Saturday, January 31, 2009

Priest Uncovers Ukraine's 'Holocaust By Bullets'

NEW York, NY -- The Holocaust has a landscape engraved in the mind's eye: barbed-wire fences, gas chambers, furnaces. Less known is the "Holocaust by Bullets," in which over 2 million Jews were gunned down in towns and villages across Ukraine, Belarus and Russia.

French Catholic priest, Patrick Desbois.

Their part in the Nazis' Final Solution has been under-researched, their bodies left unidentified in unmarked mass graves.

"Shoah," French filmmaker Claude Lanzmann's documentary, stands as the 20th century's epic visual record of the Holocaust.

Now another Frenchman, a Catholic priest named Patrick Desbois, is filling in a different part of the picture.

Desbois says he has interviewed more than 800 eyewitnesses and pinpointed hundreds of mass graves strewn around dusty fields in the former Soviet Union. The result is a book, "The Holocaust by Bullets," and an exhibition through March 15 at New York's Museum of Jewish Heritage.

Brought to Ukraine by a twist of fate, Desbois has spent seven years trying to document the truth, honor the dead, relieve witnesses of their pain and guilt and prevent future acts of genocide.

Some 1.4 million of Soviet Ukraine's 2.4 million Jews were executed, starved to death or died of disease during the war. Another 550,000-650,000 Soviet Jews were killed in Belarus and up to 140,000 in Russia, according to the U.S. Holocaust Memorial Museum. Most of the victims were women, children and the elderly.

Begun after Germany invaded the Soviet Union in June 1941, the slaughter by bullets was the opening phase of what became the Nazis' Final Solution with its factories of death operating in Auschwitz and other camps, all in Nazi-occupied Poland.

Desbois devotes his 233-page book, published by Palgrave Macmillan in August, to his work in Ukraine, where he says he has uncovered over 800 mass extermination sites, more than two-thirds of them previously unknown.

Since the book was written, he has expanded his search for mass graves into Belarus and plans to look early this year in areas of Russia that were occupied by the Germans.

Sometimes bursting into tears, old men and women from poor Ukrainian villages recount to Desbois how women, children and elders were marched or carted in from neighboring towns to be shot, burned to death or buried alive by German troops, Romanian forces, squads of local Ukrainian collaborators and local ethnic German volunteers.

Even then, it was methodical, Desbois' research shows. First, Germans would arrive in a town or village and gather intelligence on how best to transport the victims to extermination sites, where to execute them and how to dispose of their bodies.

"It was done as systematically as it was done elsewhere," said John Paul Himka, an expert on the Holocaust and Ukraine at the University of Alberta in Canada, who is not connected to Desbois' work. "You can read as they're figuring out best way to do this, the best way to shoot ... it's absolutely systematic, no accident here."

Desbois' interviews and grave-hunting tie in to millions of pages of Soviet archives, heightening their credibility, says Paul Shapiro, of the U.S. Holocaust Memorial Museum who wrote the foreword to Desbois' book.

Father Desbois' work is also having an impact on efforts to preserve Holocaust sites. In December, the 26-nation International Task Force on the Holocaust called on European governments to ensure the protection of locations such as the mass graves Desbois is uncovering, according to Shapiro, who helped draft the resolution.

Among Desbois' key findings is the widespread use of local children to help bury the dead, wait on the German soldiers during meals and remove gold teeth and other valuables from the bodies. His work has also yielded evidence that the killings were most frequently carried out in the open, in daylight and in a variety of ways — shooting victims, throwing them alive into bonfires, walling up a group of Jews in a cellar that wasn't opened until 12 years later.

Desbois' witnesses are mostly Orthodox Christian, and he comes to them as a priest, dressed in black and wearing a clerical collar, taking in their pain and trying to ease their suffering. Many have never before talked about their experiences.

In the village of Ternivka, some 200 miles south of Kiev where 2,300 Jews were killed, a frail, elderly woman, who identified herself only as Petrivna, revealed the unbearable task the Nazis imposed on her.

The young schoolgirl saw her Jewish neighbors thrown into a large pit, many still alive and convulsing in agony. Her task was to trample on them barefoot to make space for more. One of those she had to tread on was a classmate.

"You know, we were very poor, we didn't have shoes," Petrivna told Desbois in a single breath, her body twitching in pain, Desbois writes in his book. "You see, it is not easy to walk on bodies."

Desbois, 53, a short, soft-spoken man with dark, thinning hair, says the stories give him nightmares. The most difficult is "to bear the horrors that the witnesses tell me, because often the people are simple, very kind and want to tell me everything," Desbois said in a phone interview while on a trip to western Ukraine.

"You have to be able to listen, to accept, to bear this horror," said Desbois. "I am not here to judge the people's guilt, we are here to know what happened."

Desbois' small team includes a translator, a researcher, a mapping expert, a ballistics specialist and a video and photo crew. He often joins his witnesses in their homes, leaving his shoes outside. He tends to a peasant's cow while the man tells his story.

Desbois has deep personal roots in his project, dating to 2002, when he first visited Ukraine to see the place where his grandfather was interned as a French prisoner in World War II.

When he arrived, the locals told him of a stream of blood that had run from the site where the Jews were executed and of a dismembered woman hanging from a tree after the Nazis threw a grenade in a pit full of people. When he was offered a visit to more villages, he did not hesitate.

"I am in a hurry to find all the bones, to establish the truth and justice so that the world can know what happened and that the Germans never left a tiny village in Ukraine, Belarus and Russia without killing Jews there."

The Holocaust is a divisive topic here because some Ukrainians collaborated with the Nazis. Jewish groups are grateful for Desbois' efforts and lament the lack of government support for his and other Holocaust research and education programs.

"As a Ukrainian citizen and a Ukrainian historian it pains me ... that there is no policy of national remembrance," said Anatoly Podolsky, head of the Ukrainian Center for Holocaust Studies. "We are not responsible for the past but we are responsible for remembering."

Desbois leads a French association, Yahad-In Unum (the Hebrew and Latin words for "together"), which was founded by Catholics and Jews to heal the wounds between the two faiths. He believes that as a Catholic priest talking to Orthodox believers about the killing of their Jewish neighbors his work advances that healing mission.

"The book is meant so that people know ... that a genocide is simply people killing people," Desbois said. "My book is also an act of prevention of future acts of genocide."

Source: Kyiv Post

Yushchenko Blames Tymoshenko For Economic Woes; Premier Calls President's Words 'A Mix Of Lies, Panic And Hysteria'

KIEV, Ukraine -- President Viktor Yushchenko on Friday demanded that his arch rival, Ukraine's prime minister, alter the 2009 budget to withstand the world financial crisis.

Yushchenko (L) and Tymoshenko continue their war of words as who is to blame for the economy.

The president accused Prime Minister Yulia Tymoshenko, his estranged ally from the 2004 "Orange Revolution", of deliberately drafting a budget with targets he said were impossible to fulfil.

"I hereby appeal to Yulia Tymoshenko and to the majority in parliament that she has put together. This is your responsibility," Yushchenko said in a televised address.

"You have knowingly included in the budget inflated indicators and promises that cannot be fulfilled today."

Members of parliament backing the prime minister, he said, were "supporting populism which tomorrow will turn into unpaid salaries, pensions, stipends and social benefits".

"On behalf of the entire country I demand that the government and parliament put together an honest budget in which expenditure matches the possibilities afforded by our economy."

Responding in a statement issued late on Jan. 30, Tymoshenko blasted Yushchenko, calling his words “a mix of lies, panic and hysteria.”

“Everyone saw that the president is not that leader which is needed now, when the country is in the midst of a deep world economic crisis facing a test of its strength. I will not cover up the true situation with makeup, but I will also not sow panic,” she said.

“If the president cannot find a way to help, he should not interfere,” she said.

The budget, passed just before the New Year, provides for negative growth of only 0.4 percent against forecasts by some bodies, including the economy minister, of minus 5 percent as Ukraine is battered by the effects of the crisis.

Industrial production in the ex-Soviet state plunged between 20-30 percent in October and December and growth shrank by over 14 percent in November and December month-on-month. The economy grew 2.1 percent in 2008 against 7.6 percent in 2007.

The budget also provides for a deficit of 3 percent despite a stipulation by the International Monetary Fund that it be deficit-free. An IMF mission is currently in Kiev to review progress by the government and determine whether to disburse the second tranche of a $16.4 billion credit approved last year.

The prime minister has defended her government's budget and vowed to implement it. The tone of both leaders has become increasingly strident, with the prime minister repeatedly calling on Yushchenko to resign.

In his remarks, Yushchenko said he backed reservations on the budget attributed this week to Finance Minister Viktor Pynzenyk on a major Internet site. Pynzenyk dissociated himself from the report without making an outright denial.

Yushchenko has been at odds with Tymoshenko on virtually all policy issues since she became premier a second time in 2007 and in his remarks repeated allegations that she had clinched a gas supply and pricing deal with Russia detrimental to Ukraine.

The prime minister, he said, was deliberately responsible for "the economic situation, the disruption of the budget process, the wrecking of the banking system ... Enough of lies."

He vowed to defend Ukrainians against the effects of the crisis and called on the chairman of parliament to take action to ensure that the budget would be suitably amended.

Tymoshenko denied Yushchenko’s accusation that citizens could not be paid pensions and salaries due to a major shortfall in budget revenues.

“I have a sad news for the president, but optimistic information for the country. Despite the crisis, the state budget in January has been over fulfilled. Budget-funded salaries and pensions will be paid on time and in full,” she said adding that energy tariffs will not be raised on households.

Source: Kyiv Post

Thursday, January 29, 2009

Pirates’ Prison

KIEV, Ukraine -- From economic crisis to gas crisis, from autumn into winter, 17 Ukrainian sailors have remained hostages aboard the MV Faina cargo ship, seized by Somali pirates on Sept. 25.

A photo released by the US Navy in 2008 shows the crew of the hijacked merchant vessel MV Faina.

The men are still waiting for rescue, amid reports that some of them are suffering poor health and that all of them are imprisoned in terrible conditions – enduring scorching temperatures off the lawless east African coast and spending most of their time in a cramped room aboard the hijacked ship.

After months of staying silent at the Ukrainian government’s request, relatives of the crew have run out of patience and are now speaking out. They are alarmed by the indifference and inability of the nation’s political leaders to free the crew after four months of captivity, the longest of any in a recent upsurge of high seas piracy in the Indian Ocean.

“Faina is a cold-blooded, slow and incredibly cynical murder of 17 boys, who were unlucky enough to be born on the territory, declared as independent Ukraine,” said Victor Shapovalov, father of crew member Denis Shapovalov.

“I don’t even dare to call it a state. A state, by definition, pre-supposes territory, population, government and a president. Ukraine is missing the two last ones,” Shapovalov said. “Nothing has been done in four months. Nothing. The government turned a deaf ear to its 17 citizens and we [parents] will find other ways to save their lives.”

The relatives of the Faina crew note that their sons’ captivity didn’t even rate a passing mention in either the New Year’s greeting of Ukrainian President Victor Yushchenko or Prime Minister Yulia Tymoshenko. The sailors’ mothers also say they recently spent hours in the rain trying to get into the Presidential Secretariat, but were rebuffed. They note that the website of the Ministry of Foreign Affairs has a hyperlink to Euro 2012, the soccer championship to be co-hosted by Ukraine, but not to the Faina standoff.

The Ministry of Foreign Affairs deny indifference and inaction, and has blamed the interference of third parties for scuttling talks to liberate the crew. Sources and reports identify the third person as Michele Ballarin, an American businesswoman with connections to United States intelligence whose self-described aim has been to turn Somalia from a failed state into a functioning country. Ballarin claims to be trying to broker a deal freeing all hijacked ships in the region and is quoted by military.com as saying: “My goal is to unwind all 17 ships and all 450 people they’ve been holding.”

Ukraine’s Foreign Ministry “takes all necessary measure to rescue citizens,” according to spokesman Vasyl Kyrylych, noting that “according to international experience, state structures, as a rule, do not take a direct part in the negotiation process.”

So far, however, nobody appears to be successful in freeing the sailors.

Faina is owned by Israeli citizen Vadim Alperin, owner of Tomex Team, Inc., and a former deputy of the Odesa City Council. Many of the ship’s crew and their relatives are also from the Black Sea port city.

At a Jan. 22 news conference in Kyiv called by the crew’s relatives, Alperin’s representative said that negotiations with the pirates – more than 40 are believed to be aboard the ship – are making progress.

“We had already reached an agreement on a $1.7 million ransom,” said Victor Murenko, Alperin’s representative. Murenko, however, said that the pirates rejected some conditions and the deal fell apart. It was revived again on Jan. 21, Murenko said, when the two sides reached an agreement on the ransom amount. He expected release of the sailors within several days. But, as this Jan. 29 edition of the Kyiv Post went to press, the men were still in captivity.

So the desperate parents are trying everything to win the release of their loved ones. They are now planning to file a lawsuit against the government.

At their Jan. 22 news conference, the parents said they are tired of hearing stories about how negotiations were on the brink of success, only to be disrupted by various third parties.

“The informational vacuum is unbearable,” said Svetlana Mgeladze, mother of Faina crew member Roland Mgeladze. “We can’t stand anymore hearing ‘they have water, food and fuel; keep on waiting’ from the Ministry of Foreign Affairs.”

On Jan. 25, parents of the Faina crew got a rare present: a brief phone call from the ship’s crew. Relatives say the credit for arranging the phone call goes not to the Ukrainian government, but to Abdi Muhammed Nur, a representative of the non-profit Human Rights Watch.

The telephone conversation was as troubling as it was brief.

“We bear up with our last bit of strength,” Denis Shapovalov told his father. He said that the sailors get only one meal a day – rice and noodles – and have irregular supplies of water and poor sanitary conditions. The parents also said their sons told them that the talks were stalled because the pirates wanted to deal directly with the ship’s owner, a step they say hadn’t been taken yet.

Besides the 17 Ukrainian crew members, two Russians and a Latvian are also aboard the ship. The vessel’s Russian captain, Vladimir Kolobkov, died of a heart attack two days after the hijacking. His remains are still on board, reportedly kept in a refrigerator.

The hostage ship’s complicated identity and mission are raising fears among parents that some Ukrainian government officials don’t want to see the ship returned.

The ship sailed under the Belize flag and carried 33 Soviet-type T-72 battle tanks along with other weapons and ammunition. While Ukraine and Kenya insist the tanks were bound for Kenya’s military, Agence France Presse reported that the United States and the pirates themselves have said the weapons were destined for rebels in southern Sudan. If true, the shipments would be in violation of a U.N. Security Council embargo on weapons trade with Sudan.

“I judge by the fact that absolutely nothing has been done,” said parent Svitlana Mgeladze. “Probably somebody wants it to be this way.”

If the shipments were destined for a prohibited destination, it wouldn’t be the first time that Ukrainian arms exports made scandalous international headlines. During the Leonid Kuchma era, Americans accused Ukraine of supplying Saddam Hussein-led Iraq with advanced radars. More recently, Russians accused Ukraine of supplying Georgians with weapons during the August war. While Ukraine has defended its right to sell arms to Georgia, the proof of radar sales to Iraq never materialized.

Oleksiy Tolkachev, head of the non-profit Public Committee of National Security, spoke at the Jan. 22 press conference and he agreed that the ship raises potentially troublesome questions for Ukraine. “Ukrainian weapons trafficking has created international scandal and is viewed as another foundation for the possible impeachment of Victor Yushchenko,” Tolkachev said. “If this ship comes back, an investigation will be held and many questions will be asked.”

Victor Shapovalov, father of Denis, a 33 year-old graduate of Odesa National Marine University, has no intention of giving up efforts to save all aboard the Faina. “I raised my son not to lose him to mercantile interests of some shabby leaders of this ‘formation,’” Shapovalov said, referring to Ukraine.

Source: Kyiv Post

Wednesday, January 28, 2009

Valeriy Khoroshkovsky Appointed Deputy Head Of Ukraine’s Spy Agency

KIEV, Ukraine -- President Victor Yushchenko raised eyebrows on Jan. 28 appointing billionaire media magnate Valeriy Khoroshkovsky as deputy head of Ukraine’s spy agency, the State Security Service, or SBU, as it is commonly called.

Valeriy Khoroshkovsky’s appointment to the SBU seen as tactical move by Yushchenko in his rivalry with Tymoshenko.

The controversial appointment comes amidst a deepening rivalry between Yushchenko and Prime Minister Yulia Tymoshenko.

Both are expected to square off for the presidency later this year or in early 2010.

Khoroshkovsky, who has served as head of Ukraine’s Customs Service, claims to own one of Ukraine’s leading television channels, Inter, via a holding called U.A. Inter Media Group.

Tymoshenko identified Dmytro Firtash, the billionaire who controlled natural gas supplies to Ukraine via Swiss-registered Rosukrenergo, as a media partner of Khoroshkovsky.

Tymoshenko’s gas agreement this month removed this intermediary, which her political camp claims has been “corrupt” and funneled money to her opponents, Yushchenko and ex-premier Victor Yanukovych.

Khoroshkovsky this week admitted that Firtash has an option to buy into the Inter media group, but insisted Tymoshenko tried to buy Inter channel herself, or have it sold to other investors.

Source: Kyiv Post

Slain Moscow Reporter Buried In Sevastopol

SEVASTOPOL, Ukraine -- Anastasiya Baburova, who chased after the assassin of human-rights lawyer Stanislav Markelov only to be killed by the same unidentified gunman, was buried in her native Ukraine on Jan. 26.

Larysa Baburova at the funeral of her daughter Anastasiya Baburova, 25, seen in framed photo. An unknown gunman assassinated the young journalist and human-rights lawyer Stanislav Markelov in Moscow on Jan.19.

Baburova, 25, was a Moscow journalist with one of Russia’s few remaining independent newspapers, Novaya Gazeta.

She and Markelov were slain less than a mile from the Kremlin, just after the lawyer held a Jan. 19 press conference to condemn the early release from prison of a Russian army colonel convicted of killing an 18-year-old Chechen woman in 2000.

Baburova was from Sevastopol.

Agence France Presse reported that several dozen mourners attended the funeral Mass held in St. Vladimir Orthodox Cathedral in the center of the Crimean port city before she was laid to rest in a cemetery on the city’s outskirts.

Her mother, Larysa Baburova, told the French news agency that her daughter a year ago had complained that her work was too dangerous, saying: “Mum, I am not going to live long like this.”

Novaya Gazeta – one of the few Russian newspapers that allow criticism of the Kremlin in its coverage – has been hit by tragedy several times, including in 2006, when star journalist Anna Politkovskaya was gunned down in Moscow.

If these murders follow the disturbing Russian pattern, no killers will be found.

Source: Kyiv Post

Yushchenko Instructs PM To Save Artek Children Center

KIEV, Ukraine -- Ukraine's president has instructed the country's prime minister to look into and take urgent measures to prevent the possible closure of the cash-strapped International Children's Center Artek in Ukraine's Crimea.

International Children's Center Artek

During a video link between Kiev and Moscow devoted to the problem, Artek's chief doctor, Mykhailo Bezugliy, blamed interest groups, which plan to take over the center's land valued at some $100,000 per 100 sq m, for orchestrating its financial woes.

The opposition Party of Regions has accused Viktor Yushchenko and Yulia Tymoshenko of pushing Artek to bankruptcy.

"Public attention, generated by media reports, in particular those saying the government is pushing Artek to bankruptcy... are causing concern," the presidential press service quoted Yushchenko as saying.

The president gave the prime minister one week to deal with the matter.

Located in the southern Crimea not far from Yalta, Artek is famous as the main Soviet-era pioneer camp that took children in all year round since the 1930s and even carried on working during World War II, when the center moved to Altai.

It remained a unique international meeting place for children of all ages from all over the former Soviet Union and other countries after the breakup of the U.S.S.R. when already under Ukraine's jurisdiction, but closed in January over a lack of funds.

It is currently supervised by the Ukrainian president's property management committee.

Artek General Director Boris Novozhilov said in Kiev on January 16 that the center could cease to exist within a year as the government had not provided any funding for the former Soviet recreation camp for three years. On Monday he was hospitalized with heart problems.

Source: RIA Novosti

The Role Of Russian Organized Crime In The Gas War Of January 2009

WASHINGTON, DC -- On January 20 Alexei Miller, the CEO of Russia’s state-owned gas monopoly, Gazprom, made an amazing confession. He told Interfax that in late December 2008, when negotiations between Ukraine and Russia on a new gas supply contract broke down, the party largely responsible for this was RosUkrEnergo (RUE), the Swiss-based middleman company that sold Central Asian gas to Ukraine.

Gazprom chief, Alexei Miller, made an amazing confession.

RUE is 50 percent owned by Gazprom and 45 percent by a Ukrainian businessman, Dmytro Firtash. “Yes, it is true that when the prime ministers of Russia and Ukraine agreed to a price of $235 for 1,000 cubic meters of gas… RosUkrEnergo proposed paying $285. This company was betting that by making such an offer it would remain in the market,” Miller stated. What Miller failed to explain is why RUE would dare undermine the Russian government.

From its inception RUE has been accused of opacity by the media and of “criminality” by Ukrainian Prime Minister Yulia Tymoshenko. Most of the charges centered on Gazprom’s partner in RUE, Dmytro Firtash, and his alleged links to a notorious Russian mobster, Semen Mogilevich. Dmytro Firtash has denied any direct links to Mogilevich. This might be true, but the indirect links suggest that Mogilevich was indeed tied to Firtash, the Kremlin leadership, and the Ukrainian elite.

The history of RUE began in December 2002 when Firtash registered a company in Hungary named Eural Tran Gas (ETG), which signed a contract with Gazprom on December 5, 2002, becoming the middleman in the Turkmen- Ukrainian gas trade.

Strange circumstances surrounded ETG’s creation: unemployed Romanians became principles of the company; an Israeli lawyer with ties to Mogilevich became a nominal director of the company; and Andras Knopp, a former Hungarian communist cultural functionary with no knowledge of the gas business became the director of the company.

Even stranger was Firtash’s refusal to reveal that he was the ultimate beneficiary of ETG. Soon after the contract was signed, ETG was given a $70 million loan by Gazprom Bank, which also became the guarantor of a $227 million loan to ETG by Vnesheconombank.

By July 2004 media criticism of ETG forced the Kremlin to eliminate the company and create RosUkrEnergo in its place. RUE came into being during a meeting between Russian President Vladimir Putin and then-Ukrainian President Leonid Kuchma in Yalta.

At that time both leaders stressed that RUE would be a fully transparent company, tacitly acknowledging media reports that ETG was opaque. One of the two co-directors of RUE was Konstantin Chuychenko, a former KGB officer, the head of Gazprom’s legal department, and a classmate of Dmitry Medvedev (Chuychenko’s biography was posted on the Gazprom website, www.gazprom.com, but was removed after he left Gazprom to join Medvedev’s administration).

The other co-director was Oleg Palchykov, the former director of the ETG office in Moscow who represented Centragas, a company silently controlled by Firtash. Palchykov’s appointment as co-director of RUE was met with a great deal of skepticism.

“His [Palchykov’s] candidacy was submitted by Raiffeisen Investment [the nominal owners of Centragas]; and we were unable to stop it,” Alexander Ryazanov, the deputy director of Gazprom and a member of RUE’s coordinating committee, told the Russian newspaper Vedomosti.

Why Gazprom wanted to prevent Palchykov’s appointment in the first place was not clear. Gazprom had always insisted that their partners in RUE were honest, transparent businessmen. Had this view suddenly changed?

Part of the explanation could be that the Moscow ETG office Palchykov headed was located in a building on Novy Arbat 14 that was also used by an alleged mobster, Igor Fisherman, who was wanted together with Mogilevich by the FBI.

According to Vedomosti on May 30, 2006, Fisherman was Firtash’s partner in the purchase of 75 percent of a Russian company Zangas. The flow of money from RUE to Gazprom was also murky. Apparently it first went to a shell company in Cyprus and then on to Moscow to another shell company, “Rubin”. Why wasn’t the money sent directly to Gazprom?

Chuychenko, Dmitry Medvedev’s man in RUE, however, remained adamant in his whitewashing of Firtash and RUE. “Dmytro Firtash is a very well-known figure in the gas business,” Chuychenko told Ukrayina Television on December 1, 2006. “He has been working in the gas business in Ukraine for a long time, so his appearance in this field was no accident.”

On October 9, 2007, Medvedev made an incredible statement on the German television station ARD: “We will most likely review the scheme of our relations [with Ukraine] and will end the existence of middlemen structures, which we do not fully understand.” How could Medvedev, the head of Gazprom’s board of directors, not understand what RUE was?

Chuychenko’s claims about Firtash were soon disputed by Putin, who told Interfax on January 8, 2009: “50 percent of RUE belongs to Gazprom… the Ukrainian side belongs to persons we do not know…they showed us Mister Firtash once…”

A controversy over massive Ukrainian debts to RUE and RUE to Gazprom heated up in January 2008, and Mogilevich was arrested in Moscow in February 2008. He was charged with aiding a Russian businessman, Vladimir Nekrasov, the alleged owner of the chain of Arbat Prestige perfume stores, in a tax evasion scheme. Documents from the Russian business registry in the possession of Jamestown, however, show that Firtash was instrumental in creating Arbat Prestige.

The day after the Ukrainian-Russian gas agreement was signed, the Russian press reported that a Moscow court had ordered that Mogilevich and Nekrasov remain in detention until March 23. Was the timing coincidental or was it linked to RUE’s debt to Gazprom?

The litany of contradictions voiced by top Russian officials in the RUE case, as well as documented evidence, suggests that organized crime is linked not only to RUE; it is a stark indication that corruption in the Kremlin has expanded since Putin’s election in 2000. Who stood to benefit from RUE? Putin claims it was the Ukrainian leadership — the facts suggest otherwise.

Source: Eurasia Daily Monitor

Will The Real Gazprom CEO Please Stand Up

MOSCOW, Russia -- The great Russian-Ukrainian gas war is over, and it is time to assess the outcome. On the surface, the result looks promising. Finally, Russia and Ukraine have concluded a normal long-term gas agreement.

Prime Minister Vladimir Putin

Both gas prices and transit tariffs are market-related and based on clear principles without shady intermediaries or arbitrariness. The gas prices will probably average $230 per 1,000 cubic meters in 2009, while investment bankers had expected $250.

Prime Minister Vladimir Putin claimed that Ukraine had an obligation to guarantee transit of Russia's gas since Kiev ratified the Energy Charter Treaty (which Moscow has not ratified).

Putin lamented that the "European Union is placing Russia and Ukraine in the same category," but the supplier in this transaction is also obligated to deliver. Vedomosti perhaps put it best: "Gazprom's reliability as a supplier is inseparable from Ukraine's as a transit state."

Corruption and Ukrainian domestic politics were major factors in a conflict in which the prime antagonists were Prime Minister Yulia Tymoshenko and Dmitry Firtash, partial owner of the shady intermediary RosUkrEnergo.

Both Tymoshenko and Putin claim that RosUkrEnergo through Ukrainian President Viktor Yushchenko's administration disrupted the gas negotiations on Dec. 31.

Tymoshenko walked away from this conflict with an outstanding victory. RosUkrEnergo has been excluded from the Russian-Ukrainian gas trade, losing profits of at least $1 billion a year.

At his news conference on Jan. 8, Putin implausibly denied that he knew Firtash, although both were co-founders of RosUkrEnergo in July 2004. Subsequently, Gazprom sold RosUkrEnergo's debt of $1.7 billion to Naftogaz, allowing Naftogaz to squeeze Firtash out.

"Finally, we eliminated a big political slush fund, which fed several political forces," Tymoshenko said. Firtash has spent lavishly on Ukrainian politics, mainly on former Prime Minister Viktor Yanukovych's Party of the Regions but also on Yushchenko's administration.

The elimination of RosUkrEnergo will cleanse Ukrainian politics of gas money. Although Yanukovych has sensibly kept a low profile, his campaign financing will most likely dwindle in the end.

Gazprom's cost in the gas war was very high. Its direct financial loss was about $2 billion, but its reputation has suffered even more since the gas monopoly has proven itself an unreliable supplier.

Its customers will try to reduce their dependence on the state-run gas monopoly, but when Gazprom is the problem new pipelines are of little help.

Before the conflict broke out, Gazprom opened a web site that criticized Ukraine. This suggests that Moscow was gearing up for a fight. Gazprom and Putin pulled no punches in going after Kiev. "The current situation shows a high degree of criminalization of power in Ukraine," Putin said.

During the January 2006 Russia-Ukraine gas conflict, Gazprom's stock price skyrocketed because investors were impressed when the company pushed for higher export prices at a time of rising energy prices.

During the latest gas war, however, Gazprom's stocks plummeted as investors objected when the company treating its customers recklessly by demanding unrealistically high prices at a time of sharply falling energy prices.

Meanwhile, European gas consumers suffered considerably, and the European Union looked terribly weak, having failed to learn anything from previous gas wars.

But one European politician stands out as a true leader -- German Chancellor Angela Merkel. During Putin's news conference with Merkel on Jan. 16 in Berlin, Merkel lectured him like a teacher to a schoolboy, placing the responsibility on Moscow, and Putin ate his teacher's humble pie.

Austria, France, Hungary, Germany and Italy have quietly built up gas reserves that could last for three months; they have learned the lesson from 2006.

Now, other European countries are likely to build up large reserves and further diversify their energy supplies, although this is very expensive.

Putin has the most complex motivation in all of this. By directly commanding Gazprom and taking over the negotiations, Putin confirmed the old assumption that he is the real CEO of Gazprom.

Although Ukraine had paid its gas bills by Dec. 30, Putin ordered the disruption in the gas supply, making him the main culprit.

Gazprom's damaged reputation will likely impair its stock price and debt rating. The conflict was also a disaster for Russia's foreign policy. President Dmitry Medvedev's hastily arranged "gas summit" attracted no heads of state and was the largest snub to Russian diplomacy in recent memory.

Putin has been identified as one of RosUkr-Energo's main beneficiaries, but now he has accepted the fact that this middleman will have to be eliminated from gas transactions. Moreover, he looked panicky when he lost himself in technical details, accusing Ukraine of "theft" of tiny gas volumes, far smaller than customary losses.

In the end, the gas war had to be settled by Russian and Ukrainian prime ministers. The press photos showed a strident Ukrainian prime minister, while Putin looked increasingly frustrated.

So why did Putin instigate the gas war in the first place? My suspicion is that his main purpose was to whip up Russian patriotism against Ukraine and enhance support for the government in a time of economic decline. This was perhaps his only success.

According to the state-run pollster VTsIOM, 63 percent of Russians believed that Ukraine was solely responsible for the conflict.

Another suspicion is that Putin hoped to destabilize Ukraine by exploiting its domestic divisions and its severe financial crisis. If this were his goal, he failed. Tymoshenko had little choice except to liquidate RosUkrEnergo since it was an issue of her political survival.

After Putin and Tymoshenko signed the gas peace treaty, Ukraine has eliminated a major source of corruption. Now it should reform its distorted energy sector to improve efficiency and save energy.

Ukraine must stop subsidizing its imports of gas, and it should also raise the government's purchasing price for domestically produced gas to stimulate domestic production.

And the EU should get more serious about its own energy security. Whatever Putin's motive was, he is likely to offer more shocks as the situation grows worse for both Russia and Putin in a deepening economic crisis. The EU must realize that it needs a Russia policy no less than it requires an energy policy.

Only two winners are apparent -- Tymoshenko and Merkel.

There are many losers: Firtash, European gas consumers, Gazprom, its shareholders, Yushchenko and, last but not least, Putin.

Source: The Moscow Times

Tuesday, January 27, 2009

EU Chief Says Ukraine Won't Reopen Gas Deal

BRUSSELS, Belgium -- The European Union said Tuesday that Ukraine's president has promised he will not reopen a 2009 energy deal with Moscow that restarted natural gas service to EU countries last week.

Ukraine's President Viktor Yushchenko (L) and European Commission President Jose Manuel Barroso hold a joint news conference after a meeting in Brussels January 27, 2009.

Russia halted gas shipments to Europe over Ukrainian pipelines for two weeks earlier this month amid a contract dispute over what Ukraine should pay for Russian gas in 2009.

Ukrainian President Viktor Yushchenko indicated last week he wanted to revisit the gas deal with Russia, saying its terms will further undermine his country's economy, but he backed off that view at EU headquarters.

In a joint news conference with Yushchenko, EU Commission President Jose Manuel Barroso said it was now key for both sides to improve relations and help Ukraine upgrade its energy and pipeline networks so it can regain the trust of EU gas clients.

Barroso said Ukraine "will honor its commitment" to the deal signed with Russia.

Yushchenko said his country would "perform its responsibility as a transit state."

"The agreements signed are not easy ones (but) Ukraine fully takes up full-fledged transit to the European consumers," Yushchenko said.

Barroso said he was convinced the Ukraine wanted to deepen its ties with the EU and added that the EU was keen to do that as well. Ukraine has been seeking membership in both the EU and NATO.

"But of course in the energy sector there was a problem, and we have to solve that problem," Barroso said. "We have to state very clearly that we were not happy, in fact we were very disappointed."

The European Union gets a quarter of its gas from Russia, most of that over Ukrainian pipelines. The gas cutoff left many EU nations reeling, searching frantically for alternative energy sources in the midst of winter.

Barroso said the EU would work with Ukraine to seek new international investors to modernize the ex-Soviet state's energy networks and to link the country into central European electricity grids. An investors meeting is planned for March 23, in Brussels.

Source: AP

Monday, January 26, 2009

Klitschkos Look To Hold All Four Belts In 2009

MOSCOW, Russia -- Vitali and Wladimir Klitschko are worried that promoters will deny them the chance of holding all four heavyweight titles. The Ukrainian brothers currently hold three of the belts - Wladmir is the IBF and WBO champion, and Vitali is the WBC champ.

Vitaly (R) and Vladimir Klitschko seen near their heavyweight champion belts during a news conference in Moscow, Monday, Jan. 26.

Only WBA champion Nikolai Valuev stands between a historic four-belt family sweep.

The Klitschko brothers claimed Monday that Valuev's promoters, American Don King and German Wilfried Sauerland, are holding up the chance for one of them to take his title by offering an unacceptable share of the purse.

"Around the world fans and experts want to see this fight," Vitali Klitschko said. "But these promoters are doing everything to make sure that this fight doesn't go ahead."

Vitali Klitschko said the purse should be split 50-50 because it would pit champion against champion.

Both Vitali, 37, and Wladimir, 32, said they would be ready to fight the 2.14-meter (7-foot) Russian, and Valuev himself has appeared agreeable to the idea.

"The most important thing is to bring the belt to the family," Wladimir Klitschko said.

If the fight does go ahead, Wladimir Klitschko said, it will likely be toward the end of the year due to all the planning required.

That might be too late for the brothers to achieve their dream of holding all four belts at one time.

Vitali Klitschko, who announced his retirement in 2005 but came back in 2007, is preparing for the mandatory defense of his WBC title against Juan Carlos Gomez of Cuba on March 21.

He had hoped to fight Britain's David Haye in June in London, but will instead take on the WBC's No. 1-ranked challenger in Stuttgart.

Wladimir Klitschko said he would now likely face Haye, though arrangements are in their infancy, and named Chris Arreola as another possible opponent this year.

The brothers reiterated they would never break a promise to their mother and square off against each other in the ring.

"Our mom will not survive this fight, and we have to take care of her," Wladimir Klitschko said.

Source: Kyiv Post

Ukraine Assembly Fails Again To Oust Cbank Head

KIEV, Ukraine -- Ukraine's parliament failed again to oust Central Bank Chairman Volodymyr Stelmakh on Monday, passing a resolution annulling his tenure that was dismissed by the president's office as "unconstitutional".

Volodymyr Stelmakh

This was the third attempt by Prime Minister Yulia Tymoshenko's faction in parliament to persuade President Viktor Yushchenko to sack the veteran chairman, blaming him for a fall in the hryvnia currency and the state of banks' refinancing.

The two former allies have fought constantly on virtually all issues for months, delaying policy making just as the global financial crisis grips the ex-Soviet state.

Under the constitution, only the president can initiate the dismissal of the central bank chief, which must then be approved by parliament. Although lukewarm towards the central bank, Yushchenko has refused to sack Stelmakh.

"This decision is illegal and unconstitutional," presidential spokeswoman Larysa Mudrak said by telephone.

The central bank's top economic adviser, Valery Lytvytsky, said Stelmakh would continue in his job after returning from holiday. He was not able to say when that would be.

"He knows that he is the legal head of the central bank and he will continue work after his holiday," Lytvytsky said by telephone.

A total of 227 members -- one more than the minimum needed -- approved the resolution. Parliament passed a no confidence vote in Stelmakh on Dec. 26 and again asked the president to dismiss him two weeks ago.

By voting to rescind the 2004 appointment, Tymoshenko's bloc hoped to find another mechanism of getting rid of Stelmakh.

Parliament also passed a resolution naming Yushchenko solely responsible for Ukraine's financial woes. Tymoshenko has called for his resignation in December.

Lytvytsky said the central bank was currently under the control of First Deputy Chairman Anatoly Shapovalov.

"The market is not going to be overjoyed by this latest twist in the story, but we hope that it will remain calm thanks to our intervention aimed at maintaining the positive trend (of the hryvnia's rate)," Lytvytsky said.

The hryvnia traded at 8.1 to the dollar, slightly weaker than last week when it stood at a touch stronger than 8/$.

Dealers said the central bank had communicated its policy well in January with almost daily interventions that have injected liquidity and helped strengthen the hryvnia from December historic lows of 9.5-10/$.

But parliament's very moves made them nervous.

"If management of the central bank changes, then there will be a question -- how will the bank behave?" said one dealer.

Source: Guardian UK

Putin Blames Bush For Ukraine Gas War, Is ‘Optimistic’ On Obama

MOSCOW, Russia -- Russian Prime Minister Vladimir Putin blamed George W. Bush for a dispute with Ukraine that left much of Europe without gas this month, saying the former U.S. president fostered political chaos in the region. Putin said he was “cautiously optimistic” about future relations with Barack Obama.

Ex-President Bush (L) and Premier Putin at a photo op.

The Bush administration supported NATO membership applications from Ukraine and Georgia, which Russia opposes, and planned to site a missile defense system in Poland and the Czech Republic. The U.S. under Bush also signed a “strategic partnership” with Ukraine.

“What happened in recent years in Ukraine is the result, to a significant extent, of the activities of the previous U.S. administration and the European Union, which supported it,” Putin, 56, said in an interview with Bloomberg Television yesterday. He said he was “cautiously optimistic” that relations with the U.S. will improve with Obama in the White House.

Ukrainian President Viktor Yushchenko and Prime Minister Yulia Timoshenko have feuded since they were swept to power four years ago in the so-called Orange Revolution, sparked by the victory of a pro-Russian candidate in a rigged presidential election. Bush said at the time the revolution was a “powerful example” of the movement toward freedom “for people all around the world.”

Russia, which supplies about a fifth of Europe’s gas through Ukrainian pipelines, and the EU “have become hostages of this domestic political situation,” Putin said near Velikiy Novgorod, the ninth-century trading hub between Moscow and St. Petersburg. “It was that domestic political situation in Ukraine that left no chance for us to reach final agreements on the gas issue.”

‘Certain Signals’

While U.S.-Russia ties reached a post-Cold War nadir in Bush’s last months, Putin said there are “certain signals” that Obama is reassessing policies that Russia opposes, including the missile defense system and fast-track membership for Ukraine and Georgia in the North Atlantic Treaty Organization.

Bush won approval to site the planned missile shield in eastern Europe after Russia’s five-day war with Georgia in August, saying it was intended to protect against attacks from Iran or North Korea. President Dmitry Medvedev, who succeeded Putin in May, said in November he would place short-range missiles and radio- jamming facilities near Poland to “neutralize” the system.

Obama has said he has “no commitment” to the shield and wants more analysis on whether it will actually work before deciding to proceed or abandon the project.

“In Mr. Obama’s inner circle, they’re saying there is no need to rush with it and it needs to be further analyzed, and we welcome such statements,” Putin said.

International Security

Russia is also hearing “positive signals on NATO expansion,” Putin said. “They are saying that it is possible to provide security for Ukraine and Georgia in various ways and it is not essential to accept them into NATO now,” he said. “We welcome that and are ready to take part in any discussion on working out the best options to ensure international security.”

Western European countries led by Germany on Dec. 2 maintained a veto on membership roadmaps for both countries, defying Bush’s attempts to accelerate NATO entry.

Two weeks later, the Bush administration signed a “charter on strategic partnership” with Ukraine that pledged “to strengthen Ukraine’s candidacy for NATO membership” and concluded a similar agreement with Georgia on Jan. 9.

In the accord, which was signed as Ukraine was negotiating gas prices and transit fees with Russia, the U.S. also vowed “to work closely together on rehabilitating and modernizing the capacity of Ukraine’s gas transit infrastructure.”

‘Dancing’ to U.S. Tune

Talks between Ukraine and OAO Gazprom, Russia’s gas exporter, broke down at the end of December, prompting Russia to halt fuel supplies to and then through Ukraine, affecting supplies in more than 20 countries for almost two weeks. Gazprom said the U.S.- Ukraine accord on pipelines was “suspicious” and suggested Ukraine was “dancing to music” being played by the U.S.

Putin and Timoshenko, with EU mediation, signed a deal on Jan. 19 to resume gas flows. The 10-year contracts oblige Ukraine to pay more for Russian gas and for Gazprom to pay more to Ukraine in transit fees. Yushchenko, though, is unhappy with the deal and wants new talks “no later than in the summer,” said Oleksandr Shlapak, first deputy chief of Yushchenko’s staff, on Jan. 23.

“A new attempt to review these agreements at the presidential level is the best confirmation” that the political instability in Ukraine is a threat to Europe’s energy security, Putin said yesterday.

Source: Bloomberg

Sunday, January 25, 2009

NATO Has 'No Will' To Admit Georgia Or Ukraine

LONDON, England -- NATO is suffering from 'enlargement fatigue' and has no will to admit Georgia or Ukraine, according to Poland's foreign minister Radek Sikorski.

Radek Sikorski is a leading contender to become NATO's next secretary-general.

Mr Sikorski, who is a leading contender to become NATO's secretary-general when the Alliance selects a new chief in April, told The Daily Telegraph that membership for both countries was a "fairly distant prospect".

But he denied that Russia, which attaches great importance to thwarting NATO's enlargement, had achieved a victory.

Ukraine and Georgia were both promised NATO membership at a summit in Bucharest last April. But no timetable was offered and, four months later, Russia raised the stakes by invading Georgia.

Mr Sikorski said that NATO should "maintain the Bucharest consensus" and the "credible promise of membership".

Asked whether the will to admit Ukraine and Georgia existed, however, he replied: "Not at the moment. At the moment, there's a will to encourage them to reform themselves. But I believe all of our institutions, both the EU and NATO, suffer from enlargement fatigue."

He added: "It's always harder to enlarge in a recession."

Yet the onset of "enlargement fatigue" did not amount to a victory for Russia. "I don't have the feeling that Russia has increased its credibility in the last six months," he said.

"The Soviet Union never cut off gas supplies to Western Europe. Soviet strategists had a wonderful expression called 'correlation of forces' which meant all the factors - material and immaterial - affecting any situation. I don't believe that either through the Georgia crisis or the gas dispute Russia has improved the correlation of forces to its advantage."

Mr Sikorski, 45, escaped from Communist Poland and was given asylum in Britain in 1982. While studying at Pembroke College, Oxford, he was a member of the Bullingdon drinking club along with David Cameron and Boris Johnson.

Mr Sikorski took British citizenship - and diplomats say that he kept his British passport until he was made Poland's foreign minister in 2007.

During the 1980s, he was a foreign correspondent, covering the Soviet occupation of Afghanistan for The Sunday Telegraph. His firsthand experience of war in Afghanistan gives him a unique qualification for taking the helm of NATO, which now deploys 55,000 troops in the country.

The Alliance's 26 members will probably choose a new secretary-general at their 60th anniversary summit in April. When NATO Ambassadors meet on Monday, they will begin considering possible candidates, who include Anders Fogh Rasmussen, the Danish prime minister.

As for whether he might be NATO's next secretary-general, Mr Sikorski replied: "I believe that NATO needs continued leadership from the front. We have a war in Afghanistan that we mustn't lose. NATO is the most successful alliance in history and that needs nurturing. I believe that the appointment should be made on merit.

"I'm flattered by such suggestions because they imply that Poland is now a regular member and that indeed we've made worthwhile contributions to NATO and that therefore we deserve to be seriously considered for the top job."

Source: Telegraph UK

Victory: Tymoshenko

KIEV, Ukraine -- In the ongoing blood sport that is Ukrainian politics, Prime Minister Yulia Tymoshenko appears to have scored a key victory over her political rivals — especially President Viktor Yushchenko — in reaching a gas agreement with Russia last week.

Russia's Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko meet in Moscow for talks Jan. 17, 2009.

But analysts say the battle among the country’s ruling elite is far from over, and could spell further instability in the coming months.

Millions in eastern Europe were stranded without electricity and heat just after the new year, when Russia cut off all gas deliveries through Ukraine because of a pricing dispute (about 80 percent of Russian gas headed for Europe traverses Ukraine). Tymoshenko traveled to Moscow Jan. 17, where she and Vladimir Putin, her Russian counterpart, held an all-night session behind closed doors, during which they hammered out an accord that permitted shipments to resume.

Under the accord, Ukraine agreed to pay $360 per 1,000 cubic meters of gas: The amount was 20 percent less than what Moscow was aiming for, but was significantly higher than the $200 that Kiev wanted. At the same time, Ukraine agreed not to raise Russia’s transit price.

Observers took note that it was the two countries’ prime ministers — and not their heads of state, Yushchenko and Dmitri Medvedev — who were tasked with, or more likely took on the responsibility for, brokering the deal. Equally significant was the fact that the two leaders seemed to work well together, a remarkable development given both the acrimonious atmosphere that had characterized the gas dispute and relations in general with the Ukrainian president.

Tymoshenko "has added to her image as a ‘can do’ leader,” wrote Christopher Weafer, chief strategist at the Russian bank UralSib.

“Tymoshenko was the winner,” agreed Mikhailo Pogrebinsky, director of the Kiev Center for Political and Conflict Studies. “She showed herself to be a more acceptable partner for Russia — one with which it is difficult, but in the end possible, to reach agreement.”

Pogrebinsky and others also said that Tymoshenko strengthened her position by apparently eliminating RosUkrEnergo — which is owned by Russian gas giant Gazprom and two Ukrainian businessmen — as the intermediary company that sells Russian gas to Ukraine.

RosUkrEnergo’s activities are highly opaque, but analysts believe — without any documentary proof — that the company, which enjoyed vast profits from its middleman position, is linked to Tymoshenko’s political rivals. By removing it, Tymoshenko has simultaneously added an element of transparency to the Ukrainian gas trade and possibly starved a major source of financial support for her competitors.

“Tymoshenko came out of the tawdry affair looking better than President Victor Yushchenko,” according to an editorial in the English-language Kyiv Post. “He emerged from the deal looking like an incompetent, corrupt bumbler who got caught trying to prop up the shady RosUkrEnergo for reasons of personal gain.”

Tymoshenko's victory may be fleeting, however. The ink was scarcely dry on the agreement before knives were drawn among the Ukrainian political elite, pointing towards further infighting and possibly political deadlock. Oleksander Shlapak, Yushchenko's economic aide, said that the deal might have to be re-negotiatiated. And the president himself lashed out at Tymoshenko, albeit without mentioning his one-time Orange Revolution ally by name.

"We must not blindly believe alluring promises,” he said. “We must not blindly believe politicians who, within an instant, betray the national interest.”

The prime minister gave as good as she got: “I believe that if the president could have secured better conditions, there was no one to stop him.”

Tymoshenko, 48, is a controversial figure in Ukrainian politics. She is a striking figure who sports a halo of blond braid wrapped around her head — almost giving her the air of a mythical heroine. Some supporters practically worship her. Her critics, meanwhile, claim she is corrupt and voraciously ambitious, and point to her extensive involvement with the country’s energy sector, both as a businesswoman and as government deputy minister. She is sometimes referred to as the “gas princess” or “Lady Yu.”

She is also the political leader most closely associated in the public mind with the economy, and as the country’s financial woes deepen, she may suffer for this. Analysts anticipate political and social unrest in the spring.

“The most important issue at the moment is the economic crisis,” said Volodymyr Fesenko, director of the Penta Center for Political Studies. “Tymoshenko’s victory may be relative and short-term.”

Source: GlobalPost

The CIA's Secret Triumph

MOSCOW, Russia -- Under the rules of the Swedish Academy, the Nobel Prizes archives may be opened 50 years after the awarding takes place. Thus, the documents of October 1958 may be declassified in January of this year.

Russian poet Boris Pasternak

This is a notable date for Russian culture. That year, the Academy awarded a Nobel Prize in literature to Soviet poet Boris Pasternak.

Now that the archives have been declassified, the circumstances of the loudest scandal in the history of Nobel Prizes will be finally scrutinized.

The story of the Pasternak award was crowned with quite a sensation. It transpired that the CIA made a contribution to the award. It was the CIA that printed the first Russian version of "Doctor Zhivago" without which Pasternak's nomination would not have been discussed because the Nobel Committee only reviews fiction in the original.

Needless to say, Pasternak himself had nothing to do with intelligence. His genius was simply used as a powerful weapon in the Cold War between the West and the East. Until recently, this detective story has been couched in a thick veil of secrecy. It was solely owing to the persistence of philologist Ivan Tolstoy (from the famous Tolstoy family) that the secret was revealed and made public. It took him 20 years to resolve the enigma.

Boris Pasternak started writing his legendary novel soon after the end of WWII, in 1946. It took him ten years. Upon completing it in January 1956, Pasternak started to wonder what to do next. The novel that was eventually called "Doctor Zhivago" (the initial title was "The Burning Candle") ran counter to the principles of Soviet literature. Should he just shelve it until better times? But when will these better times come, if at all? Also, he was no longer young.

Pasternak decided to try to get it published. He took the novel to the editorial office of the popular literary journal Novy Mir. At the same time he gave a huge folder with its typed version to the young Italian journalist Sergio D' Angelo.

A Moscow radio broadcaster, the Italian was looking for new Soviet novels for Giangiacomo Feltrinelli, a Milan-based ambitious young Italian publisher with communist views. Having found out about the new novel, the Italian journalist rushed to Peredelkino, outside Moscow, where the writer lived, and Pasternak handed it to him without any hesitation.

Having learned about this, Pasternak's wife Zinaida almost burst into tears. She had no illusions about the consequences - arrest, a labor camp, separation. The poet was trying to put a good face on the matter, and reassured his family but felt that the clouds were gathering over him.

Nonetheless, he decided to go to the end and gave two more typed copies to another two foreign visitors - British essayist and philosopher Isaiah Berlin, and French specialist in Slavic Studies Helene Peltier.

At this point, secrecy cast its first shadow on the story. The CIA found out about Pasternak's novel. Its Russian section understood full well what political benefits could stem from the publication of a novel which was bound to be banned at home. It only remained to get the text.

Here comes the most mysterious episode of the story. The aircraft carrying a passenger with a copy of the novel was ordered to land in the airport of Malta in the Mediterranean. The pilot apologized for the stopover.

The annoyed passengers went to the airport's departure lounge, while CIA agents found the right suitcase, took out the text, and photographed it page by page. They put the text back into the suitcase, and two hours later the aircraft was airborne again. The passengers arrived at their destination. The owner of the suitcase was in blissful ignorance of what had happened with it.

Approximately at the same time the KGB found out that Pasternak's novel had been taken abroad. The events began snowballing into an avalanche. The Novy Mir journal rejected the novel, and reprimanded the poet for the inadmissible text; the KGB and the Soviet Communist Party Central Committee exerted pressure on the publisher from Milan through the Italian Communist Party, but Feltrinelli published the novel and demonstratively quit the party.

On November 23, 1957, the novel went out of print in Italian and exceeded all expectations. Its first edition of 12,000 copies was sold out in a matter of days. More copies were printed every two weeks but a boom did not subside. It became world famous, and was translated into English, German, and French. In the spring of 1958, Albert Camus nominated Pasternak for a Nobel Prize.

However, under the Nobel Committee's rules, the novel had to be in the original. Here the CIA-copied version came in handy. Every hour counted in what was a now-or-never situation. Through proxy funds, the CIA gave money to urgently publish the novel in Russian. To cover up the traces of stealing, the CIA made galleys from the photocopies and printed the Russian version in the academic publishing house of Muton in the Hague without any copyrights in the August of 1958.

The Swedish Academy had no more obstacles for awarding Pasternak, and on October 23, 1958 the Nobel cannon shot at the Soviet government. Pasternak received a Nobel Prize for outstanding merits in modern lyric poetry and for continuing the traditions of the great Russian novel.

Pasternak sent a reply cable: "Immensely thankful, touched, proud, astonished, abashed."

He naively hoped to go to Stockholm and receive his Nobel Prize from the hands of the King but the authorities twisted the arms of the woman he loved, Olga Ivinskaya. Stunned by such consequences and gripped with fear for his beloved, Pasternak turned down the Nobel Prize, and sent a relevant cable to Stockholm.

The CIA operation was a success. The Soviet Union received a tangible blow.

The Pasternak story revealed the shattering power of anti-Soviet literature in the West. Pasternak paved the way to a whole series of anti-Soviet publications which were crowned with the sensational "Gulag Archipelago," for which the dissident Alexander Solzhenitsyn was also awarded a Nobel Prize.

Source: RIA Novosti

Cleaning Up Ukraine

LONDON, England -- Ukraine needs to reform its corrupt gas sector and reduce its dependency on Russia. It's in the EU's interest to help.

Russia spread its message in this website and in EU capitals that this was a "commercial" dispute, and that Ukraine was to blame.

The war in South Ossetia in August last year evidently taught Russian leaders the value of PR: however shaky your story, it's worth getting your side out there as loudly and as often as possible.

Well before the dispute began, the Russian side was spreading its message in foreign-language media and in EU capitals that this was a "commercial" dispute, and that Ukraine was to blame. They set up a website to provide "facts" about the dispute. The site also carried English-language media reports that followed their interpretation.

Even if we accept the argument that the spat began as a commercial argument, Moscow's PR efforts, combined with their actions during the crisis, have demonstrated a clear political aim: to discredit Ukraine and its leaders in the eyes of the EU and Ukrainians.

By showing Ukraine as an unreliable transit partner, Russia hoped to push its case for the Nord and South Stream pipelines bypassing the country and to gain some amount of control over Ukraine's pipeline network. In this way it hoped to undermine Ukraine's primary bargaining tool in gas negotiations: its control over gas pipelines.

Two of the main accusations about Ukraine's reliability need questioning. First, Russia accused Ukraine of siphoning gas from transit supplies, the reason originally given for cutting flows. The jury remains out on this, but EU energy commissioner Andris Piebalgs has said he has seen no evidence that Ukraine took gas without permission.

Second, Russia accused Ukraine of not keeping its side of the agreement to resume gas supplies to Europe on 13 January. But not only did the Ukrainian side complain that the gas was sent in such a way that made delivery impossible, this was also confirmed by independent analysts and EU sources.

To deliver the gas would have required supplies to be cut off to the populous areas in the east of the country, leaving the Ukrainian authorities between the devil (an angry EU waiting for deliveries) and the deep blue sea (a backlash from Ukrainians already angry at their handling of the economic crisis).

One of the more ironic accusations from the Russian side was made by Russian prime minister Vladimir Putin on 8 January, when he blamed the crisis on the "high degree of official corruption" in Ukraine and the fact the Ukrainian leaders were fighting for "the possibility to maintain one or other intermediaries so that they can use the proceeds for their personal gain and also get resources for future political campaigns."

The intermediary concerned was RosUkrEnergo, set up by none other than then-Russian president Putin (along with ex-Ukrainian president Leonid Kuchma) – 50% of which is owned by Gazprom.

Gazprom itself has been described by one economist as "effectively an economic crime syndicate"; insiders have spoken of private slush funds and given detailed accounts of the complex nexus of political and business interests at its heart.

Ukrainian prime minister Yulia Tymoshenko has, by and large, been singing from the same hymn sheet in obliquely accusing Ukrainian president Viktor Yushchenko of corruption through RosUkrEnergo.

It suits both her and Putin to try to weaken Yushchenko. Tymoshenko is involved in a long-running political battle with the Ukrainian president, and should win points at home for showing she can do a deal with Russia and removing RosUkrEnergo from the trade; Putin is furious with Yushchenko for his moral support of Georgian president Mikhail Saakashvili during the war with Russia in August last year and clearly wants a more pliant leader in Kiev.

But there has been one clear winner in the gas crisis – Ukraine's pro-Russian opposition leader Viktor Yanukovych. Already benefiting from public dissatisfaction at the authorities' handling of the economic crisis, the man defeated by the Orange Revolution has been able to pose as the only one who could strike a good deal with the Russians and follow Moscow in blaming Ukraine's "Orange" leaders for the problem.

A recent poll put support for Yanukovych in the upcoming presidential elections at 23%, compared with Tymoshenko at 14% and Yushchenko at 5%.

The relative success of Russian PR (compared to previous efforts) has been enhanced by the Ukrainian leaders' propensity to consistently shoot the country in the foot with their infighting and inability to deal with the corruption that cripples the country's gas sector.

But the PR drive failed in its aim to obfuscate the corruption problems on Russia's own side of the gas trade and redefine our image of Gazprom as a purely commercial entity. In fact, by focusing on the Ukrainian side of the problem it has highlighted the country's potential role in a solution.

By giving Ukraine incentives to clean up its gas sector, the EU can put to the test the claims of all three of its top political figures to be pro-European and at the same time reduce Ukraine's dependence on Russia.

Source: Guardian UK

Gas Deal Gives Opportunites To Make Tough Decisions

KIEV, Ukraine -- Ukraine, by signing a normal, long-term contract with Russia for Central Asian gas, took a major step forward, bringing it in line with European economic realities.

An employee at the Orlovka gas-compressor station near the Ukrainian-Romanian border.

How will the new price arrangement impact on the Ukrainian economy in 2009 and beyond? Will the country be able to pay the new gas prices? Will it finally begin to revamp its energy intensive economy and live within its means?

For the past 10 years, Ukraine has been buying Turkmen gas, the price of which was not linked to the price of oil or to the laws of supply and demand. The formula for determining the final price was based on the arbitrarily negotiated price reached by Ukraine (later by Gazprom) with the unstable and highly corrupt former president of Turkmenistan, Saparmurat Niazov, plus the cost of transit from Turkmenistan to the Ukrainian border –roughly $40 for 1,000 cubic meters.

It is therefore incorrect to say, as Vladimir Putin often does, that Russia has been subsidizing the price of gas to Ukraine. RosUkrEnergo’s Dmytro Firtash also has spread this lie in his recent television appearances by claiming that he and RUE subsidized Ukraine to the tune of over $2 billion. The truth is that Turkmenistan sold gas at a lower price than Russia, and Ukraine took advantage of this. The only subsidy was the abnormally low transit tariff Ukraine charged Gazprom and RosUkrEnergo.

The large price difference between Turkmen gas and Russian gas – which was pegged to the price of oil – left a large margin of profit for intermediary companies such as RosUkrEnergo. It bought Turkmen gas as part of the Russian-Ukrainian gas contract and then resold part of the volume to European customers at close to European prices, making a huge profit on this.

According to experts, the average European price for gas in 2009, barring any major jump in the price of oil, will be in the range of $210-$240 for 1,000 cubic meters.

This will create mild hardships for the already ailing Ukrainian chemical and metallurgical industries, which will have to pay slightly higher prices for their energy-intensive production needs. These prices, however, will be lower than what European chemical and steel producers are paying, but higher than those paid by Russian producers, Ukraine’s main competitors.

Yet grave problems are bound to arise for Ukraine in the future. These need to be examined in order for future Ukrainian governments to prepare for the gathering storm.

The newly signed Ukrainian-Russian gas contract will expire in 2019. A major provision in the contract obliges Ukraine to pay the full European price for gas (without the 20 percent discount Ukraine will get in 2009) beginning in January 2010. Russia at that time will begin paying Ukraine the European transit tariff for gas going to Europe. Presently this tariff is $1.70 per 1,000 cubic meters for 100 kilometers; in 2010 it is scheduled to rise to about $4. According to press reports, the $4 transit fee will remain fixed until 2019, even if European transit fees increase – or decrease.

In the first quarter of 2009, when the new price of gas will be relatively high, Ukraine should be able to cushion the pain by continuing to rely on its own gas stored underground and not buy large quantities from Gazprom. By the second and third quarters of the year, the price should continue dropping in line with the price of oil 9 months earlier (thus in September 2009, the gas price will be calculated based on the price of oil in January 2009 - $50-$35).

If the world-wide recession ends by late 2009, oil prices are likely to rise. If the recovery continues into 2010 and beyond, it is almost certain that oil prices will rebound to $80-$90 or more per barrel and the European price for gas will reflect these price increases by mid-2011. Ukraine should be prepared to pay about $300-$325 for 1,000 cubic meters of gas at that time. If such a trend continues, it is altogether feasible that Ukraine will pay $350-$450 for 1,000 cubic meters of gas by 2015.

The price for Ukraine in 2015 will also be affected by the North Stream and South Stream pipelines (if they are operational by then) which would most likely lead to a decrease in the volume of Russian gas shipped via Ukraine –thus lowering income from the transit fee.

Ukraine has six years in which to complete a number of critical projects in the energy sphere:

It is essential for Ukraine to drastically reduce its consumption of gas.

The government of Ukraine must encourage new drilling for gas, including coal bed methane and remove the artificial barriers it has created which discourage foreign investors from entering the Ukrainian energy market.

Ukraine should proceed to build an LNG regasification terminal on the Black Sea in order to diversify suppliers. By placing all its bets on Central Asian or Russian gas producers, Ukrainian governments could well find themselves without gas in the future.

The price of gas sold to Ukrainian consumers, both industrial and household users, should be raised in increments to reflect the real price of gas and not maintain a foolish, politically motivated, subsidized price.

Those responsible for energy policy must once and forever come to terms with reality. There is no going back to the old, corrupt schemes with crooked Central Asian leaders or using fly-by-night intermediaries. If Ukraine is to survive as a country its leaders must make hard and painful decisions.

Source: Kyiv Post

Saturday, January 24, 2009

Dubyna Hospitalized After Emergency Heart Surgery

KIEV, Ukraine -- Oleh Dubyna, chairman of Ukraine’s state gas company, Naftogaz, was hospitalized and underwent emergency heart surgery, Prime Minister Yulia Tymoshenko said appearing on TRK Ukraina television channel late on Jan. 23.

Naftogaz head, Oleh Dubyna.

“The head of Naftogaz is in intensive care; he had a very difficult operation on his heart,” she said adding that stress during the gas crisis likely built up upon Dubyna.

Tymoshenko said that Dubyna was under a lot of stress during the gas dispute because Ukraine's president, Victor Yushchenko, gave him "diametrically" different instructions from her government.

"It was very difficult for him," she adding that the president and lawmakers in the Regions party close to middlemen company Rosukrenergo purposefully tried to sabotage her chances of finalizing an agreement before the New Year.

Interfax-Ukraine reported that Dubyna was in stable condition at Kyiv's Feofania hospital, were the country's elite are traditionally treated.

Source: Kyiv Post

Thursday, January 22, 2009

US 'Welcomes' End Of Russia-Ukraine Gas Dispute

WASHINGTON, DC -- The United States said Thursday it "welcomes" the end to the gas dispute between Russia and Ukraine, and offered to help the European Union's efforts to enhance energy security.

Employees at the gas-compressor station Orlovka in the Izmail region, by the Ukraine-Romanian border.

"The United States welcomes the resolution of the gas dispute between Ukraine and Russia. We understand gas flows have been restored to European customers," said acting State Department spokesman Robert Wood.

Both Russian state-run energy giant Gazprom and its Ukrainian counterpart Naftogaz confirmed that gas flows had resumed after they signed a 10-year contract on Monday to end their dispute.

"This incident underscores the need for transparent, market-oriented arrangements for the sale and shipment of natural gas and the importance of diversifying energy supplies," Wood added in a statement.

"The United States stands ready to support European Union efforts to enhance its energy security."

The crisis erupted on January 1 when Russia cut gas to Ukraine's domestic market over unpaid debts and demands for a higher price in 2009.

It escalated six days later, when all supplies for Europe transiting through Ukraine were halted, with Moscow accusing Kiev of stealing gas. Ukraine vehemently denied the allegation.

Source: AFP

Ukraine President, Prime Minister Row Again Before Key Meeting

KIEV, Ukraine -- Ukraine's president and prime minister, at odds over the merits of a deal to restore Russian gas flows to Europe, traded new barbs on Thursday ahead of a meeting of top officials about the agreement.


Prime Minister Yulia Tymoshenko, who praises the accord and the 2009 gas price as a "victory" for Ukraine, said the National Security and Defence Council had no right to derail the deal she struck at weekend talks in the Kremlin.

President Viktor Yushchenko says the deal's provisions for Ukraine to pay European prices less 20 percent damaged the national interest. He made no direct reference to the premier but warned in a speech against "alluring promises".

Yushchenko and Tymoshenko were allies in the 2004 "Orange Revolution" that swept Ukraine's pro-Western leaders to power. They have since been at odds on nearly all policy issues, particularly since Tymoshenko was made prime minister for a second time in late 2007.

In an address marking the 1919 proclamation of a shortlived Ukrainian state that was crushed by the Bolsheviks, Yushchenko said Ukrainians would not be duped by groundless pledges.

"We must not blindly believe alluring promises. We must not blindly believe politicians who, within an instant, betray the national interest," he told dignitaries.

Tymoshenko said a meeting on Friday of the National Security and Defence Council could in no way alter the deal's provisions to do away with what she denounces as "corrupt" intermediaries in trade between the Ukrainian and Russian gas companies.

"I will not allow the president to bring back corrupt intermediaries between (Russia's) Gazprom and (Ukraine's) Naftogaz, no matter what sort of council meeting he holds," Tymoshenko told a news conference.

"I believe that if the president could have secured better conditions, there was no one to stop him. A meeting of the Council should have taken place in the middle of the crisis."

The premier says the Council, whose decisions must in theory be implemented under the constitution, has no powers to overturn the deal clinched in two tough Kremlin negotiating sessions.

In her comments, Tymoshenko renewed her attack on the central bank, saying its "speculative manoeuvres led to such an abrupt and groundless fall in the hryvnia (currency), which has placed the economy in such a difficult position".

The hryvnia fell to 50 percent of its former value late last year, but has since regained ground.

Tymoshenko has urged the president to sack the central bank chairman and said parliament must determine his responsibility in the currency's decline, which has increased the cost of loans taken out by millions of Ukrainians to purchase cars or homes.

A year before a presidential election, Tymoshenko rides high in polls just behind Viktor Yanukovich, the Kremlin-backed candidate initially declared the winner in a rigged 2004 presidential poll that sparked the "Orange Revolution" protests. Yushchenko trails far behind in surveys.

Source: Kyiv Post

It's Been A Gas

KIEV, Ukraine -- As traumatic and as pointless as the three-week gas war seemed to be, Ukraine actually gained a lot from this open conflict. True, the nation’s reputation and its ambitions to integrate more closely with the West took a severe beating.

Prime Minister Yulia Tymoshenko

Many worldwide got the unfortunate impression that Ukraine is ruled by corrupt, incompetent leaders who don’t pay their bills, who steal gas and who don’t play by market rules.

Russia picked this fight for self-serving reasons and its reputation slid much further than Ukraine’s.

But the difference is that Russian leaders don’t care much about their international reputation or, particularly, about integrating with Western institutions. Ukraine does.

Still, the agreement brokered by prime ministers Yulia Tymoshenko and Vladimir Putin – at least as we, Brussels and Washington understand it – will be a big help for two reasons: market prices and transparency.

If Ukraine is finally forced to buy gas at market prices, then perhaps the nation will be less wasteful and more resourceful about its vast energy needs, as well as less subservient to manipulation from Moscow.

Also, if the deal eliminates RosUkrEnergo and other shady intermediaries once and for all, then the notoriously corrupt gas trade stands a chance of being cleaned up.

Tymoshenko came out of the tawdry affair looking better than President Victor Yushchenko.

Yushchenko emerged from the deal looking like an incompetent, corrupt bumbler who got caught trying to prop up the shady RosUkrEnergo for reasons of personal gain.

When Putin, who rules as a Mafia don, can justifiably call you on the carpet for corruption, you are finished politically.

In the end, Yushchenko was left lamely complaining about the price Tymoshenko negotiated.

Still, no true leadership has emerged yet in Ukraine.

Real statesmanship would find ways to improve Ukraine’s reliability, as well as improve its vast but neglected state-owned pipeline network.

Such domestic improvements would let the air out of the arguments for building costly alternative routes – such as North Stream, South Stream and Nabucco – that bypass Ukraine.

Without gas to transport, Ukraine will find itself with hundreds of kilometers of useless pipes.

Source: Kyiv Post

Tuesday, January 20, 2009

Putin Emerges From Gas Wars With Ukraine’s Yushchenko Sidelined

MOSCOW, Russia -- Russia’s gas agreement with Ukraine will warm up Eastern Europe after 12 freezing days without sufficient heat or power. It may also warm up relations between Prime Minister Vladimir Putin and Ukraine, where the deal elevates Putin’s preferred political power broker and weakens his rival.

Russia's Prime Minister Vladimir Putin (R) and Ukraine's Prime Minister Yulia Tymoshenko shake hands after signing documents during a ceremony in Moscow, January 19, 2009.

The accord let Putin portray himself as a strong leader at a time of economic turmoil and boosted Ukrainian Prime Minister Yulia Timoshenko over Putin’s political foe, President Viktor Yushchenko.

“It certainly looks like a good deal for Putin,” said Chris Weafer, chief strategist at UralSib in Moscow. “He has won his game of chicken with Ukraine. It also looks like a victory for Timoshenko. She has emerged as the can-do politician who brokered a deal.”

Yushchenko is pushing for Ukraine to join the European Union and the North Atlantic Treaty Organization over Russian objections. While he and Timoshenko came to power on a pledge of pulling Ukraine from Russia’s influence in the 2004 Orange Revolution, Yushchenko’s popularity has tumbled since a similar gas price dispute in 2006 and Timoshenko has been more willing to deal with Russia.

Russia emerged with its reputation in better shape than after a previous attempt at pushing a West-leaning neighbor around: the August military invasion of Georgia.

Gas Standoff

Putin and Timoshenko presided over the signing of a 10-year contract yesterday, ending a standoff that deprived millions of Europeans of heat and power. Both countries’ reputations have been battered as European leaders called for the building of alternative pipeline routes and faster implementation of nuclear power projects.

Putin took pains to praise Timoshenko after the accord was signed and promised to do “everything we can to support Ukraine.”

“These are the best possible agreements and are fully in the interests of both Russia and Ukraine,” he said. “In this very complicated situation, she took upon herself the responsibility for making these most important decisions, which allowed us to find a way out of a dead end.”

Putin has weakened Yushchenko, 54, more than he was able to undermine Georgian President Mikheil Saakashvili after Georgia’s army was routed in a five-day August war. Russia invaded to protect local Russians in the separatist region of South Ossetia.

Sagging Popularity

Saakashvili, who also is pushing to join NATO, remains in power as his opposition flounders. Yushchenko’s party has a popularity rating of 4.5 percent, according to a survey last month by the Kiev-based Razumkov Center for Economic and Political Studies.

Saakashvili, 41, also can boast pledges from Washington to rebuild the nation’s shattered military and a promise to provide Georgia with $1 billion in humanitarian and economic assistance.

“Saakashvili is luckier,” said Yulia Latynina, a political commentator on the Ekho Moskvy radio station.

In Ukraine, the currency has tumbled 80 percent, the government has sought $16.5 billion in aid from the International Monetary Fund and yields on Ukraine’s $105 billion of government and company debt are the highest of any country with dollar- denominated bonds except Ecuador, which defaulted in December.

To be sure, even if Yushchenko is knocked out of the political arena, Timoshenko, 48, would still face a serious fight against pro-Russian opposition leader Viktor Yanukovych.

‘Continued Infighting’

Ukraine is tired of the “continued infighting between the president and prime minister,” said Kaan Nazli, director of Medley Global Advisors LCC, a New York-based policy intelligence service. “The conflict will first and foremost benefit Yanukovych as the polls show a majority of the Ukrainian public disagree with the government’s handling of the conflict.”

Russian gas flows via Ukraine were halted on Jan. 7 after OAO Gazprom accused Ukraine of siphoning off transit flows for its own needs, a charge the country denies. Europe relies on Russia for a quarter of its gas, 80 percent of which is carried via Ukraine.

The deal will see Ukraine pay higher, European prices for Russian gas starting in 2010, after a 20 percent discount this year. At the same time, 2009 transit fees paid by Russia to send gas through Ukraine will remain at last year’s level.

Russia can use the money. While gas prices are based on oil prices, currently falling, Gazprom would have earned an extra $12 billion last year had it charged Ukraine market prices for gas, according to Uralsib. The deal comes as Russia’s economy is poised to enter a recession this year and budget revenue is falling on depressed demand for the nation’s main export.

Putin, 56, touted the accord as putting an end to Soviet-era discounts for Russia’s neighbors and a final shift to transparent market pricing.

“Today’s decision unblocks a range of issues in the economic sphere,” he said after the signing.

Source: Bloomberg

Sunday, January 18, 2009

Gas Issue Points To Ukraine's Failures

KIEV, Ukraine -- In the heady months following the Orange Revolution, after the crowds had swept the democratic opposition into power but before the hopes inspired by the movement had begun to fade, Ukraine's new, American-backed leaders decided to renegotiate the terms on which the country purchased natural gas from Russia.

A worker in Kiev views an indicator board at the main gas distribution center of Naftogaz, the state energy company.

President Viktor Yushchenko, the former banker who defeated the Kremlin's favored candidate, had campaigned on a promise to fight corruption, using the rallying cry, "Put the bandits in jail!" The gas contract with Russia, a notorious source of patronage and cash for the old regime, was a natural target for his new government.

But now, as Ukraine prepares to sign an accord ending an 18-day Russian gas embargo that disrupted energy supplies in much of Europe, the consensus here is that instead of cleaning up the gas trade, Yushchenko's first gas deal left this former Soviet republic more vulnerable to bullying by Russian leaders determined to thwart its turn to the West.

Concessions made three years ago -- under suspicious circumstances, some say -- sharply reduced Ukraine's leverage against Russia in this month's crisis.

More broadly, according to a wide spectrum of political figures, journalists, diplomats and analysts, the Orange Revolution's failure to eliminate the corrupting influence of cheap Russian gas poisoned Ukraine's transition to democratic politics, tarnishing its reputation abroad and leaving much of the public here disillusioned.

"There are no reformers left," said Alexander Dubinsky, a business journalist for the Ekonomicheskie Izvestia newspaper. "After a reformer gains power, he becomes corrupt, too. That's what people think now."

In explaining the importance of access to Russian gas in Ukrainian politics, he added: "All the big money here was made in gas. If you control the gas, you can control industries, you can control politicians."

Early Sunday, Russian Prime Minister Vladimir Putin and his Ukrainian counterpart, Yulia Tymoshenko, emerged from late-night talks in Moscow with the outline of a deal to end the midwinter standoff over gas prices that has left large parts of Europe struggling to maintain heat and electricity for 12 days.

Russia said it would grant a 20 percent discount to Ukraine on European gas prices this year, while Ukraine agreed not to raise the low fee it charges Russia to use its pipelines to deliver gas to Europe.

Tymoshenko was scheduled to return to Moscow on Monday to sign the contract, but the details, which have derailed previous deals, were still being worked out.

Depending on the fine print, the agreement will probably mean a gas price not far from the final negotiating positions of both sides before talks broke down, suggesting that the standoff has always been less about commercial differences than political ones.

Many in Ukraine and the West have seen it as an attempt by Russia to assert its influence in the region and weaken the pro-Western government of a neighbor, a sort of non-violent sequel to its August war against Georgia.

But the crisis also highlighted much of what has gone wrong with Ukraine's experiment in democracy, including a crippling feud between the Orange Revolution's leaders, Yushchenko and Tymoshenko, and a weak judiciary that has been unable to address pervasive allegations of corruption.

The political disarray has played into the Kremlin's efforts to portray Ukraine to the world as a failed state, unfit for membership in NATO and the European Union, and to convince the Russian people of the superiority of Putin's more authoritarian model of government.

"They simply didn't know what to do, and therefore made many mistakes," said Viktor Yanukovich, the pro-Kremlin politician who was defeated in the Orange Revolution and who now leads the largest party in parliament.

Russia has sold natural gas to Ukraine at below-market prices since the fall of the Soviet Union, a legacy of the communist planned economy. But many scholars say cheap gas has hurt Ukraine more than it has helped, creating opportunities for corruption because billions can be made by those with access to the fuel.

The Orange Revolution raised hopes for reform, with the government launching an investigation into the gas sector.

But in September 2005, Yushchenko dismissed Tymoshenko as prime minister, and in January 2006, after a brief standoff, Ukraine and Russia struck a new gas deal. Yushchenko hailed the contract as a victory because it allowed Ukraine to continue receiving gas at subsidized prices for another year. In exchange, Ukraine agreed to charge Russia a low fee to use its pipelines.

It soon became public, however, that the contract allowed Russia to increase gas prices every year but fixed Ukraine's transit fee for five years, a condition that severely weakened its negotiating position this month.

In addition, the deal gave a shadowy intermediary company, RosUkrEnergo, full control of gas imports from Russia, as well as access to the Ukrainian domestic market. Gazprom, the Russian gas monopoly, owns half the firm, and two Ukrainian tycoons say they own the other half. Tymoshenko says the company is a vehicle for corruption benefiting both Russian and Ukrainian officials.

"It was a huge opportunity lost," said Edward Chow, a senior fellow at the Center for Strategic and International Studies in Washington, who argues that Ukraine's failure to reform its gas sector continues to "destroy public trust in its politics, and undermine the interests of its European neighbors."

The gas deal came under attack in the newly assertive Ukrainian press. Yushchenko stood by it while his allies accused its most prominent critic, Tymoshenko, of being upset because her own attempts to profit on the deal had been thwarted. No investigation ever sorted through the competing accusations.

Igor Burakovsky, director of the Institute for Economic Research and Policy Consulting in Kiev, said the situation is typical of Ukraine's incomplete democratic transition. There is free speech and wide access to information, he said, but fervent debate rarely leads to action because of the weakness of the courts and other institutions.

"It creates a cloud of cynicism," he said. "People believe everyone is a thief, but nobody is ever punished."

U.S. officials have urged Ukrainian leaders to reform the gas sector by boosting domestic production, improving energy efficiency and eliminating RosUkrEnergo. But analysts say corruption has worsened because political uncertainty has encouraged short-term thinking. Yushchenko has appointed four prime ministers in as many years.

In 2007, the state energy firm, Naftogaz, tried to determine what it should be charging Russia to use its pipelines. Yuri Vitrenko, the economist who supervised the analysis, concluded Ukraine was getting paid much less than it cost to operate the pipelines and recommended a sharp increase. But the government responded by asking him to justify the lower fee. "They just wanted to keep the old deal," he said.

Yushchenko's failure to bring corruption under control has contributed to a precipitous drop in his approval ratings, from highs near 75 percent after the Orange Revolution to less than 5 percent now.

Bohdan Sokolovsky, Yushchenko's representative on energy security, said the president was not directly involved in the 2006 gas deal and argued it may have been the best contract possible at the time. But he acknowledged that the government needed to do more to reform the gas sector.

"We remain critical ourselves about the too-slow pace," he said, especially "because there were higher expectations" after the Orange Revolution. He added that the government was continuing to work on the problem "step by step."

"The less politics in the energy sector, the more just and open it will be," he said. "This is the position of President Yushchenko."

Tymoshenko, who was appointed prime minister again in late 2007 and is expected to challenge Yushchenko for the presidency this year, told reporters last week that Ukrainian politicians derailed a December deal because she had insisted on cutting out RosUkrEnergo. She did not accuse Yushchenko directly, but only the president would have the power to overrule her.

An official in the president's office fired back Friday, accusing Tymoshenko of being "hooked by Russian special services" and recalling that she made a fortune in the 1990s as chief of a gas trading firm that was investigated for criminal activity.

"We think it was a crime," Hryhoriy Nemyria, one of her deputy prime ministers, said of the 2006 gas contract. "It basically created a situation of strategic vulnerability for Ukraine."

Source: Washington Post