ACTION UKRAINE REPORT -
AUR
An International
Newsletter, The Latest, Up-To-Date
In-Depth Ukrainian News, Analysis and Commentary
Ukrainian History, Culture, Arts, Business,
Religion, Sports,
Government, and Politics, in Ukraine and Around the
World
ECONOMICS, EUROPEAN UNION, MOSCOW,
CRISIS IN KYIV, VP CHENEY,
HOLODOMOR
ACTION UKRAINE REPORT - AUR - Number
904
Mr. Morgan Williams, Publisher and Editor,
SigmaBleyzer
WASHINGTON, D.C., SUNDAY,
SEPTEMBER 7, 2008
INDEX OF ARTICLES
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Clicking on the title of any article takes
you directly to the
article.
Return to Index by clicking on Return to
Index at the end of each article
UkrInform - Ukraine News, Kyiv, Ukraine, Friday, September 5,
2008
The former bread basket of the Soviet Union, Ukraine, saw a CAGR of
16.3%
EIU Business Newsletters Eastern Europe, Economist Intelligence Unit
Limited
New York, New York, Monday, August 25, 2008
By Polya Lesova, MarketWatch, New York, NY, Friday, Sep 5, 2008
5
. MAX-WELL: TRANS ATLANTIC
MEDICINEUnique pharmaceutical firm combines Ukrainian and American
practices
By Jim Davis, BusinessUkraine weekly magazine, Kyiv, Ukraine,
Monday, July 28, 2008
KPMG-Ukraine Opens New Office in Donetsk
U.S.-Ukraine Business Council (USUBC),
Washington, D.C., June, 2008
Analysis & Commentary: By Anders Aslund, Senior Fellow
Peterson Institute for International Economics, Washington, D.C.
Financial Times, London, United Kingdom, September 4 2008
Global Market Brief: Stratfor Today, Austin, TX, Thursday, September
4, 2008
A soft-spoken academic is described by many as the second-most powerful
person in Ukraine's government
By Toby Vogel, European Voice, Brussels,
Belgium, Thursday, August 28, 2008
Jamie Smyth in Avignon, Irish Times, Dublin, Ireland, Saturday, September
6, 2008
OP-ED: By Richard Holbrooke, U.S. Ambassador to the United Nations
during the administration of U.S. President Bill Clinton
The Moscow
Times, Moscow, Russia, Thu, Sep 04, 2008
John Marone, Columnist, Eurasian Home website, Kyiv,
Ukraine
Eurasian Home, Moscow, Russia, Monday, September 1, 2008
15
. IS UKRAINE
NEXT?
The EU should be thinking about how it can extend a
commitment to security, democracy and prosperity to neighbours
Analysis & Commentary: Andrew Wilson, Senior Policy Fellow
European Council on Foreign Relations.
Guardian newspaper, London, United Kingdom, Friday September 05 2008
By Mykola Siruk, The Day Weekly Digest (25), Kyiv, Ukraine, Tuesday,
September 2, 2008
Noting its “intimidation” of Ukraine and the Baltic states, and a threat of
attack on Poland
Says demise of the Soviet Union was the greatest step for liberty in the
last 60 years
By Guy Dinmore and John Thornhill in Cernobbio, Italy, Financial
Times, London, UK, Sep 6 2008
By Tabassum Zakaria, Reuters, Kiev, Ukraine, Friday, Sep 5, 2008
By Roman Olearchyk in Kiev, Financial Times, London, UK, Friday,
September 5 2008
23
. SUNFLOWER GROWS WITH MEANING
A Glenside resident is hoping a 9-foot-tall flower brings more than an
appreciation of flowers to those who see it.
By Mischa Aaron Arnosky, Times
Chronicle, Glenside News, Fort Washington, PA, Wednesday, August 13, 2008
Ukrinform, Kyiv, Ukraine, Saturday,
September 6, 2008
By Stanislav Kulchytsky, Professor, Scholar,
Researcher, Historian
The Day Weekly Digest (25), Kyiv, Ukraine, Tuesday, 2 September
2008
======================================================
1. UKRAINE GDP GROWTH
REACHES HIGHEST MARK IN JULY
UkrInform - Ukraine News, Kyiv, Ukraine, Friday, September 5,
2008
KYIV - GDP growth in July reached the highest mark and
totaled 7.3% against July 2007 due to increase of the production of agrarian
products, the analytical report of the Concorde Capital investment company reads
with taking into account results of development of Ukrainian economics in
July-August 2008.
GDP growth speeded up mostly owing to increase of production of
agrarian products: volumes of agrarian production went up by 10.6% over seven
months 2008 against the relevant period last year when reduction of 0.3% was
registered in H1 2008.
Thus, rich yield in 2008 allowed the agricultural sector to compensate
slowing down of industrial production which totaled 7.3% over seven months
2008.
According to the statement of the Concorde Capital, the agricultural
investments went up by 45.3% in H1 2008. At the same time, the total investment
growth reduced to 8.2% versus the relevant period last year because of high
inflation level and toughened crediting terms.
For the first time over two years Ukraine registered deflation in July
2008. The prices went down by 0.5% against June. It was also caused by seasonal
reduction of prices for food products by 1.3%. According to the forecast, by
late 2008, inflation will total 21%, the statement of the Concorde Capital
says.
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2
. EGYPT, UKRAINE MAY
EXCHANGE GAS FOR WHEAT
Reuters, Cairo, Egypt, Friday
September 5 2008
CAIRO - Egypt and Ukraine are negotiating a
gas-for-wheat trade deal, Egypt's state news agency said on Friday, quoting a
Ukrainian diplomat.
"The governments of the two countries are negotiating
now to reach a deal to exchange Ukrainian wheat for Egyptian natural gas which
will be exported
through a pipeline which passes through Syria and Turkey to
the Balkans," MENA quoted Valerie Grygorash, head of Ukraine's trade delegation
in Egypt,
as saying.
An official at the Ukrainian embassy could not
immediately comment on the report. MENA did not give further
details.
High wheat prices have strained Egypt's bread subsidy system,
and riots have erupted this year over bread shortages. Egypt, one of the world's
largest
wheat importers, often buys wheat from Ukraine. It purchased 52,500
tonnes of Ukrainian wheat in a tender this week.
Ukraine faces rising
prices for gas from Russia, through which half of its gas is imported. Russia
halted gas flows to Ukraine for several days in a pricing dispute in early 2006
which had a knock-on effect for gas passing through Ukraine and on to European
customers.
Egypt had proposed in April to grow wheat in Sudan to meet the
needs of Egyptian consumers, and then in May identified an area of about 2
million acres on the Sudan border where the two countries could grow wheat in a
joint project. (Writing by Will
Rasmussen)
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3
. EASTERN EUROPE: BAKERS
RISING
The former bread basket of the Soviet
Union, Ukraine, saw a CAGR of 16.3%
EIU Business Newsletters Eastern Europe, Economist Intelligence Unit
Limited
New York, New York, Monday, August 25, 2008
The bakery sector in Eastern Europe and Russia is in a state of flux. But
compared with Western Europe, the Eastern European bakery sector is still small
and fairly undeveloped.
While Europe overall dominates the global bakery products market, with an
estimated share of 43.85% in 2007 according to US-based Global Industry Analysts
(GIA), Eastern Europe’s contribution to the continent’s total bakery sales is
barely in the double figures.
Of course, the huge discrepancy in retail prices is largely responsible,
and in fact per capita consumption in terms of consumption is of a comparable
level, despite increased awareness of health issues and concerns about obesity.
As the economies and currencies of Eastern Europe strengthen, the
numbers are starting to catch up, however. Market watcher Euromonitor projects
that the region’s bakery sector will rise in value from euro22.7bn in 2008 to
euro26.6bn by 2013- a 17% increase over five years. Already, the gains this
decade have been great, albeit from a low base. In 2000-06 the retail value of
bakery sales in Belarus leapt 263% to euro292.9m.
The former bread basket of the Soviet Union, Ukraine, saw a CAGR of 16.3%
to euro647.8m while the Hungarian market grew at a CAGR of 13.8% to be worth
euro461m.
ARTISANS UNDER SIEGE
Although major corporations such as Barilla of Italy, Danone of France,
US-based Kellogg, UK-based United Biscuits and Switzerland-based Cereal Partners
Worldwide (a joint venture of Nestle and General Mills) head the list of
Europe’s top industrial bakers, their combined sales amount to less than 10% of
the market.
Indeed, Euromonitor reckons that artisan bakeries—which by definition tend
to sell unpackaged products—still account for 55% of sales in Western Europe and
45% in Eastern Europe.
But the rising cost of raw materials is putting pressure on local and
regional producers who struggle to compete with the manufacturing and
distribution networks of bigger outfits. Exacerbating the trend, supermarket
chains such as Austria’s Billa, itself part of German retail giant Rewe, have
expanded their in-store bakeries in supermarkets in countries like Slovakia and
Poland.
Indeed, liberalisation has opened the way for larger companies with
better economies of scale to make a play for market consolidation. In August,
for instance, Austrian private equity firm Capexit acquired 100% ownership of
Serbian bakery Bread & Co from a domestic agricultural company, Fidelinka.
As well as opening 20 new locations in Serbia by the end of the year,
Capexit plans to export the brand to Croatia, Bulgaria and Romania so that the
regional network boasts more than 200 stores over the next five years.
Meantime, Czech bakery company Penam, which is part of the Prague-based
Agrofert group, recently acquired local baker Pekast and flour mill Nobrs for an
undisclosed sum, simultaneously offloading its pasta unit as part of its
strategy to focus on the baking game.
Employing some 2,500 people, Penam owns 13 production facilities and four
mills, and as well as running about 40 shops supplies most retail chains in the
Czech Republic. The acquisition of Pekast extends its market share from 12% to
15%.
NOT FAZED BY RUSSIA
On another scale altogether is the strategy of Finland’s Fazer Group,
currently the only significant foreign player in Russia. In March the
Helsinki-based company announced plans to build a euro100m factory on a 20-ha
greenfield plot on the edge of St Petersburg, where fresh and frozen bread and
coffee bread is to be baked. Century-old Fazer has invested euro130m in Russia
over the past decade, to acquire a string of baking facilities.
Last year, for example, Fazer acquired a majority stake in Russian bakery
company OAO Volzhky Pekar, the market leader for fresh and coffee bread in the
Tver region. Volzhky Pekar’s turnover is currently about euro2m, a figure Fazer
reckons it can double by 2012. The company seems to have the wherewithal to
achieve that goal.
Over the past three years Fazer, which operates in nine countries and
earned revenues of more than euro1bn in 2007, has enjoyed an average annual rate
of about 40% in Russia. Turnover there last year was euro170m, representing
about 18% of group revenue.
But if bread remains the dominant product on the global bakery scene,
the category is in a state of flux. In Russia, the sector continues to be
affected by state control of bread prices, which has probably deterred other
foreign investors from following Fazer into the market. This, coupled with the
rising cost of ingredients, means the profitability of bread production is low.
Not surprisingly, bakeries and bread making plants are closing all across
Russia.
Despite the strength of the big players, the news for smaller bakers is
not all bad. In its report, which profiled some 934 companies including Danone
and German biscuit maker Bahlsen, GIA notes that while large bakeries have
acquired many unproductive bakeries and invested heavily in automation, cost
control and branding, small, productive bakeries are finding ways to exploit
consolidation by developing niches.
Even so, it seems inevitable that local bakers will merge their businesses
to strengthen their position against incomers.
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4
. UKRAINE'S PFTS STOCK INDEX
FALLS 7%, STOCK EXCHANGE SUSPENDS
TRADING
By Polya Lesova, MarketWatch, New York, NY, Friday, Sep 5, 2008
NEW YORK - Ukraine's PFTS Stock Exchange suspended trading Friday from
12:45 p.m. local time until 3 p.m. after the benchmark PFTS index tumbled 7%,
according to a statement from the exchange.
"There is somewhat of a meltdown in the Ukrainian financial markets," said
Lars Christensen, chief analyst at Danske Bank. "Politically, the situation is
very, very bad in Ukraine. We have now been in a state of permanent political
crisis for almost two years."
Earlier this week, Ukraine was plunged into political turmoil after the
coalition government broke up amid disagreement between President Viktor
Yushchenko and Prime Minister Yulia Tymoshenko. Yushchenko has warned he might
call early general elections.
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Promoting U.S.-Ukraine business
relations & investment since 1995.
==============================================================
5
. MAX-WELL: TRANS
ATLANTIC MEDICINE
Unique pharmaceutical firm combines
Ukrainian and American practices
By Jim Davis,
BusinessUkraine weekly magazine, Kyiv, Ukraine, Monday, July 28, 2008
The
only US-owned pharmaceutical production facility in Ukraine is also is the
largest single high-technology American investment in Ukraine to
date.
The Max-Well Scientific Oncological and Cardiological Production
Centre, a unique manufacturing complex producing immunobiological
and
chemico-pharmaceutical products, opened on March 26 in the Kyiv Oblast
town of Boryspil.
Max-Well is the largest such specialised complex
project in the former Soviet Union, with production workshops for manufacturing
drug products and a scientific research centre.
This innovative
Kyiv Oblast venture is a subsidiary company of MaxWell Biocorporation LLC (USA),
where the substances for biopharmaceuticals are
developed and produced and
substance quality is controlled.
Max-Well's primary mission lies in
increasing the lifespan and improving the quality of life for Ukrainians by
development and introduction into medical
practice of top quality drug
products and advanced effective methods for treatment of oncological,
cardio-vascular and other life-threatening diseases.
From Soviet Kazakhstan to America
Dr. Kenneth
Alibek, president of Max-Well company, is an internationally known scientist and
professor of biological sciences and the author of
numerous scientific papers
and 10 books. Dr. Alibek, a native of Kazakhstan, was educated in the United
States and became a U.S. citizen. "With my
cultural and linguistic
background, I could have chosen to develop this business in any of the former
Soviet states.
However, I chose Ukraine because I felt comfortable here
and I saw an opportunity to have a profitable business while at the same time
making a positive impact on the health and quality of life of people throughout
all of the former Soviet Union," Dr. Alibek commented of his decision to make
Ukraine the centre of his operations.
Impacting on shocking health stats
As evidence
of the health issues his company hopes to impact upon, Dr. Alibek pointed to
statistics that show Ukrainian men with a life expectancy of 62.24 years and
Ukrainian women with a much longer life expectancy of 74.24 years.
"We
believe that by making top quality medications available at more affordable
prices, we will be able to make a very great impact on bringing greater wellness
and longer and more enjoyable lives to both men and women," Dr. Alibek
says.
National wealth is not necessarily the best indicator of national
health. Russia, now the recipient of huge inflows of capital thanks to its
exploitation of its natural resource wealth, still has lower life expectancies
than Ukraine. In Russia, the life expectancy for men is 59.19 years and for
women the number is 73.1 years.
Interestingly enough, Moldova, considered
the poorest of the former Soviet states, has a life expectancy superior to both
Ukraine and Russia. Moldovan
men may expect to live for 66.81 years while
Moldovan women may expect to live 74.41 years.
"Our plans call for us to
develop the markets for our pharmaceuticals throughout the entire former Soviet
Union with the idea that this will not only make a considerable health impact,
but also at a level of profitability that allows a reasonable return to our
investors while at the same time pouring more money into expanding our range of
drugs for our focus area of cardiovascular and cancer treatments," Dr. Alibek
says.
"The fact that 64% of our people die of cardiovascular disease at a
relatively young age is a situation that we are in a position to improve today
and keep making greater improvements in the future. We are here for the long
haul and dedicated to making a real impact on the former Soviet health and
wellness picture," he adds.
Pumping
money into an convalescent economy
According to Dr. Alibek,
Max-Well is actually the most intensive international investor into integral
methods of control of oncological, cardiological and critical infectious
diseases. The company's total investment in this project already exceeds USD 90
million. Company plans call for increasing the investment over time to USD 130
million and even more over the years.
Of the company's USD 30 million
investment in equipment, USD 9 million went to equipment from Ukrainian
manufacturers. Construction costs of USD 39
million made an even greater
impact in Ukraine with USD 32 million going to Ukrainian construction
firms.
The development of funding for the pharmaceutical enterprise
construction project in Ukraine was headed by Mr. Mukhtar Ablyazov, Chairman of
the Board of Directors at JSC BTA Bank, a well-known businessman in CIS
countries, Europe and the United States.
Dr. Alibek is emphatic in his
praise for the support the company has received for its Ukrainian venture from
the US embassy in Kyiv. Also, on June 4, Carlos M. Gutierrez, US Secretary of
Commerce paid a visit to the Max-Well facilities along with Oleksandr Fedorovych
Vosianov, President of Academy of Medical Sciences of Ukraine.
Vladimir
Bugaychuk, Max-Well's general director took the visitors on a tour of the
facilities that will permit manufacture over 200 million capsules, about 150
million pills, 60 million vials, 30 million pre-filled syringes and 30 million
suppositories per year.
The production facility was designed and built
according to GMP standards (Good Manufacturing Practice), the world-wide
regulations for the production
of drug products.
Also, both
chemico-pharmaceutical and immunobiological drug products will be manufactured
at the production facility, which is innovative not only for
Ukraine, but for
the CIS countries as a whole.
"We have made our initial investment in
Ukraine and expect to see great growth in the years ahead. I had the advantage
of having language skills and
cultural knowledge that served me well.
However, for other US investors, there are still great opportunities and whole
fields for development," comments Dr. Alibek.
"My advice to investors is
to find a reliable local business partner who understands the language and
culture. The US-Ukraine Business Council [USUBC] has also been a great help in
making contacts and dealing with problems. With the right partners, it is
possible for anyone with good business sense to find opportunities
here."
LINK:
http://www.businessukraine.com.ua/trans-atlantic-medicine
NOTE: Max-Well is a member of the U.S.-Ukraine Business Council
(USUBC), Washington, D.C.,
www.usubc.org.
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6
. KPMG JOINS
U.S.-UKRAINE BUSINESS COUNCIL (USUBC)
KPMG-Ukraine Opens New Office in
Donetsk
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wednesday,
June, 2008
WASHINGTON, D.C. - The
executive committee of the U.S.-Ukraine Business Council (USUBC), on behalf of the entire membership, is most
pleased to announce that KPMG has been approved for
USUBC membership. KPMG-Ukraine is USUBC member number 81.
KPMG is a global network of professional firms providing audit, tax and
advisory services. KPMG operates in 148 countries and have more than
113,000 professionals working in member firms around the world.
KPMG-Ukraine Ltd. is a company incorporated under the Laws of
Ukraine and a member firm of the KPMG network of independent member firms
affiliated with KPMG International, a Swiss cooperative.
Mason Tokarz is the Managing Partner of KPMG-Ukraine Ltd. and will
represent KPMG on the USUBC board of directors.
KPMG IN UKRAINE
As a member firm of one of the world's leading professional services
organizations, KPMG in Ukraine brings clients technical skills, solid practical
experience and wide industry and sector knowledge which provide clients with a
competitive edge over their competitors. Their goal is to help our clients
not only compete, but become marketplace leaders.
KPMG in Ukraine has
established multi-disciplinary teams of Ukrainian and expatriate professionals
which provide focused services to Ukrainian and
foreign clients.
They apply a rigorous approach to assist their clients in defining
their business or investment objectives and then work with them to
achieve
those objectives.
The following are some of the potential benefits KPMG provides to
their clients in Ukraine: a. understanding of the local business environment; b.
industry-specific focus; c. broad based experience; d. combined delivery teams;
e. tangible return on investment; f. well-established assessment and
implementation methodologies; g. flexibility to match client culture; h. access
to KPMG's global resources.
KPMG OPENS OFFICE IN
DONETSK
On May 22, 2008 KPMG in Ukraine announced
the opening of its office in Donetsk. With their business expanding rapidly
across Ukraine, KPMG felt
is was important to have the resources in the right place at the
right time to meet the needs of their clients.
Mason Tokarz,
Managing Partner, KPMG in Ukraine, said: "The Donetsk region is home to some of
the largest and most recognized companies in Ukraine. It has a dynamic local
economy, and is attracting considerable interest from investors all over the
world. Our decision to open the office in Donetsk is aimed to better serve our
existing clients in the area, and to develop relationships with potential
clients in the region of Donbass".
Anna Parkhomenko, who will direct the
team in the new office, stated: "We are looking forward to the launch of
our new team in Donetsk, which consists of professionals at various levels with
various specialized skills.
The team is excited about the opportunities arising as a result of the
opening in Donetsk. At KPMG, we are committed to contributing as much as
possible
to the development of the business environment in this important region of
Ukraine".
For more information about KPMG-Ukraine click on:
www.kpmg.kiev.ua.
BUSINESS DRIVES UKRAINE'S INTEGRATION
"The U.S-Ukraine Business Council (USUBC) is most pleased to have
KPMG-Ukraine join the rapidly expanding USUBC membership." said
Morgan Williams, SigmaBleyzer, who serves as President of USUBC.
"The international and domestic business community is now the main driving
force regarding Ukraine's integration into the world. It is
important
for the business community to work together to influence the government to
adopt more reforms that will bring Ukraine's laws and standards
more
into line with internationally accepted practices," Williams
said.
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7
. THE WEST SHOULD USE
ECONOMICS TO REIN IN RUSSIA
ANALYSIS & COMMENTARY: By Anders Aslund, Senior Fellow
Peterson Institute for International Economics, Washington, D.C.
Financial Times, London, United Kingdom, September 4 2008
Russia’s invasion of Georgia has shocked the west and spurred talk
about how to respond. The conventional wisdom is that the west can do little to
punish Russia. True, western governments have limited leverage, but in economic
terms the Russian invasion has already hit it hard, even before western
governments lifted a finger. This economic blow shows the west how it can punish
Russia’s leaders.
On the fateful day of August 8, Russia’s stock market plummeted 6.5 per
cent. It has now fallen 36 per cent in the past two months, wiping out $500bn
(euro346bn, £281bn) of shareholders’ capital, almost equal to Russia’s
international currency reserves of $580bn. During the week of the invasion,
capital outflow reached $16bn, causing a sudden domestic credit squeeze.
Two wealthy Russians have been identified as among the biggest sellers of
Gazprom stock . They cannot have been happy with Vladimir Putin, the Russian
prime minister. Indeed, Mr Putin’s boasts about Moscow as a new global financial
centre and the rouble as a coming international reserve currency have become a
sad joke.
These substantial losses are likely to last. In a note to investors,
UBS, the investment bank, explains that the old paradigm – that investment in
Russia carries high political risk – has returned. UBS cut its price targets on
Russian companies by an average of 20 per cent or a market value of
$300bn.
Russia’s economic strength should not be exaggerated. Its gross
domestic product has jumped from $200bn in 1999 to an estimated $1,700bn this
year, yet it accounts for only 2.8 per cent of the world’s GDP. Despite the
Georgian success, Russia’s military is under-resourced. Official military
spending is $48bn, or 7 per cent of US defence spending.
With oil and natural gas accounting for 60 per cent of its exports, Russia
is dependent on world energy prices, which are falling. Its energy production is
stagnant because of renationalisation and the hostile climate for investors.
Corruption is Russia’s worst scourge and the state cannot carry out
infrastructure investment because of huge kickbacks. With authoritarianism,
economic reforms have stalled but without them high growth rates will not be
maintained.
The west faces a choice between sanctions and economic engagement.
Trade sanctions would only strengthen the security elite’s hold on the economy
and reinforce its dictatorship. It would be wrong to oust Russia from the
International Monetary Fund or stop its membership of the World Trade
Organisation, because open markets and international standards will only expose
Mr Putin and his cronies.
Instead, the European Union and US should impose ethical and legal
standards that make it costly for Russia to misbehave, targeting big state
companies and top officials not private citizens or businessmen.
[1] First, the EU
should adopt a common energy policy, imposing the rules of the energy charter –
such as transparency, equal investment rights and third-party access to
pipelines – on Russia. A united EU has bargaining power as all Russian pipelines
outside the former Soviet Union go to Europe.
[2] Second, the
European Commission should force Gazprom to unbundle production and
transportation to break up its monopolies. Why does the EC pursue antitrust
suits against Microsoft but not Gazprom? It would have to divest its pipeline
network outside Russia’s borders, abandon blatant price discrimination and end
its planned construction of the Nord Stream and South Stream gas
pipelines.
[3] Third, the west
should investigate Russian top officials and their trading companies for
money-laundering.
[4] Fourth, Russia’s
big state companies habitually woo politicians in other countries. Gerhard
Schröder, the former German chancellor, is just Gazprom’s most prominent catch.
Western ethical rules for contacts with Russian state companies need to be
tightened and the EU should establish American rules for the disclosure of
income anybody earns from lobbying. Unethical behaviour is best fought with
increased transparency.
[5] Finally, if
western intelligence agencies possess evidence of any corruption by Mr Putin or
his cronies they should publish it. Nothing would undermine him more in Russian
eyes than verified facts about corruption. Russia and its leaders are quite
vulnerable, but to be effective the west needs to unite.
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8
. THE FINANCIAL
AFTERMATH OF THE RUSSO-GEORGIAN WAR
Global Market Brief: Stratfor Today, Austin, TX, Thursday, September
4, 2008
A redefinition of Russia has taken place — rather
jarringly — following its war with Georgia, and the entire world is reassessing
its position and relations with the resurgent power. This reassessment includes
financial factors — a much more tender area for today’s Russia than for the
Soviet Union, because Russia’s large economy is tied into the global economy.
During the Russo-Georgian war, Russia’s stock index declined to its
lowest level in two years, the ruble registered its largest monthly decline
against the U.S. dollar in more than nine years, and foreign investment flight
amounted to $25 billion in just three weeks, according to French investment bank
BNP Paribas.
But the flight of foreign direct investment that has resulted from
deteriorating ties between Russia and the West will not hurt Russia as much as
is believed.
Rather, Russia will be dealt a massive blow when the West ceases giving
Russian companies the financial access they need to continue expanding or even
operating. The main reason Russian companies have done so well in the past few
years (and made Russia a much stronger country) is that foreign entities have
been the ones financing their expansion. This is all about to change.
THE RUSSIAN
MODEL
There are three main types of financial models in the world: Western, Asian
and Russian.
[1] The Western financial model is economically based, with gaining money
and profit as the end goal; such a model tends to crush inefficiency and protect
the system as a whole.
[2] The Asian model is socially based. This model’s goal is maximum
employment and social stability, where money is used as a political resource for
nonfinancial ends despite all inefficiencies.
[3] The Russian model is politically based. In Russia, finance is a
political tool to control the country and operates much like money for loan
sharks or organized crime. The system is highly inefficient, but it allows a
very small few to hold all the power in an enormous country.
It is the Russian model that has made it nearly impossible for Russian
companies to gain access to cash outside their own earnings and has led them to
look outside the country. To put it simply, a company needs money in order to
grow; in its search for that money, it has three options. It can use its own
money, but this limits a company in its ability to make major purchases, take on
large projects, or greatly or quickly expand.
This option has been seen not only in companies’ purchases, but in most
financial transactions in Russia. A good example of this in Russia is mortgages,
which the country had never seen until the past few years. Previously, Russians
had to use their own money to buy homes without any financing options.
The other two options involve borrowing money, either by taking out
loans or by issuing bonds. A loan would have to come from a bank, and any
sizable loan would have to come from a large (most likely Western) one. Issuing
bonds is like dividing up pieces of a loan to a number of purchasers.
Most Russian companies cannot turn to Russian banks for loans, because
the banks are either too small to finance major projects or are state- or
oligarch-owned. Of Russia’s 10 largest banks, the top five are all state-owned,
which means that if a company wants to finance a major project it has to develop
an understanding with the Kremlin.
Traditionally, the major state banks have stayed out of financing large
projects, mainly because they have no expertise in these fields. When the
government does actually step into the role of financier, it is usually because
of political or control issues and not because the Kremlin sees a good
investment.
The other large banks in Russia are typically oligarch-run. The
oligarchs are billionaires who lead most of Russia’s vital sectors, both private
and state-controlled.
Most of these individuals rose to power during the Yeltsin-era “shock
therapy” transition from socialist structures to capitalist ones (which more
resembled a free-for-all), but the oligarchs who have remained in power are
either owned by the Kremlin or have the Kremlin’s blessing to continue holding
strategic sectors.
During their rise, the oligarchs basically created their banks in order to
fund projects or manage their own companies. For example, Rosbank was created by
the owners of Interros — oligarchs Mikhail Prokorov and Vladimir Potanin — in
order to finance projects by Interros’ Norilsk Nickel, the world’s largest
nickel company.
These banks typically are not able to take on any other company’s major
projects and often cannot handle major financing for their own related firms;
moreover, these oligarchs have no interest in funding any rival oligarch’s
expansion plans.
The oligarchs also created these banks in order to keep the Kremlin from
having a say in their companies and projects (though the Kremlin has since
either worked its way into partial ownership of most “private” banks or placed
lackeys as bank chiefs).
Russian companies cannot issue bonds to the domestic market simply
because there are not enough interested people in the country with the money to
buy them. Those who have money to spend are, once again, the government or the
oligarchs, and all the same rules apply to their investment in bonds as to the
banking sector.
The only option left has been for Russian companies to turn to foreign
money and banks. This is an option Russian companies have turned to only very
recently (in the last five years) after the fall of the Soviet Union and a
decade of economic turmoil.
The Russian market has been so starved for capital — particularly for
investment, and for nearly a century — that foreigners are seeing a lot of bang
for their buck in financing Russian companies, and they have been lending cash
and snapping up bonds left and right.
The potential for growth in Russia is so great that foreign cash is
estimated to fund 70 percent of Russian debt. It is foreign loans and bonds that
are actually making a difference in Russian companies and economic expansion.
SUDDEN
CHANGES
But the Georgian-Russian war has changed all of this.
It is not that the war was the proximate trigger for the massive fall in Western
confidence in Russia; rather, it was a clear sign of a downfall already in
progress. General perception of and confidence in Russia has now changed —
especially in the West.
Russian companies (and then the Russian economy) will have to shift when
the reality hits that the West simply no longer has confidence in Russia or its
companies. Russia was already a risky market, given the Kremlin, oligarchs and
organized crime, but when global credit conditions are poor — as they are now —
investors tend to shun riskier ventures.
According to BNP Paribas, the amount of debt raised by Russian
companies in August was 87 percent less than July’s levels, and the issuance of
new equity nearly halted — from $933 million in July to $3 million in August.
This dramatic slowdown will not lead to a Russian collapse (the country does
have its own money), but Russian companies will find it very hard to raise
capital and fund expansions, leading to stagnating operations.
Russian President Dmitri Medvedev is already hearing the cries of
Russian companies and oligarchs over the tightened situation and restrictions
from world financial markets. Medvedev will be meeting with the country’s
biggest firms and businessmen at the annual Russian Union of Industrialists and
Entrepreneurs summit on Sept. 19-20. Medvedev has vowed to unveil a new program
for easy credit soon after the summit, once he has input from the country’s
business leaders.
THE KREMLIN'S
OPTIONS
There are three options for Moscow.
[1] First, Russia could
just take the blow, no matter how many ticked-off oligarchs it creates. This
would mean that some of Russia’s most powerful companies would have to revamp
their plans entirely. Such a move would definitely affect the expansion plans of
nonstate firms, but it will also hit many state companies — like energy giants
Rosneft and Gazprom — which have been gorging on the bonds markets.
It also means that the Russian government, which uses many of the companies
as champions and tools for domestic or foreign control, would have to overhaul
its future strategy as well.
[2] Second, the
government could learn how to spend money. Moscow does not have a problem with
cash and holds the world’s third-largest foreign currency reserve (currently
just under $600 billion). The problem is that the government does not like to
spend any of its reserves unless it is desperately needed.
The only time in the past decade the Kremlin has dipped into the reserves
was to finance its war with Georgia. But some Russian oligarchs, like Potanin,
are already calling on the Kremlin to tap its reserves to ease the crisis.
[3] The third option
is the most difficult: Russia could actually set up a real large bank for real
large loans. But this would change the country’s entire financial model and cut
the Kremlin’s and local politicos’ abilities to control and manipulate who can
borrow money and for what. The social and economic implications of this option
are something that the Kremlin has never shown it is willing to risk.
Setting up a real banking structure would offer people in Russia a resource
outside the government’s control, which would in turn give them the ability to
have an opinion and hold economic power, and potentially rival the government in
making decisions — something that Russia has never seen or allowed before.
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9
. MOSCOW WINS A MAJOR
VICTORY ON PIPELINES
Window on Eurasia: by Paul Goble, Vienna, Austria, Sep 5, 2008
VIENNA - With
Iran's declaration that it opposes the construction of any undersea pipelines in
the Caspian on "ecological grounds" and thus will block any delimitation of the
seabed that allows for them and Baku's decision not to back the West's push
NABUCCO project, Moscow can claim its first major political victory from its
invasion of Georgia.
These actions mean that the Russian government will now
have full and uncontested control over pipelines between the Caspian basin and
the West which pass through Russian territory and will be able either directly
or through its clients like the PKK to disrupt the only routes such as
Baku-Tbilisi-Ceyhan that bypass the Russian Federation.
That does not mean, of course, that Moscow now has
effectively reestablished its control over the states of this region – all of
them have other interests besides oil and gas – but it does mean that Russia has
won a major victory and the West, which all too often in recent years has
focused on oil and gas alone, has suffered a major defeat.
Yesterday, Mehti Safari, Iran's deputy foreign minister,
told journalists that Tehran opposes the construction of any undersea pipelines
in the Caspian because "this can bring harm to the ecology of the sea." He noted
that exporting countries can send their gas out via either the Russian
Federation or Iran (www.oilru.com/news/81667/).
Given the existence of "such possibilities," the Iranian
diplomat said, "why harm" the delicate eco-system of the Caspian? But in making this statement, Tehran was
underscoring its willingness to destroy any chance for the completion of the
NABUCCO gas pipeline in the near term that the United States and some Western
European countries have been pushing for.
And because Washington opposes the flow of hydrocarbons
from the Caspian basin out through Iran, Tehran's action in fact makes it likely
that many of the oil and gas exporting countries in the region will now choose
to send more or even all of their gas and oil through the Russian Federation, a
longstanding geopolitical goal of Moscow's.
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10. HISTORICAL MASTERMIND:
HRYHORIY NEMYRIA
A soft-spoken academic is described by
many as the second-most powerful person in Ukraine's
government
By Toby Vogel, European Voice, Brussels,
Belgium, Thursday, August 28, 2008
Ukraine's democracy is not old.
Just a few years ago, the country was run by Leonid Kuchma, a Soviet-style
president, until he was ousted in the Orange
Revolution of December 2004.
But it is certainly vibrant.
The rivalry between the two orange leaders,
Yulia Tymoshenko and Viktor Yushchenko, has gripped the country ever since they
descended the stage in
downtown Kiev from which they launched their
challenge to Kuchma. Since they took up the reins of government in early 2005,
with Yushchenko as president and Tymoshenko as on-and-off prime minister, they
have been jockeying for supremacy.
But neither a reform of the
constitution nor two parliamentary elections have decisively empowered either of
the two offices. Now the next presidential poll, due in January 2010, is already
casting its spell and reinforcing the split between the erstwhile allies. The
Russian invasion of Georgia has sharpened the divide, with the president's
associates accusing the prime minister of doing Russia's bidding in
Ukraine.
FORMER ACADEMIC HRYHORIY
NEMYRIA
So what is a soft-spoken former academic doing in
this world? And what has prompted Hryhoriy Nemyria, a former think-tanker who is
now described by
many as the most powerful man in Ukraine's government after
the prime minister, to throw in his lot with Tymoshenko, by far the more
colourful and
controversial of Ukraine's leaders?
For one thing,
Nemyria suggested on the BBC's Hard Talk programme in February that Tymoshenko
is "the most investigated politician in Ukraine"
and no proof has ever been
found that her considerable wealth was acquired by illegal means.
Not
only is she clean, in his view, but clean government is her top priority.
(Ukraine ranked 118th out of 179 countries on Transparency International's
corruption perception index for 2007, squeezed between Mali and
Mauritania.)
Nemyria, who is a deputy prime minister, runs Tymoshenko's
Europe policy out of a corner suite on an upper floor of the Council of
Ministers' imposing
building in downtown Kiev. It overlooks the leafy area
enclosing Dynamo Kiev's home turf, with the mighty Dnieper flowing by just
behind it.
The Verkhovna Rada, the country's parliament, is just round
the corner. But the impressive location is incidental. Nemyria, though a
first-rate diplomat
and effective advocate for his boss, is not primarily
about representation. He is all about getting things done - and the list is
long.
The most immediate concern for Ukraine's policymakers is the
negotiation of a new association agreement with the EU, which will include
sweeping
free-trade provisions that could open the EU's vast market to
Ukrainian goods, while exposing uncompetitive Ukrainian firms to new
challenges.
HE KNOWS WHAT INTERNATIONAL
INVESTORS WANT
Nemyria understands this, an observer of Ukraine's economy says. "He knows
what foreign investors want and he is quite explicit about what is needed in
terms of economic reforms," he says, adding that Nemyria "speaks the
language that we want to hear."
This is also true in a literal sense. His
English is excellent and he lists travel as a hobby. Stints at Washington's
Center for Strategic and International Studies, Harvard University, the NATO
Defence College in Rome and the University of Bordeaux have exposed him to
different mentalities and ways of doing business - not a trivial matter for
someone who spent the first 31 years of his life in the Soviet
Union.
There are some who question Nemyria's influence on events and on
his boss, Tymoshenko. His amiable but reserved manner and the academic precision
of
his speech suggest a thinker, rather than a decider. But the people he
talks to in the EU appreciate the solidity and focus of the trained historian,
qualities that will be in demand when the two sides meet for a key summit in
Evian, France, on 9 September.
Tymoshenko told European Voice earlier
this year that she expected "some sort of political association which would help
us in our bid for EU
membership" - the one thing the EU is reluctant to offer. "The EU hasn't
changed its approach to Ukraine substantially since the revolution," says an
observer of Ukrainian affairs, likening the EU to "a super-tanker that takes
a long time to turn around".
Nemyria concedes that not all difficulties
in the relationship originate in Brussels. He concedes that EU counterparts do
not always find it easy to perceive who is in charge in Ukraine. "There's a
significant dose of dualism, of duplication," he acknowledges, alluding to the
"appetite" of the presidential administration for involvement in European
affairs.
Yushchenko repeatedly offers ambitious timelines and promises
for closer ties with the EU, raising expectations that are inevitably
disappointed. Nemyria insists that European integration properly falls under the
authority of the Council of Ministers, since it is above all a domestic
issue.
It is an important issue on which independent observers are more
trenchant than Nemyria. One says that it does not matter whether the prime
minister or
the president is empowered as long as the current dualism ends.
"Someone", he says, "needs to take charge".
Another dualism frequently
mentioned by Western diplomats is firmly rejected by Nemyria: the idea that
Ukraine really is two countries, one in the west
that looks to Europe and is
ethnic Ukrainian, and one to the east that looks to Moscow and is ethnic
Russian.
Nemyria, himself brought up as a Russian-speaker in the industrial eastern
heartland of Donetsk, is a living rebuttal of this simplistic view of his
country. He warns that Russian-speaking does not equal pro-Russian.
It is
a point he underlines as highly topical. There are unspoken assumptions that
secessionist tendencies, especially strong on the Crimean peninsula, are being
manipulated by Moscow and its allies in Ukraine. Diplomats fear that Crimea,
where most of the population hold Russian passports, might be the next
flashpoint after Russia's show of force in Georgia, a point Nemyria reiterated
earlier this month.
He says that the European Neighbourhood Policy, the
main lens through which the EU looks at Ukraine, has failed. "The EU," he said,
"has in its Black
Sea policy looked at environmental protection, local
border traffic and cultural exchanges. It should perhaps also ask itself what
would happen if the oil stopped flowing."
Promoting Ukraine & U.S.-Ukraine
business & investment relations since 1995.
=============================================================
11
. EU SPLIT OVER
UKRAINE'S PATH TO MEMBERSHIP
By Stephen Castle,
International Herald Tribune (IHT), Paris, France, Fri, Sep 5,
2008
BRUSSELS: After the crisis over Georgia, new divisions have emerged
within the European Union over whether to offer Ukraine a clear signal that it
might one day join the 27-nation bloc.
The Russian military action in August increased pressure on the EU to
increase its engagement in Georgia, Ukraine and Moldova to shore up pro-Western
forces there. But the Georgian conflict has reignited a vigorous debate within
the EU on whether the bloc can continue to expand to include more nations that
border Russia.
A test of the EU's commitment to its Eastern neighbors comes Tuesday in
Évian, when President Nicolas Sarkozy of France, which holds the EU rotating
presidency, leads talks with Ukraine on behalf of the bloc. The meeting will
have an added sense of urgency following the collapse of the government in
Ukraine this week. The two sides expect to reach broad consensus on a new
agreement dealing with ties between the EU and Ukraine.
POLAND, CZECH REPUBLIC, BALTIC STATES,
SWEDEN AND UK
But several EU countries, including Germany, Belgium, the Netherlands and
Luxembourg, want to make clear that this will not lead, automatically, to EU
membership talks. By contrast, Poland, the Czech Republic, the Baltic
States, Sweden and Britain are pressing for language stating that Ukraine has a
clear European future.
Latest drafts of the text suggest that the EU will say that the
agreement does "not prejudge any possible future developments in the EU-Ukraine
relationship."
One EU diplomat, who spoke on condition of anonymity due to the
sensitivity of the discussions, said writing the draft required a "delicate
balance" because governments "were pushing quite hard in both directions."
The outcome could disappoint the Ukrainian president, Viktor
Yushchenko, who may have hoped that the crisis in Georgia would have spurred the
EU to be bolder about its ties with Kiev.
However, the EU will agree to Kiev's suggested title for the accord -
an Association Agreement - a name that Ukraine believes implies a path to
membership. Recently, countries that aspire to membership in the EU, such as
Croatia, negotiated Stabilization and Association Agreements before becoming
candidates to join the club.
The accord with Ukraine will include similar elements, such as a
free-trade agreement already being negotiated, cooperation on energy, and
discussions on visa-free travel in the long term.
Tomas Valasek, director of foreign policy and defense at the Center for
European Reform in London, argued that the EU risked being too timid by refusing
Ukraine a clear prospect of membership. "The biggest advantage of an EU
membership perspective is that it allows us to influence their decision-making
and changes their political calculus," he said.
"Countries that want to be in the EU and want a perspective of being in
the EU are a lot more disciplined and focused on the political and economic
reforms needed for accession. Ukraine does not have that discipline," Valasek
added.
On Wednesday, the shaky coalition that united Yushchenko and Prime
Minister Yulia Tymoshenko collapsed. Opponents of giving Ukraine a clear
prospect for EU membership have pointed to this as evidence of the country's
lack of readiness.
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12
. UKRAINE WILL NOT BE
OFFERED PROSPECT OF EU MEMBERSHIP
Jamie Smyth in Avignon, Irish Times, Dublin, Ireland, Saturday, September
6, 2008
UKRAINE: EU FOREIGN ministers signalled yesterday that Ukraine would not be
offered the prospect of future membership of the union at a summit meeting next
week in France.
They also called for an inquiry to be established to find out who was
responsible for the start of the devastating conflict in the Georgian region of
South Ossetia last month.
"The question of who participated, and with what motives, in the escalation
to armed conflict is important as we consider future ties with the conflict
parties - and I mean both Georgia and Russia," German foreign minister
Frank-Walter Steinmeier told journalists yesterday at an EU foreign ministers
meeting in Avignon, France, which is discussing the crisis.
He said the Organisation for Security and Co-operation in Europe, which has
monitors on the ground in Georgia, had information about the run-up to the
conflict. Georgia and Russia have blamed each other for starting the conflict in
South Ossetia, which erupted unexpectedly on the eve of the Olympic Games on
August 7th.
Mr Steinmeier's call for an independent inquiry was backed by Italy.
Italian foreign minister Franco Frattini said he had got positive signals on it
from Moscow and Tbilisi. "I spoke about this idea with both the Russian
Federation and Georgia. Both told me they are not against. There are good
possibilities to launch it," he added.
Austria and Luxembourg also supported an inquiry, while British foreign
minister David Miliband said Britain had always called for verification of
allegations of human rights abuses. "We have always said we would follow them up
without fear or favour," said Mr Miliband, who has argued Russia must face
consequences for its actions in the conflict.
EU foreign ministers will return to the Georgian crisis today when they
are expected to discuss the launch of a civilian monitoring mission and aid to
help rebuild the country's shattered infrastructure following the ceasefire
brokered by the EU in mid-August.
They will also discuss how to respond to an increasingly assertive
Russia, which has proved in Georgia that it is prepared to use military action
to exert influence in its neighbourhood.
They are also expected to focus on Ukraine, which is in the midst of a
government crisis and is one of several states in eastern Europe that is in
Russia's sphere of influence. But hopes expressed by some EU states, such as
Poland and the Czech Republic, that the union may offer Kiev the prospect of
future EU membership at an EU-Ukraine summit next week were dashed.
France the current holder of the EU's rotating presidency ruled out
using a planned EU-Ukraine summit next week to offer Ukraine official-candidate
status.
"If you have no Lisbon you have no enlargement," said French foreign
minister Bernard Kouchner when questioned as to whether Ukraine could become an
EU candidate state in the near future.
Instead the summit is expected to offer the prospect of closer ties to
the EU without declaring that Ukraine is eligible for future membership of the
bloc.
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13
. BUILDING A STRONG
GEORGIA
OP-ED: By Richard Holbrooke, U.S. Ambassador to the United Nations
during the administration of U.S. President Bill Clinton
The Moscow
Times, Moscow, Russia, Thu, Sep 04, 2008
Given the tremendous damage that Russia has inflicted on Georgia, it is
easy to conclude that the Kremlin has achieved its objectives. But, so far, the
Kremlin has failed in its real goal -- getting rid of pro-U.S. Georgian
President Mikheil Saakashvili.
To be sure, Russia has tightened its
control of the separatist enclaves of South Ossetia and Abkhazia. It shattered
the Georgian military, grievously damaged Georgia's economy, and stirred up
discord within the Western alliance.
For three years, it has tried every conceivable tactic to bring Saakashvili
down -- fomenting a domestic uprising, imposing an economic blockade, beefing up
its forces in the enclaves and finally a war. Yet Georgia's president remains in
power.
Russia's invasion of Georgia has reshaped the strategic landscape.
But, as the West debates how to "punish Russia," it is vital to remember that
the main front is still in Georgia. Talk about taking away the 2014 Winter
Olympics or ejecting Russia from the Group of Eight may or may not have some
effect on the Kremlin, but the most important thing the West can do now is
strengthen the government in Tbilisi.
The equation is simple: If Saakashvili survives, Prime Minister Vladimir
Putin loses.
The intense personal hatred between these men overlays two
centuries of tortured history between Russia and Georgia. Many people report
that Putin simply "loses it" when discussing the upstart Saakashvili, who led
his country from near bankruptcy into a golden age of economic growth and the
world's highest rate of foreign direct investment relative to gross domestic
product. All this has been halted by Russian tanks.
The Kremlin has
probably lost its chance to remove Saakashvili by overt force, although
sinister, more stealthy means cannot be ruled out. The Kremlin's best hope now
is that Georgia's economy will crumble, its currency will collapse, and an
unhappy populace, encouraged by some opposition leader (perhaps bankrolled by
Russia), will force Saakashvili from power.
The Western response to this
challenge must go beyond rhetoric. What matters most right now is massive
economic and military assistance. Public commitments to help rebuild Georgia are
the best way to prevent Russia from achieving its goal. Georgian Prime Minister
Vladimir Gurgenidze estimates that rebuilding railroads, bridges, ports and
other infrastructure will cost at least $1 billion.
This does not include humanitarian relief, refugee resettlement costs or
rebuilding Georgia's military. Gurgenidze also foresees negative economic
growth, a huge budget deficit, and a collapse of tourism, which was just taking
off in this beautiful country.
U.S. Senator Joseph Biden has called for
an immediate $1 billion supplemental appropriation, a proposal quickly endorsed
by presidential candidate Barack Obama. The European Union, the World Bank, the
International Monetary Fund and the European Bank for Reconstruction and
Development must match U.S. support.
In the long run, Georgia and Russia
must coexist peacefully. Here, Georgia must do its part. Saakashvili, an
immensely talented 41-year-old, saved his country from utter collapse in 2003.
But he must think strategically about the future.
On occasion, he has
berated the Europeans for insufficient support -- not a good tactic for someone
trying to join the EU -- and has used rhetoric about Russia that, while
understandable, only increases the danger to himself. Saakashvili cannot pick up
his tiny country and move it to Mexico. He has to manage the situation with
greater care.
There will be consequences, of course, for Russia's
relations with the West. (Bush's inattentiveness to this Russian threat,
dramatically illustrated by his literal embrace of Putin in Beijing as Russian
tanks rolled into Georgia, may have led the Kremlin to think it could get away
with its invasion.)
While the West will not risk going to war over Georgia, Russia must
understand that it will pay for using force, or the threat of force, against
neighbors that were once part of the Soviet space.
This is especially
true for Ukraine and Azerbaijan, which are likely to be Moscow's next targets
for intimidation. The rules of the post-Cold War world are changing, but not to
the ultimate benefit of Russia, which has underestimated the unifying effect its
actions will have on the West. Exactly how these relationships evolve depends on
what each side does in the coming weeks -- especially in Georgia.
LINK:
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14
. UKRAINE’S INDEFENSIBLE
POSITION - IN THE WAKE OF GEORGIA
John Marone, Columnist, Eurasian Home website, Kyiv,
Ukraine
Eurasian Home, Moscow, Russia, Monday, September 1,
2008
Ever since it
was handed independence in 1991, Ukraine has sat on the fence like a country
coquette with her back to her jealous ex-husband Russia, from which the
country’s ‘elite’ have nevertheless continued to get rich on cheap gas, while
batting her eyes at the glamorous West, which offers lots of nice gifts but
never a firm proposal of marriage.
However, that fence no longer provides a comfortable seat, much less an
opportunity to play off geopolitical suitors against each other.
Just down the road, little Georgia, another former Soviet possession
with a mind of its own, has found itself occupied and dismembered by the Russian
army, and no one is coming to its aid. Unlike the fickle Ukrainians, Georgians
are united in their preference for a Western alignment. And now they are paying
the price for this preference.
It doesn't matter if one is inclined to sympathize with the Russians,
who feel they are being encircled by an aggressive foreign military bloc (i.e.
NATO).
Indeed, besides the allegedly broken Western promise to refrain from
extending NATO to the Russian border, who's idea was it to plant a missile
defense system in Central Europe while the US is tied down in two wars? And it's
hard to argue that the leaders of Georgia and Ukraine are only representing the
wills of their people when both men have Western wives.
On the other hand, Mikheil Saakashvili and Viktor Yushchenko were
elected in fair, democratic elections. Georgia and Ukraine are, after all,
sovereign nations, regardless of their histories or geographical locations.
If the Kremlin wants respect, as its president Dmitry Medvedev claims, it
might try more seduction and less abduction. And considering the plight of
Russian democracy and free speech, the country should start by cleaning up its
act at home.
At the very least, there could be a more equitable distribution of the
revenues from oil and gas exports. Lastly, Moscow's insistence on the parallels
between South Ossetia and Kosovo are absurd if not profane. But I guess that's
the kind of international principles the Bush administration should have
expected after its truth-challenged invasion of Iraq.
Regardless, like it or not, the redrawing of borders in Europe is now
in vogue, which forebodes nothing good for Ms. Ukraine. On August 26, the
Kremlin made its recognition of Georgia’s secessionist regions Abkhazia and
South Ossetia officially.
Next in line could be Crimea, which was a part of Russia until Soviet
leader Nikita Krushchev presented it to Ukraine. Already, Moscow loudmouths like
Mayor Yury Luzhkov have challenged the ownership of Sevastopol. The
Russians not only have lots of (paid) support among the local population but a
fleet parked out back in case things get ugly.
And who’s going to stop them, if things go from bad to worse? The
invasion of Georgia wasn’t sparked off by a hot summer or captivating Olympic
contest. It was timed by the Kremlin to broadly precede the free-up of US troops
in Iraq a few years down the road, and more narrowly - a meeting of NATO foreign
ministers at the end of this year, during which Ukraine and Georgia might have
been offered a membership plan.
In between, there is Ukraine’s presidential elections, scheduled for
early 2010. None of these events are sharply defined on the calendar with
specific consequences for Moscow. Nevertheless, taken together, they represent a
limited window of opportunity for the Kremlin to kick the US out of its
backyard.
It’s not even clear whether the Russian move will backfire, with, for
example, NATO uniting around Ukraine’s membership bid, and Ukrainians around
their country. However, such hopes ignore the geopolitical natures of
Russia and Ukraine, and more importantly the relations the two states developed
during all those years of marriage.
Moscow didn’t intend to scare its former bride, but to show the
Ukrainian people how passionately it cares – especially in comparison to the
seemingly empty gestures of security offered by Western suitors.
This type of approach, of course, wouldn’t be possible if a large
percentage of the Ukrainian population didn’t already support Russia to one
extent or the other: on, for example, language, culture or even Kremlin policies
themselves.
Also, the Kremlin doesn’t have “to take” Ukraine, but merely keep NATO,
the EU or the US from moving in. Moscow only has to play up to the most natural
and to-date best demonstrated of Ukrainian characteristics: fence sitting, the
reluctance to take a stand due to weak leadership as a result of internal
division based largely on personal interests.
For example, no one should be surprised to hear support for Russia’s
military adventurism from Ukraine’s Communist Party, who have consistently all
but called for a return to the Soviet Union.
The response from the eastern-looking Party of Regions took a little
longer, but (no doubt following appropriate pressure from Moscow) also left
little surprise.
“The Russian Federation’s recognition of South Ossetia’s and Abkhazia’s
independence was a logical continuation of the process that was started by
Western countries in relation to the recognition of the independence of Kosovo,”
party leader Viktor Yanukovych told a Ukrainian news agency on Tuesday.
Following the failure of his fraud-filled grab for the presidency in
2004, which the Kremlin tellingly recognized, Mr. Yanukovych looks set to try
again under the same banner in 2010.
More surprising was the half –hearted condemnation of Moscow by
Ukrainian Premier Yulia Tymoshenko, who also has presidential
ambitions.
Having built her career on fiery, provocative rhetoric, in which
the Kremlin has been a favorite foreign target, the supposedly pro-Western
Tymoshenko has suddenly become more diplomatic if not restrained in her choice
of words.
“We absolutely support the territorial integrity of Georgia, and
all decisions taken counter to this position will absolutely not be supported by
us,” she told a briefing on Wednesday.
For comparison, Ukraine’s pro-Western President Viktor Yushchenko flew
to Tbilisi during the heat of the conflict to stand side by side with the
leaders of Poland and the three Baltic states in vociferously condemning Russian
aggression.
More recently, Mr. Yushchenko said Ukraine had become “a hostage” of
Russia by hosting the Russian Black Sea Fleet on Ukrainian territory. In short,
even Ukraine’s pro-Western politicians are divided on how to deal with Russian
aggression for what can only be called personal reasons.
Add to this the fact that Russia can bring the country’s economy to its
knees by once again abruptly raising gas prices – a lever it can also use to
diffuse European support for post-Soviet democracy – and Ukraine’s predicament
becomes pretty clear. The prospect of these threats in itself will be enough to
cool foreign investment - one of the few things keeping Ukraine’s economy
afloat.
And then there is the unrecognized Dniester Region, formally a part of
Moldova but lying adjacent to Ukraine. That would be a no-brainer for the
Russians, especially if the US elects a president short on foreign-policy
backbone.
The situation is such that the heroic support that Yushchenko has shown
for Georgian independence can only be called a little too little and a little
too late.
The window of opportunity to unite the country around strategic goals in
energy, diplomacy and economics was wasted amidst infighting in Ukraine’s
pro-Western camp. Even before Yushchenko, the country’s politicians were largely
occupied with enriching themselves at the expense of the state instead of
building a new country.
Ms. Ukraine is not going to be pushed off her fence in any way that would
suggest violence or disrespect. That’s not necessary. Instead, she and her
people will come to the slow and sobering realization that they are being fenced
in by their northern neighbor on all sides – creating a thoroughly indefensible
position.
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15. IS UKRAINE NEXT?
The EU
should be thinking about how it can extend a commitment
to security, democracy and
prosperity to neighbours
ANALYSIS & COMMENTARY: Andrew Wilson, Senior Policy Fellow
European Council on Foreign Relations.
Guardian newspaper, London, United Kingdom, Friday September 05 2008
The war in Georgia has clearly exposed the security vacuum in the
surrounding region, as well as a lot of raw nerves. Russia's hasty decision to
recognise the "independence" of South Ossetia and Abkhazia was a shot across the
bows for every former Soviet country, and has intensified speculation about who
might be "next" – and how to prevent Russia from multiplying the supposed Kosovo
"precedent" in other ex-Soviet countries.
Having established itself as the main broker in the conflict, the
European Union has many urgent priorities in Georgia itself. But it should also
be thinking ahead about how it can demonstrate a stronger commitment to
security, democracy, and prosperity in the European "neighborhood".
The most effective way of dealing with a newly-assertive Russia will be for
Europe to issue a collective refusal to accept a bipolar Europe of distinct
Russian and EU spheres of influence.
The place to start is Ukraine. Fortunately, the EU-Ukraine summit on
September 9 in Evian, France, provides the perfect opportunity.
Many Ukrainians now hear domestic echoes of the lead-up to war in
Georgia. Ukraine has its own potentially separatist region in Crimea, and the
country's Russian minority numbers some 8.3 million. Half of Ukraine's
population is Russian-speaking in various degrees.
Although the Ukrainian constitution bans dual citizenship, the government
has had to launch an inquiry into alleged covert Russian passport-holding in the
Crimean city of Sevastopol.
Ukrainians note that Russia justified its invasion of Georgia, as the Nazis
justified their dismemberment of Czechoslovakia, as being necessary to "protect"
a minority to whom they had just given citizenship.
Russia has begun a war of words over Ukraine's supply of arms to Georgia.
And the conflict itself has shown that the Russian Black Sea Fleet, based in
Sevastopol, can operate with impunity, whether Ukraine likes it or not.
Based on its analysis of Ukraine's "Orange Revolution" as a
foreign-backed "NGO revolution", Russia has also been quietly building its own
network of Russia-friendly NGOs in Ukraine since 2004. Ukrainians also talk of
an otkat ekonomiya ("kickback economy"), in which Russian money percolates
throughout the Ukrainian elite.
The European Neighborhood Policy is worthy enough, but it does not
address the pressing concerns about maintaining and securing Ukraine's
independence.
Many member states will worry about leaping straight to the contentious
issue of ultimate membership for Ukraine, but the EU already recognises
Ukraine's theoretical right to join once it has met the Copenhagen criteria; and
it cannot be beyond EU leaders' verbal dexterity to play up the prospect.
What Ukraine would value most is a real sense that it is being treated
distinctly in its own right. The key words are "association" and "partnership",
in whatever order or combination.
The EU has more scope for short-term measures, and should develop a
multi-dimensional solidarity strategy as a signal to both Ukraine and Russia.
For example, the EU's foreign ministers should invite their Ukrainian
counterpart to give a briefing on Ukraine-Russia relations at their next
meeting. Ukraine should be offered a road map for visa-free travel.
The new EU-Ukraine agreement should include a beefed-up solidarity clause,
building on the 1994 Budapest Memorandum, whereby the EU would consult and
assist Ukraine in case of challenges to its territorial integrity and
sovereignty. And the EU should back Ukraine if it insists that the Russian Black
Sea Fleet leaves on schedule in 2017.
The EU should also launch a comprehensive study of all aspects of
Europe's reliance on Russian energy supplies, including transit, energy security
and conservation, supply diversification, and the impact of "bypass" pipelines
like Nord Stream and South Stream.
It should consider linking the opening of the Nord Stream pipeline, which
would allow Russia to cut off gas to Poland and Ukraine while maintaining
deliveries to Germany, to the opening of the proposed "White Stream" pipeline to
bring gas from Azerbaijan directly to Ukraine via Georgia, bypassing Russia.
The EU could even play a part in keeping the 2012 European Championship
football finals on track. The decision to appoint Ukraine and Poland as co-hosts
was a powerful symbol of European unity across the current EU border (Poland is
a member, Ukraine is not). UEFA is unhappy with Ukraine's progress in building
the necessary infrastructure, but Ukraine should be given time to get its act
together.
Where appropriate, the EU should extend these measures to Moldova,
which is now calling Ukraine a "strategic shelter."
Ukraine faces a crucial presidential election in 2009 or 2010 (and
Moldova will hold elections in March 2009). After getting its fingers badly
burned at the last election in 2004, Russia is clearly tempted to intervene
again. The "Russian factor" will strongly influence the campaign. Greater
Western engagement is needed to ensure that the "Europe factor" is equally
prominent.
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16
. CRISIS IN
KIEV?
The outlook for Ukraine is stormy, but the
country's not about to split apart. Instead, a complex political dance
is unfolding
ANALYSIS & COMMENTARY: Yurii
Ruban, Guardian, London, UK, Friday September 05 2008
Dick Cheney, the US
vice-president, arrived in Kiev this week amid what most Ukrainians will regard
as just another seasonal gale. They have become
acclimatised to their
nation's stormy politics. To casual outside observers, though, it certainly
sounds more serious than that.
When a prime minister is accused of leading a "constitutional coup" and a
president is referred to as a "dictator" it might be assumed that civil unrest
is on the cards. It isn't.
What might make the bickering all the more
incomprehensible is that the dispute centres on the two heroes of the 2004
Orange revolution. President Viktor Yushchenko and Yulia Tymoshenko, the prime
minister, at one time the prince and princess of western values, have found it
almost impossible to work together since.
Nevertheless, for all the
violent epithets they throw at each other, the Orange revolution represented a
watershed: disputes, no matter how fierce, will be resolved within the
(imperfect) constitutional framework. Ukraine's politics are certainly robust -
but so is its democracy.
The Orange bloc dissolved more quickly than most
liberation movements. With the latest crisis coming so soon after the
Russia-Georgia war, it makes
sense to hunt for Moscow's fingerprints. They
are not hard to find: the Putin/Medvedev regime doesn't use kid
gloves.
Still, wholly domestic Ukrainian factors are also at play. Real
differences exist between President Yushchenko and his erstwhile ally, not
merely of
personality or in terms of the nuances of foreign policy, but in
the vital economic realm as well.
Moscow will not be unhappy this week
with events in the neighbour it too often still regards as a satellite but, in
fairness, Putin is not to blame
for Ukraine's inflation rate and the
cabinet's seeming inability to restrain public spending.
Yulia Tymoshenko
might like to portray herself in front of some audiences as an eastern European
Margaret Thatcher, but the reality is of a shameless
economic populist. Yes,
she supports privatisation - as does the president - but, for her, it is a means
to enrich an oligarchic elite and fund lavish public spending.
Moreover,
while supporters of the two Orange parties, Our Ukraine-Self Defence (OU) and
Bloc Tymoshenko (BYuT), share the same basic attitudes - in
contrast to the
openly pro-Russian Party of Regions (PoR) and the Communists - the prime
minister has recently modified her positions somewhat.
When President
Yushchenko and counterparts from Poland and the Baltic states were on the
barricades in Tbilisi last month defending Georgia's
independence, Ukraine's
prime minister was notably absent and unable to provide any details of her
whereabouts over a two-week period.
She has also appeared ambivalent
about ending Russia's lease on the port facilities at Sevastopol, which expires
in 2017. The president has been clear that he sees the Black Sea fleet's
continued presence as an anachronism.
The assumption that Tymoshenko is
courting favour with Moscow in advance of the presidential elections in 2010 in
which she is a strong candidate was
borne out by the votes this week in the
Rada, the Ukrainian parliament. Tymoshenko's MPs joined forces with the PoR in
an attempt to limit the presidential prerogative in the field of foreign affairs
and reduce the status of the office from a French-style presidency to a purely
ceremonial role.
Although Ukraine still enjoys strong economic growth, it
must be questioned whether constitutional change needs to be rushed through when
the price of
staple goods is most Ukrainians' focus.
Tymoshenko
enjoys a cult-like following and has improved her poll position, but because her
government's record is flimsy, she is unlikely to want early
elections.
Yushchenko's promise to put things in the people's hands is commendable and no
idle threat - he has done so several times before - but it is not inconceivable
that these two will patch things up.
Yushchenko might be prepared to risk
electoral humiliation in early elections but his primary interest is in
maintaining some degree of unity on policy in the run-up to the decision on
Ukraine's application for a Nato accession plan in December.
Equally, the
prime minister might want to tease votes away from the PoR but if she were
forced into a coalition with them it might destabilise her own
power base,
which understands it would freeze the process of further Euro-Atlantic
integration.
Ukraine has managed reasonably well to accommodate its
various minorities - not just the Russophone one - by providing generous
autonomy for Crimea, for instance. But events in Georgia have certainly given
politics a new edge.
Ukraine took a once-and-for-always decision in 2004;
it sees its destiny as being with the rest of Europe. The prime minister now has
to demonstrate
whether she is still in step with Ukraine's citizens or
dancing to a different tune, one played on the balalaika.
LINK:
http://www.guardian.co.uk:80/commentisfree/2008/sep/05/ukraine.russia?gusrc=rss&feed=worldnews--------------------------------------------------------------------------------
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17
. AN EXPERT WARNING -
JAMES SHERR: "IF UKRAINE DOES NOTHING TO HELP ITSELF, THEN WHO WILL
AGREE TO ASSIST?
By Mykola Siruk, The Day Weekly Digest (25), Kyiv, Ukraine, Tuesday,
September 2, 2008
The head of the Russia & Eurasia Programme, British Royal Institute
of International Affairs (Chatem-House) James Sherr is known well to Ukrainian,
Russian as well as Western expert circles. He has been following the development
of events in the post-Soviet countries in the security dimension for a long
time.
What meaning will Russia’s recognition of the independence of South Ossetia
and Abkhazia for the regional security and the situation in the world? What will
be the consequences of this conflict for Ukraine? What conclusions should be
made by the Ukrainian government? Why is the NATO Membership Action Plan a
distracting moment?
These and other questions are raised in The Day‘s exclusive interview with
the British expert James SHERR.
[JAMES SHERR] “Let’s keep in mind the primary issue. On Aug. 8, Russia
was given a magnificent opportunity to use military force on a limited and
responsible scale. It didn’t. If it had done so-if it had ejected Georgian
forces from South Ossetia and stopped at the border-it would have won a
convincing military, political and psychological victory, and it would have come
a giant step closer to securing that mantle of legitimacy as a ‘guarantor of
stability and security’ that it has always aspired to in the former USSR.
"The West would have felt humiliated, it would have been apprehensive about
Russia’s longer-term game plan, but it would have been in no position to object
to anything or demand anything. Despite all the evidence that Russia had
provoked President Saakashvili to take the rash and wanton step he took, Russia
would have secured the moral high ground, and the West would have been consumed
by self-reproach.
“Yet from the moment Russia occupied Georgian ports and cities, cut its
key transport arteries, threatened the Baku-Tblisi-Ceyhan pipeline, brought its
Abkhaz allies (and its own forces in Abkhazia) into the conflict, allowed its
Osetian satraps to ethnically cleanse South Ossetia of Georgians and displayed
swaggering contempt for the agreement it concluded with President Sarkozy, one
thing has become clear to everyone: the issue is not Saakashvili, but Russia.
The West is profoundly divided about what it can and should do, but there is no
serious division on this point.
NO SERIOUS PERSON CAN NOW DOUBT RUSSIA'S
DETERMINATION
“And two other points of division have
disappeared. No serious person can now doubt Russia’s determination to
re-establish its dominance over what it still calls ‘post-Soviet space’. For 17
years in the West, the emotionally placid, ideologically complacent and
intellectually over-sophisticated dismissed this ‘rhetoric’ as a ‘legacy of the
past’ that would recede as Russia ‘adjusted’, became more self-confident, more
prosperous, more integrated into the global economy. "All the latter things have
happened. Yet what kind of Russia have they produced? Answer the question
yourself.
“Moreover, who can now claim that a strong Russia is good for Europe?
Many leaders of the G7 speak with urgency about the importance of cooperation
with Russia. But which leader wants Russia to be stronger? This question also
answers itself.
“These divisions were disappearing even before Russia recognised South
Ossetia and Abkhazia on Aug. 26. So the question inevitably arises: Did Russia
consider this fact before crossing this Rubicon? Here, the answer is not
self-evident.
‘No, they are dizzy with success.’ ‘Yes, but they are dizzy with
success’....Neither of these answers are adequate. They miss the key point:
Russia is not only determined to use its new-found power, it feels entitled to
use it. (As Putin put it in 2006, ‘Russia has earned a right to be
self-interested’).
"And they miss a key nuance: Russia is more contemptuous of the West than
confident of itself. The astute editor of Rossiya v Global’noy Politike, Fyodor
Lukyanov (who supported Russia’s action of 8 August) is as convinced as I am
that, with every step, Russia has calculated on Western division to secure its
success.
"Yet whenever Russia’s leadership saw that it overestimated these
divisions, it has ‘taken a more radical position’. In Lukyanov’s words, ‘the
Russian leadership like the overwhelming majority of Russians was shocked by the
unanimous support the West gave to Saakashvili’ and so, ‘in this emotional
atmosphere’, on Aug. 26 ‘it took a great risk’.
“Consider the irony. Western division and Western toughness, in equal
measure, now provoke Russia ‘to be self-interested’. Consider the implications.
In the 1990s whenever the West reacted more negatively than Moscow anticipated,
it sought compromise or backed down; today, it doubles the stakes.
"Consider the greater implication: when rational calculations prove faulty,
‘emotional’ considerations take over. Conclusion: we are not only in uncharted
waters, but dangerous waters.”
[THE DAY] How do you see the implications for Ukraine?
[JAMES SHERR] “Precarious, but far from desperate. Ukraine will come
under greater pressure from Russia. It will be offered greater ‘inducements’,
too About these two things, I have no doubt.
I also have no doubt that when Russia planned war with Georgia and finally
found the excuse for one, it had Ukraine on its mind as much as Georgia. But
that does not mean Ukraine is Georgia. War between Russia and Georgia is
shocking, and it is also threat to the entire Black Sea region.
"But war between Russia and Ukraine is a threat to the entire Euro-Atlantic
system. And it is a threat to Russia as well. Russia’s preferred mode of action
in Ukraine, even under threatening circumstances, is different from what it was
in Georgia, and its timetable is longer.
"The challenge for the West as well as Ukraine is to keep it long: to slow
the game down and equalise the players as well. At one level, that should not be
difficult for Ukraine. Ukraine, unlike Georgia, has never provoked its
neighbour. That is not Ukraine’s way.
Ukraine can no longer allow the greatest threat to its security to be
Ukraine itself.
“But equalizing the stakes is very difficult for Ukraine. I can only
endorse what Anatolii Hrytsenko has recently said and what I have said in almost
every previous interview. Ukraine can no longer allow the greatest threat to its
security to be Ukraine itself.
"It must act with purpose, not parade its principles. It must implement
policies, not declare them. It dare not promise (let alone threaten) what it has
no means to deliver. Its leaders must bring competent professionals together and
listen to them.
"They must revive institutions, get the wheels of the state machine to
turn, motivate the people inside it and raise the morale of people outside it.
They must stop finding scapegoats for their own mistakes.
"They must remove every ‘subjective’ factor that obstructs people of
dedication, competence and integrity and stop rewarding servility, venality and
laziness. They must think about the future and make plans for it. And that means
modernising the Armed Forces, the security services and the energy
sector.”
UKRAINE SHOULD WITHDRAW ITS MAP
APPLICATION?
[THE DAY] Does that mean you agree with Hrytsenko that Ukraine should
withdraw its MAP application?
[JAMES SHERR] “Of course, Hrytsenko proposed this as a gesture of
strength. Today, I fear that it would be interpreted as a sign of weakness and,
whatever the actual motivation, many in the West would simply come to the
conclusion that Ukraine had capitulated to Russian pressure. But on the basic
issue, Hrytsenko and I are of one mind.
"MAP is a distraction. The tough, indispensable issue is how to strengthen
Ukraine’s capacity, security and defences in concrete terms. And how we, NATO,
can help Ukraine strengthen it-not just by ‘enhancing cooperation’ but by
practical measures of assistance.
"That course of action will prove more rewarding, more convincing and less
provocative than MAP, and it will prove more reassuring and less divisive in
Ukraine itself. That is the commitment that Ukraine now requires from NATO, not
MAP. And that commitment will be the litmus test of our relationship. If NATO is
unwilling to provide real assistance, then what value could MAP possibly have?
"If Ukraine does nothing to help itself, then who will agree to
assist?”
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18
. U.S. VP
CHENEY ACCUSES RUSSIA OF USING 'BLUNT FORCE'
Noting its “intimidation” of Ukraine and
the Baltic states, and a threat of attack on Poland
Says demise of the Soviet Union was the
greatest step for liberty in the last 60 years
By Guy Dinmore and John Thornhill in Cernobbio, Italy, Financial
Times, London, UK, Sep 6 2008
Dick Cheney, the US vice president, broadened his attack on Russia late
on Saturday, directly challenging Vladimir Putin’s view of history and warning
that his government could “not have it both ways” by using “brute force” and
still hoping to build economic progress. Mr Cheney saved his toughest
anti-Russian speech for the last leg of his tour of Georgia, Azerbaijan, Ukraine
and Italy.
His unequivocal rhetoric contrasted with the more moderate remarks of José
Manuel Barroso, the head of the European Commission who goes to Moscow on Monday
with Nicolas Sarkozy, the French president, to try to get Russia to abide by the
ceasefire agreement it signed after invading Georgia last month.
Addressing the global Ambrosetti conference near Lake Como, Mr Cheney
said that within a 30-day period Russia had violated the sovereignty of a
democratic country, breached a ceasefire agreement with the EU, seriously
damaged its international standing and undermined its relations with the
US.
The Bush administration’s most hawkish member widened his list of
Moscow’s alleged misdeeds by also accusing it of selling advanced weapons to
Syria and Iran. Arms sold to Damascus had been channelled to Lebanon and Iraq,
Mr Cheney said. His comments come at a delicate moment of diplomacy
between Europe and Syria with Mr Sarkozy in Damascus just two days
earlier.
GREATEST FORWARD STEP FOR LIBERTY
IN LAST 60 YEARS
Mr Cheney also got personal,
quoting Mr Putin, the Russian prime minister, as calling the end of the Soviet
Union “the greatest geopolitical catastrophe of the 20th century”. He then
added: “Let me give you my opinion. The demise of the Soviet Union was
inevitable and the greatest forward step for liberty in the last 60
years.”
He went on to say that the Russian people deserved freedom and
prosperity. He warned: “The Russian leaders cannot have it both ways” – enjoying
the benefits of commerce and prestige while engaging in brute force.
INTIMIDATION OF UKRAINE
Concern was intensifying over Russia’s “larger objectives”,
Mr Cheney said, noting its “intimidation” of Ukraine and the Baltic states, and
a threat of attack on Poland for agreeing to accept US missile defence systems
directed toward Iran.
Mr Cheney warned Europe over the dangers of its over-reliance on Russia
as an energy supplier. He also challenged European partners in Nato over their
reluctance to extend membership for Georgia and Ukraine, saying the “time has
come” to start MAP, the membership action plan.
Business leaders and politicians attending the conference had expected
an uncompromising assault by Mr Cheney. But some said it only highlighted a
sense of exasperation by a departing administration that had failed in its own
diplomacy toward Russia, and the acute differences between Washington and
Europe.
Mr Barroso also appeared to want to diminish the role of the US in
resolving the conflict in Georgia, telling the Financial Times: “The hope for
peace is the EU.” “I’ve not seen any proposals coming from any parts of the
world apart from the peace proposal put forward by president Sarkozy on behalf
of the EU,” he said.
Speaking later to reporters, Mr Barroso said: “We are interested in
having constructive relations with Russia. It is important to note what we need.
We need cool heads, not a cold war and this is the basic message.”
Mr Barroso also urged Russia to respect the Sarkozy peace plan it had
signed. Responding to Russia’s unilateral recognition of the breakaway Georgian
regions of South Ossetia and Abkhazia, Mr Barroso noted that article six of the
plan provided for diplomatic discussions over their status.
Moscow has said it will withdraw its forces from a “buffer zone” it has
established in Georgia only after international peacekeepers are in place and
the government of Georgia has signed non-aggression pacts with the two
regions.
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19
. U.S. APPEALS TO
UKRAINE TO FORGE CLOSER LINKS WITH THE WEST
By Tabassum Zakaria, Reuters, Kiev, Ukraine, Friday, Sep 5, 2008
KIEV - U.S. Vice President Dick Cheney appealed to Ukraine's divided
leaders on Friday to unite and forge closer links with the West, pledging
Washington's support for Kiev to join the NATO military alliance.
Cheney was visiting amid a political crisis in Ukraine which has split
the ruling coalition and sparked fresh debate about whether the former Soviet
republic should draw closer to the West, to Russia, or pursue a neutral
stance.
"The United States has a deep and abiding interest in your well-being
and security," Cheney said after meeting President Viktor Yushchenko, a
pro-Western leader seeking rapid NATO membership. Ukraine's best hope to
overcome threats, he added, "is to be united, united domestically first and
foremost, and united with other democracies."
Cheney's visit was likely to anger neighbouring Russia, already
irritated at his strong support on Thursday for Georgian membership of NATO.
Moscow wants to keep Ukraine, a key gas transit country, part of its sphere of
influence.
A Russian Foreign Ministry spokesman attacked Cheney for making fresh
promises to Georgia on Thursday about NATO membership, saying this encouraged
Georgian aggression.
Russia and Georgia fought a brief war last month after Tbilisi sent in
troops to try to seize back the rebel region of South Ossetia, provoking massive
retaliation by Moscow.
"The new promises to Tbilisi relating to the speedy membership of NATO
simply strengthen the (President Mikheil) Saakashvili regime's dangerous feeling
of impunity and encourages its dangerous ambitions," Russian Foreign Ministry
spokesman Andrei Nesterenko told reporters.
The conflict has hurt Russian stocks and the rouble as foreign
investors pull money out because of the increased political risk. Russian shares
plunged more than 7 percent on Friday to their lowest level in over two years
and the Central Bank intervened on Thursday to prop up the rouble.
DISSENT ON
NATO
Yushchenko, hosting Cheney on Friday, said NATO membership was vital to
protect his country, which shares a land border with Russia and has a large
Russian-speaking population.
Cheney restated a promise made by NATO at a summit in Bucharest that
Ukraine would be eventually allowed to join the military alliance, saying "that
commitment stands today".
That meeting refused to give Kiev and Tbilisi a Membership Action Plan
-- a first step towards membership. The U.S.-backed idea was resisted by
Germany, France and smaller NATO states.
Nor is the idea of membership wholeheartedly embraced in Ukraine
itself. Polls show a majority of Ukrainians oppose NATO membership and the
leader of the country's biggest parliamentary party said the issue should be
decided by the Ukrainian people.
"Any attempts to force Ukraine into NATO are doomed to failure," Viktor
Yanukovich told a news conference. "This question has to be solved ... through a
referendum".
Cheney was touring the region to show Washington's support for Ukraine,
for close U.S. ally Georgia and also for booming oil state Azerbaijan. The
latter two countries are key links in an energy corridor bypassing Russia that
transports around 1 percent of daily world crude oil output west from the
Caspian Sea.
Earlier in Kiev, Cheney met Prime Minister Yulia Tymoshenko, whose
enthusiasm for NATO has cooled since she signed a letter in January calling for
a Membership Action Plan. Tymoshenko and Yushchenko's coalition collapsed on
Wednesday after only nine months, plunging the country into chaos.
EU
RESPONSE
European Union president France brokered a ceasefire
to the Georgian conflict and EU foreign ministers were meeting in southern
France later on Friday to discuss sending civilian monitors to the zone.
EU foreign policy chief Javier Solana said plans were "practically
ready" for an EU civilian monitoring mission to Georgia which the bloc hopes
will convince Russia to withdraw its forces to pre-conflict lines in
Georgia.
The EU, Russia's biggest trading partner, has threatened to suspend
talks on a partnership agreement if Moscow fails to withdraw its troops to
pre-conflict positions by Sept. 15. But EU leaders are wary of sanctions
which could isolate Moscow, encourage Kremlin hardliners and damage Europe's
booming business relationship with Russia.
EU trade chief Peter Mandelson told Reuters in an interview on Friday
it was in no-one's interests to use the Georgia crisis to delay Russia's entry
into the World Trade Organisation.
The Moscow-led Collective Security Treaty Organisation, known as the
ODKB, backed Russia's actions in Georgia on Friday, but stopped short of
recognising Georgia's separatist regions as Moscow has done.
In Washington, a U.S. official said Washington would scrap a civilian
nuclear deal with Russia intended to lift Cold War restrictions on trade and
open up the U.S. nuclear market and Russia's uranium fields to companies from
both countries.
"The administration will not be moving forward with the agreement. It
will be pulling it back from Congress," said the State Department official,
speaking on condition of anonymity.
The United States has used warships to ferry relief supplies to
Georgia, in part to send a signal to Moscow. Its biggest ship yet arrived on
Friday. The USS Mount Whitney dropped anchor off Georgia's Russian-patrolled
port of Poti. Russia has accused U.S. warships of rearming Tbilisi's defeated
army, a charge rejected as "ridiculous" by Washington. (Additional reporting by
Conor Sweeney and Oleg Shchedrov in Moscow, Sabina Zawadski in Kiev and Mark
John in Avignon)
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20
. CHENEY PLEDGES SUPPORT
FOR UKRAINE
By Steven Lee Myers, The
New York Times, New York, NY, Friday, September 5, 2008
KIEV, Ukraine — President Viktor A. Yushchenko said Friday that the
question of Ukraine’s membership in NATO had new urgency in the wake of Russia’s
conflict with Georgia, even though his political coalition was once again on the
brink of collapse in part because of the issue.
Meeting with Vice President Dick Cheney, he also expressed concerns
about the broader threat that Russia posed to its neighbors in the region. And
he pressed the United States and its allies to reconsider a decision in the
spring not to begin a process intended to lead to Ukraine’s membership in the
North Atlantic Treaty Organization.
The conflict, Mr. Yushchenko said, “showed that there are security
risks in the Black Sea and we need to do everything possible to make sufficient
steps that would not allow expanding that threat to other regions and other
frozen conflicts.”
Mr. Cheney expressed strong support for Ukraine’s membership in NATO,
as he did the day before in Georgia, where Russian forces seized control of two
breakaway regions, Abkhazia and South Ossetia, as well as “buffer zones” in
Georgian territory.
“The United States fully supports the right of Ukraine to build
ever-stronger ties of cooperation and security throughout Europe and across the
Atlantic,” Mr. Cheney said, appearing with the Ukrainian leader after separate
meetings with him and his once and again estranged ally, Prime Minister Yulia V.
Tymoshenko.
Russia’s anger over NATO’s expansion has boiled over in recent months,
with Prime Minister Vladimir V. Putin and other leaders denouncing the alliance
as an aggressive and destabilizing force on its borders. In Moscow, the Foreign
Ministry criticized Mr. Cheney’s similar promises of membership in the alliance
to Georgia and its president, Mikheil Saakashvili.
“Statements of this kind and new promises to Tbilisi of fast NATO
membership only strengthen the dangerous feeling of impunity of the Saakashvili
regime and encourage its aggressive ambitions,” a spokesman, Andrei Nesterenko,
said.
Russia has blamed Mr. Saakashvili for inciting last month’s brief war
by trying to seize control of South Ossetia on the night of Aug. 7.
The Bush administration has vigorously lobbied the alliance to offer
“membership action plans” to Ukraine and Georgia and considers the alliance’s
expansion an important part of President Bush’s “freedom agenda.” The NATO
allies, led by Germany and others wary of aggravating Russia, balked at that in
April at the alliance’s summit meeting in Bucharest, though a final statement
included a promise that both countries could eventually join the alliance.
While the United States and most European countries have uniformly
denounced Russia’s invasion, as well as its recognition of Abkhazia and South
Ossetia, there has been no collective agreement on how strongly to respond. Even
within the Bush administration, the matter is evidently still largely unsettled,
though the administration has been very supportive of Georgia and Ukraine
diplomatically, and has granted Georgia an aid package of $1 billion.
A
senior administration official traveling with Mr. Cheney said he believed that
NATO would rethink its position on Georgia and Ukraine when the alliance’s
foreign ministers met again in December. “People have been shaken by events in
Georgia,” the official said. “It has created a new situation. I think there are
some indications that some of the allies are looking with a fresh set of
eyes.”
The official said the Bush administration would expend “an awful lot of
energy” in its