[Ohio UZO News] FT; IHT; Congressional Dear Colleague

[Deychak, Orest]

Financial Times


Ukraine needs to lower barriers to the west


By Keith Smith 

Published: August 2 2007 

Ukraine is too important for its energy investment and tax policies to be
ignored by the European Union and the US. If the Yanukovich government is
serious about closer economic and political ties to the west, it should
reverse its current policies and opaque practices, which are discouraging
western energy investment.

Ukraine needs to establish a transparent investment regime that encourages,
rather than discourages, non-Russian business in all sectors, including in
oil and gas exploration, development and production. Only a level playing
field for all energy investors and rational tax policies that encourage
western companies will lead to Ukraine's integration into the west. The
development of a strong Ukrainian democracy and thriving economy is
important for stability in central Europe and therefore vital to the
security interests of Europe and the US.

Ukraine symbolises the dilemma faced by all of the central European states
as they search for greater energy security in an era of high oil and gas
prices. At the same time, they are compelled to deal with a Russia
determined to dominate its neighbourhood by manipulating the flow of energy
to its customers. The Kremlin's neo-colonial objectives are being achieved
in central Europe by working with complicit business groups and
collaborative politicians in the importing countries.

Ukraine is resource-rich, but control of natural resources by groups hostile
to western investors is a serious drawback to attracting foreign investment
in new energy production. Although Ukraine split from the Soviet Union in
1991, it has continued to maintain a more friendly investment climate for
Russian energy companies than for transparent western companies. Three-
quarters of Ukraine's refining capacity is owned by state-owned Russian
companies, such as Gazprom. Gazprom creations, such as EuralTransGas, help
fund pro-Russian politicians. Another Gazprom creation, RosUkrEnergo, is now
increasing its ownership and control over Ukraine's internal gas market at
the same time that western companies are coming under pressure to close.

Western energy companies find it difficult to gain a foothold in Ukraine.
Several large integrated European companies have failed to break through
business barriers facing anyone but Russian or Ukrainian oligarchic groups.
The technology and financing advantages for Ukraine from western companies
are substantial. Ukraine would clearly benefit from substituting greater
domestic production for costly imports. Security benefits would also flow
from a decreased reliance on a Russia that uses its massive energy resources
to exert political influence.

The Ukrainian council of ministers made the situation worse in January this
year. It approved a budget act that obliges any energy company that is part
of a joint activity agreement, almost all of which are western companies, to
accept a fixed price for Ukrainian natural gas. The price is about70 per
cent less than the market price. This has depressed production and reduced
investment.

Although the stated purpose of the new law is to supplement the state
budget, the effect is to squeeze western investors out of Ukraine. The
beneficiaries are local oligarchic groups which can avoid the new tariffs by
not being tied to a joint activity agreement and/or by evading price limits
through non-transparent deals with the state apparatus. Also benefiting
through reduced western competition is RosUkrEnergo.

Europe and the US remember Russia's shut down in 2006 of the pipeline
carrying Turkmen and Russian natural gas supplies to Ukraine. The cut-off
affected gas supplies to several EU countries, raising European concerns
about the consequences of relying too heavily on Russian energy supplies.
The disruption resulted from a dispute between Kiev and Moscow over the
validity of their 2004 agreement on import prices and transit fees. Within
four days of the cut-off, Kiev agreed to a one-year, largely non-transparent
deal over price and volume.

Because of Ukraine's geo-strategic importance, the west should focus more
attention on the country's need for greater transparency, particularly in
the vital energy sector. If Russia succeeds in reasserting control over
Ukraine by manipulating the flow of energy resources from Russia and from
central Asia, it will be even more -difficult for the west to prevent the
undermining of democracy in theother newly democratic states of Europe.
Russia's use of energy as a foreign policy tool could drive awedge between
Europe and the US. Much will depend on the policies ofthe central Europeans
and especially the Ukrainians.

The writer was a career diplomat with extensive experience in central Europe
and is now senior associate at the Center for Strategic and International
Studies in Washington, DC


International Herald Tribune


August 3, 2007


Parliamentary election campaign kicks off in Ukraine



KIEV, Ukraine: Ukrainian politicians officially began campaigning Thursday
for the upcoming parliamentary election and called to resolve a bitter
political struggle between the former Soviet nation's two feuding leaders.



The agreement to hold the early vote Sept. 30 was seen as a compromise
between President Viktor Yushchenko, the pro-Western leader whose supporters
staged Ukraine's 2004 Orange Revolution, and his nemesis, Prime Minister
Viktor Yanukovych, after the president ordered the parliament dissolved in
April.

Ukrainian politics long have been mired in a power struggle between the
president and Yanukovych, considered closer to Russia, Ukraine's larger and
more powerful neighbor.

Yushchenko had accused Yanukovych's majority coalition in parliament of
trying to usurp power. The president's decision to disband the Verkhovna
Rada resulted in weeks of street rallies and political skirmishing that
virtually paralyzed the country.

Both men were bitter rivals during the 2004 mass protests, which erupted
following a fraudulent presidential contest in which Yanukovych claimed
victory. The courts ordered a revote, which Yushchenko won.


But before his election, Yushchenko agreed to a series of measures that
watered down presidential powers and increased the clout of parliament. That
led to repeated conflicts with legislators, culminating in Yushchenko's
decision this year to dissolve parliament and call an early vote.


The election campaign officially kicked off Thursday as political parties
held congresses and presented their election programs, a Central Election
Commissions spokesman said.

While analysts hailed the early vote as an effective and democratic way out
of the bitter crisis, they said the election and the ensuing coalition
building is likely to be marked by the same divisions that had plagued the
country's politics for several years.

Also Thursday, senior U.S. diplomat David Kramer met with representatives of
Ukraine's main political forces and stressed "the importance of free and
fair elections," U.S. Embassy spokesman John Sullivan said.

If the election were held last Sunday, Yanukovych's Party of Regions would
have won with 30.2 percent of the vote, according to the latest opinion poll
conducted by the independent Public Opinion Foundation.

The Our Ukraine-Our Self-defense bloc, loyal to Yushchenko, would have come
in second with 15.1 percent, while the political party led by Yulia
Tymoshenko, the former prime minister, would have received 14.3 percent.

The nationwide survey polled 2,000 Ukrainians last month and had the margin
of error of 2.2 percentage points.


 

Dear Colleague Letter to Members of the House of Representatives Urging
Cosponsorship of Resolution on Ukraine Elections (H. Con. Res 189)
Introduced July 23 by Helsinki Commission Chairman Rep. Alcee L. Hastings
(D-FL)

Cosponsors as of August 3, 11:00 a.m:  Reps. Louise Slaughter (D-NY), Doris
Matsui (D-CA), Michael McNulty (D-NY), Jim Gerlach (R-PA), Sander Levin
(D-MI), Darrell Issa (R-CA), Corrine Brown (D-FL), Marcy Kaptur (D-OH),
Danny Davis (D-IL). 

Congress of the United States

House of Representatives

Washington, DC  20515

  July 30, 2007

Support Resolution on Ukraine Elections

Cosponsor H. Con. Res 189: Urging all sides to the political crisis in
Ukraine to abide by the May 27, 2007 agreement which calls for a new round
of parliamentary elections on September 30, 2007, and to ensure a free a
fair, transparent democratic system in Ukraine based on the rule of law 

 Cosponsors:  Louise Slaughter, Doris Matsui, Michael McNulty, Jim Gerlach,
Sander Levin, Darrell Issa   

Dear Colleague:

Please join me in supporting democratic processes and the rule of law in
Ukraine by cosponsoring H. Con. Res. 189, which urges all sides to abide by
the agreement signed by Ukraine's leadership on May 27, providing for a new
round or parliamentary elections to be held on September 30, and encouraging
the holding of these elections in a free, fair and transparent manner in
keeping with Ukraine's commitments as a participating State of the
Organizations for Security and Cooperation in Europe  (OSCE) . This
resolution is a demonstration of Congress' interest, concern, and support
for Ukraine as that strategically important country perseveres towards full
democracy and the rule of law. 

A political dispute between Ukraine's President Viktor Yushchenko and Prime
Minister Viktor Yanukovich -- rooted in weak constitutional deliniations of
their powers -- resulted in a political crisis in April and May.  After
weeks of tense standoff,  Yushchenko, Yanukovich and Parliamentary Speaker
Oleksandr Moroz reached an agreement calling for early elections to be held
on September 30.  

Ukraine has made important progress since the 2004 Orange Revolution, but
its democratic institutions and the rule of law are still emerging and lack
in their ability to safeguard democratic gains.  It is important for the
September 30 elections to be held in a free, fair, open and transparent
manner -- following the pattern of Ukraine's last two elections.  While
democratic elections will not, in and of themselves, resolve all of the
challenges facing Ukraine in strengthening the rule of law and delineating
power among branches of government, they are a critical stepping-stone in
Ukraine's democratic development.  

Democratic consolidation and the rule of law will enhance Ukraine's
aspirations for full integration with the West and, improtantly, serve as a
positive model for other former Soviet countries, many of whom are in the
grip of authoritarianism.    

Please have your staff contact Orest Deychakiwsky or Mark Hadzewycz at the
Helsinki Commission at 5-1901 or e-mail
<mailto:orest.deychak at mail.house.gov> orest.deychak at mail.house.gov regarding
cosponsorship.

Below please find the text of the resolution.  

Sincerely,

 /s/

Alcee L. Hastings

For text of resolution, full introductory statement, see Helsinki Commission
website:   <http://www.csce.gov> www.csce.gov

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