahead of next year's presidential election.

Mr Yushchenko's party last week pulled out of the ruling coalition after Ms Tymoshenko's camp voted with Moscow-leaning parties to curtail presidential powers. Ms Tymoshenko, in turn, accused the president's party of systematically sabotaging her government.

POINTING THE FINGER AT MOSCOW IS STUPID
"Pointing the finger at Moscow is stupid. The coalition collapsed not by the hand of the Kremlin, but by the president's decision," Ms Tymoshenko said, urging Mr Yushchenko to revive the coalition.

She said starting a presidential campaign "this way . . . complicated the country's plans for closer integration with Brussels and Nato". "I well understand his hysteria because polls show his rating has sunk from 53 per cent to 5 per cent."

At an European Union-Ukraine summit tomorrow in the French town of Evian, Kiev hopes to win support for associate membership of the EU. In December Nato will review a membership action plan for Ukraine and Georgia. Both organisations are uneasy over the latest bout of political infighting in Kiev, which could complicate relations with Russia.

Ties with Moscow soured after the 2004 Orange Revolution brought Mr Yushchenko and Ms Tymoshenko to power. Both have pushed to break Moscow's grip on energy supplies but Ukraine remains vulnerable, a position that will worsen if their on-off alliance turns into a cut-throat power struggle. Fears loom that a Georgia-style conflict could erupt between Ukraine and Moscow, which is staunchly against Nato's eastward expansion.

Ms Tymoshenko stressed her support for Georgia's territorial integrity but said only "balanced and harmonised" relations with Russia would avoid trouble and make Ukraine a reliable partner for the west. "Ukraine needs peace, stability and investment."

Dismissing as "comical" allegations from the president that she had plotted with the Kremlin, she insisted she had pushed to cut Russia's grasp over Ukraine's energy sector.

She also claimed that Mr Yushchenko had protected "Russian interests" in a strategic Black Sea hydrocarbon exploration project. By cancelling the venture, "where Russian interests were camouflaged by Houston-based Vanco Energy . . . I returned Ukraine's strategic Black Sea gas reserves".

Asked if she would run for president next year, the prime minister said: "Before this I was willing to support a single candidate. After the events of last week I am seriously considering it."

LINK: http://www.ft.com/cms/s/0/80cbd044-7d3d-11dd-8d59-000077b07658.html

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18. VANCO HAS NO INTEREST IN INVOLVING RUSSIANS IN UKRAINE PROJECT

Letter-to-the-Editor: From Mr Gene Van Dyke, Founder and President,
Vanco Energy Company, Houston, TX, US, Financial Times, London, UK, Fri, Sep 12 2008

Sir, In her interview with your reporter ("Collaboration claims are 'comical' ", September 8), Ukraine's prime minister, Yulia Tymoshenko, claims that "Russian interests were camouflaged by Houston-based Vanco Energy", the company that I own and operate.

Nothing can be further from the truth. We have no interest in involving any Russian oil and gas company in our project with the Ukrainian government - and we will not do so in the future.

In 2005, the Ukrainian government initiated a public tender for offshore oil and gas exploration in the Black Sea's Prykerchenska Block. We won that tender fairly in 2006, and in 2007 negotiated and signed a Production Sharing Agreement with the government. All of this was done transparently with no Russian oil company involvement.

We were to begin exploration operations this year. But, this past May, the government violated our agreement by unilaterally and unjustifiably withdrawing it. What price is the sanctity of contracts in Ukraine? No country can grow economically unless governments respect contracts issued by previous governments.

In addition, this action delays the development of Black Sea energy resources, which would in the future make Ukraine much less dependent on Russian gas and oil. We have made numerous attempts to meet with the government to try to sort things out, but to no avail. Now we are pursuing protection of our contractual rights through arbitration.

Disturbing are indications the Ukrainian government is planning to invite Russia's Gazprom into the exploration and development of Ukraine's Black Sea.

We have no interest in involving Gazprom in our project with the government. We simply want to get on with the job of exploring for hydrocarbons in the Prykerchenska licence, as our contract gives us the right to do, and which is consistent with the energy security interests of the Ukrainian people.

LINK: http://www.ft.com/cms/s/0/ce21ff4e-8062-11dd-99a9-000077b07658.html

bne Ukraine Daily List, Berlin, Germany, Wed, September 10, 2008

The European Union decided to dub the next EU-Ukraine pact an "Association Agreement." Talks on this new trade and cooperation agreement should be finalized in the second half of 2009, according to Ukrainian President Viktor Yushchenko, who characterized the outcome of the summit as a historic point in EU-Ukraine relations.

Most recently signed Association Agreements signed by the EU have included a Free Trade Agreement. French President Nicolas Sarkozy, representing the EU, said that yesterday's declaration marked the first time the EU has so clearly pronounced itself on Ukraine's European orientation. The EU also said it will start talks that could lead to visa-free travel for Ukrainians to Europe.

Dragon writes: Reports from the summit suggest the EU continues to hesitate about offering Ukraine the so called "membership prospect" in the new bilateral cooperation deal while Ukraine remains determined to have the membership pledge included.

The EU's cautious approach, epitomized by French President Nikolas Sarkozy's statement the future association agreement "neither opens nor closes any route" for Ukraine, is understandable given the latest bout of political instability in the country and divisions within the EU itself as to how to treat Ukraine.

At the same time, the joint statement released after the meeting acknowledged "the European aspirations of Ukraine and welcomed its European choice" and also stated "Ukraine, as a European country, shares a common history and common values with the countries of the EU", according to the DPA news service.

This is reportedly the first time such vocabulary was used in EU-Ukraine bilateral statements. In other important news from the summit, the EU agreed to start talks on a visa-free regime for Ukraine in the near-term.

We expect Ukraine to continue to negotiate the membership pledge with the EU, and stabilization of the domestic political environment will be crucial to ensuring such talks are successful. In today's circumstances, when Ukraine is likely to receive a new ruling coalition in weeks' time, any firmer commitment from the EU could hardly have been expected.

Galt & Taggart verdict: The 12th EU-Ukraine Summit has to be viewed as a failure for Ukraine, which had hoped for its place in Europe to be confirmed. However, Germany, Holland, and to a lesser degree Belgium, strongly opposed any guarantee of future membership, and ardent lobbying from Poland, Sweden, the United Kingdom, and the Baltic States could not sway opinion.

Euro Activ, Brussels, Belgium, Wednesday 10 September 2008

By keeping Ukraine's EU accession prospects alive, European Union leaders yesterday (9 September) steered clear of creating a "damned-if-you-do and damned-if-you-don't" situationby balancing a desire to encourage the country's pro-Western leadership with concerns not to further radicalise Moscow in the wake of the Georgia crisis.

The venue of the EU-Ukraine summit yesterday became the latest casualty of the Georgia-Russia crisis. Originally scheduled to take place in the Alpine resort of Evian, the summit had to be moved at the last minute to the Elysée Palace in Paris due to the time constraints of French President Nicolas Sarkozy and other top EU officials, who were returning from a mission to Moscow and Tbilisi (EurActiv 09/09/08). Amid the haste, the final document still referred to the Paris event as "the Evian summit".

At the summit, EU leaders offered Ukraine's President Viktor Yushchenko closer ties and recognised the legitimacy of Ukraine's European aspirations, but stopped short of issuing a firm membership pledge.

The summit conclusions state that the legal basis between Ukraine and the EU, currently under negotiation, will be referred to as an "association agreement" as has always been the case with prospective EU members. But the EU has also signed "association" deals with a number of its trading partners, including Chile and Egypt.

What's more, a far-from-poetic formula dims the membership perspective, specifying instead that the bloc "leaves the door open to progressive further developments in EU-Ukraine relations".

In fact, despite the expectations, the summit did not go further than what was already agreed at foreign ministers' level before the Georgia crisis (EurActiv 23/07/08).

The divided meet the separated

The EU appeared to be divided at the summit, with France, Germany and Italy advocating a cautious approach to Moscow, while Poland, Sweden, the United Kingdom and the Baltic states expressed their wish to develop stronger ties with the EU's eastern neighbourhood after the Georgia crisis.

Discussions were further complicated when EU leaders met a Ukrainian president currently in the throes of conflict with his prime minister, former Orange revolution ally Yulia Timoshenko (EurActiv 04/09/08). EU leaders would have preferred to receive both the Ukrainian president and the prime minister, but only Yuschenko and his foreign Minister Volodymyr Ogryzko made the trip to Paris.

Diplomats said Germany and the Netherlands, and to a lesser extent Belgium, were the most reluctant to state clearly that Ukraine could one day join the EU. "This is the maximum that we could do," said Sarkozy.

Yushchenko put up a courageous face and stressed the positive achievements. "Today we started a very ambitious plan that will with time lead us to victory. Today we received the qualification of a European country," said Yuschenko.

Ukraine the next target?
But a Ukrainian diplomat complained that Kiev has been the victim of EU divisions. European diplomats had also expressed bitterness over the ill-timed political in-fighting between the two leaders of the pro-Western coalition.

EU leaders, and notably French Foreign Minister Bernard Kouchner, had warned Ukraine about possible destabilisation following the Georgia crisis (EurActiv 27/08/08). Olli Rehn, the EU's enlargement commissioner, had also said Ukraine could become Russia's next target if it was not offered membership.

An agreement on visa facilitation seemed to be the only sweetener for Ukraine, at least in the short term, with the two parties agreeing to launch a "visa dialogue aimed at developing the adequate conditions with the long-term perspective of establishing a visa-free regime between the EU and Ukraine".
Positions:

French Socialist MEP Bernard Poignant warned in an article published by the daily Le Monde that the Georgian war represents a precedent for a Crimean war. Recalling that the agreement between Moscow and Kiev to use the military naval base of Sebastopol expires in 2017, Poignant argues that Moscow will continue to repeat the scenario of issuing Russian passports to the local population until these "Russian citizens" issue a call to their Moscow brothers to come to the rescue. "If Europe does not anticipate, all it will have left is its tears," the French MEP writes.

Andrew Wilson, a Russia and Eastern Europe expert for the European Council on Foreign Relations in London, said the outcome of Tuesday's talks was a clear step forward for Ukraine.

"On balance, it's good news for Ukraine compared to where we were four years ago, three years ago or even three months ago. The problem with these kind of summits is that often expectations race ahead. Clearly Ukrainian expectations were very high, probably too high. But given what has been achieved in practice, Ukraine has got quite a lot," he said.

Graham Watson, leader of the Alliance of Liberals and Democrats group in the European Parliament, welcomed the positive signal sent by the EU to its Ukrainian neighbours.

"Paradoxically, Prime Minister Putin's military adventure in the summer has done more for the cohesion of EU foreign policy than any number of Council statements could have achieved. He has re-awakened the demons of the former Soviet era and pushed many former soviet satellites to seek shelter and stability in the European Union framework," said Watson.

LINK: http://www.euractiv.com:80/en/enlargement/eu-keeps-door-half-open-ukraine/article-175221

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21. RUSSIA'S WESTERN NEIGHBOURS: UKRAINE COMES TO THE FOREFRONT
An already fragile Ukraine has been made a lot more nervous by Russia’s war with Georgia - and it is not alone

The Economist print edition, London, UK, Thursday, September 11, 2008

THE first priority for Europe after Russia’s short August war with Georgia was to secure a ceasefire and a genuine pullback of Russian forces (see article). The second was to start fretting about Russia’s other neighbours. And the most significant of these by far is Ukraine.

Ukraine could not have ignored the war even if it had wanted to. Sebastopol, on the Crimean peninsula, is home to Russia’s Black Sea fleet, some of whose warships dropped anchor off the Georgian coast during and after the fighting.

Evidence of Ukraine’s proximity to the conflict is also on show at Moscow’s military museum, where visitors can gawp at war booty: Georgian T-72 battle tanks that were modernised in Ukraine.

This, say the Russians, shows Kiev’s support for what it sees as a “criminal regime”. Indeed, Viktor Yushchenko, Ukraine’s president (pictured above) flew to Tbilisi to support his counterpart and friend, Mikheil Saakashvili.

Add to this the fact that Russian nationalists believe Crimea, which has a large ethnic Russian population, should be returned to Russia (there are rumours of new Russian passports being handed out, just as happened in South Ossetia and Abkhazia).

Throw in, too, the fact that Ukraine, like Georgia, has for years been trying to secure a place in both the European Union and NATO. The inevitability of Ukraine catching a post-war cold becomes clear.

Ukraine’s always anarchic politics have been directly shaken up by the war. The usually pro-Western government led by Yulia Tymoshenko, the prime minister, is unravelling.

The first cracks emerged when Ms Tymoshenko blocked a parliamentary motion to condemn Russia’s aggression. She also resisted Mr Yushchenko’s attempts to impose restrictions on the Black Sea fleet, accusing him of populism ahead of a presidential election in 2010 that both will contest.

But it was her decision to join, temporarily, with the pro-Russian Party of the Regions, led by Viktor Yanukovich, so as to push through legislation diluting presidential authority, that incensed Mr Yushchenko, who promptly pulled his own Our Ukraine party out of its coalition with the Tymoshenko block.

Mr Yushchenko claimed that Ms Tymoshenko had formed a de facto rival coalition with Mr Yanukovich’s party. Ms Tymoshenko urged him to reconsider and “save” a political partnership that burst on to the world stage in the Kiev snow in the 2004 “orange revolution”.

Both went on television to put their case, evidence (said some) that their relations had become so sour that they could no longer bear to sit down and talk to one another.

Even by Ukrainian standards, the recriminations have got out of hand. Mr Yushchenko accused Ms Tymoshenko of “high treason”, suggesting she was a Kremlin agent out to win Moscow’s support (and financial backing) for her presidential bid. Even as she begged his party to rejoin the coalition, she poured scorn on him, poking fun at his abysmal popularity ratings. (One poll gave him 5%, against 22.5% for her.)

Yet Ms Tymoshenko is no Russian stooge. She says her muted response to the Georgian war is motivated by a desire to guarantee Ukraine’s territorial integrity—without inflaming relations with Russia.

Ukraine faces three political options: a fresh parliamentary election, a face-saving truce between Mr Yushchenko and Ms Tymoshenko or a new coalition between Ms Tymoshenko and Mr Yanukovich. America’s vice-president, Dick Cheney, made his preference abundantly clear on his recent whistle-stop tour of Baku, Tbilisi, Kiev and Rome by calling for orange unity.

He said that Ukraine should be “united domestically first and foremost, and united with other democracies.” He reiterated that the Bush administration backed Ukraine’s NATO aspirations, angering Mr Yanukovich, who pointed out that a majority of Ukrainians are against joining.

At a European Union-Ukraine summit in Paris on September 9th, the EU too had little beside warm words of support to offer. The “maximum” it could do, said France’s Nicolas Sarkozy, was to offer to sign a vague “association agreement” next year.

But unlike similar-sounding agreements for the Balkan countries, this one would not carry any implication of eventual membership. Countries such as Belgium, the Netherlands and Germany are unwilling at this stage even to hint at candidate status for Ukraine.

The Russians have been publicly silent about Ukraine in recent weeks, knowing that they hold some strong cards, besides having just defeated Georgia. Ukraine is almost entirely dependent on Russia for its oil and gas, for uranium enrichment, and as a market in which it can sell its own goods. It may agonise about its east-west choice, but in reality it will have to maintain reasonable relations with Moscow as well as the rest of Europe.

The Georgian war is reverberating among Russia’s other western neighbours. The Baltics, already in both the EU and NATO, are still wary. Belarus, Europe’s “last dictatorship”, is trying to use the war to thaw its frosty relationship with the West.

Resisting Russian pressure to recognise South Ossetia and Abkhazia immediately, Belarus’s president, Alyaksandr Lukashenka, said he would let a new parliament decide the matter, after an election at the end of September. It is not, he hinted, a foregone conclusion; he even added that it would be wrong to “run with the crowd” (what crowd?) and recognise the two regions simply because Russia had done so.

Mr Lukashenka’s diplomatic tiptoeing came as the EU publicly voiced a desire to reward Belarus for releasing three political prisoners in August, a move that led to a slight easing of Western sanctions on the country.

Mr Lukashenka seems also to have ruled out the possibility of hosting Russian nuclear missiles on his soil as part of the Kremlin’s response to America’s planned missile defences in Poland and the Czech Republic. Yet he still rejoiced, in an interview with a Russian daily, Izvestia, that Moscow had got one over Washington. “The Americans got kicked in the teeth for the first time in years,” he said. “That means something, you know!”

Tiny Moldova is also anxious. Like Georgia, it has a breakaway enclave, Transdniestria, that is “protected” by Russian troops. Although Moldova has no aspirations to join NATO, it is keen to get into the EU. Its president, Vladimir Voronin, met his Russian counterpart, Dmitry Medvedev, in late August. Mr Medvedev said there was a “good chance” of settling the dispute. But after the August war, the Moldovans fear, rightly, that this might be done only on Russian terms.

LINK: http://www.economist.com/world/europe/displaystory.cfm?story_id=12209028

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22. RUSSIA SLAMS 'UNFRIENDLY' UKRAINE

Agence France Presse, Moscow, Russia, Thursday, September 11, 2008

MOSCOW - Russia on Thursday condemned Ukraine's "unfriendly" stance over the war with Georgia and efforts to restrict Russia's Black Sea fleet which has a based in Ukraine. "Ukrainian authorities have recently been pursuing policies that cannot be seen as anything other than unfriendly towards Russia," the foreign ministry said in a toughly-worded statement.

Western officials have expressed concern that Ukraine's large ethnic Russian population could leave it exposed to intervention from Moscow after its war
in the Georgian breakaway region of South Ossetia. Russia said it was defending Russian nationals when it sent in troops to halt a Georgian offensive on South Ossetia.

Ukrainian President Viktor Yushchenko last month raised tensions by imposing restrictions on the Russian fleet, requiring ships to seek permission at least 72 hours prior to crossing the Ukrainian border.

The announcement, which came after the Black Sea fleet took part in armed conflict with Georgia, also called for talks on the future of the fleet's base in the southern port of Sevastopol.

The Russian foreign ministry statement said the fleet -- based on the predominantly Russian-speaking Crimean peninsula -- was "a stabilising factor both for relations between Russia and Ukraine and in the context of regional stability."

"The rights of the Russian-speaking population of Ukraine are being abused and there is a policy targeted at excluding the Russian language from the public life of the country," the statement said.

Russia also accused Ukraine of siding with the pro-West government in Georgia, saying: "We have not heard words of pity or compassion on the death
of civilians in Tskhinvali and of Russian peacekeepers.

"On the contrary, the Ukrainian president has tried to blame Russia for the bloodshed," it said, adding that Ukraine bore responsibility for casualties
because it had supplied Georgia with arms.

LINK: http://afp.google.com/article/ALeqM5hrc9lBEEf8vdFVclRo8FTzdqXAcA
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23. EU PLEDGES CLOSER TIES TO KIEV IN CAUTIOUS MOVE

By David Gauthier-Villars, The Wall Street Journal, New York, September 10, 2008; Page A9

PARIS -- The European Union said it would build closer economic and political ties with Ukraine but stopped short of inviting its neighbor to join the 27-nation bloc, despite hopes in Kiev that Russia's incursion into Georgia would prompt a stronger signal of European support.

After a meeting in Paris with Ukraine President Viktor Yushchenko, French President Nicolas Sarkozy, who holds the rotating presidency of the EU, said both sides would finalize an "association agreement" by March 2009 to gradually eliminate trade barriers and travel restrictions.

The EU's cautious step reflects the limits of what some of its most important members are willing to do to challenge Moscow on behalf of its neighbors. Germany and France have long opposed giving any guarantee of eventual membership to Ukraine, a nation of some 46 million that would have a major impact on budgets and power-distribution in the EU.

At a news conference with Mr. Yushchenko and EU Commission President José Manuel Barroso, Mr. Sarkozy summarized the EU's position toward Ukraine as "this is the maximum we can do."

Since the breakup of the Soviet Union, Ukraine has tried to free itself from Russian tutelage. Although Ukraine has a large Russian ethnic minority, Mr. Yushchenko was elected four years ago on the promise that he would drive his country toward EU membership by 2020.

After Russia unilaterally recognized the independence of two Georgian separatist territories last month, it has been widely suggested that Moscow may covet other parts of its former empire, such as parts of Ukraine -- though Russia has dismissed the idea. In early 2006, however, Moscow showed it could punish Kiev for its aspirations to join the West, severing natural-gas deliveries to Ukraine for several days.

Mr. Yushchenko said Tuesday he wanted to renegotiate with Russia a set of rules governing the use of the Black Sea Fleet, a group of Russian warships anchored in the Ukraine city of Sebastopol.

Ukraine didn't do itself any favors last week, when the government entered yet another political crisis. Mr. Yushchenko withdrew his party from the pro-Western coalition government, saying that Prime Minister Yulia Tymoshenko had become too close to a pro-Russian opposition party.

Asked at Tuesday's news conference whether he continued to nurture hope Ukraine would join the EU one day, Mr. Yushchenko said: "We are patient."

[Write to David Gauthier-Villars at David.Gauthier-Villars@wsj.com]

LINK: http://online.wsj.com/article/SB122099395243616295.html

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24. THE NEXT CRISIS COULD TAKE PLACE IN UKRAINE

Analysis & Commentary: By F. Stephen Larrabee

Corporate Chair in European Security at the RAND Corporation

Japan Times, Tokyo, Japan, Monday, September 8, 2008

PRAGUE — The Russian invasion of Georgia has sent shock waves throughout the West and the former Soviet space — especially Ukraine. Indeed, Ukraine could be the next potential crisis.

Georgia's increasingly pro-Western course, including growing ties to NATO, has been a thorn in Moscow's side. But it did not pose a serious threat to Russian security. Georgia's army is small, ill-equipped and no match for Russia's, as was amply demonstrated last month.

Ukraine's integration into NATO, by contrast, would have far-reaching strategic consequences, ending any residual Russian hopes of forming a "Slavic Union" composed of Russia, Belarus and Ukraine — a dream that still beats in the breast of many Russians. It would also have important implications for the Russian defense industry, notably air defense and missile production.

In short, the real source of Moscow's anxiety and strategic angst is Ukraine's future political and security orientation. Georgia has largely been a side show.
Russia has a number of means of pressuring Ukraine short of using military force. One is energy. Ukraine is heavily dependent on Russian energy, particularly gas.

Russia has used the gas issue as a foreign policy instrument. Ukraine currently pays $179 per 1,000 cubic meters for gas from Russia — more than three times what it paid in 2004 — and there have been reports that Moscow is considering a further doubling of the price. Russia's long-term strategy is to try to gain control of Ukraine's pipelines by transferring them to a joint venture, as it has done in Belarus, thus enabling it to control both supply and distribution of gas to Ukraine.

The Black Sea Fleet is another potential source of tension. Under an agreement signed in 1997, Ukraine granted Russia basing rights for the fleet at Sevastopol in Crimea until 2017. Ukraine has been pressing Russia to begin discussions on the fleet's withdrawal. But Russia has dragged its feet, suggesting that Moscow may seek to use the presence of the fleet as a means of pressuring Ukraine.

Crimea itself represents a third potential flash point. Crimea is the only region in Ukraine where ethnic Russians constitute an overwhelming majority of the population (58 percent). Khrushchev transferred the peninsula to Ukraine in 1954 as a gift to commemorate the 300th anniversary of the unification of Ukraine and Russia. At the time, the gesture was largely symbolic, as Ukraine was part of the Soviet Union and few could envisage an independent Ukraine.

Separatist pressures emerged in Crimea immediately following the collapse of the Soviet Union. They subsided after 1995 largely because the Russian separatists were divided, and Moscow, facing separatist pressures in Chechnya, showed little inclination to support them.

However, separatist pressures, while diminished, continue to exist in Crimea. Given Crimea's historic ties to Russia and its majority ethnic Russian population, many Ukrainian officials fear that Russia could try to foment separatist movements in Crimea as a means of putting pressure on Ukraine to curb its ties to the West.

Moscow's tactics in Abkhazia and South Ossetia provide cause for concern in this regard. Russia encouraged and supported separatist movements in both entities, then used the separatist tensions to justify sending "Russian peacekeepers" into the regions. Moreover, it granted Russian citizenship to Abkhaz and South Ossetian residents, and then justified its recent invasion of Georgia on the grounds that it had an obligation to protect Russian citizens.

Western allies have a strong strategic interest in supporting Ukrainian democracy and Ukraine's Euro-Atlantic integration. But this course must be pursued prudently and with great care.

As the Georgian crisis has underscored, there are limits to the ability to influence developments in a region where Russia has strong strategic interests and a preponderance of military power. Thus Europe and the United States need to be very careful about making security commitments they are unwilling or unable able to carry out.

This does not mean that Moscow should be given a veto over Ukraine's security orientation or that Ukraine can never become a member of NATO. The door for Ukraine to join NATO should remain open.

But with Russia in a defiant mood and refusing to fully withdraw its troops from Georgia, now is not the time to accelerate efforts to bring Ukraine into the Alliance. Poking an angry bear is not a wise policy. Ask Mikhail Saakashvili.

NOTE: F. Stephen Larrabee holds the Corporate Chair in European Security at the RAND Corporation, a nonprofit institution that helps to improve policy and decision-making through research and analysis. He served on the U.S. National Security Council staff in the Carter administration. © 2008 Project Syndicate

LINK: http://search.japantimes.co.jp:80/rss/eo20080908a2.html

OPINION: By Leon Aron, Director of Russian studies

Resident Scholar at the American Enterprise Institute (AEI)

The Wall Street Journal, New York, NY, Wed, September 10, 2008; Page A15

Perhaps the most urgent question in the world affairs today is whether Russia's invasion and continuing occupation of Georgia was a singular event. Or was it the onset of a distinct, and profoundly disturbing, national security and foreign policy agenda?

Much as one would like to cling to the former theory, the evidence favors the latter. A European delegation led by French President Nicolas Sarkozy did manage this week to get assurances that Russian troops would withdraw from Georgia (excepting Abkhazia and South Ossetia, whose independence Moscow says is "irrevocable").

But ultimately, this short war is likely to be remembered as the beginning of a decisive shift in Russia's national priorities. The most compelling of these new priorities today seems to be recovery of the assets lost in the Soviet Union's collapse in 1991, which Vladimir Putin has called the "greatest geopolitical catastrophe of the 20th century."

How does Russia achieve this goal? By dominating the domestic politics and, more importantly, economic- and foreign-policy orientation, of the former Soviet republics. Anything considered antithetical to Russia's interests, as interpreted by the current Kremlin leadership, must be discarded -- be it democratization, oil and gas exports that bypass Russia, and, especially, the membership in the Western organizations such as the European Union and NATO.

And if, in the process, Russia must sacrifice most or even all of the fruits of the post-Soviet rapprochement with the West -- including membership in the G-8, entry to the World Trade Organization or ties to the EU -- so be it.

Russia's "targets of opportunity" include simmering border disputes (and virtually all Russia's borders with newly independent states could be disputed, since they are but the very badly demarcated internal borders of the Soviet Union), and the presence of the ethnic Russian or Russian-speaking minorities in neighboring countries.

Apart from Estonia and Latvia -- where ethnic Russians constitute over a quarter of the population, but where NATO membership raises the risk for the Kremlin -- by far the most likely target is Ukraine. Kiev has repeatedly defied and angered Russia by the domestic politics of democratization, a decidedly pro-Western orientation, and the eagerness of its leadership to join NATO. Nearly one in five Ukraine citizens are ethnically Russian (a total of almost eight million) and live mostly in the country's northeast, adjacent to the Russian border.

Mr. Putin has made his contempt for Ukrainian sovereignty clear, most notably at the NATO summit in Bucharest last April when, according to numerous reports in the Russian and Ukrainian press, he told President Bush that the Ukraine is "not even a real state," that much of its territory was "given away" by Russia, and that it would "cease to exist as a state" if it dared join NATO.

Clearly, Vice President Cheney's trip to Ukraine this past weekend, where he expressed America's "deep commitment" to this "democratic nation" and its "right" to join NATO, was intended as a message to Moscow.

Still, there is no better place to cause a political crisis in Ukraine and force a change in the country's leadership, already locked in a bitter internecine struggle, than the Crimean peninsula. It was wrestled by Catherine the Great from the Ottoman Turks at the end of the 18th century. Less than a quarter of the Crimeans are ethnic Ukrainians, while Russians make up over half the inhabitants (the pro-Ukrainian Crimean Tatars, one-fifth).

Ever since the 1997 Treaty of Friendship and Cooperation between Russia and Ukraine, signed by President Boris Yeltsin and Ukrainian President Leonid Kuchma, a solid majority of the Russian parliament has opposed the recognition of the Crimea as Ukrainian territory.

Russian nationalists have been especially adamant about the city of Sevastopol, the base for Russia's Black Sea fleet and the site of some of the most spectacular feats of Russian military valor and sacrifice in World War II and the Crimean War of 1854-55.

Nationalist politicians, including Moscow Mayor Yuri Luzhkov, have repeatedly traveled to Crimea to show the flag and support the Russian irredentists -- many of them retired Russian military officers who periodically mount raucous demonstrations. In 2006, their protests forced the cancellation of the joint Ukraine-NATO Sea Breeze military exercises.

Sevastopol was and should again be a Russian city," Mr. Luzhkov declared this past May, and the Moscow City Hall has appropriated $34 million for "the support of compatriots abroad" over the next three years. On Sept. 5, Ukraine's Foreign Minister Vladimir Ogryzko accused the Russian consulate in the Crimean capital of Simferopol of distributing Russian passports to the inhabitants of the peninsula.

With almost three-quarters of Sevastopol's 340,000 residents ethnically Russian, and 14,000 Russian Navy personnel already "on the inside" (they've been known to don civilian clothes and participate in demonstrations by Russian Crimean irredentists), an early morning operation in which the Ukrainian mayor and officials are deposed and arrested and the Russian flag hoisted over the city should not be especially hard to accomplish.

Once established, Russian sovereignty over Sevastopol would be impossible to reverse without a large-scale war, which Ukraine will be most reluctant to initiate and its Western supporters would strongly discourage.

A potentially bolder (and likely bloodier) scenario might involve a provocation by the Moscow-funded, and perhaps armed, Russian nationalists (or the Russian special forces, spetznaz, posing as irredentists). They could declare Russian sovereignty over a smaller city (Alushta, Evpatoria, Anapa) or a stretch of inland territory.

In response, Ukrainian armed forces based in the Crimea outside Sevastopol would likely counterattack. The ensuing bloodshed would provide Moscow with the interventionist excuse of protecting its compatriots -- this time, unlike in South Ossetia, ethnic Russians.
Whatever the operational specifics, the Russian political barometer seems to augur storms ahead.

NOTE: Mr. Aron, director of Russian studies and resident scholar at the American Enterprise Institute (AEI), Washington, D.C., is the author, most recently, of "Russia's Revolution: Essays 1989-2006" (AEI Press, 2007).

LINK: http://online.wsj.com/article/SB122100831438617621.html

A collection of major works by noted US historian James Mace, exposed the genocide of 1932-1933

By Nadia Tysiachna, The Day, and Natalia Dziubenko-Mace

The Day Weekly Digest, Kyiv, Ukraine, Tuesday, September 9, 2008

Another book has just been published as part of The Day’s Library Series. The new publication, entitled James Mace: “Vashi mertvi vybraly mene“ (James Mace: “Your Dead Chose Me”) is Ukraine’s first collection of the major works of this noted US historian, who exposed the truth about the Holodomor genocide in Ukraine.

The volume includes nearly all his articles that were published in The Day between 1997 and 2004, as well as a handful of his articles that were published in other Ukrainian periodicals. An inalienable component of Ukrainian journalism and political culture, Mace’s articles are a kind of analytical diary of the defeats and victories of the Ukrainian state.

Mace’s scholarly grasp of the Holodomor reveals his quest for the purely political reasons behind this heinous crime, and this collection of articles addresses a number of crucial political, economic, and cultural issues. At the same it is a social diagnosis of the pathologies afflicting the Ukrainian society and state, a quest for optimal solutions with a universal and substantial meaning.

The creation of a civil society, the assertion of freedom of expression and freedom of the individual, and many other urgent problems are considered on the foundations of humanistic world views, with the aid of a variety of intellectual tools that were the hallmark of this outstanding American with a Ukrainian heart.

Mace stood out conspicuously among Ukrainian intellectuals with his quick temperament, fundamental knowledge, erudition, and undeniable polemical talents. He responded to all attacks and attempts to label him and, at the same time, deprive him of the moral right to his own ideas with genuine good humor tinged with regret.

He wrote: “At this point a digression is in order...What did I need this for? I have been asked this question frequently, and I have often been tempted to ask in turn: Why should millions of Russians, Jews, Armenians, and Ukrainians travel across the ocean to that faraway and godforsaken country, my America?

FATE DECREED THAT THE VICTIMS CHOSE ME
I did it because Ukrainian Americans required this research, and fate decreed that the victims chose me. Just as one cannot study the Holocaust without becoming half- Jewish in spirit, one cannot study the Famine and not become at least half- Ukrainian. I have spent too many years for Ukraine not to have become the greater part of my life. As Martin Luther said, ‘Here I stand, I can do no other.’”

In 2006 the President of Ukraine signed an edict establishing the Ukrainian Institute of National Memory. Mace had voiced this same idea in several Ukrainian periodicals as early as 1993, and his proposal sparked a heated debate in the press. He responded with a series of devastating articles that reflected the pain in his heart. Eventually, he wrote the program and statute of the new institute.

That same year the Ukrainian World Coordinating Council appointed him head of the newly established structure. The present volume includes Mace’s programmatic speech in Baturyn. This conceptually important speech points toward the direction in which it is necessary to move and indicates how to turn this institution into a truly living organism, a powerful generator of new ideas and new research, one that will be able to influence all aspects of intellectual life.

DECISIVE ROLE IN EXPOSING THE HIDDEN STALINIST CRIME OF THE FAMINE
“James Mace played a decisive role in exposing the hidden Stalinist crime of the famine of 1932-33 in Ukraine,” noted Stanislav Kulchytsky, deputy director of the Institute of Ukrainian History at the National Academy of Sciences of Ukraine.

“As the executive director of the US Commission on the Ukraine Famine, in 1988 he prepared and published the groundbreaking Report to the US Congress, which was followed in 1990 by three volumes of Holodomor eyewitness testimonies. These publications forced the Soviet Ukrainian government to officially acknowledge the fact of the famine, which had been kept secret for 55 years.

“The activities of Mace’s commission gave an impetus to research on the Ukrainian tragedy. The truth about the Holodomor turned into an effective means of freeing Ukrainian society from misleading Soviet propaganda stereotypes.

James Mace dedicated the last 10 years of his short life to Ukraine. His scholarly and educational endeavors focused on amassing arguments that prove that the Holodomor was an act of genocide corresponding to the UN Convention on the Prevention and Punishment of the Crime of Genocide (Dec. 9, 1948).

We owe the ratification by the Verkhovna Rada of the Law of Ukraine “On the Holodomor” to a number of domestic and foreign scholars, but we must not forget that Mace was present at the early stages of this research.

The truth about the Holodomor is helping us revive our historical memory, rally the Ukrainian people, and direct the state-building process along national lines. This is precisely why James Mace became a Great Ukrainian.” [To inquire about ordering this book, call (044) 414-6400 in Ukraine.]

FOOTNOTE: The artistic work on the cover of the book, a pencil on paper drawing, showing a grieving mother sitting on the ground with her child, is by famous Ukrainian graphic artist Volodymyr Kutin. The original of this artwork is held in the collection "Holodomor: Through The Eyes Of Ukrainian Artists," Morgan Williams, Founder and Trustee, Kyiv, Ukraine. LINK to article and photograph of book: http://www.day.kiev.ua/251220/.

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