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                 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       

                        

           --------  INDEX OF ARTICLES  --------

         Clicking on the title of any article takes you directly to the article.               

1.       FROM HEART OF UKRAINE, THE SOUL OF A SCORER

                   Ukraine's high hopes rest squarely on Shevchenko
By Nathaniel Vinton, The New York Times
New York, New York, Wednesday, June 14, 2006

2.               SPAIN-UKRAINE AN INTRIGUING MATCHUP
By Barry Wilner, Associated Press, Berlin, Germany, Tue, June 13, 2006

3. UKRAINE LIKELY TO SEEK COUNTERATTACK AGAINST SPAIN
By Stefan Korshak, Deutsche Presse-Agentur
Leipzig/Potsdam, Germany, Tuesday, Jun 13, 2006

4.                                UKRAINE FEEL THE HEAT

By Jon West, PA Sport, Leipzig, Germany, Tue, June 13, 2006

5.            BALLACK AND SHEVCHENKO SET TO GRACE CUP
By Paul Radford, Reuters, Berlin, Germany, Wed, June 14, 2006
 
6.            UKRAINE STEPS OUT ONTO THE BIGGEST STAGE 
Morning Star, London, UK, Wednesday, June 14, 2006

7.     UKRAINE PLAYERS PROMISED $2.8 MILLION TO PROCEED

REUTERS, Kiev, Ukraine, Tuesday, June 13, 2006

8.                     WHO IS RESPONSIBLE FOR UKRAINE?
Behind the Breaking News: By Tammy Lynch in Kyiv
Institute for the Study of Conflict, Ideology & Policy
Boston University, Boston, MA, Tuesday, June 13, 2006

9.         UKRAINIAN LEADERSHIP: BETWEEN PAST AND...PAST
ANALYSIS & COMMENTARY: Yulia Mostovaya & Serhii Rakhmanin
Zerkalo Nedeli On The Web, Mirror-Weekly, No. 22 (601)
International Social Political Weekly, Kyiv, Ukraine, Sat 10-16 June 2006

10. EVENT: TRANSFORMATION OF THE UKRAINIAN CIVIL SERVICE
            SYSTEM UNDER CONDITIONS OF POLITICAL REFORM
           Speaker: Tymofiy Motrenko, Head of the Civil Service of Ukraine
U.S.-Ukraine Foundation, Kennan Institute, and the
Woodrow Wilson International Center for Scholars
Washington, D.C., Tuesday, June 13, 2006

11.   US EMBASSY ON DEPARTURE OF US MARINE RESERVISTS
Public Affairs Section, U.S. Embassy, Kyiv, Ukraine, Tuesday, June 13, 2006

12.          UKRAINE AGAIN FACES INCREASE IN GAS PRICES
By Judy Dempsey in Berlin, International Herald Tribune
Paris, France, Tuesday, June 13, 2006

13.              VOLODARKA SUITS UKRAINE'S NEW IMAGE
   Volodarka is one of Eastern Europe's leading men's tailoring companies
Just.Style.com, United Kingdom, 22 March 2006

14.            UKRAINE: CURRENT ISSUES AND U.S. POLICY
CRS Report for Congress: By Steven Woehrel
Specialist in European Affairs, Foreign Affairs, Defense & Trade Division
Congressional Research Service, The Library of Congress
Washington, D. C., Wednesday, June 7, 2006
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1.      FROM HEART OF UKRAINE, THE SOUL OF A SCORER

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2.               SPAIN-UKRAINE AN INTRIGUING MATCHUP

By Barry Wilner, Associated Press, Berlin, Germany, Tuesday, June 13, 2006

BERLIN -- Spain's biggest star is questionable for its World Cup opener
against Ukraine. And Ukraine's top player is questionable against Spain.
Seems fair.

The final set of opening games Wednesday features the Spanish and Ukrainians
in Leipzig, and Tunisia against Saudi Arabia in Munich. Then the host
Germans play Poland in Dortmund in the first match involving teams that
already have played in the tournament.

No team is shrouded in more secrecy in this event than Ukraine. Striker
Andriy Shevchenko, one of the world's most dynamic scorers, has been
battling a knee injury since being hurt while playing for AC Milan, and
nobody is saying how healthy - or unhealthy - he is. He apparently has
discarded a white bandage that wrapped his left leg in earlier training
sessions.

"If he is not wearing a bandage, that is good news for us," team spokesman
Igor Miroshnyschenko said in completely noncommittal fashion. "I don't know
if he will play. That is a decision for the head coach and he will not
decide until the day of the match."

That's about all the information the Ukrainians will offer, but their
chances of doing anything in the World Cup are slim without Shevchenko.
Spain knows it and isn't counting on Shevchenko being absent.

"We're the favorites because of the team and the players we have, but if we
want to be first in the group we have to keep working hard," Spanish
midfielder Cesc Fabregas said. "We know they're a great team. They have
players like Shevchenko who can kill the game in one second."

Longtime Spanish star Raul Gonzalez, in his third World Cup, has struggled
since partially tearing a left knee ligament in November while playing with
Real Madrid. Spain's all-time leading scorer with 43 goals went seven months
without a goal until a friendly against Egypt 10 days ago.

Coach Luis Aragones seems prepared to leave the team captain on the bench.
"We are all working hard to be starters, and if it doesn't happen, then
we'll have to help the team from the sidelines," said David Villa, the
likely starter in place of Raul. "If the coach decides that I have to start
the game from the bench for the good of the team, then I think that won't
surprise anybody."

But with Raul practicing with the second team, his inclusion in the first 11
would be surprising. "The coach believes there are others who can do a good
job against Ukraine, and it's no problem," Raul said. "We are 23 players on
the team and we all want play. The coach has selected an 11 for the first
game and I think we will all have other opportunities to play in the World
Cup."

Anything can happen between Tunisia and Saudi Arabia. The Tunisians are in
their third consecutive World Cup and won the 2004 African Cup of Nations
under coach Roger Lemerre. They have placed special emphasis on the opener.

"The first match will be the first key," Lemerre said. "Whoever opens the
door in the first game can hope to progress. Psychologically, it's very
important."

The Saudis got off to the worst possible start four years ago, losing 8-0 to
Germany in their 2002 Cup opener. Their coach, Brazilian Marcos Paqueta, is
dismissing that debacle, even if many observers are not and consider Saudi
Arabia the weakest team in the field. "We have a plan, and the players feel
good," Paqueta said. "I think 2002 should be behind them. They want to do
everything possible to clean the slate.

"I see my boys are very motivated. Once the match begins, they will show
their composure, confidence and good morale."

Tunisia goalkeeper Ali Boumnijel anchors a veteran defense including Ajax
Amsterdam's Hatem Trabelsi and Bolton's Radhi Jaidi. "We are confident

of our abilities," said Boumnijel, at 40 the oldest player in the tournament.

Germany comes off a 4-2 victory over Costa Rica in the opener and can
solidify advancement with another decisive victory. The Poles were stunned
by Ecuador 2-0 in their first game and another loss will send them home in
ignominious fashion.

But Poland never has beaten Germany in soccer. And the hosts will get back
captain Michael Ballack, who was injured for the first game. "This is going
to be a totally different game than the opener," Ballack said. "Costa Rica
didn't tackle very much, they let us play. Against Poland, it's going to be
a fight.

"Poland is under pressure, for them it's almost all or nothing. We are
confident and we know what to expect. They are like groggy boxers, at their
most dangerous."                                  -30-
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3. UKRAINE LIKELY TO SEEK COUNTERATTACK AGAINST SPAIN

By Stefan Korshak, Deutsche Presse-Agentur
Leipzig/Potsdam, Germany, Tuesday, Jun 13, 2006

Leipzig/Potsdam - Ukrainian football tactics are quite old- school. Even for
the most important of matches, there are two basic tactics a coach can
select: The 'first number', and the 'second number.'

Coach Oleg Blokhin will almost certainly select the 'second number' -
defensive tactics aimed at scoring by counterattack - for Ukraine's opening
World Cup match against Spain.

The problem is, whatever plan Blokhin adopts will have to work against
against a technically superior Spanish side. 'We have no pretensions to
superiority over the Spaniards on the technical level, that is not the way
with us,' Blokhin told a press conference Tuesday. 'We will build our game
on the Ukrainian strength, and that strength is collectivism.'

Blokhin's focus is on group play, and the use of physical fitness to
compensate for sometimes player inferiority on the technical level.
Blokhin - and decades of Soviet coaches - call the most desirably
characteristic in a team 'collectivism': players able to team up to gain
control of the ball, and to execute attacks in fast groups before the
opposition's defence is set.

During its World Cup qualifying campaign, Ukraine visibly departed from a
'collectivist' defensive stance only once - against Turkey during the last
game in the two-year series, and that only for a single half.

Using its tried-and-true methods, Ukraine was the first European country to
qualify for the finals in Germany. Besides, Ukrainian sports specialists
point out, Blokhin has a counterattack weapon par excellence in Andrij
Shevchenko, one of the world's fastest and most cold-blooded strikers.

Add in the Ukrainian side's lack of top-level creativity in the midfield and
the inexperience of some defenders, and the only possible Ukrainian solution
to a superior side like Spain is 'build a fortress around our goal, press
the Spaniards in our half, and then get Shevchenko loose and give him a long
ball - anything else is suicide,' said Oleh Rudinsky, a reporter for the
respected Sports Express newspaper.

Unfortunately for the admittedly fleet-footed Ukrainians, continuous
pressing and fast raids into opposition territory require fitness, and there
are problems on that front for the East Europeans. The team itself, built on
the physically-oriented Dynamo Kyiv side, in itself is capable of running.

But Ukraine is a cool country and temperatures in Germany - hovering in the
30s - are some 10 degrees hotter.

Then there is Shevchenko, with a leg just finished recovering from injury,
but not back to full match fitness. A very difficult decision facing Blokhin
is how to field Shevchenko - from the start, at the half, or perhaps not at
all.

True, even the opposition is saying Shevchenko should be on the field. 'Even
if he is not fully fit, we must consider Shevchenko extremely dangerous,'
said Raul, Spain's team captain.

'I think of the temperatures, and I wonder if I have the right to ask
Shevchenko to play in this heat,' Blokhin said.

Another tough one for Blokhin is which attacking midfielder to back
Shevchenko: Germany-based Andrij Voronin, a national team veteran but with
little club playing time in recent months; or Ukraine-based Serhy Rebrov,
who has had a stunning club season this season and was Shevchenko's
tandem-man in his youth, but has had little experience on Blokhin's side.

A similar difficult choice faces Blokhin on the left wing, where Ruslan
Rotan - a gifted Dynamo Kyiv winger with a precocious ability to predict
play, but little international experience - competes with Maxim
Kalinichenko, a solid midfielder less capable of defensive mistakes than
Rotan. 'I'll make the decisions,' Blokhin said. 'But they won't all be
easy.'                                              -30-

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4.                            UKRAINE FEEL THE HEAT

By Jon West, PA Sport, Leipzig, Germany, Tue, June 13, 2006

World Cup debutants Ukraine are already feeling the heat as they prepare for
their big tournament bow against Spain tomorrow.

Their Group H opener kicks off at 2pm BST and the temperature is likely to
be more than 30 degrees Centigrade at Leipzig's impressive Zentralstadion.

That has angered manager Oleg Blokhin, the former European footballer of the
year, who has a short fuse anyway. Blokhin, who will wait until the last
minute to see if star striker Andriy Shevchenko has recovered from a knee
injury, moaned: "It will be hard enough for the spectators so imagine what
it will be like for the players. "I don't know why we couldn't play at six
o'clock or nine o'clock."

Shevchenko was also worried his nation's chances of causing an upset would
be hampered by the weather. Chelsea's new signing said: "It will be very
difficult to play in this heat. It is just too hot."

Team-mate Sergei Rebrov, the former Tottenham and West Ham striker, agreed.
He said: "These weather conditions are very hard to play in, it is so
difficult to play at 3 o'clock but what can we do?

"We are confident we can do well but there is just one problem and it is for
both teams - we have to play in these conditions."

Blokhin conceded that Spain were also a more technically gifted side as well
as more used to playing in intense sunshine but was confident nonetheless.

He said: "I have never said we have the technique of Brazil or Spain but we
always play a team game. "We can't play at our normal speed in such
conditions but we know we will just have to keep our rhythm." Shevchenko
added: "I feel okay but I will decide with the coach tomorrow if I can
play."

The Chelsea striker, recently recruited from AC Milan for £31million, has
played just 30 minutes of football since suffering the injury in an Italian
league game with Parma on May 7. He did however score in that match, a 3-0
friendly win over Luxembourg last week.

Blokhin, who is also a member of parliament in his homeland, also found time
to tell one Russian sportswriter exactly what he thought of a particular
article, which attempted to use theatrical allusions. Blokhin accused him of
calling him a clown.

He ranted: "If you want to call me a clown you should pay me the Equity
rate. I'm not the people's artist but the manager of the national team."

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5.      BALLACK AND SHEVCHENKO SET TO GRACE CUP

By Paul Radford, Reuters, Berlin, Germany, Wed, June 14, 2006

BERLIN - German playmaker Michael Ballack and Ukraine marksman Andriy
Shevchenko, two of the game's greats, should take their opening bows on the
2006 World Cup stage on Wednesday, a day which could spell doom for Poland.

Ballack missed the hosts' opening 4-2 victory over Costa Rica on Friday but
should be back to face Poland in Dortmund while Shevchenko would hope to
pass a late fitness test and appear in Ukraine's World Cup debut against
Spain in Leipzig.

Poland's hopes hang by a thread on only the sixth day of competition and,
ironically, two Polish-born players could well be their executioners. Beaten
2-0 by Ecuador on Friday, Poland know defeat at the hands of Germany would
end their chances of advancing to the second round.

By a curious twist of fate, the German twin strike force of Miroslav Klose
and Lukas Podolski were both born in Poland but moved to Germany as
children. Klose scored twice in Germany's opening match 4-2 victory over
Costa Rica.

The omens do not look good for the Poles as they have not beaten Germany in
85 years of trying but, if there are crumbs of comfort, it could be in
Germany's poor record against European opponents.

It is 10 years since Germany beat a European team at the World Cup or
European Championship finals, their last victory coming in their 2-1 victory
over the Czech Republic in the final of Euro 1996.
                                      KNEE INJURY
Shevchenko has been nursing a knee injury but has been training with his
Ukrainian team and will face Spain in the first match for both teams in
Group H providing he passes a fitness test just before the game.

Spain, who are on the longest unbeaten run of the 32 finalists, not having
lost in 22 games, are likely to be without captain and top scorer Raul. The
striker may well sit on the bench after failing to rediscover his goal touch
following a knee injury.

Tunisia and Saudi Arabia meet in an all-Arab encounter in Munich and will be
the last two teams to open their World Cup finals campaign.

The Tunisians, the only one of five African nations at the finals who have
taken part before, seek also to be the first to avoid defeat. Ivory Coast,
Angola, Ghana and Togo all lost their opening games.

Saudi Arabia, in their fourth consecutive finals, are conscious they must do
much better than their opening game in Japan four years ago when they were
crushed 8-0 by Germany.

In Tuesday's matches, champions Brazil opened their campaign quietly with a
1-0 victory over Croatia in Group F in Berlin, thanks to a superb strike
just before halftime from Kaka.

The 1998 champions France labored to a disappointing 0-0 draw with
Switzerland in Stuttgart in Group G, their fourth successive match without a
goal at World Cup finals since they won their title.

Togo, whose players have been involved in a pay dispute and whose coach
walked out last week only to return the day before their first World Cup
finals game, almost pulled off a surprise when they took a first half lead
over South Korea thanks to Mohamed Kader Coubadja.

But they eventually lost 2-1 in Group G after their captain Jean-Paul Yaovi
Abalo Dosseh was sent off in the second half, the Koreans scoring through
Lee Chun-soo and substitute Ahn Jung-hwan.               -30-
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6.     UKRAINE STEPS OUT ONTO THE BIGGEST STAGE 

 

Morning Star, London, UK, Wednesday, June 14, 2006

ANDREI SHEVCHENKO and his Ukrainian countrymen make their nation's
long-awaited World Cup Finals debut today after years of struggle following
the dissolution of the Soviet Union.

For their opponents Spain - particularly for veterans Raul and David Villa -
it's the start of yet another Spanish bid for the title after 11 failed
attempts.

On the surface, much distinguishes the neophyte Ukrainians and the
experienced Spaniards, who boast internationally renowned players such as
Villa, Fernando Torres and Luis Garcia and whose clubs won both this
season's European Champions League and UEFA Cup titles.

But the opening group H showdown in Leipzig at 2pm could be a lot tighter
than expected. "Of course, Spain are a favourite, but Spain have to be
afraid of us, not the other way around," declared Ukraine's coach Oleg
Blokhin.

Blokhin is a legendary figure in his country who helped Dynamo Kiev win the
European Cup Winners' Cup and Super Cup crowns in 1975.

Although this is Spain's eighth consecutive World Cup appearance, they have
never come close to the title. Their best result was fourth in 1950. "We're
the favourites because of the team and the players we have, but, if we want
to be first in the group, we have to keep working hard," said Arsenal's
young midfield star Cesc Fabregas.

"We know they're a great team. They have players like Shevchenko who can
kill the game in one second."

This game will go a long way towards deciding the group, with Saudi Arabia
and African Cup of Nations champions Tunisia on the horizon. "Tunisia are
just as dangerous for us," Blokhin insisted.

"African teams are famous for surprising their opponents. And any team
coached by Roger Lemerre is capable of surprises. "So a win over Spain

would be good."

Both team captains are doubts for the tie. Raul, in his third World Cup, has
struggled since injuring his knee in November. He may be replaced by Villa.

Blokhin has been evasive about whether Shevchenko has recovered from a knee
injury that he picked up in May.

The newly signed Chelsea striker's participation will probably be announced
just an hour before the match, presumably to keep Aragones guessing.

But Spain will stick to their 4-3-3 formation regardless. "So far, we have never

changed our system depending on another team," Real Madrid right-back

Michel Salgado said.

Ukraine will rely on discipline, quick counter-attacks and a forward line
led by the predatory finishing of Shevchenko, if fit.

A question mark remains over whether Blokhin will field veteran Sergei
Rebrov, who is back at Dynamo after disappointing stints in England and
Turkey but has always been a dangerous force when paired with Shevchenko.

Bayer Leverkusen's Andrej Voronin is challenging Rebrov for a place. Also
today, Tunisia take on Saudi Arabia at 5pm and Germany face Poland in the
evening kick-off. The hosts will be hoping to continue their goalscoring
form after seeing off Costa Rica 4-2 in the opening fixture.

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7. UKRAINE PLAYERS PROMISED $2.8 MILLION TO PROCEED

 

REUTERS, Kiev, Ukraine, Tuesday, June 13, 2006

 

KIEV - Ukraine's team in the World Cup will earn a bonus of $2.8
million if they make it out of their qualifying group, the head of the
country's soccer federation Hryhory Surkis told Interfax Ukraine

news agency on Tuesday.

Ukraine, making their first World Cup appearance, open their campaign

on Wednesday against Spain, considered the group favourite.

Coach Oleg Blokhin says his initial objective is to make it out of the
group, which also includes Saudi Arabia and Tunisia.     -30-
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8.                     WHO IS RESPONSIBLE FOR UKRAINE?

Behind the Breaking News: By Tammy Lynch in Kyiv
Institute for the Study of Conflict, Ideology & Policy
Boston University, Boston, MA, Tuesday, June 13, 2006

Negotiations to form a new Ukrainian government once again broke down on
Saturday, as President Viktor Yushchenko’s Our Ukraine party pulled out of
talks with fellow “orange” parties, The Bloc of Yulia Tymoshenko and the
Socialist Party.

Three months after the country’s parliamentary elections, its leaders appear
helpless and hapless, unable to govern the country even as it faces some of
the most difficult challenges in its modern history.   And now, after
numerous rounds of negotiations, President Yushchenko suddenly has
removed himself from the process, suggesting that it is not his
responsibility to help form the government.

In 2006, Ukraine became a parliamentary-presidential republic.  The cabinet
is now responsible for most day-to-day domestic policy, but the president
maintains general oversight, with significant powers of decree, as well as
control over the security services and foreign policy.

                   [YUSHCHENKO SUDDENLY PULLS OUT]
On Saturday, Yushchenko implied that this structure absolves him of the
duty to help form a new government. (1) The president unexpectedly made
this statement after being intimately involved in the process for almost
three months.

Since the election, the country has been run by an acting government with
little apparent interest in reform.  Economic growth has slowed, debts
accumulated by the country’s domestic gas supplier reportedly now total
approximately 1 billion dollars, foreign investors have stayed away because
of political instability, protests have erupted over plans to hike energy
tariffs, a delivery of military construction materials to Crimea by a US
carrier resulted in sustained protests against the US and NATO, US President
George W. Bush nixed a tentative trip to the country, and Russia announced
that gas prices for Ukraine could double on 1 July.

And yet, there has been no rush by either Yushchenko or his Our Ukraine
party to form a new government.  In fact, Yushchenko and Our Ukraine spent
the better part of the last two months refusing to accept that, since the
election bloc of former Prime Minister Yulia Tymoshenko finished more than 8
points ahead of Our Ukraine in the election and would be the biggest party
in the proposed coalition, Tymoshenko should be premier.   Talks were
suspended more than once by Our Ukraine in protest against this claim.

Two weeks ago, Yushchenko’s press service released a statement pointing out
that the president must submit the name of the premier for confirmation by
parliament, and that by law he can refuse to submit the premier suggested by
the majority coalition. (2)   This announcement was seen to be aimed clearly
at Tymoshenko.

However, finally, on Friday, almost three months after the election,
President Yushchenko announced that he supported the idea that the largest
party in the coalition should name the premier. (3)

        [NOW TYMOSHENKO'S JOB TO FORM A COALITION]
The next day, suddenly and without warning, Our Ukraine pulled out of the
talks; President Yushchenko then suggested that it was Tymoshenko’s job,
not his, to form a coalition.

"I believe that the politician seeking to become prime minister must take
responsibility for creating a coalition," he said in his weekly radio
address.   "This is European practice, this is common sense, this is a norm
of Ukraine's Constitution." (4)

Yushchenko apparently would like to suggest that it would be Tymoshenko’s
responsibility, not his, if the coalition negotiations fail.

If only he had told her sooner.

According to Ukraine’s constitution, a parliamentary majority coalition must
be created within 30 days of the first sitting of the newly elected
parliament.  The deadline, therefore, is 25 June.  Even more importantly,
parliament has been unable to convene successfully since no majority exists.

Its next session is 14 June, when the body is scheduled to discuss important
issues, including authorization of Ukraine’s participation in international
military exercises.  Without the majority coalition, this measure will not
pass, leaving Ukraine potentially in violation of several major
international agreements.

Already, a joint Ukrainian-British exercise has been postponed—in spite
of the British outlay already reportedly totaling over $200,000—because
of the lack of parliamentary authorization.

Since Yushchenko and Our Ukraine only agreed to allow Tymoshenko to
become premier on 8 June, she therefore effectively has 7 days to form a
workable coalition.  And she is to do so with a party whose “honorary”
leader seems to have withdrawn from the process.  It is no surprise, then,
that Tymoshenko seemed slightly shell-shocked at a press conference
following the president’s statements.

        [WHY DID OUR UKRAINE PULL OUT OF TALKS?]
So why did Our Ukraine pull out of talks?  Ostensibly, the party suggests
that it could not accept the demand by the Socialists that their leader,
Oleksandr Moroz, become speaker of parliament.  The reasoning seems
questionable, however.

Moroz has made it clear since the first week after the election that his
party wants only one major position – the speakership.  This demand has not
hampered the negotiations; in fact, after weeks of discussions, Our
Ukraine’s political leadership announced that all coalition members had
agreed on an approximately 100-page program of action. (5)  Throughout
these discussions, Moroz’s requirement for participation was clear.

Our Ukraine is now insisting that one of its members receive the position of
speaker. Our Ukraine spokeswoman Tatyana Mokridi said, “The Socialist Party
strongly insists that its head, Alexander [sic] Moroz, be given the post of
speaker. However, Our Ukraine insists on proportional distribution based on
the results of the elections.” (6)

In other words, Mokridi suggests that since Our Ukraine had the second-
best results of the three coalition partners, it should have the right to
the second highest position available to be filled by the coalition
partners.

In a fully parliamentary republic, this would be the case.  However, Ukraine
is a parliamentary-presidential republic and the position of president
cannot be ignored.  Ukraine’s system of governance places a similar level of
power in the hands of the president and prime minister, although the
historical authority of the presidential position makes it far more
formidable when used to its capacity.

Despite attempts by the president’s aides to suggest otherwise, President
Yushchenko clearly represents Our Ukraine.  The party featured him in its
election ads, lists him as its honorary party leader, and distributed
campaign material carrying the slogan, “The Party of Yushchenko.”

Yushchenko himself spoke at the organizational 2005 Our Ukraine party
conference, his closest friends are party leaders, and his brother and
nephew represent the party as Members of Parliament.

If the country is striving for a governing coalition based on balance and
fairness, Yushchenko’s position representing the interests of Our Ukraine
cannot be dismissed.

Additionally, Ukraine’s constitution allows the president to unilaterally
appoint the secretary of the powerful National Security and Defense Council,
the head of the Security Services, the Foreign Minister, Interior Minister,
Defense Minister and all 25 regional governors.  Yushchenko has insisted
these positions be removed from consideration in coalition negotiations. (7)
Most, if not all, will almost certainly be filled by representatives of
Our Ukraine.

  [WHY DOES OUR UKRAINE OBJECT TO MOROZ AS SPEAKER]
Why, then, with its representatives in most of the major positions governing
the country, does Our Ukraine object to Oleksandr Moroz as speaker?

Tymoshenko bluntly suggested Saturday that the reason given by Our Ukraine
was simply a “pretext” to disguise the fact that Our Ukraine’s leadership
does not want to reform the “orange coalition.”  Instead, she said, its
leaders would rather form a coalition with the party of President
Yushchenko’s defeated presidential opponent, Viktor Yanukovich. (8)

This suggestion is given weight by the recent creation of an “inter-party
parliamentary alliance” by certain members of Our Ukraine and Yanukovich’s
Party of Regions. (9)  Most Our Ukraine members in this alliance appear to
have business or financial interests that coincide with those of the Party
of Regions.

If this is the case, Our Ukraine’s attack against Moroz is even more
disturbing, given Moroz’s long history of fighting against corruption and
for democracy.

It was neither Yushchenko nor Tymoshenko who first stood up to publicly
accuse President Leonid Kuchma of involvement in the death of Goergiy
Gongadze:  It was Oleksandr Moroz and the Socialists.  And it was Moroz
who led protests against Kuchma while most others were biding their time.

Love him or hate him, there is little doubt that Oleksandr Moroz was as
vital as Tymoshenko and Yushchenko to the protest movement that eventually
led to the Orange Revolution – and Yushchenko’s presidency.

The question now is whether Moroz will once again become a vital part of the
opposition, or whether he will be allowed to use his skills as the speaker
of parliament.  The answer will demonstrate whether Ukraine truly is serious
about embracing democratic governance, coalition-building and transparency.
-------------------------------------------------------------------------------------------------
                                          SOURCE NOTES:
(1) “Ukrainian president vows no repeat election - fuller version [Text of
Yushchenko radio address],” Ukrainian Radio First Program,1500 GMT,
10 Jun 06; via Lexis-Nexis.
(2) “Poludionny says President can refuse to nominate premier,” UNIAN,
1836 CET, 31 May 06; via www.unian.net/en.  (Author’s Note: The same
story appeared on President Yushchenko’s website as issued by the
president’s press service on 31 May 06, but has since been removed.)
(3) Ukrainian Radio, Op. Cit.
(4) Ibid.
(5) Orange coalition has agreed on all items except portfolios, 10 Jun 06;
via ForUm.
(6)  “Talks on parliamentary coalition in Ukraine suspended,” ITAR-
TASS, 1934 CET, 10 Jun 06; via Yahoo! News.
(7) Ukrainian Radio, Op. Cit.
(8) Press Conference of Yulia Tymoshenko, 10 Jun 06.
(9) “About 20 Ukrainian progovernment, opposition MPs join forces,”
Ukrayinska Pravda, 7 Jun 06; via Lexis-Nexis.
---------------------------------------------------------------------------------------------------
Contact Tammy Lynch, tammymlynch@hotmail.com.
For back issues of Perspective and The ISCIP Analyst, or information
about the Database and the Institute’s other work, please see our web
site at http://www.bu.edu/iscip/
-----------------------------------------------------------------------------------------------
[return to index] [Action Ukraine Report (AUR) Monitoring Service]

========================================================
9.  UKRAINIAN LEADERSHIP: BETWEEN PAST AND...PAST

ANALYSIS & COMMENTARY: Yulia Mostovaya & Serhii Rakhmanin
Zerkalo Nedeli On The Web, Mirror-Weekly, No. 22 (601)
International Social Political Weekly, Kyiv, Ukraine, Sat 10-16 June 2006

Contrary to hopeful expectations, the [pro-Yushchenko] Our Ukraine, the
Yulia Tymoshenko Bloc, and the Socialists again proved to be unable to build
the long-awaited "democratic coalition" and subsequently form a new
government. Even the situation in Crimea did not work as a catalyst. This
means that their prime concerns are anything but national interests.

Now a coalition without the Party of Regions does not appear impossible.
And it does not matter much whether the should be "orange allies" can find
euphemisms for their controversies. Nor does it matter how many of their
members are likely to connive with the Party of Regions.

Now we need to have a bird's-eye view of the country that has lived through
10 years under the Kuchma regime, 18 months without a leadership, and 10
weeks of anarchy. The picture looks rather grim, with almost no hope for a
fast recovery because the "resuscitation" has to be entrusted either to
those who "strangled" one another yesterday or to those who strangled the
country the day before.

            "ORANGE COALITION": NO RUDDER, NO SAIL
So far, the attempts to build an orange coalition have been dictated by
voters' expectations rather than political reasons. One well-known
politician noted sarcastically that the biggest minus in such attempts was
the absence of pluses. He was right, in a way.

Sad as it sounds, we have to admit that the political project named "orange
coalition" is doomed to fail. And even if the negotiators do manage to
produce something like an alliance, it will hardly last and bear fruit.

Dictionaries interpret the word "coalition" as a "tactical alliance." We
have heard the leaders of the Ukrainian alliance swear "eternal love" for
one another at joint press conferences, but we have also heard them spit
hatred at one another separately. In politics, there is no place for eternal
love or eternal hatred. There are no lasting partners. There are only
lasting interests.

It is in pursuit of interests that politicians ally in coalitions, which
presuppose observance of unified rules. Such rules are easy to formulate if
the allies follow common (or at least similar) ideological principles. In
this case, though, we can see nothing of the kind. There are too many
differences between the action programs announced by Our Ukraine, the
Tymoshenko Bloc, and the Socialists.

These differences show even more strikingly in their oral statements, which
are often mutually exclusive. But it is obvious that, without a common
platform, they can never make a team. Subsequently, without coordinated
actions, it is impossible to pursue a consistent and effective policy.

It is wrong to hope that the allies might skip their differences and move
on: firstly, there should be no omissions among reliable partners; secondly,
the mass of differences is next to critical; thirdly, the differences
involve critical problems of national concern.

Take, for instance, their different views on Ukraine's foreign political
course. Representatives of Our Ukraine have more or less clearly articulated
their desire to see the country as a full-fledged member of the European
community and Euro-Atlantic structures.

But the Socialists have repeatedly called for "building Europe inside
Ukraine," criticized the too hasty movement toward the World Trade
Organization, and been quite outspoken against NATO. Yulia Tymoshenko and
her comrades have always been tight-lipped about geopolitical issues, so it
is difficult to identify the position of this political force in this
regard.

The same is true regarding domestic policies. The OU leaders constantly
criticize the new [parliamentary-presidential] model of government,
insisting that the president can and must remain the central figure in
political processes. Some of them even raise the issue of restituting the
former presidential powers.

The Socialists are dead set against the idea and ready to defend the
constitutional reform any way they can. Moreover, they suggest further
limitations of presidential powers. The leaders of the Tymoshenko Bloc (who
stood up for a strong presidential rule yesterday) are vehement advocates of
a parliamentary rule today. Nobody can be sure, however, that this position
will be the same tomorrow.

The three political forces are equally divergent on economic problems. The
liberalism declared by OU is too dissonant with the state regulation policy,
to which Tymoshenko is evidently inclined. And both forces are likely to
have difficulty coordinating their steps with the Socialists, who stand for
restituting the planned economy model.

Here is just one example: Tymoshenko insists on reimbursing Ukrainians for
their devalued deposits in the former USSR Savings Bank. OU argues that it
would cost nearly $6 billion annually and would surely trigger
hyperinflation. As a way out, Tymoshenko suggests large-scale privatization,
but the Socialists say they will never subscribe to it.

Private ownership of land, privatization of state property,
territorial-administrative reform, the status of the Russian language,
functions of state secretaries and governmental committees, political
rehabilitation of former members of the UPA [Ukrainian Insurgent Army - the
paramilitary organization that fought against both Nazi and Soviet troops in
WW II] - these are not the only sore spots in the coalition negotiations. On
some issues, the negotiators are definitely antagonistic.

Moreover, there are serious controversies inside each of the orange
political forces as well. That would not be a big problem if their ranks
were disciplined. But they are not. None of them has a clearly identified
ideological orientation. Therefore, it is impossible to forecast future
disagreements among them after they assume supreme authority.

There are objective and subjective reasons for these controversies. The
Socialists, struggling for political survival, have drifted from radical
leftism to moderate left-centrism. The conditionally liberal Our Ukraine,
trying to expand its electoral field, has taken a visible list toward social
populism. The Tymoshenko Bloc is still undecided. As a political force (not
Tymoshenko's support group), it is only just in the making. This team
includes players with varying views, and there are no definite ideological
principles in sight.

While on the racetrack, the leaders of the three political forces avoided
slippery spots. Such a tactic was justified in the tough contest for the
electorate. But now, when it is time for joint decision-making and shared
responsibility, the pile of omissions becomes an insurmountable hurdle.
Regrettably, there are too few factors that could unite the three forces. In
fact, they have no common values.

One may mention "the ideals of the Orange Revolution." Yes, one of its most
important "products" was a kind of "code of honor," which was formulated by
protesters against the old regime and accepted by their political leaders.
The latter pledged to adhere to this code. But did they keep their promise?

[YESTERDAY'S OPPOSITION LEADERS FAILED TEST OF POWER]
Today we can assert with regret and bitter disappointment that yesterday's
opposition leaders have failed their test of power. Disregarding laws,
lobbying for individual business interests to the detriment of national
interests, conniving at corruption, running shadow businesses, using
administrative resources, and bringing pressure to bear on the judiciary,
they indulge in the same vices as their hateful predecessors did.

The verdict may sound too harsh, but representatives of each political force
engaged in forming the "democratic coalition" can be indicted of betraying
the ideals of the Orange Revolution. Those who abide by its political
values, and not only declare them, are a small minority. There have been a
few small victories in these 18 months, but they were achieved despite the
impotence of the "orange leaders," rather than owing to their efforts.

Political competition among them is another deterrent to the coalition
talks. They acted as one in 2004, when they had one common enemy---the old
regime. Then peacetime turned the allies into rivals struggling for power.
Yushchenko and Tymoshenko regard each other as political opponents, and the
forces they lead are but two belligerent parties in a state of armistice.

The Socialists are unable and unwilling to play the role of the peacekeeper.
The heaviest burden they can carry is the flag of truce. Or they may
collaborate with either side.

The coalition could be consolidated by a leader with an indisputable moral
authority and reputation, someone who would be an impartial arbiter for the
three political forces. But there is no such figure.

Attempts to give this whistle to the president failed: not just because
Yushchenko may not be an arbiter de jure since he is not a member of
parliament, but also because he is simply not up to the mark in this
respect. He is unwilling to ask and unauthorized to give orders. Besides, in
the eyes of many orange leaders, he is no longer a highly moral politician.

The general attitude to Oleksandr Moroz in the orange camp has also changed.
He may not deserve such a revaluation. But the sad fact is that there is no
one in this camp to claim the role of the "political guru" who would smooth
things over, find compromise solutions, and reconcile the allies in their
inevitable conflicts.

Thus, the coalition is supposed to be treble-led and thus hardly capable.
The personal incompatibility between Yulia Tymoshenko and the OU leadership
is another aggravating factor.

Notably, the three political forces are not only short of top "sensei"
leaders, but also of rank-and-file functionaries. During the pre-election
campaign, for a number of political or economic reasons, their ranks were
beefed up with too many chance people. Now their presence in the team has
proven to be useless and even harmful. Such persons, being well-known as
sportsmen, artists, and pop stars, make a good electoral image. But being
ignorant in politics or economics, they make heavy ballast.

All three orange teams enlisted moneybags to cover their pre-election
expenses, but that was a time bomb: being above ideology, these people seek
power exclusively in pursuit of their business interests, which certainly
differ. People with loud names and big money leave no room for people with
knowledge, experience, and principles---the ones who are really needed to
make a strong coalition.

Each political force claims to have enough human resources to staff the
whole Cabinet of Ministers, but that looks very doubtful. Of course, there
are professionals in each "club," but they are hardly capable of team-play.
The "coaches" seem to be ignorant of the real scale of their tasks. A
coalition is not just an association of MPs entitled to staff and control
the government.

The parliamentary-presidential model entitles a parliamentary coalition to
the main policy-making role in the state. Thus, its members are supposed to
make decisions and see that the tasks they set are fulfilled at all levels.

They are supposed to rely on productive brain centers, highly qualified
managers and organizers, and skilled negotiators able to settle problems
with the opposition and the presidential administration. The quasi-team we
are going to have is hardly able to cope with all that.

The way the orange leaders are going to distribute key posts makes prospects
even vaguer and grimmer. Of course, it is easy to "mete out" posts. But this
method excludes professional qualification as the decisive criterion, leaves
out individual compatibilities (incompatibilities) of those who have to work
in a team, and rules out the very possibility of coordinated work (when a
minister and his two deputies represent three different political forces).

Professionals are always the first victims in a war of ambitions. If
national interests prevailed over personal ones, then the coalition talks
would not be so hard. But to each of the negotiators, they are just an
opportunity to get a hold of more powers and resources. Neither wants to
miss this opportunity, and that is why the negotiations are so protracted.
The country can wait

Even if they skip their differences and subscribe to a formal coalition,
will that structure last? How soon will its ideologically unstable elements
break away, yielding to lucrative promises from the opposite camp? The
latest vote in the session hall, when the orange camp produced a mere 227
yeas, revealed its poor safety margin.

MPs are only formally bound to their respective factions and are free to
vote any way they please. Should anyone go against the grain, he may be
stripped of his mandate, but there are quite a few loopholes for them in the
active parliamentary rules.

The orange forces still have time to agree. But each day they waste in
disputes increases mistrust among them and makes chances for a strong
alliance bleaker. A real opportunity was missed right after the elections by
the president.

He should have openly accepted the election returns and Okayed the
distribution of key posts among the winners according to their respective
vote records. That would not have removed all problems, but it would have
prevented their aggravation.

Formally, Yushchenko was not obliged to intervene, as the Constitution of
Ukraine puts presidency above parliamentary processes. But it was his stance
that made the OU faction so obstinate and turned the negotiating process
into an endless series of squabbles. As a result, too much time was lost.

The parliament is paralyzed and important bills (including the one on
admission of foreign troops to Ukraine for multinational exercises) remain
shelved. The government is in limbo and the understaffed Constitutional
Court can not start working. Many governmental organizations and hosts of
officials are just dangling their feet, waiting for an outcome of this
wrestle for power.

The Party of Regions made the most of the situation and took real control of
the administrative regions where it won the election: local authorities
actually usurped the functions of the central government.

The country has sustained another stress, which could have been avoided. The
president's near-sightedness aggravated both Ukraine's position and his own.
Now he must be interested in a strong orange coalition more than anybody
else: it is the only way for him to retain his control over OU and remain a
serious political player.

                          MAJORITY A LA DONETSK CLAN
None of the three conventionally "orange" political forces has officially
reported negotiating a coalition with the Party of Regions. Yet no one
should be fooled by this silence or even public denials of any such
contacts, as almost all leaders (or, rather, authorized and non-authorized
OU, BYuT, and SPU representatives) were engaged in some sort of dialogue
with the Party of Regions.

The only reason behind the "orange" politicians' reluctance to publicly
admit contacts with the Regions is a strong probability of a re-election
that keeps their respective forces within the frameworks of announced
ideologies and electoral paradigms.

Meanwhile, the Party of Regions wastes no time and approaches the MPs whose
business interests are incompatible with the oppositional status. It offers
various incentives to those in SPU, BYuT, and OU who are hesitant about the
"orange" coalition prospects and not averse to cooperation with the Regions.

Thus, the formation of a coalition comprising the Party of Regions (be it
"Regions + OU + whoever joins from other factions" or "Regions + OU +
SPU," or else "Regions + CPU + whoever joins from other factions")
cannot be excluded for a number of reasons.

[1] First, the Ukrainian public is sick and tired of the endless
coalition-forming process. The politicians' lack of responsibility,
integrity, and competence has exasperated every thinking citizen in this
country. As a result, the number of Party of Regions sympathizers has
increased of late to over 40 percent, according to the recent opinion polls.

In the event of re-elections, this number could guarantee it a monopolistic
majority in a hypothetical sixth convocation of parliament. The same opinion
polls show a fall in the "orange" forces' popularity, as well as a decrease
in the number of those YTB, SPU, and OU supporters who believe in a purely
"democratic" coalition. The general public seems resigned to the idea of any
coalition capable of ensuring stable and sustainable governance.

[2] Second, the Party of Regions has succeeded in establishing close
contacts with individual MPs from the three "orange" factions. One recently
developed scenario is to muster a sufficient number of votes on the first
session day to elect the speaker, thus causing a panic in the midst of
opponents and their massive migration to the white-and-blue camp.

Even if the "orange" coalition is formed and the three leaders sign a
memorandum thereof, it does not mean that the coalition will always vote
unanimously when appointing ministers or electing the Rada's ruling bodies.

[3] Third, Yuliya Tymoshenko could, to a certain degree, become a spur to an
alternative coalition. To some she is a temporary ally, to others a brake to
their business plan implementation, and to others still a threat to
profitable gas schemes. To the Party of Regions, she is the only meaningful
contender.

In addition, few people would trust Yuliya Tymoshenko as a negotiator,
knowing that she has not always lived up to her promises. The Party of
Regions leaders cultivate their image of a "man of his word." Amazingly,
people tend to buy it, together with the promises of assured stability.

[4] Fourth, the Party of Regions has absolute control of local councils in a
number of oblasts. A surge of "regional" language and foreign policy
statements made by several oblast councils was meant to demonstrate that the
Party of Regions persists in promoting the idea of the country's
federalization. Speculating on the pro-Russian sentiment of their
electorate, the party's "major shareholders" do not seem to realize that the
masses of their voters perceive the party slogans most literally and
seriously.

Carried away with nourishing this sentiment, they risk losing their grasp on
the situation; then the masses could produce new leaders that will topple
the old heroes and masters. And the Kremlin will instruct Akhmetov to whom
and for how much he should sell his FC "Shakhtar." Very few in the Party of
Regions are insightful enough to apprehend this danger.

The stuck administrative and territorial reform, poor budget relations
between the center and the regions urge some local and regional authorities
to declare their independence in economic and social spheres. In most cases,
the central authorities could prove unable to face these artificial
challenges as they have practically no levers (except for the uniformed
ministries) to influence the oblasts under the Party of Regions' control.

Kyiv had to negotiate candidates for governor positions in a couple of
oblasts with local representatives of the Yanukovych and Akhmetov Party,
which adds little value to such governors as the center's trusted agents.

Finally, a number of objectively originated crises are looming in the
humanitarian, social, and economic spheres. In order to handle them
efficiently, the authorities will have to mobilize a good deal of effort,
intellectual capacity, and strategic vision, things of which they can hardy
boast today.

To add insult to injury, the Party of Regions, on its own or in tandem with
Moscow, instigates new, man-made crises that drive Kyiv into a corner. The
resulting general impression is that the country has passed the point where
the authorities could stabilize the situation without seeking help from the
Party of Regions. Of course, the "orange" coalition can still be created,
but will it be able to address the objective crises aggravated by
"emergencies" jointly masterminded by the Kremlin and internal opposition?

           [ANTI-KYIV, ANTI-WESTERN, AND PRO RUSSIAN]
The Party of Regions will continue to activate anti-Kyiv, anti-Western, and
pro-Russian sentiment whenever it needs them for pursuing its agenda. The
party's electoral basis (eastern oblasts and the Crimea) will continue to be
a testing ground for political consultants and spin doctors from Lubianka.

Party of Region's coming to power could break the "Moscow-local
leaders-pro-Russian electorate" chain. At this juncture, the Party of
Regions is still at the helm in its "native" territories, with the exception
of the Crimea. If it comes to power, it could prefer to become an ally to
Kyiv rather than to Moscow. It is blackmail, pure and simple. But is the
Party of Regions to blame that the blackmail could be so effective?

The 2004 presidential elections in Ukraine removed the old leadership
because the majority of voters realized they needed freedom. The Kuchma
administration tightened its corset of cynicism around society so that the
latter could not breathe. Events on the Maidan got rid of the corset, but it
turned out that there was no backbone underneath.

If the Party of Regions joins the coalition, in both the legislative and
executive power, the overall Ukrainian system of power will gain more
stability, systemic consistency, executive discipline and professionalism
(at least in some sectors). What will Ukraine have to sacrifice if the Party
of Regions comes to power, though? The answer to this question requires a
preamble.

Until now, SPU and OU negotiators with the Party of Regions assured their
colleagues and allies that the leaders of the Party of (Eastern and
Southern) Regions have no big administrative ambitions and are prepared to
play modest roles in the central power bodies.

For one thing, they are fully aware that the situation in the country,
particularly in the economy, is very grave and by autumn is likely to become
exacerbated even further. Why shoulder the responsibility? Let it kill the
popularity ratings of the political forces that would peg out the prime
minister's and speaker's positions for themselves.

For another thing, what the Party of Regions needs today is a bridgehead
rather than the entirety of power. Regions will use it to win the war for
power after the new (still non-existent) cabinet is dismissed.

Limited representation in power will enable the Party of Regions to rule
out, once and for all, the law enforcement authorities' interference into
the party bosses' life and business activity; to make sure nothing threatens
their business, and to enhance it with limited but very effective
administrative capacities; to gain access to all data available to the state
power bodies, which will allow them to assess their actual standing and
adjust plans for the future when the party has much more clout.

There is another thing driving the Party of Regions toward the coalition:
the amended Constitution of Ukraine does not provide for an automatic
discharge of the cabinet in the event of the coalition disintegration!
According to the new Supreme Rada Rules of Procedure, the government can
remain operational even if one of the coalition factions leaves it; only the
ministers representing the retiring political force should also go.

Given this and huge funds available to the Party of Regions for buying MPs
to their side, it will be able to protect its government from being
discharged by 226 votes in parliament. So, once in power, the Party of
Regions will stay there for good. And when coalition #1 (of which they will
be neophyte members) falls apart, they will be in the position to decide who
to partner with in coalition #2.

FOUR IMPLICATIONS OF PARTY OF REGIONS ADVENT TO POWER
Their subsequent, fully fledged advent to power will have the following
implications:

[1] - first, curbing the democratic processes in the country. Of course, not
all of the party members hate democracy, but its opinion-leaders and
decision-makers believe that democracy and freedom of expression, being
non-convertible into hard currency, have no value to their business
interests;

[2] - second, full or partial assimilation of coalition partners. Not a
single party or bloc will be able to withstand the military hierarchy and
discipline of the "Regions," their persistence and notorious "plentiful
recourses." The only person Party of Regions will not be able to assimilate
is Yuliya Tymoshenko. The party will have to choose its tactics toward her:
pragmatic cooperation on strictly defined terms or war. The other political
forces are doomed to play the role of satellites, with sporadic pockets of
resistance;

[3] - third, course revision in foreign policy. The reason is not that the
"shareholders" (as Akhmetov, Yanukovych, Kliuyev, and Kolesnikov are
collectively referred to) dislike NATO, Washington, or Brussels. Nor is it
that Azarov, Kushnariov, Peklushenko, and Bogatyriova care about Russia's
interests much more than about Ukraine's.

The reason is that the Party of Regions cannot forget about its election
trump cards. The reason is that not only the party's electorate, but also
its leaders fail to realize that NATO is a defense alliance designed to
safeguard democratic values.

However, the "shareholders" are concerned with the image they project
internationally, especially to the American business community. Otherwise,
Rinat Akhmetov would not have spent so much money on image-makers and
consultants, advertised his SCM Corporation on Western TV channels and
working to have his name associated with international organizations,
including the UN agencies.

Western values and rules are alien to Party of Regions' business principles
and practices, but it needs Western markets. The introduction of Western
living standards (in a broad meaning of the term) will undermine the system
of relations between "the rulers and the ruled," as they exclude fear from
the category of active political factors.

At the same time, Donetsk business is dependent on cooperation with Moscow
but tries to keep it at arm's length. Approaches of this kind could throw
the nation back into the times of multi-vector foreign policy. Yet Russia
has changed since then: it will not be contended with anything less than a
complete dictate in economic, foreign, and domestic policy.

Being an innate monopolist, the Party of Regions can hardly be ready to
accept this. As for the USA and Europe, Russia ceases to be their exclusive
and overwhelmingly important partner (for a number of reasons again, the
main being security of energy supplies). Ukraine's role is growing in
significance. So are the requirements of clarity and definiteness of Kyiv's
position on many issues;

[4] - fourth, use of power to boost the wealth of the party "shareholders"
and leading members. Unlike the powers that be, the Party of Regions will be
more "professional," tireless, and methodical in so doing.

This is how matters stand today. "Now you know".         -30-
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http://www.mirror-weekly.com/ie/show/601/53636/?429496729=5e817e4adf4612f7a6f99989c26d1893

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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
10. EVENT: TRANSFORMATION OF THE UKRAINIAN CIVIL SERVICE
            SYSTEM UNDER CONDITIONS OF POLITICAL REFORM
           Speaker: Tymofiy Motrenko, Head of the Civil Service of Ukraine

U.S.-Ukraine Foundation, Kennan Institute, and the
Woodrow Wilson International Center for Scholars
Washington, D.C., Tuesday, June 13, 2006

WASHINGTON - Tymofiy Motrenko, Head of the Civic Service of
Ukraine will give a presentation entitled "Transformation of the Ukrainian
Civil Service System under Conditions of Political Reform" on Thursday,
June 15, 2006. 4:00PM - 5:30PM, at the Woodrow Wilson Center, 5th
Floor Auditorium, 1300 Pennsylvania Ave., NW, Washington, DC.

The event will be moderated by Ambassador William Green Miller.
Please RSVP to Marta Matselioukh at martam@usukraine.org or at (202)
223-2228 by COB Wednesday, June 14, 2006.

This discussion is open to the public, and seating for this is available on
a first come, first served basis. Please call on the day of the event to
confirm. Please bring an identification card with a photograph (e.g.
driver's license, work ID, or university ID) as part of the building's
security procedures.

                       U.S.-UKRAINE FOUNDATION (USUF)
   PROJECT TO ASSIST UKRAINE'S CIVIL SERVICE REFORM
Tymofiy Motrenko is in Washington, DC, from June 11 to June 16, as part
of a delegation for the U.S.-Ukraine Foundation's Project to Assist
Ukraine's Civil Service Reform.

The other members of the delegation are Oleksandr Demyanyuk, Head of
the Personnel Management Department at the Ministry of Foreign Affairs
of Ukraine; and Andriy Vyshnevsky, Director of the Center for Support of
Civil Service Institutional Development at the Main Department of the Civil
Service of Ukraine.

The U.S.-Ukraine Foundation's Project to Assist Ukraine's Civil Service
Reform is designed to assist the Ministry of Foreign Affairs of Ukraine in
its stated goals of improving its personnel management systems.

More specifically, the project will be supporting efforts within Ukraine's
Ministry of Foreign Affairs to design and install more effective systems for
rotating personnel between domestic and foreign assignments, the recruitment
and placement of foreign service professionals, training, managing the
performance of personnel, and strategic planning. The Ministry has already
instituted changes to move towards a more merit based foreign service
system.

The principal work of the project will be conducted by dedicated task forces
established within the Ministry to develop concrete solutions to the
problems identified jointly by Ministry officials and US project
specialists. Members of the task forces will visit Washington (and possibly
other capitals) to observe how their problems are addressed by the U.S. and
other governments.

Ukraine's Foreign Minister has designated Volodymyr Ogryzko, the First
Deputy Minister of Foreign Affairs of Ukraine, to lead this work within the
Ministry of Foreign Affairs of Ukraine. Since the Government of Ukraine is
undertaking a government-wide review of the civil service system, this
project will be coordinated by the Ministry of Foreign Affairs of Ukraine
and the Main Department of the Civil Service of Ukraine.

The eighteen month program seeks to engage the participation of senior
officials of U.S. Government agencies, such as the U.S. Department of State,
the United States Agency for International Development, the Office of
Personnel Management, the Federal Labor Relations Authority, the Merit
Systems Protection Board, the Office of Government Ethics, and the Office
of Special Counsel.

This project is being funded by the Fund for Democracy and Development
(FDD). An initial assessment team, comprised of Nadia K. McConnell, USUF
President, Jack Heller, Fund for Democracy and Development Senior Vice
President, and George Nesterczuk, Senior Advisor to the Director of the U.S.
Office of Personnel Management, traveled to Kyiv in February 2006 to meet
with officials from the Ministry of Foreign Affairs and the central civil
service agency of Ukraine. The visit resulted in the initial scope of effort
for this project.

For further program information, please contact Marta Matselioukh at
martam@usukraine.org or (202) 223-2228 or visit Project to Assist
Ukraine's Civil Service Reform: http://www.usukraine.org/foreign_affairs.shtml.
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11.  US EMBASSY ON DEPARTURE OF US MARINE RESERVISTS

Public Affairs Section, U.S. Embassy, Kyiv, Ukraine, Tuesday, June 13, 2006

STATEMENT BY BRENT BYERS, U.S. EMBASSY SPOKESMAN

The U.S. Marine reservists invited to Ukraine by the Ukrainian government to
construct infrastructure upgrades at Ukraine's military training facility at
Stary Krym in Crimea have departed Ukraine to return to their civilian jobs.
As reservists, they are called up for active duty for only two weeks each
year.

We are disappointed the Marines were unable to complete these upgrades that
would have improved training conditions for Ukraine's Armed Forces.  Those
who claimed they had come to construct an American or NATO base were either
misinformed or ill-intentioned.

The U.S. is a strong supporter of an independent, democratic Ukraine and
this includes the rights of free speech and peaceful assembly.  However, it
is unfortunate that a few people's misguided agendas were able to interfere
with completion of a project that would have benefited Ukrainian soldiers
and would have pumped approximately $150,000 into the economy of

Feodosiya through local contracts for construction materials and labor.

Although the engineering project was being undertaken in preparation for the
upcoming Sea Breeze 2006 exercise, the departure of these Marine reservists
will not necessarily influence any future decision regarding that exercise.
We hope to move forward with the exercise, providing the Ukrainian
Government expresses a willingness to conduct Sea Breeze 2006 and the Rada
passes the relevant legislation.

Ukraine has been a regular and active participant in Partnership for Peace
exercises since 1994.   These exercises benefit Ukraine's Armed Forces
through training and improve cooperation and coordination between partner
countries.                                      -30-
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http://kiev.usembassy.gov/infocentral_eng.html
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Public Affairs Section, United States Embassy Kyiv
4 Hlybochytska St., Kyiv  04050  Ukraine
(380 44) 490-4026, 490-4090; Fax (380 44) 490-4050
http://kiev.usembassy.gov/; info@usembassy.kiev.ua
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12.    UKRAINE AGAIN FACES INCREASE IN GAS PRICES

By Judy Dempsey in Berlin, International Herald Tribune
Paris, France, Tuesday, June 13, 2006

BERLIN - Ukraine, economically ill- prepared and without a government, faces
a new demand from Russia to pay more for natural gas in a move that could
bring another confrontation between Moscow and Kiev just six months after
Russia stopped supplying gas to Ukraine because of a dispute over energy
charges.

Gazprom, Russia's state-owned energy giant, said Tuesday that a new round of
talks on gas prices would start in July, but it warned that the negotiations
with Ukraine could be very difficult. "There is no government in Ukraine.
There is no head of the gas sector," a Gazprom spokesman said. "Even more
worrying, Ukraine is not putting enough gas into their underground storage
facilities, which could affect gas supplies to Europe."

Ukrainian government officials said Tuesday that they were more focused now
on trying to form a coalition government, adding that they were waiting to
see what kind of offer Gazprom would put on the table.

Ukraine has been without a government since March when parliamentary
elections failed to produce any outright winner. Since then, the former
leaders of the democratic Orange Revolution of December 2004, President
Viktor Yushchenko and his Our Ukraine party have been at loggerheads with a
bloc led by former Prime Minister Yulia Timoshenko over who would head the
next government.

"Ukraine is completely unprepared for the negotiations with Russia," said
Ivan Poltavets, an energy expert at the independent Institute for Economic
Research and Policy Consulting in Kiev. "The situation in the country is now
very unclear. There is nobody with whom to negotiate over gas prices.
Everyone is waiting for a new government."

The new round of price negotiations was covered in the agreement signed in
January by Alexei Miller, chairman of Gazprom, and Oleksiy Ivchenko,
chairman of Naftohaz Ukrayiny, the state- owned gas company. The agreement
was reached only after the Kremlin had exerted maximum pressure on Ukraine
to accept higher prices by curtailing the flow of gas to the country,
despite bitterly cold weather conditions.

Ukraine made up some of the shortfall by siphoning off gas from the
pipelines used to deliver Russian gas to Europe - leading some West European
countries to dip into their reserves.

Although the interruption lasted no more than a few days, it seriously
damaged Gazprom's image in Europe. Some governments, particularly those of
Poland and Lithuania, questioned Gazprom's reliability as a gas exporter.
Russia supplies a quarter of Europe's gas requirements.

Russia's president, Vladimir Putin, was also accused of using the power of
his country's energy sector as a political instrument to punish Ukraine for
the pro-Western Orange Revolution.

The January accord, which was neither a trade contract between Gazprom and
Naftohaz nor an intergovernmental agreement, stipulated that Ukraine would
purchase gas at the Russian border from RosUkrEnergo, an intermediary
trading company, at $95 per 1,000 cubic meters.

Although much lower than the world market price of $230 per 1,000 cubic
meters originally proposed by Gazprom, the price was to be renegotiated
after six months. Gazprom did not say Tuesday what price increase it would
seek from Ukraine, although its final goal is to reach market prices.

In any event, Poltavets said Ukraine was also ill-prepared for dealing with
Russia's demand because it had lost its main trump card during the
negotiations in January.

At that time, Ukraine could have demanded that Russia pay more for sending
gas to Western Europe across Ukraine - which is the biggest and most
important transit route for Russian gas - if Gazprom wanted to raise its gas
prices. But under the January accord, the parties agreed to fix the transit
price for five years at $1.60 per 1,000 cubic meters of gas per 100
kilometers, or 60 miles - even though the price of gas was only fixed for
six months.

"The transit costs are still relatively low," Poltavets said. "The problem
facing the Ukraine side this time is that the gas and transit agreements are
separate agreements. The accord was poorly written."

When the details of the January agreement were disclosed to Ukraine's
Parliament, legislators accused Yuri Yekhanurov, who was then the prime
minister, of negotiating a bad deal. Under pressure, the government
collapsed and new elections were held in March.

Then last month, the chairman of Naftohaz, Oleksiy Ivchenko, resigned. The
official explanation was that he had been appointed by the outgoing
Parliament. But according to analysts, Ivchenko had failed to begin
reorganizing the energy sector or to prepare domestic and industrial
consumers for higher energy prices resulting from more expensive gas
imports.

According to the Institute for Economic Research and Policy Consulting,
under the January accord the price of gas is already scheduled to increase
by 80 percent next month. Households are to pay $82 per 1,000 cubic meters
and utilities are to pay $136 per 1,000 cubic meters.

Gazprom has said that it intends to substantially increase the price of the
gas it exports to Belarus, which is another transit country for Russia's gas
exports to Europe. Belarus pays $46.68 per 1,000 cubic meters.

Mikhail Fradkov, Russia's prime minister, said during a recent visit to
Belarus that the price increase depended on whether Belarus was willing to
integrate with Russia by turning over control of Beltransgaz, the company
that manages transit pipelines.                             -30-

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LINK: http://www.iht.com/articles/2006/06/13/business/gaz.php
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13.          VOLODARKA SUITS UKRAINE'S NEW IMAGE
   Volodarka is one of Eastern Europe's leading men's tailoring companies

Just.Style.com, United Kingdom, 22 March 2006

Ukrainian company Volodarka is one of Eastern Europe's leading men's
tailoring companies. Not only does it manufacture for both for the domestic
and export markets, but it is also developing a retail network in the main
cities of eastern and central Ukraine. Niki Tait found out more on a recent
visit.

Volodarka, situated in Vinnitsa, west central Ukraine, is one of Eastern
Europe's leading men's tailoring companies. Employing 2,000 people at one
location, it produces around 2,000 men's jackets per day and 1,445 trousers,
both for export and the domestic market (the latter being produced under the
company's own label, Volodarka).

The company was set up in 1923 when the sewing industry workers' union
organised a sewing workshop for unemployed tailors in Vinnitsa. The first
labour collective consisted of 15 male and female masters who renovated old
clothes.

New workshops were gradually opened and the collective was turned into a
factory in 1928, named Volodarsky after the famous Russian Marxist
revolutionary and early Soviet politician. By 1933, the suit factory and its
various satellite units was producing 10% of the total gross output of the
Ukrainian clothing industry.

                            REGIONAL CONCENTRATION
The former Soviet Union had a system of regional concentration in the
textile industry: production of raw materials tended to be located in the
eastern republics of the USSR, the textile sector was concentrated in the
European part of Russia, and a large share of sewing production was based in
Ukraine.

Companies were state-owned, told what to make, how much to make, where to
sell and how much for. With the collapse of the Soviet Union, production of
all textiles and apparel products declined sharply, by more than ten times
for some product groups.

After independence, the old traditional markets disappeared but new
alternative markets were created, mainly in the west European region and
Germany in particular.

Volodarsky began contract work for well known European men's clothing brands
which helped the company to gain wider production experience, to create its
own brand and gain professional contacts.

Since April 1994, under the leadership of Mr Leonid Gavrysh, the factory
reorganised as the public corporation 'Volodarka.' Initially the company was
50% privatised, but grew this to 100% privatisation in March 1996.

Recognising that to succeed it must modernise, both for productivity and
quality reasons and to gain export customers, an ongoing investment
programme has resulted in Volodarka becoming one of the most technically
advanced clothing companies within the Ukraine today.

Soon after Gavrysh took over the company he invested in Assyst CAD for
marker making and pattern design, becoming one of the very first companies
within the Ukraine to use any sort of CAD system.

This system was subsequently expanded by investment in the much cheaper,
locally developed, Julivi software. Today there are five Assyst stations,
one for pattern design and four for marker making, and five Julivi stations.
There are two plotters, one from Gerber Technology and a Wild.

Around 80% of the company's production is made for export as contract work.
The customer provides the patterns, fabrics and trims. Volodarka grades the
patterns and submits these for approval before cutting. For its own brand
the company obviously does the whole design development.

                            AUTOMATED EQUIPMENT
Not only was the company one of the first to use computer aided design, it
was also one of the first to invest in automated cutting room equipment.

In 1994 the company visited IMB in Germany and as a result upgraded its
cutting room to incorporate band knife cutting and automatic spreading using
the Gerber Niebuhr Synchron 100B spreader.

Eight years ago it upgraded further and introduced the Gerber Technology
7250 NC cutter, the first Gerber cutter of this type to be sold within the
Ukraine. This is used today for 60% of the fabric cutting; the remaining
40%, which consists of striped and checked fabrics, is spread and cut
manually.

Also about 12 years ago the Meyer RPS-Junior fusing machine was purchased to
ensure high quality fusing.

Over the years the sewing machinery has also been updated, with many Durkopp
Adler automated machines to carry out critical operations such as pocket
insertion as well as automated side seamers for increased productivity.
Modern Pfaff, Brother and Juki machines are also prevalent.

2003 saw major investment into Brisay and Indupress fully programmable
pressing machines and carousels. The bank of Brisay top finishers includes
automatic front presses, sleeve presses and lapel setters. Rotundi and Test
have supplied most of the trouser pressing equipment. Irons and vacuum
tables mainly come from Veit.

Production orders range from 80 to 4,500 garments per style, although the
average is 150-300. Both classic and fancy suit designs are catered for,
plus the region's traditional wear.

This makes for a multi-style, high variation short run production. Overseas
customers include Lego, Berwin & Berwin, Basler and Hugo Boss. The
company aims to increase its export and branded production in parallel.

All departments work a two shift system. Training is important to the
company, with many of the middle managers having been sent to Germany to
learn modern European construction and management techniques. Currently, 100
employees are undertaking evening and/or weekend classes locally to improve
their technical skills.

Each year the company reinvests 50% of its profits. The cutting room, which
was one of the first areas to be modernised, has recently been enlarged by
the addition of a new GTXL cutter and Synchron spreader, both of which were
supplied by Gerber Technology and installed in February 2006 to increase its
capacity.

The company is also developing a network of branded shops in the main cities
of eastern and central Ukraine.

As standards of living improve within the country, the Ukrainian market for
high quality suits has began to grow rapidly over the last two years. The
brand is also proving popular in Russia, where business is also likely to
develop.

Talking about future plans, Gavrysh explains that the company will continue
to invest in equipment to continually improve quality and productivity.
"Products get more and more complex, and fabrics get more and more
difficult," he says. "It is not possible to ever take a rest."
---------------------------------------------------------------------------------------------
Niki Tait, FCFI heads Apparel Solutions, which provides independent

assistance to the apparel Industry in the areas of manufacturing
methods, industrial engineering, information technology and quick response.

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LINK: http://www.just-style.com/article.aspx?ID=93139
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14.        UKRAINE: CURRENT ISSUES AND U.S. POLICY

CRS Report for Congress: By Steven Woehrel
Specialist in European Affairs, Foreign Affairs, Defense & Trade Division
Congressional Research Service, The Library of Congress
Washington, D. C., Wednesday, June 7, 2006

                                           SUMMARY
In January 2005, Viktor Yushchenko became Ukraine's new President, after
massive demonstrations helped to overturn the former regime's electoral
fraud, in what has been dubbed the "Orange Revolution," after Yushchenko's
campaign color.

The "Orange Revolution" sparked a good deal of interest in Congress and
elsewhere. Some hope that Ukraine may finally embark on a path of
comprehensive reforms and Euro-Atlantic integration after nearly 15 years
of half-measures and false starts.

However, subsequent events have led to a certain amount of disillusionment
among Yushchenko's supporters. These include infighting within his governing
coalition and a political non-aggression pact Yushchenko made with his
opponent from the presidential election, Viktor Yanukovych. Economic
reforms have also been hampered by political conflict, including over an
effort to reprivatize firms sold to the previous regime's cronies at very
low prices. Economic growth has slowed the Orange Revolution.

On March 26, 2006, Ukraine held parliamentary elections. No party won a
majority of the vote, resulting in protracted talks to form a coalition
government. Analysts interpreted the election results as a sharp rebuke to
President Yushchenko and his Our Ukraine bloc.

The largest vote-getter in the elections was the Party of Regions, headed by
Yanukovych. Our Ukraine is attempting to reconstitute the Orange Revolution
coalition government, which many Western observers see as the best outcome
for promoting reform and a pro-Western foreign policy.

However, such a result is far from assured, due to continuing enmity between
supporters of Yushchenko and those of former Prime Minister Yuliya
Tymoshenko, who Yushchenko fired in September 2005. The importance
of the new parliament will be heightened by the implementation of
constitutional reforms that will reduce the powers of the presidency and
increase those of the prime minister and the parliament.

After taking office as President, Yushchenko said that Ukraine would seek
integration into the global economy and Euro-Atlantic institutions. The
Ukrainian government's main foreign policy goal is to join the World Trade
Organization (WTO) by the end of this year. In the longer term, Ukraine's
leaders seek to join the European Union and NATO.

Ukraine is seeking to retain good ties with Russia, but relations have been
troubled since Yushchenko has taken power, particularly after Russia cut
off natural gas supplies to Ukraine in January 2006. The supplies were
quickly restored, but only after Ukraine agreed to a hefty increase in gas
prices.

U.S. officials supported the "Orange Revolution" in Ukraine in late 2004 and
early 2005, warning the former regime against trying to impose fraudulent
election results, and hailing Yushchenko's ultimate victory. U.S. officials
have remained upbeat about Ukraine's successes in some areas, such as
adopting legislation needed for WTO membership and in improving media
freedom, while acknowledging difficulties in others. Administration
officials have also praised Ukraine's efforts to hold a free and fair
parliamentary election on March 26, 2006. This report will be updated
as needed.

                                       BACKGROUND
Ukraine, comparable in size and population to France, is a large, important,
European state. The fact that it occupies the sensitive position between
Russia and new NATO member states Poland, Slovakia, Hungary, and
Romania, adds to its geostrategic significance regionally and for the United
States.

Many Russian politicians, as well as ordinary citizens, have never been
fully reconciled to Ukraine's independence from the Soviet Union in 1991,
and feel that the country should be in Russia's political and economic
orbit.

The U.S. and European view, especially in Central and Eastern Europe, is
that a strong, From the mid 1990's until recently, Ukraine's political scene
was dominated by President Leonid Kuchma and the oligarchic "clans"
(groups of powerful politicians and businessmen, mainly based in eastern
and southern Ukraine) that supported him.

Kuchma was elected President in 1994, and re-elected in 1999. He could
not run for a third term under the Ukrainian constitution. His rule was
characterized by fitful economic reform (albeit with solid economic growth
in recent years), widespread corruption, and a deteriorating human rights
record.

In 2004, many observers believed that Ukraine was at a key period in its
transition that could shape its geopolitical orientation for years to come,
in part due to presidential elections held on October 31, November 21,
and December 26, 2004.

In their view, the elections could move Ukraine closer to either integration
in Euro-Atlantic institutions, real democracy and the rule of law, and a
genuine free market economy; or they could move Ukraine toward a Russian
sphere of influence, with "managed democracy" and an oligarchic economy.

The oligarchs chose Prime Minister Viktor Yanukovych as their candidate to
succeed Kuchma as President. The chief opposition candidate, former
Prime Minister Viktor Yushchenko, was a proreform, pro-Western figure.

International observers criticized the election campaign and the first and
second rounds of the election as not free and fair, citing such factors as
government-run media bias in favor of Yanukovych, abuse of absentee
ballots, barring of opposition representatives from electoral commissions,
and inaccurate voter lists.

Nevertheless, Yushchenko topped the first round of the vote on October
31 by a razor-thin margin over Yanukovych. Other candidates finished far
behind.

After the November 21 runoff between the two top candidates, Ukraine's
Central Election Commission proclaimed Yanukovych the winner.
Yushchenko's supporters charged that massive fraud had been committed.
Hundreds of thousands of Ukrainians took to the streets, in what came to
be known as the "Orange Revolution," after Yushchenko's chosen campaign
color. They blockaded government offices in Kiev and appealed to the
Ukrainian Supreme Court to invalidate the vote.

The court invalidated the runoff election on December 3, and set a repeat
runoff vote on December 26. Yushchenko won the December 26 re-vote,
with 51.99% of the vote to Yanukovych's 44.19%. After court challenges by
Yanukovych were rejected, Yushchenko was inaugurated as President of
Ukraine on January 23, 2005.

On February 4, 2005, the Ukrainian parliament approved President
Yushchenko's appointment of Yulia Tymoshenko as Prime Minister of
Ukraine by a vote of 373-0. Tymoshenko is a charismatic, populist leader
with a sometimes combative political style who campaigned effectively on
Yushchenko's behalf.

She is a controversial figure due in part to her alleged involvement in
corrupt schemes as a businesswoman and a government minister during
the Kuchma regime.

The "Orange Revolution" sparked a good deal of interest in Congress and
elsewhere. Some hope that Ukraine may finally embark on a path of
comprehensive reforms and Euro-Atlantic integration after years of half-
measures and false starts. However, subsequent events have led to a certain
amount of disillusionment among Orange Revolution supporters. Yushchenko's
efforts have been hampered by infighting within his governing coalition.

In September 2005, Yushchenko dismissed Prime Minister Tymoshenko's
government. The atmosphere between the two leaders was poisoned by
accusations of corruption lodged by supporters of each against the other
side's partisans, including over the highly lucrative and non-transparent
natural gas industry. The two leaders also clashed over economic philosophy,
with Tymoshenko favoring populist and statist methods in contrast to
Yushchenko's preference for a more orthodox free-market approach.

In order to secure support for a new government led by Yuri Yekhanurov, a
technocratic figure, Yushchenko then made a political non-aggression pact
with his opponent from the presidential election, Viktor Yanukovych, and
promised not to prosecute Yanukovych's key supporters for electoral fraud
and other crimes.

Some supporters of the Orange Revolution viewed the move as a betrayal of
one of the key principles of their movement. Some even began to question
whether the new government was better than the old regime, given ongoing
government corruption scandals and the perception that the Orange Revolution
might be reduced to squabbling over the redistribution of property among
the "old" oligarchs and wouldbe, new "Orange" ones. 1

                           CURRENT POLITICAL SITUATION
On March 26, 2006, Ukraine held parliamentary elections. The elections were
considered important in determining whether Ukraine will be able to move
forward with political and economic reforms, and maintain its support for
Ukraine's Euroatlantic integration. Analysts interpreted the results as a
sharp rebuke to President Yushchenko and his Our Ukraine bloc.

The largest vote-getter in the elections was the Party of Regions, headed by
Yushchenko's former presidential election  rival Viktor Yanukovych. It
received 32.12% of the vote, and received 186 seats in the 450-seat
Ukrainian parliament. The Yuliya Tymoshenko Bloc received 22.27% and
129 seats.

The Our Ukraine Bloc, backed by Yushchenko, won only 13.94%
of the vote and 81 seats. The Socialist Party, currently part of
Yushchenko's ruling coalition, won 5.67% and 33 seats. The Communist
Party was the only other party to surmount the 3% minimum vote
requirement needed to receive seats in the parliament. It won 3.66% of
the vote and 21 seats.

Observers have noted that the voting, as in the presidential election, was
heavily olarized a long regional l i n e s. Yushchenko and Tymoshenko are
unpopular in eastern and southern Ukraine, where most ethnic Russians live
and most Ukrainians speak Russian almost exclusively. People in these
regions tend to favor very close ties with Russia. The Party of Regions won
crushing victories in southern and eastern Ukraine, for example gaining
73.63% in Donetsk, its eastern Ukraine power base.

It did very poorly in the center and west of the country, winning only 3% of
the vote in the nationalist stronghold of Lviv in western Ukraine. After the
election, local governments in eastern Ukraine declared Russian to be their
"regional language."

Yushchenko and Tymoshenko draw their support from western and central
Ukraine, which have more Ukrainian-speakers and where support for a
Western orientation for Ukraine is higher. The Yuliya Tymoshenko Bloc
and Our Ukraine split the vote in western and central Ukraine. However, the
Tymoshenko Bloc easily bested Our Ukraine in central Ukraine and the capital
Kiev, and even made deep inroads into Our Ukraine's core electorate in
western Ukraine.

This may have been due to feelings of betrayal among in these regions (which
were the strongholds of the Orange Revolution) over Yushchenko's dismissal
of Tymoshenko and rapprochement with the Party of Regions. Both blocs
did very poorly in eastern and southern Ukraine. For example, the Tymoshenko
Bloc won only 2.45% in Donetsk, and Our Ukraine only 1.4%. The Socialist
Party's appeal was concentrated in rural areas of central Ukraine, while the
Communists did best in southern and eastern Ukraine.2

Talks on forming a coalition government have been protracted and difficult.
Many Western observers see a reconstituted Orange Revolution coalition after
the election as the best outcome promoting reform and a pro-Western foreign
policy. However, such a result is far from assured. Aside from the strength
of the Party of Regions, other obstacles include continuing suspicion and
enmity between supporters of Yushchenko and Tymoshenko.

As a condition for re-establishing the Orange Revolution coalition,
Tymoshenko is demanding reappointment as Prime Minister, a point Yushchenko
has been very reluctant to concede. A coalition between Our Ukraine and the
Party of Regions, an unthinkable possibility a year ago, cannot be ruled
out. A "grand coalition" of all of the major parties is unlikely, as
Tymoshenko has rejected cooperation with the Party of Regions.

The importance of the new parliament will be heightened by the
implementation of constitutional reforms that will reduce the powers of the
presidency and increase those of the prime minister and the parliament. The
parliamentary majority will select the ministers of the government, with the
exception of the foreign and defense ministries, which will be chosen by the
President. The President will also choose the Prosecutor General and the
head of the SBU, Ukraine's security agency, but can dismiss them only with
the permission of the parliament.

                                 ECONOMIC SITUATION
After taking office, President Yushchenko vowed to accelerate economic
reforms in Ukraine. However, policy disagreements within the government and
a balky parliament hampered progress. A government initiative to reprivatize
key firms sold to the old regime's cronies at cut-rate prices was mired in
conflicting policy statements from Ukrainian leaders (Prime Minister
Tymoshenko favored a much larger reprivatization effort than Yushchenko) and
court challenges from the current owners. The parliamentary election
campaign further delayed some reforms. These difficulties have hampered
foreign and domestic investment in Ukraine, which are needed to spur
economic growth.

Economic growth has declined sharply since the victory of the Orange
Revolution. Growth in Gross Domestic Product (GDP) was 12.1% in 2004 and
only 2.6% in 2005. Yanukovych (who was Prime Minister in 2004) and his
supporters have pointed to the figures as proof of the failure of the Orange
Revolution.

Yushchenko's supporters claim that the previous regime "cooked" the 2004
figures to boost its electoral chances. Experts also cite a fall in exports,
especially steel, due to decreased international demand and the strength of
Ukraine's currency, the hryvnya. The Ukrainian central bank has informally
pegged the hryvnya to the U.S. dollar. Ukraine's current account surplus
has dwindled from 10.5% of GDP in 2004 to 3.1% in 2005.3

Ukraine's consumer price inflation rate is currently under control; it was a
relatively modest 8.5% in March 2006, year-on-year. However, Ukrainian
government officials warn that further steep price increases for Russian
natural gas supplies to Ukraine will have a devastating impact on Ukraine's
economy. They say they plan to put in place policies to encourage energy
conservation and to stimulate domestic oil and natural gas exploration.

On the other hand, Ukrainian wages are increasing rapidly, as they did before
the Orange Revolution. Average monthly wages were up by 23% in real terms in
February 2006, as compared to February in the previous year. Domestic demand
has been strong, fueling an increase in imports. However, most Ukrainians
remain poor; the average Ukrainian wage is only about $5 per day, which is
about half that of Russia's.

                             UKRAINE'S FOREIGN POLICY
Until Yushchenko's election in 2005, Ukrainian foreign policy was
characterized by an effort to balance ties with Russia with those with the
United States and Western countries. President Kuchma and his supporters
gave lip service to joining NATO and the European Union, but did little to
meet the standards set by these organizations. On the other hand, Ukrainian
leaders also promised closer ties with Russia in exchange for Russian energy
at subsidized prices, but balked at implementing agreements with Russia that
would seriously compromise Ukraine's sovereignty, such as ceding control
over Ukraine's energy infrastructure to Moscow.

After taking office as President, Yushchenko put integration into the global
economy and Euro-Atlantic institutions at the center of Ukraine's foreign
policy. In the short term, the Ukrainian government's main foreign policy
goal is to join the World Trade Organization (WTO) by the end of this year.
Ukraine has signed bilateral market access market agreements with the United
States and other WTO countries and has passed important legislation needed
to comply with WTO standards. However, market access agreements with a
few other countries, additional legislation, and a protocol of accession are
needed before Ukraine can join the WTO.

In the longer term, Ukraine's leaders seek to join the European Union and
NATO. Ukraine has sought to retain good ties with Russia, but relations have
been troubled since Yushchenko has taken power. Given the lack of a foreign
policy consensus across the political spectrum in Ukraine, it is uncertain
whether Ukraine can sustain its current pro-Western orientation in the long
term.

                                                  NATO
Ukrainian officials say they want Ukraine to join NATO as early as 2008,
after they have made progress in military reform and have built public
support for the move within Ukraine. NATO officials have declined to suggest
a timetable for Ukraine's possible entry, stating only that Ukraine needs to
make further efforts to professionalize its armed forces, reform its
security sector, and fight corruption in order to improve its membership
chances.

Ukraine currently has an "Intensified Dialogue" with NATO, but is seeking a
Membership Action Plan (MAP), a key stepping-stone to joining the Alliance.
The MAP gives detailed guidance on what a country needs to do to qualify for
membership. NATO may consider whether to grant Ukraine a MAP at its
November 2006 summit in Riga, Latvia.

Ukraine's leaders face domestic political obstacles to NATO membership. The
new parliament could have a majority opposed to NATO membership, given the
strength of Regions of Ukraine, and the presence of other groups such as the
Communists, Socialists, and the Tymoshenko bloc. In November 2005, the
outgoing parliament rejected a proposal to permit NATO aircraft to fly over
Ukraine on their way to Afghanistan.

In June 2006, the Socialist Party demanded the resignation of Defense
Minister Anatoli Hrytsenko over the visit of a U.S. Navy cargo ship to
Crimea. Public opinion polls have shown that NATO membership lacks majority
support in Ukraine at present. President Yushchenko has said that Ukraine
will hold a referendum on NATO membership before joining the Alliance.

                                      EUROPEAN UNION
Ukraine seeks to open talks on an Association Agreement with the European
Union. Association Agreements are aimed at preparing a country for eventual
EU membership. Many countries in the EU have been cool to Ukraine's possible
membership, perhaps because of the huge burden a large, poor country like
Ukraine could place on already-strained EU coffers. Indeed, EU officials
have tried to dissuade Ukraine from even raising the issue.

However, not all EU states are reluctant to consider Ukraine's eventual
membership. Poland and the Baltic states have advocated Ukraine's joining the
EU, in part because they see a stable, secure Ukraine as a bulwark against
Russia.

However, even supporters of Ukraine's EU membership acknowledge that it could
be a decade or more before Kiev is ready to join, but believe that formal EU
recognition of Ukraine's candidacy could speed the reform process in
Ukraine.

Ukraine currently has a Partnership and Cooperation Agreement with the EU,
as well as a Ukraine-EU Action Plan within the context of the EU's European
Neighborhood policy. These agreements envisage EU designation of Ukraine as
a market economy, assistance for Ukraine's WTO candidacy, a feasibility
study for an EU-Ukraine free trade area, and other forms of assistance. At
an EU-Ukraine summit in December 2005, the EU announced that it would grant
Ukraine market economy status. The move should make it easier for Ukrainian
firms to export to the EU without facing antidumping duties.

                                               RUSSIA
Ukraine's most difficult and complex relationship is with Russia. President
Putin strongly backed Yanukovych's fraudulent "victory" during the 2004
presidential election campaign and reacted angrily at the success of the
Orange Revolution. Russian observers with close ties to the Kremlin charged
that the Orange Revolution was in fact a plot engineered by the United
States and other Western countries. For his part, President Yushchenko
offered an olive branch to Moscow, calling Russia a "permanent strategic
partner" of Ukraine. 5

Nevertheless, relations have been rocky. Russia has been irked by
Yushchenko's efforts to support greater democratization in the region and
impose tighter border controls on Transnistria, a pro-Moscow, separatist
enclave within neighboring Moldova. Russia has been troubled by Ukraine's
efforts to strengthen the role of the GUAM group, which is an acronym of
its four members - Georgia, Ukraine, Azerbaijan, and Moldova.

These countries, which have in common a desire to avoid domination by
Russia, are working on a number of projects, particularly efforts to
diversify energy resources. Ukraine has sought to have the group play a
larger role in regional democratization.

In May 2006, the group's name was changed to "Organization for Democracy and
Economic Development - GUAM," reflecting this goal. The United States has
backed Ukraine's efforts to strengthen GUAM.

However, wishing to avoid offending Moscow, Yushchenko has refrained from
calling for Ukraine to leave the Russian-dominated Commonwealth of
Independent States, despite Ukraine's dissatisfaction with the organization.
6

Ethnic Russians make up 17.3% of Ukraine's population, concentrated in the
southern and eastern parts of the country. Moreover, ethnic Ukrainians in
these same regions tend to be Russian-speaking, are suspicious of Ukrainian
nationalism, and support close ties with Russia. Russian officials have
tried to play on these regional and ethnic ties, not always successfully, as
demonstrated by the 2004 Ukrainian presidential election.

The most severe crisis in Russian-Ukrainian relations in recent years
occurred in January 2006. In 2005, the Russian government-controlled natural
gas monopoly Gazprom insisted on a more than fourfold increase in the price
that it charges Ukraine for natural gas. When Ukraine balked at the demand,
Russia cut off natural gas supplies to Ukraine on December 31, leading also
to cuts in gas supplies to Western Europe. The gas supplies were restored
two days later after a new gas supply agreement was signed.

Western observers have expressed concern that Moscow may be using the "gas
weapon" to try to secure foreign policy or economic concessions from
Yushchenko. Putin may also hope to achieve Russia's long-standing goal of
ownership of Ukraine's natural gas pipelines and storage facilities.

Another issue is the involvement of a shadowy company, RosUkrEnergo, as
the nominal supplier of Russian natural gas to Ukraine. Some analysts are
concerned about possible involvement of organized crime groups in the
company, as well as corrupt links with Russian and Ukrainian officials. The
U.S. Justice Department is reportedly investigating the firm.7

                                         U.S. POLICY
U.S. officials supported the "Orange Revolution" in Ukraine in late 2004 and
early 2005, warning the former regime against trying to impose fraudulent
election results, and hailing Yushchenko's ultimate victory. President
Yushchenko visited the United States from April 4-7, 2005 and had meetings
with President Bush and Secretary of State Rice.

Yushchenko's address to a joint session of Congress on April 6 was
interrupted by several standing ovations. U.S. officials have remained
upbeat about Ukraine's successes in some areas, such as adopting legislation
needed for WTO membership and in improving media freedom, while
acknowledging difficulties in others.

Administration officials have also praised Ukraine's efforts to
hold a free and fair parliamentary election on March 26, 2006. Press reports
have claimed that President Bush is considering a visit Ukraine in June or
July 2006, around the time when he will go to Moscow to participate in the
G-8 summit.

The fight against terrorism is a top foreign policy priority for Ukraine,
according to the State Department's 2004 Country Reports on Terrorism.
President Yushchenko withdrew Ukraine's troops from Iraq in December 2005,
in fulfillment of a campaign pledge, but promised to continue participation
in Iraqi troop training efforts.

In recent months, the United States has taken several steps to upgrade its
economic relations with Ukraine. On January 23, 2006, the United States
reinstated tariff preferences for Ukraine under the Generalized System of
Preferences (GSP).

Ukraine lost GSP benefits in 2001 for failing to protect U.S. intellectual
property, particularly CD and DVD piracy. U.S. officials hailed Ukraine's
efforts in the past year to improve its record on this issue.

On March 6, 2006, the United States and Ukraine signed a bilateral agreement
on market access issues, a key step in Ukraine's effort to join the WTO.
U.S. officials said that Ukraine committed itself to eventual duty-free
entry of U.S. information technology and aircraft products, as well as very
low or zero duty on chemical products. U.S. firms will also receive more
open access in such areas as energy services, banking and insurance,
telecommunications, and other areas.

The bilateral agreement also addressed other key concerns such as protection
of undisclosed information for pharmaceuticals and agricultural chemicals,
imports of information technology products with encryption, the operation of
state owned firms based on commercial considerations, and reduction of
export duties on non-ferrous and steel scrap.

The Administration has approached the issue of NATO membership for Ukraine
with some caution. During an April 4, 2005 press conference with Yushchenko,
President Bush said, "I'm a supporter of Ukraine becoming a member of NATO.
I think it's important." But he warned that Ukraine's NATO membership "is
not before it can join the Alliance. 8

U.S. officials say no invitations for new countries to join NATO are likely
before 2008, at the earliest. U.S. officials are backing Ukraine's request
to join the Alliance's Membership Action Plan program in the future. If the
United States decides to strongly advocate Ukraine's NATO membership in the
near future, it would likely have to cope with Moscow's strident opposition,
as well as tension with several European NATO allies more eager to
accommodate Moscow on the issue.

The Administration was sharply critical of Russia's behavior during the
January 2006 natural gas standoff between Russia and Ukraine. State
Department spokesman Sean McCormack criticized Russia for using "energy
for political purposes." He stressed that while the Administration supported
a gradual increase in prices to market levels, it disagreed with a
"precipitous" increase and cutoff. Secretary of State Condoleezza Rice
likewise on January 5 stated that Russia had made "politically motivated
efforts to constrain energy supply to Ukraine." 9

In May 2006, Vice President Dick Cheney characterized Russia's energy policy
toward vulnerable countries as "blackmail" and intimidation."10 The United
States has favored helping Ukraine and other countries reduce their
dependence on Russian energy supplies.

The United States advocates the building of multiple means of supplying
energy from Central Asia and Azerbaijan to Europe, including a pipeline from
the Ukrainian oil terminal at the port of Odesa to Brody, on the border with
Poland.

                            CONGRESSIONAL RESPONSE
During the Ukrainian presidential election campaign and during the ensuing
electoral crisis, the 108th Congress approved legislation calling for free
and fair elections in Ukraine and urged the Administration to warn Ukraine
of possible negative consequences for Ukraine's leaders and for U.S.-Ukraine
ties in the case of electoral fraud. The 109th Congress passed resolutions
after President Yushchenko was inaugurated. On January 25, 2005, the House
passed H.Con.Res. 16 and the Senate passed S.Con.Res. 7 on the 26th.

The identical resolutions included clauses congratulating Ukraine for its
commitment to democracy and its resolution of its political crisis in a
peaceful manner; congratulating Yushchenko on his victory; applauding the
candidates, the EU and other European organizations and the U.S. Government
for helping to find that peaceful solution; and pledging U.S. help for
Ukraine's efforts to develop democracy, a free market economy, and integrate
into the international community of democracies.

Congress has also dealt with the issue of U.S. aid to the new government in
Ukraine. The FY2005 Iraq-Afghanistan supplemental appropriations bill (P.L.
109- 13) provided $60 million in aid to help the new government in the
run-up to the March 2006 parliamentary election. Including funds
appropriated in Y2005 foreign operations appropriations legislation, Ukraine
received $156 million in U.S. assistance in FY2005.

The FY2006 foreign operations appropriations legislation (P.L. 109-102)
allocated $84 million in Freedom Support Act funds to promote reforms in
Ukraine. Five million of that amount was earmarked for nuclear safety
initiatives and 1 million for mine safety programs in Ukraine. Total FY2006
U.S aid to Ukraine is expected amount to $106.5 million. In addition to
Freedom Support Act funds, Ukraine is expected to receive $2.18 million in
Child Safety and Health funds; $10.89 million in Foreign Military Financing;
$1.68 million in IMET military training funds; $3.53 million in NADR funding
to fight terrorism and proliferation; and $5.08 in Peace Corps funding. The
Administration has requested $105 million for Ukraine for FY2007.

U.S. aid to Ukraine is also focused on anti-corruption and rule of law
efforts, fighting trafficking in persons, media and NGO development, and
election monitoring and other democracy-building programs. The United States
also seeks to increase exchange programs between the two countries.

Other programs include efforts to help Ukraine prepare for WTO membership,
encourage the growth of small business, strengthen export and border
controls, assist defense reform and interoperability with U.S. and NATO
forces, and building a "sarcophagus" around the damaged Chernobyl nuclear
reactor.11 In 2005, the Millennium Challenge Corporation (MCC) selected
Ukraine for Millennium Challenge Account (MCA) Threshold status.

Congress has dealt with a long-standing stumbling block in U.S.-Ukrainian
relations by passing legislation to terminate the application of the
Jackson-Vanik amendment to Ukraine, granting the country permanent Normal
Trade Relations Status. On March 8, 2006, the House passed H.R. 1053 by a
vote of 417-2. It was approved by the Senate by unanimous consent on March
9, and was signed by the President on March 23. 12           -30-
-------------------------------------------------------------------------------------------------------
                        UKRAINE'S MAIN POLITICAL GROUPS
Party of Regions: The largest party in Ukraine's parliament. It draws its
support from eastern Ukraine, where suspicion of Ukrainian nationalism is
high and support for close ties with Russia is strong. It defends the
economic interests of powerful oligarchic groups in eastern Ukraine.

Yulia Tymoshenko Bloc: Mainly a vehicle for the ambitions of the charismatic
Tymoshenko, it has little ideological cohesion of its own. It is the second
largest group in the Ukrainian parliament largely because many Ukrainians see
Tymoshenko as the most stalwart defender of the populist, anti-corruption
ideals of the Orange Revolution.

Our Ukraine bloc: The main political group supporting President Yushchenko.
Our Ukraine favors free market economic reforms and a pro-Western foreign
policy. It draws its main support from western Ukraine, where Ukrainian
nationalism is strong.

Socialist Party: Part of the Orange Revolution coalition, this rurally-based
party took a strong stand against the corruption of the Kuchma regime.
However, unlike Our Ukraine, the Socialists oppose NATO membership for
Ukraine and are skeptical of free market policies.

Communist Party: Now a shadow of its former self, overtaken by the Party
of Regions in its eastern Ukraine strongholds and faced with an aging
electorate. It strongly opposes market economics and favors strong ties to
Russia.
-------------------------------------------------------------------------------------------------------
                                            FOOTNOTES:
1 Jamestown Foundation, Eurasia Daily Monitor, September 9, 2005;
RFE/RL Belarus, Ukraine, Moldova Report, September 16, 2005.
2 Central Election Commission of Ukraine website,
[http://www.cvk.gov.ua/vnd2006/w6p001.html]
3 Global Insight Report: Ukraine, May 2004.
4 Economist Intelligence Unit Country Report: Ukraine, April 2006.
5 Jamestown Foundation, Eurasia Daily Monitor, January 25, 2005.
6 RFE/RL Belarus, Ukraine, and Moldova Report, June 2, 2006.
7 Glenn R. Simpson and David Crawford, "Supplier of Russian Gas Draws
Investigation," Wall Street Journal, April 21, 2006, 1. For background on
the gas crisis, see CRS Report RS22378, Russia's Cutoff of Natural Gas to
Ukraine: Context and Implications, by Bernard Gelb, Jim Nichol, and Steven
Woehrel.
8 Transcript of President Bush's press conference with President Yushchenko,
April 4, 2005, from the White House website, [http://www.whitehouse.gov].
9 The State Department. Statement, January 1, 2006; Daily Press Briefing,
January 3, 2006; Secretary Condoleezza Rice, Remarks at the State Department
Correspondents Association's Breakfast, January 5, 2006.
10 "Vice President's Remarks at the Vilnius Conference," May 4, 2006, from
the White House website [http://www.whitehouse.gov]
11 FY2007 Congressional Budget Justification for Foreign Operations, from
the State Department website, [http://www.state.gov].
12 CRS Report RS22114, Permanent Normal Trade Relations (PNTR) Status
for Ukraine and U.S.-Ukrainian Economic Ties, by William H. Cooper.
-----------------------------------------------------------------------------------------------
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