Saturday, July 31, 2010

Ukraine Sees Iran As A Major Trading Partner

KIEV, Ukraine -- Ukraine is keen to boost trade relations with Iran, the Ukrainian Deputy Prime Minister Serhiy Tihipko stated.

Ukrainian Deputy Prime Minister Serhiy Tihipko

The National Radio Company of Ukraine quoted Tihipko as saying that, “Ukrainian oil and gas industry, as well as aircraft engineering are interested in developing cooperation with Iran and the Ukrainian-Iranian economic relations are very important for both countries.”

He made the remarks during his meeting with Iranian Ambassador to Kiev Akbar Qasemi-Aliabadi.

During the meeting the two sides discussed bilateral trade and scientific-technical cooperation.

Serhiy Tihipko said that after last year’s recession, bilateral trade began to recover rapidly. Thus, Ukrainian exports to Iran since the beginning of the year have grown by more than 40%, while the country’s imports rose by 60%.

“In the Middle East, Iran is one of the key trading partners of Ukraine. It is important that high-tech engineering products comprise a significant share of Ukrainian exports to Iran,” said the Deputy Prime Minister.

Tihipko also pointed to the immense potential of cooperation in the field of aircraft engineering. It is known that Iran already produces and operates the An-140 aircraft, and is interested in the purchase and licensed assembly of An-148. ”Also there is a mutual interest in cooperation in oil and gas production.

Iran has huge deposits of minerals, and Ukraine has many years of experience and technologies. Both sides are prepared for mutually beneficial cooperation,” Serhiy Tihipko said.

The Iranian Ambassador to Ukraine Akbar Qasemi-Aliabadi also said that Iran is interested in exporting gas to West European countries via territories of Georgia and Ukraine.

“We can renew negotiations on transit of Iranian gas via the territories of Georgia and Ukraine to West European countries,” he said, pointing out to a “principally new page” in relations of the two countries.

Re-export of grain crops and steel by using ports of the Caspian Sea and the Persian Gulf was called as another perspective trend of cooperation with Ukraine that will allow substantially increasing goods turnover with the countries of Africa, South Asia and the Persian Gulf countries.

Emphasizing on an advantageous geopolitical situation of Ukraine, Qasemi-Aliabadi pointed out to possibility of cooperation in expansion and setting up new air, automobile and railway corridors.

“Between Iran and many countries in the region, in particular, Iraq, Pakistan, Syria, Afghanistan, as well as with the Latin American countries, joint projects are underway in the fields such as construction of electric stations, dams, oil refineries, setting of railway roads. Ukraine can join these projects on contract basis,” he explained.

Source: Tehran Times

High Price Of Havens

KIEV, Ukraine -- The use and abuse of offshore tax havens are reasons why Ukraine’s budget coffers are far from full. To compensate and keep state finances afloat, Ukraine‘s government has landed another multi-billion-dollar bailout loan from the International Monetary Fund.

For many elderly in richer nations, their last years are "golden" ones – free from the stress of having to worry about work or where their next meal will come from. But many Ukrainian pensioners can only make ends meet by begging, such as the woman above, in downtown Kyiv. This would not be the case if Ukraine’s rich elite stopped pilfering state assets and concealing profits from the government in offshore havens.

The nation‘s oligarchs and loyal political elite continue to profit from these sweet tax deals at the nation's expense. When will the weight of their conscience become heavy enough to make them end this practice, which has cost the nation so dearly?

Back to 1982: It’s the height of the cold war, and the Soviet Union is desperately cultivating allies. The communist heartland signs a generous double taxation avoidance treaty with Cyprus– regulating which of the two countries has the right to levy taxes on subjects operating on both territories.

The landmark treaty gives left-leaning Cyprus most taxation rights upon companies operating in both countries.

The Soviet aim? To provide economic support to a rare European ally, similar to that enjoyed by Finland, and also to develop the Mediterranean island as a conduit for importing goods to the U.S.S.R.

Fast forward to 1992: The Soviet Union is gone, but the treaty lives on for each of the successor states, including Ukraine. Meanwhile, Cyprus has become an offshore tax haven with a corporate tax rate of 4.25 percent – a sweet deal.

With the Soviet republics embarked on a no-holds-barred path towards crony capitalism, the double tax avoidance treaty and low taxes are matches made in heaven for the asset-stripping post-Soviet nouveau riche. Capital flight from Ukraine takes off on a huge scale.

Fast forward further to July 2008: With a major economic crisis hiding just round the corner, Ukraine’s parliament votes on abrogating a treaty that critics claim has seen billions of dollars leave the country for the pockets of the rich over the previous seventeen years. The motion is backed by the government of Yulia Tymoshenko, but fails by only three votes.

Ironically, it was Ukraine’s Communist Party that failed to deliver the three votes needed. Petro Symonenko, leader of a Ukrainian Communist Party which like most domestic political groupings is, reputably, backed by big business tycoons, struggled to explain his party’s behavior.

Defensive, he said the party did not want to damage relations with a country that, as of February 2008, had a Communist Party President, Dimitris Christofias. Skeptics suspect motives closer to party coffers.

If the treaty had indeed been abrogated in July 2008, and the $5.5 billion in Ukrainian financial flows to Cyprus in 2009 subject to Ukraine’s standard 15 percent withholding tax, Ukraine’s state coffers would be around $1 billion richer today: roughly equivalent to the budget sequester recently imposed on Ukraine by the International Monetary Fund in order for the government to borrow more money.

Only since 2007 have information exchange agreements with Cyprus allowed an accurate assessment of Ukrainian funds leaked to Cyprus year after year – $5.5 billion to $6 billion. But one thing is certain: Few countries have a bigger tax haven problem than Ukraine – and few countries have a bigger fiscal problem.

Ukraine has a wealth structure redolent of untaxed income. Huge wealth is concentrated in the hands of a thin layer of super-rich, while most of the population scrapes by on salaries and pensions measured in hundreds of dollars per month. The country goes hat in hand to both Russia and the West.

According to Ukraine’s state statistics committee, direct Ukrainian investment in Cyprus over the last three years accounted for an incredible 92 percent of all outward-going foreign investment by Ukrainian companies. Experts assess the tax revenues lost each year due to the Cyprus double tax treaty at 1-2 percent of gross domestic product (GDP).

Suspension of a far less generous Russia-Cyprus treaty in 2007 immediately boosted Russian tax revenue by 0.6 percent, according to World Bank figures.

Now the international financial institutions Ukraine relies on for funding are demanding that the country ends the Cyprus exemption. “Ukraine should close tax loopholes connected with the U.S.S.R.-Cyprus double taxation treaty,” said Martin Raiser, head of the World Bank mission to Ukraine, who drew up a 100-day plan to rescue Ukraine's state finances.

But with Ukraine's parliament stuffed with businessmen – most of whom actively benefit from the treaty, including the current government's main financial backers – implementing changes will not be easy.

A unique treaty

“The Cyprus-U.S.S.R. tax treaty, as it still applies in the case of Ukraine, is the most favorable double tax avoidance treaty concluded and in force,” said Sophie Stylianou, senior tax manager at Cyprus-based corporate law firm Eurofast Taxand.

“This is a magnificent treaty,” says Volodymyr Kotenko, head of tax and legal services in Ukraine for Ernst & Young. “It is unique. It exempts from tax virtually all income earned by Cyprus residents. And because there is no concept of beneficial owner, it may be equally used if the company registered in Cyprus is only an intermediary for a Ukrainian company or person.”

“The double tax treaty with Cyprus means that dividends, interest and royalties from Ukrainian companies to Cyprus residents are not taxed at all in Ukraine. These payments are only subject to tax in Cyprus. The Cyprus tax rate is zero on all of these items,” explains Hennadiy Voytsitskyi, head of law firm Baker McKenzie’s tax practice group in Kyiv.

“Moreover, while corporate profit tax in Cyprus is very low at only 10 percent, Cyprus itself has no withholding tax on financial flows to other countries, meaning Cypriot-registered companies can transfer money on to tax havens with even lower tax rates.”

“This all makes Cyprus a nice jurisdiction to siphon profits out of Ukraine,” says Voytsitskyi.

According to Volodymyr Didenko, partner for tax questions at leading Ukrainian law firm Magisters, the treaty allows Ukrainian business to achieve 20-30 percent tax savings. “This is not tax evasion, this is completely legal tax avoidance,” Didenko emphasized.

The double tax treaty is, in fact, only half the story, explained Svitlana Musienko, head of DLA Piper’s tax practice in Kyiv. The other half are the tax avoidance schemes companies employ to maximize their benefit from the treaty, which are reflected in corporate structure.

Ukrainian holdings maximize revenue channeled through Cyprus and minimize profits taxable in Ukraine. To do so they employ two mechanisms that enjoy worldwide notoriety for tax avoidance effects: transfer pricing and thin capitalization.

Transfer pricing means that subsidiaries belonging to one international holding skew the prices they charge each other so that company profit is realized where tax is least – invariably a tax haven.

Offshore shareholders use thin capitalization schemes to provide funding to their onshore companies in the form of loans instead of equity. The onshore company’s debt can thus exceed its actual capitalization many times over, hence the term.

The point is that the company then pays interest to shareholders on these outsize loans, instead of declaring profits. Interest is tax deductible for the company in Ukraine and exempt from tax for the offshore shareholder under the terms of the Cyprus double taxation treaty.

The Organization for Economic Cooperation and Development (OECD) states have now declared war on both thin capitalization and transfer pricing, although there are huge difficulties in enforcing such clampdowns, especially regarding transfer pricing.

But in Ukraine, things are a whole lot easier. Both practices are completely legal.

Ukraine has no legislation against transfer pricing, and the Cyprus double tax treaty allows for thin capitalization, according to Pablo Saavedra, tax expert at the World Bank.

According to Musienko, head of DLA Piper's tax practice in Kyiv, Ukrainian companies use Cypriot intermediaries in three main ways: firstly as a holding vehicle, to conduct upstream distribution on profits from Ukraine to Cyprus, and then further on to a final shareholder in a tax haven such as British Virgin Islands.

Secondly, as a finance company used to shift taxable profits from Ukraine to Cyprus through thin capitalization schemes. Thirdly, as an intellectual property company, shifting taxable profits from Ukraine to Cyprus by way of paying royalty for instance for use of some trademark owned by a Cypriot company.

In addition, “most of the ownership vehicles for Ukrainian companies that tapped foreign capital markets for equity are registered off-shore,” said Volodymyr Nesterenko of BG Capital.

Thus, with the exception of state-owned companies, use of Cyprus-based intermediaries is more or less obligatory for Ukrainian big business. But pressure is mounting on Ukraine’s cash-strapped government to broaden its tax base and end tax loopholes. The shadow economy is currently estimated at around 50 percent, most of which is down to underreporting of earnings and of income.

Closing down the scheme

Something has to give, and the most likely candidate is the double tax treaty.

Ukraine and Cyprus already hammered out a replacement treaty in 2008. The new draft treaty incorporates far tougher terms, including a 10 percent withholding tax on interest and royalties, and 5 percent on dividends, according to Magisters’ Didenko.

However, the Cyprus parliament refused to accept the treaty, due to its anticipated impact on the country’s economy, dependent on the tax avoidance industry.

Ukrainian big business is also far from happy. “The 10 percent tax rate is unacceptable for business,” said Didenko. “Companies will not pay it.”

Cypriot finance minister Charilaos Stavrakis visited Kyiv at the end of June to continue negotiations on the issue, and indicated the Ukrainian side may have softened its position. “Ukrainians are very tough negotiators, but I'm still smiling,” he said at a meeting with tax experts, according to Ernst & Young's Kotenko.

The Cypriot finance ministry refused comment on the provisions of the new treaty.

With Ukraine unlikely to abrogate the treaty unilaterally, “a horrible thing to do”, according to Kotenko, it still needs Cyprus to agree to a new version. The shadow cast on Cyprus by the mounting uncertainty is itself a stimulus for Cyprus to negotiate. “Our standard practice is to warn clients about the possibility of change,” said Kotenko.

There is also a new competitor to Cyprus in the eyes of Ukrainian business.

“Investors are now increasingly looking at alternative jurisdictions to structure their Ukrainian operations, such as the Netherlands, which now appears to be preferable in the long-term perspective,” said Serhiy Melnik of Salans law firm in Kyiv.

While Netherlands has a good double tax treaty with Ukraine, its domestic tax rates are substantially higher than Cyprus and it also collects withholding tax on funds moved out of the country.

The first signs of a shift in Ukrainian loyalties from Cyprus to Holland are already apparent. Experts point to recent changes in corporate structure of System Capital Management (SCM), the multi-sector industrial group owned by Ukraine's richest man and high-profile government backer, Rinat Akhmetov.

Until 2009, SCM's Ukraine subsidiaries were owned by Cyprus holding company, SCM Ltd, and the company's website still displays them as such. However, in December 2009, as part of a corporate structure overhaul, SCM eliminated its Cyprus intermediary from the power sector holding DTEK, in favor of a Netherlands-registered holding company DTEK B.V.

SCM’s massive Metinvest holding, one of Europe’s largest steelmakers, is also owned by Dutch-registered Metinvest B.V. SCM investor relations manager Jock Mendoza-Wilson said the reason for the moves was “enhanced transparency.”

With the thirtieth anniversary of the Soviet-Cyprus double tax treaty approaching, its anomalous role in the flawed development of post-Soviet capitalism may be finally drawing to an end.

Source: Kyiv Post

Friday, July 30, 2010

Ukraine's Credit Ratings Raised At S&P After IMF Approval Of New Bailout

WASHINGTON, DC -- Ukraine’s credit ratings were raised by Standard & Poor’s after the International Monetary Fund approved a new $15.2 billion loan program for the country.

S&P raised its long-term foreign currency ratings on Ukraine by one level to B+ from B and the long-term local currency rating to BB- from B+, the company said in a statement late yesterday. The ratings were removed from CreditWatch.

The IMF agreed on July 28 to disburse $1.9 billion immediately, allowing the former Soviet republic to use $1 billion of the first payment to help cover the budget deficit.

The government increased gas prices for households and heating companies to balance the finances of state energy company NAK Naftogaz Ukrainy and agreed to trim the deficit to 5.5 percent of gross domestic product this year and 3.5 percent next year.

“We believe that the IMF program will increase the chances of a stability-oriented policy measures that should increase the resilience of the Ukrainian economy and its public finances,” S&P said in the statement. “The IMF program also reduces the external vulnerability of Ukrainian economy by providing external financing.”

Ukraine got a two-year, $16.4 billion loan from the IMF in 2008 after the global recession cut demand for its exports. The nation received $10.6 billion before payments were frozen in November as the government declined to cut spending ahead of presidential elections at the start of this year.

VTB Loan

Ukraine in June received a $2 billion loan from VTB Group, Russia’s second-largest bank, to help cover the deficit.

“We expect that the first tranche from the IMF will be used to finance the budget deficit and, in particular, to refinance a $2 billion loan received from VTB,” said Anastasia Golovach, an analyst at Renaissance Capital in Kiev in an e- mailed note.

The IMF will provide a second $1 billion for the state budget after the first quarterly review, the IMF said. The remaining $13 billion will go to central bank reserves, it said.

The loan “eases concerns over budget financing for this year,” said Tim Ash, head of emerging market research at Royal Bank of Scotland Plc in London, by e-mail yesterday. The program “should enable rational energy pricing, which will do much to help rein in the quasi-fiscal deficit in the energy sector.”

Ukrainian Gas

Prime Minister Mykola Azarov initially aimed for a deficit target of 5.3 percent of GDP plus 1 percent to cover funds for Naftogaz. The IMF said it wants Ukraine to reduce the budget deficit to 2.5 percent of GDP in 2012. Naftogaz’s deficit should be “eliminated starting from 2011,” the IMF said.

“A long-term permanent shift to a more sustainable fiscal position on the back of a permanent improvement in the finances of Naftogaz and the social security system could lead to further ratings improvements,” S&P said.

“Alternatively, setbacks to political stability, higher-than-projected recapitalization needs for the financial system, or a weakening of the government’s resolve to finalize an IMF lending program, could put downward pressure on the ratings.”

Resumed cooperation with the IMF opens the way for a European Commission loan estimated at 610 million euros ($792 million) and for an $800 million loan from the World Bank, Deputy Prime Minister Serhiy Tigipko said on July 7.

“Fiscal adjustment will start in 2010 and deepen in 2011- 12, backed by robust structural reforms of the pension system, public administration, and the tax system,” IMF Deputy Director John Lipsky said on a July 28 conference call.

Ukraine’s gas industry “will be strengthened, including through domestic price hikes and broader reforms supported by other multilateral institutions, which will help eliminate energy subsidies and create a more modern and viable sector.”

Market Strength

The benchmark UX stock index rose 70.13 points to 2093.85 yesterday, the biggest increase since July 6. Ukraine’s 6.58 percent bond maturing 2016 rose to 101.053, from 100.000. Ukraine’s credit default swaps fell 4 basis points to 514.5, according to data provider CMA.

The IMF action “will be moderately positive” for Ukraine’s Eurobonds “as the approval of the stand-by program has been expected and the market has already accounted for this,” Astrum Investment Management said in a comment for clients.

The decision should cause a further decline in the cost of hedging against devaluation risk, Astrum said. This “should increase the appeal of the Ukrainian domestic bond market for non-residents,” according to Astrum.

Source: Bloomberg

Thursday, July 29, 2010

Vladimir Putin, Moscow Mayor And Patriarch Kirill Promote Russian Interests In Ukraine

WASHINGTON, DC -- Russian Prime Minister, Vladimir Putin, Moscow Mayor, Yury Luzhkov, and Patriarch Kirill flocked to Ukraine last week.

Vladimir Putin (L), Moscow Mayor (C) and Patriarch Kirill (R).

While the official goals of the visits were different, each promoted the Kremlin’s ideology of a single Russian worldview and personally congratulated President, Viktor Yanukovych on his birthday, the man who made it possible for them to preach this ideology in Ukraine.

His predecessor, the nationalist President, Viktor Yushchenko, and Putin, shunned each other. Relations between Kyiv and Kirill’s church were strained, while Luzhkov was persona non grata in Ukraine. These relationships have dramatically changed under Yanukovych.

The guests from Moscow literally felt at home during their visit.

Putin’s July 24 visit to Yanukovych’s summer residence in the Crimea had a rather symbolic meaning. Commenting on a plea by Ukrainian pipe makers to open up the Russian market, Putin nonchalantly dismissed the business dispute as a “family matter,” suggesting that his “special relations with Yanukovych” might help solve it.

The most spectacular event involving Putin’s participation, covered by the Ukrainian and Russian media, was his visit to a bikers’ festival near Sevastopol, a city where the Russian Black Sea Fleet will stay until 2042 and possibly beyond (rather than until 2017 thanks to the gas-for-fleet agreement reached with Yanukovych last April).

Putin played the macho leader, as he likes to do before a domestic audience. Putin drove a Harley-Davidson and addressed bikers, many of whom arrived from Russia, with a speech praising freedom.

Luzhkov’s visit raised controversy even before his arrival. He told a press conference in Moscow on July 19 that he would not change his view on the status of Sevastopol which is “a Russian city,” adding that “We must never leave either Sevastopol or the Crimea;” since losing Sevastopol which is strategically important “would be tantamount to losing the south of Russia,” he told naval officers in Moscow three days later.

The Ukrainian foreign ministry promptly criticized Luzhkov for the statements which “contradicted the recently established atmosphere of constructive and good-neighborly relations between Ukraine and Russia”. This did not prevent him from visiting Sevastopol.

In 2008, Kyiv declared Luzhkov persona non grata for his repeated calls to return Sevastopol to Russia. However, in June 2010, Yanukovych revoked that decision. Luzhkov publicly expressed his gratitude to Yanukovych speaking in Sevastopol’s main square.

He praised Yanukovych’s team for “the atmosphere of friendship and cooperation” and also told the cheering crowd that “the Russian Black Sea Fleet will stay in Sevastopol forever”.

Unlike Putin and Luzhkov, who visited only the Crimea, Patriarch Kirill went to several places including Kyiv. This visit was unlike last year’s, when Kyiv protested Kirill and characterized him as an unwanted guest.

From among the two largest rival Orthodox churches, the Kyiv Patriarchate and the Moscow Patriarchate, Yushchenko clearly favored Kyiv on the basis that he wanted to establish a single national church independent from Moscow.

However, Yanukovych openly sided with the Moscow Patriarchate, whose clergy backed his victorious presidential election campaign in 2009-2010.

From the Moscow Patriarchate’s point of view, Kirill’s July 20-28 tour of Ukraine was a home visit, because the Moscow church is more popular than the Kyiv church among the Orthodox communities in the densely populated and largely pro-Russian east and south.

Kirill pointedly ignored Kyiv Patriarch Filaret who was excommunicated by Kirill’s predecessors for setting up the Kyiv Patriarchate in 1992. Last year, Filaret tried to meet Kirill, but was ignored. The current government made it clear that it supports Kirill, allowing him to preside over a mass in St. Sophia’s Cathedral in Kyiv on July 26.

Prior to his visit, only ecumenical services were allowed there annually, as the cathedral, the cradle of Ukrainian Christianity, has museum status. Filaret’s representatives said they would demand that the government also permit them to serve in St. Sophia’s church in the future.

Yanukovych is unlikely to make such a concession to Filaret, especially after Kirill, who on July 23 decorated him with the Russian Orthodox Church’s highest award, the order of the Holy Prince Vladimir, emphasized that his church was “the absolute antipode” to Filaret’s.

Kirill also ruled out any reconciliation with the Kyiv Patriarchate during the synod which he chaired in Kyiv on July 26. Instead, the synod called on Filaret’s “schismatic’s” to “return to the canonical church through repentance.”

The synod criticized the authorities for interfering in church matters in the past, possibly referring to Yushchenko’s idea of an Orthodox Church independent from Moscow It also stated that nothing should now prevent the followers of Filaret from “repentance”.

Source: Eurasia Daily Monitor

IMF Approves $15.2 Billion Loan To Ukraine After Fiscal Adjustment Pledge

WASHINGTON, DC -- The International Monetary Fund approved a $15.2 billion, 2 1/2-year loan to Ukraine, which agreed to trim its budget deficit and raised natural gas prices to qualify for funding.

The Washington-based institution’s board of directors agreed to disburse $1.9 billion immediately, with subsequent payments subject to quarterly reviews.

“Ukraine is emerging from a difficult period during which the economy was severely hit by external shocks and exacerbated by domestic vulnerabilities,” John Lipsky, the fund’s first deputy managing director, said in a statement.

“Authorities are committed to addressing existing imbalances and putting the economy on a path of durable growth, through important fiscal, energy, and financial sector reforms.”

Ukraine got a two-year, $16.4 billion loan from the IMF in 2008 after the global recession cut demand for its exports. The nation has received $10.6 billion and payments were frozen in November as the government declined to cut spending ahead of presidential elections at the start of this year.

The Cabinet of Prime Minister Mykola Azarov, which was formed in March, failed to reach an accord with the IMF in May.

The government this month increased gas prices for households and heating companies. Under policies attached to the loan, the consolidated general government deficit has to reach 5.5 percent of gross domestic product this year and 3.5 percent next year.

‘Fiscal Adjustment’

“Fiscal adjustment will start in 2010 and deepen in 2011- 12 backed by robust structural reforms of the pension system, public administration, and the tax system,” Lipsky said.

“The financial position of the gas sector will be strengthened, including through domestic price hikes and broader reforms supported by other multilateral institutions, which will help eliminate energy subsidies and create a more modern and viable sector.”

Azarov initially aimed at a target of 5.3 percent of GDP plus 1 percent to cover funds for state-run energy company NAK Naftogaz Ukrainy.

Resumed cooperation with the IMF opens the way for a European Commission loan estimated at 610 million euros ($792 million) and for an $800 million loan from the World Bank, Deputy Prime Minister Serhiy Tigipko said on July 7.

Tigipko said in March Ukraine needs IMF support to boost its economy, which contracted 15.1 percent in 2009, the biggest drop since 1994. Gross domestic product expanded 4.9 percent in the first quarter, according to government figures.

Standard & Poor’s said on July 22 it may for a third time this year raise Ukraine’s credit rating, to B+, after the government reaches agreement with the IMF.

Source: Bloomberg

Wednesday, July 28, 2010

EU Commissioner Says Russia Gas Transits To Europe Best Via Ukraine

KIEV, Ukraine -- Transits via Ukraine remain the most reliable means of transporting Russian gas to Europe, EU Energy Commissioner Gunther Oettinger said on Wednesday.

EU Energy Commissioner Gunther Oettinger

"It is a direct route and it provides the highest technical reliability," Oettinger said during a meeting with Ukrainian Prime Minister Mykola Azarov in Kiev.

"We are now in a dialogue about how best to invest in Ukraine's transport system... and how this investment may make the best business-plan for the future, more successful than South Stream," he said.

Ukraine is interested in modernizing its transport system and is ready to invest in the project, Azarov said.

"However, we must have guarantees that the EU will buy certain gas volumes from Russia, which will then be transported through our territory," he said.

Oettinger also said Ukraine may join the European Energy Community within 12 months. The community's meeting in 2009 approved Ukraine's membership of the organization on the condition it bring its gas laws closer to EU standards.

Some issues remained to be resolved, he said.

Azarov, however, said that Ukraine had met the membership conditions after passing the relevant law in early July.

The commissioner said the European Commission would consider the law within a week.

Ukraine currently transits 80% of Russian gas to Europe. It has been trying to persuade Russia to give up the South Stream project over fears that it will see a serious decline in gas volumes transited through its territory.

South Stream will deliver Russian gas to Western Europe bypassing Ukraine. The offshore part, operated by Russia's energy giant Gazprom and Italy's ENI, will run from Russia's mainland under the Black Sea to the Bulgarian coast.

The launch of the gas pipeline is scheduled for December 2015.

Source: RIA Novosti

Ukraine Church Hit By Explosion

ZAPORIZHYA, Ukraine -- Nine people have been injured in an explosion at an Orthodox Christian church in southern Ukraine, reports say.

An official said the blast in the city of Zaporizhya was believed to have been from a homemade explosive device.

At least one person is said to have been seriously injured.

It comes on the day that Ukraine celebrates the anniversary of its adoption of Christianity, which occurred in the year 988.

Security forces said it also took place during a controversial visit to the country by Russia's Orthodox Patriarch Kirill I, seen by critics as a slight to the country's sovereignty.

"It was a homemade bomb," Ukrainian security services spokeswoman, Marina Ostapenko, said.

A spokesman for the regional interior ministry, Olexandre Volkodav, said a team of investigators was at the scene.

He added that one woman had suffered severe leg wounds.

Source: BBC News

Helsinki Group Says Ukraine Becoming 'Feudal State'

KIEV, Ukraine -- The Ukrainian Helsinki Human Rights Union (UHSPL) says that corruption and human rights violations in Ukraine are on the rise and turning the country into a "feudal state," RFE/RL's Ukrainian Service reports.

Volodymyr Yavorskiy

Volodymyr Yavorskiy, UHSPL's executive director, told RFE/RL that his organization recently completed extensive surveys with the Kharkiv Human Rights Protection Group showing that the number of complaints by Ukrainians about corruption in local politics had greatly increased.

He said most of the complaints were about public prosecutors, mayors, and police -- people whose first duty is to "protect human rights and uphold the law."

Yavorskiy said people living in rural areas "feel completely unprotected; police are not fulfilling their duties." He said local politicians and other elites are also acquiring large plots of land.

Yavorskiy added that people's human rights are being violated in Ukraine but officials are closed off from society and fail to react to people's complaints.

He added that the UHSPL and the Kharkiv Human Rights Protection Group will work together with Amnesty International and other rights groups to publish a more extensive report on the results of their survey in September.

But Yavorskiy said a new draft bill on the holding of peaceful gatherings in Ukraine that is currently in the parliament is an improvement over a similar one proposed by then-Prime Minister Yulia Tymoshenko in 2008.

"If a couple provisions in that bill are changed it is going to be much better and the situation could be really improved compared to the current situation," Yavorskiy said.

"The first thing [in improving the situation] is for people to know and understand when bad things are happening in their country. [It is also important] to see how the international community responds to such things. Ukraine can't be an isolated country."

Yavorskiy said that if the government disregarded human rights in Ukraine, then it would keep the country's economy from developing. He said Western and other countries would not trade as fully with countries that violate human rights.

Yavorskiy said that since Ukrainian politicians were so tightly connected with large businesses in the country, the government would be forced to respect human rights.

Yavorskiy, 33, is a longtime human rights activist who has headed the UHSPL since 2004. As a student he was a member of the Ukraine Without Kuchma movement and was active in the 2004 Orange Revolution as a liaison between the Organization for Security and Cooperation in Europe and Ukrainian opposition groups.

Source: Radio Free Europe

Tuesday, July 27, 2010

Russia: Ukraine: Arrests And Bans During Patriarch Kirill's Visit To Ukraine

MOSCOW, Russia -- Down with the Moscow pope", is the slogan repeated by nationalist demonstrators every time the Patriarch of Moscow and All Russia visits Ukraine.

Policemen stand guard behind members of a Ukrainian nationalist party laying out a flag of Ukraine to protest against a visit by Patriarch Kirill.

In fact it was brandished again today in Kiev, where Patriarch Kirill is on an official visit and were he opened the Synod of the Russian-Orthodox Church. Eight people were arrested for demonstrating against the leader of the Russian Orthodox Church.

In Dnipropetrovsk, however, the authorities have even banned any kind of street protests against Kirill, on this his third trip to the country since being elected in 2009.

In the Patriarch’s attempts to unify the various Orthodox Churches in Ukraine, bringing them back under the spiritual leadership of Moscow, the nationalists glimpse the political objective of the Kremlin to reassert its influence on the former satellite republic.

In Russia the "tour of Ukraine" by Kirill is being closely followed by TV and newspapers, as if it were a state visit. In fact at the very same time, Prime Minister Vladimir Putin met with Ukrainian President Viktor Yanukovich.

After the fall of the USSR in 1991, the Orthodox Church in Ukraine underwent a schism, with some bishops declaring their independence from Moscow.

So far, the Russian Patriarchate has been able to avert their recognition by the global Orthodox hierarchy.

In Ukraine, 80 percent of the 46 million inhabitants are Orthodox Christian, with a third referring to the Moscow Patriarchate.

Beyond the controversy, Kirill’s visit confirms that the unity of the Eastern Orthodox Church is one of his key objectives.

During trip which touched several cities, the Patriarch made the most significant statement on the issue to date in the city of Odessa, tracing what the Russian media have called his "third path".

In the city home to the Kremlin’s Black Sea fleet, where the majority of the population is Russian and relations with the Ukrainian minority are always tense, Kirill spoke for the first time against nationalism as a "dangerous instrument for building societies" which instead, end up living under the "continuing threat of violence."

The alternative to a fanaticism of boundaries, race and ethnicity is "a Western-style multicultural society, but based on a solid structure." "Even in the most multi-ethnic societies like the U.S. – he said - there is always a dominant culture, in this particular case the Anglo-Saxon culture: for Russia and Ukraine it is the Orthodox culture."

And the Patriarch has also listed its core values: "Goodness, the absence of ill will, the spirit of sacrifice and willingness to help others."

The "third path" is realized, then, in a society whose members live according to the "divine law of love."

Source: Asia News

Controversial Moscow Mayor Back In Crimea

KIEV, Ukraine -- Just weeks after losing his status of persona non-grata in Ukraine, the infamous and hard-charging Moscow Mayor Yuri Luzhkov is back in Crimea and making headlines claiming that the peninsula, and particularly the city of Sevastopol, has always been Russian.

Moscow Mayor Yuri Luzhkov

Luzhkov, whom former President Viktor Yushchenko declared “persona non-grata” in 2008 over his comments that the Crimean city of Sevastopol, where the Russian Black Sea Fleet (BSF) is based, should be transferred to Russia, was granted permission to enter Ukraine on July 9. He immediately flew to Kyiv the following day to celebrate President Viktor Yanukovych’s 60th birthday.

But the more disconcerting visit came when Luzhkov traveled to Crimea on July 24-25, which has an ethnic Russian majority and has long been a hotbed of ethnic tension. While there, he visited the Crimean capital of Simferopol, then headed to Sevastopol to meet the city’s mayor, Valeriy Saratov, with whom he signed cooperation agreements between Moscow and Sevastopol for 2011-2013.

Luzhkov also celebrated Russian Navy Day on July 25 along with Russian Prime Minister Vladimir Putin, who came to visit Yanukovych vacationing in a state residence nearby.

But experts say Luzhkov’s visit to Crimea in light of his position that Sevastopol is a “Russian city” sends the wrong signals.

“Allowing Luzhkov, someone who behaves inappropriately and considers Ukraine some sort of mistake, to visit Crimea is an irresponsible act,” said Serhiy Solodky, deputy director of the Institute of World Policy think tank. “If Russia wants to take its relations with Ukraine seriously, it wouldn’t allow people like Luzhkov to come to Ukraine and make such statements.”

Luzhkov said he expresses no regrets and stands by his statements, underscoring the strategic and geopolitical value Sevastopol carries for Russia.

"We must by no means leave Sevastopol and Crimea. This position is firm, and our response to all innuendoes is: Sevastopol is a Russian city and a Russian naval base, which ensures the geo-strategic balance in southern Russia,” he said at a July 22 press conference in Moscow. “Its loss will be tantamount to the loss of southern Russia.”

It is precisely such statements that had made Luzhkov persona non-grata in Ukraine on May 12, 2008, amidst fears of Russia’s increased involvement in Ukrainian affairs in Crimea.

Allegations have abounded in recent years that Russia uses the presence of its once-mighty Black Sea Fleet to monitor the peninsula’s ethnic Russians, in many cases handing out Russian passports in order to claim rights over “their own citizens.”

The situation reached a boiling point in mid 2008, after Yushchenko expelled two Russian diplomats –one from Crimea –on allegations of subversive activities, provoking Moscow to do the same to two Ukrainian diplomats in Russia.

Then, during Russia’s brief war with Georgia the same year, Yushchenko blocked ships from the BSF from returning to their base after deploying on combat missions to the Georgian coast.

Luzhkov, who is known for his widespread and near-absolute power in the Russian capital, has in recent years kept Sevastopol on his personal agenda.

He personally funded the renovation of the missile cruiser Moskva, the flagship of the Russian BSF, and has donated funds in the past for the establishment of Russian Orthodox churches, housing for Russian sailors, and even a branch of Moscow State University in Sevastopol.

But experts said Luzhkov’s heavy-handed support is part of a greater narrative of Russian involvement in Crimea, particularly in Sevastopol. As a city of immense historical importance to Russia, Sevastopol under Ukrainian stewardship is a hard pill to swallow, according to Viktor Chumak, director of the Ukrainian Institute for Public Policy think tank, and while Moscow’s official line is to accept Ukrainian independence, the status quo is one of denial.

“Some Russian politicians see Ukraine as under their historical ownership, and they simply don’t accept the fact that it is now an independent country,” said Chumak. “And Luzhkov is one them.”

As for Ukraine’s rapidly warming relations with Moscow, Chumak said Kyiv is unlikely to make any more shrewd decisions such as banning Russian politicians from Ukraine over questionable statements.

“The current government is built on cooperation with Moscow in whatever respect,” he said. “While it may realize that this endangers Ukraine’s sovereignty, they will allow it so long as it doesn’t threaten their ability to stay in power.”

Source: Kyiv Post

Will Russia Buy Up Ukraine?

KIEV, Ukraine -- The description of Belarusian President, Alyaksandr Lukashenka, as “pro-Russian” has side-stepped the fact that he is a Soviet Belarusian nationalist which developed after 2002, when he rejected the then Russian President, Vladimir Putin’s, offer to unite both countries.

One factor behind Lukashenka’s Soviet Belarusian nationalism is his unwillingness to open up the Belarusian economy to Russian economic take-over. Moscow’s exasperation with Lukashenka partly rests on his economic protectionism in relation to Russia, which closely resembles that of Latin American left-wing nationalism vis-à-vis the US.

Hence, it is not surprising that Lukashenka has developed close ties with left-wing, anti-American populist Venezuelan President, Hugo Chavez.

The election of Viktor Yanukovych brought to power in Ukraine a team with similar pro-Russian sentiments and Soviet nostalgia as that found in Belarus – but with one major difference. Ukraine, unlike Belarus, has undergone a transition to a market economy and the majority of its GDP is produced by the private sector.

Russian investment in Ukraine, and the takeover of strategic sectors of its economy, is therefore more likely than in Belarus. Ironically therefore, Lukashenka looks more like a nationalist than does Yanukovych. Economic protectionism (nationalism) has its supporters in the Yanukovych team, but is directed against Western rather than Russian investors, as the latter are seen as more benign.

This is assisted by the inter-mixing of Russian, Ukrainian and former Soviet capital through Foreign Direct Investment (FDI) from Cyprus and the Virgin Islands, two of the biggest sources of FDI in Ukraine.

When the Yulia Tymoshenko government nationalized and re-privatized the Kryvorizhstal plant to a Western investor, Yanukovych and the Party of Regions criticized the sale on economic protectionist grounds with the plant remaining under Ukrainian control. Kryvoriozhstal was privatized in July 2004 by the oligarchs, Renat Akhmetov and Viktor Pinchuk, for $800 million and re-sold in October 2005 for $4.8 billion to Mittal Steel.

On June 8, Putin had dinner with Yanukovych in Istanbul and told him about his irritation with Akhmetov for causing difficulties with Russian companies trying to buy metallurgical businesses in Ukraine.

Putin pressured Yanukovych to reduce Akhmetov’s influence within the Party of Regions. Such a step would put Yanukovych and Akhmetov on a collision course as the latter is the wealthiest person in Ukraine, closely linked to the Donetsk clan since its incarnation as the Party of Regions in 2001, and hugely popular in that city.

Akhmetov is a major benefactor for the Shakhtiar soccer team and financed the construction of its new stadium opened in July 2008 at a cost of $250 million.
Akhmetov blocked the sale of the Mariupol MMK Ilyich steel plant, one of Ukraine’s top three steel producers, to a secretive group of Russian investors backed financially by Russia’s state-owned Vnesheconombank, chaired by Putin.

Akhmetov’s Metinvest agreed to take a 75 percent stake in the plant and invest $2 billion in return for a merger of the two steel.

Prime Minister, Nikolai Azarov, stated: “The government is on the side of the working collective and will not allow a raider takeover of one of Ukraine’s flagship metallurgical enterprises”. Russian investors Alexander Katunin and Troika Dialog Russian investment bank, had earlier taken control of the Industrial Union of Donbas (ISD) group, one of Ukraine’s top three steel producers.

Zaporizhstal, another large Ukrainian steel producer, is also likely to fall under Russian control.

Such a lack of transparency was also evident in Russia’s acquisition of Luhanskteplovoz, one of the world’s largest producers of rail locomotives. Deputy Prime Minister, Sergei Tigipko, complained about the lack of transparency in the sale and the loss of 200 million hryvnia ($25.3 million).

Russia controls MTC (formerly UMC) and a controlling share in Kyiv Star, Ukraine’s two biggest mobile phone operators, which have led to warnings about the threat to national security if Russia gains access to Ukraine’s mobile phone network.

Russia is also prioritizing Ukraine’s nuclear energy sector. Ukrainian economic expert, Andriy Kolpakov, sees Russian economic expansion into Ukraine in four waves.
The first, metallurgical, was almost fully achieved except for one take-over being blocked by Akhmetov.

The second is beginning in machine building, with the first attempted take-over in Mykolayiv. The third will be into the banking sector.

The final stage would witness a push to take over large areas of Ukrainian land. Russia is not only seeking to acquire Ukrainian blue chip industries in a non-transparent manner, but also land. Moscow will move into food processing at the end of this year and within 2-3 years Russian capital will enter the land market if a moratorium on land privatization is lifted, Kolpakov believes.

First Deputy Head of the Presidential Secretariat, Iryna Akimova, has called for the removal of the moratorium on land privatization. The government will propose a law on land sales by the end of 2010. The Communist and Volodymyr Lytvyn bloc (which includes the renamed Agrarian Party) factions within the ruling Reforms and Stability coalition, who together provide 47 deputies, are opposed to land privatization.

Yet, with defections from the opposition, the coalition has grown to 265 and the government could eventually have sufficient deputies to initiate legislation to privatize land. A high level source told Jamestown that Putin wants his people within the Yanukovych administration to accelerate legislation to enable the privatization of agricultural land in Ukraine.

The same source said Putin has offered to make available $6 billion to Russian businesses to purchase huge tracts of Ukrainian land.

Russian take-overs are non-transparent and unlikely to bring new investment and capital. Their purpose is geopolitical and to remove competitors rather than the profit motive. Akhmetov and Ukrainian oligarchs who supported Yanukovych’s election have been side-lined from the Yanukovych administration, which is controlled by the gas lobby and pro-Russian ideological wing of the Party of Regions who provide it with a link to former communist voters.

The weak influence of the oligarchs, long associated with pragmatism, makes Ukraine’s foreign policy less pro-European as the energy and ideological lobbies increase the influence of the eastern vector. This makes Yanukovych’s foreign policy more pro-Russian and explains why a return to Leonid Kuchma’s multi-vector approach so far has failed to occur.

Source: Eurasia Daily Monitor

Sunday, July 25, 2010

Ukraine: Back From The Grave

KIEV, Ukraine -- Growing confidence that the International Monetary Fund will back a $14.9bn standby loan for Kiev this week, is encouraging the brave to look around,

National Bank of Ukraine

Earlier this month, Ukraine cancelled a $2bn 10year eurobond issue after balking at paying 8 per cent or more. It hopes that with the IMF deal in place it will secure cheaper money - and that investors will still be ready to cough up.

“There will be a window for Ukraine to borrow and market appetite will be strong immediately after the IMF approves assistance,” Tim Ash, emerging markets analyst at the RBS, told beyondbrics. “The appetite for Ukrainian corporates has also been strong and is getting stronger.”

Groups of European bankers were seen in recent days visiting Ukraine on scouting missions, seemingly eager to buy fresh debt from a government desperate to cover a budget shortfall.

After adopting a series of unpopular but economically necessary austerity measures in recent weeks, including budget cuts, Ukraine has a strong chance of landing approval for the IMF loan during when the Fund’s board meets on July 28.

Recently, international debt markets, virtually closed since Ukraine plunged into recession in 2008-9 and the last IMF agreement was suspended, have opened up a little to the recession-battered nation’s oligarchs.

Companies controlled by Rinat Akhmetov, Ukraine’s richest man, have raised nearly $2bn through Eurobond placements and syndicated loans. Akhmetov, who is close to president, Viktor Yanukovich, hopes to use the money to expand his dominant position in Ukrainian steel.

But other sectors are still desperate for finance. Domestic banking was hit hard last year, with the European banks which control more than 40 per cent of the market suffering seriously.

Net banking sector losses are down substantially from last year’s $4bn, but are still high - at about $1.1bn for the first half of 2010. Results of a central bank stress test released this month show that at least one third of Ukraine’s 175 banks need $5 billion in capital injections.

“The banking sector in Ukraine remains fragile,” said Martin Raiser, head of the World Bank office in Ukraine. “For Ukraine, the recovery of the banking sector will play a critical role in recovery. Without the flow of credit, investment will remain subdued and this would impact the pace of post-crisis GDP growth.”

Government figures released this week indicate the economy has rebounded robustly from its 15 per cent plunge last year, posting 6 per cent growth year-on-year in the first half of 2010.

But dependent on steel, Ukraine’s top export, the recovery is fragile. A dip in global steel demand in June had an immediate impact on Ukrainian steel revenues. Meanwhile, a recent survey suggests consumer confidence has slipped after steadily recovering for the first five months of the year.

Further pain is ahead, with utility prices up 50 per cent to meet a key IMF condition. And a summer heat wave is scorching the harvest.

So, investors buying Ukrainian bonds for the long-term may be in for a rough ride. But the yields on offer immediately after the IMF deal could be among the most tempting in Europe.

Source: Financial Times

Russia Proposes Ukraine To Conduct Joint Naval Drills More Often - Navy Commander

SEVASTOPOL, Ukraine -- Russia proposed Ukraine to conduct joint Russian and Ukrainian naval drills more often, Russian Navy Commander Admiral Vladimir Vysotsky said.

Russian Black Sea Fleet warships.

"[There is] a proposal to reduce periods of time between these events," Vysotsky said after parade marking Russia's Navy Day.

He said that the countries should hold naval exercise annually instead of one in a year leaded by Russian and Ukrainian fleets' commanders alternately.

Russia celebrates the Navy Day on the last Sunday of July.

The festivities usually include a military parade, a number of sport and cultural events and an exhibition of skills by naval personnel.

Source: RIA Novosti

Russian-Ukrainian Trade Turnover Reaches Pre-Crisis Level: Putin

FOROS, Ukraine -- Russian-Ukrainian trade turnover reaches pre-crisis level, Russian Prime Minister Vladimir Putin said on Saturday during the talks with his Ukrainian counterpart in the Crimea resort town of Foros.

Vladimir Putin

Putin said he was particularly satisfied with the Russian-Ukrainian cooperation in "high-tech areas - aircraft and space industries".

Russian-Ukrainian relations worsened during the presidency of pro-Western Viktor Yushchenko. In February, 2010 the new President Viktor Yanukovych came to power what resulted in the thaw between Moscow and Kiev.

Both countries saw the improvement of bilateral economic and trade cooperation.

The premier said the countries were dynamically developing the projects on the joint venture on sales of An-series transport and passenger planes.

One of the first projects is the joint production of the An-158 passenger jet. Along with this deal, Russia plans to buy the Ukrainian-designed Antonov An-124 and An-70 military transport aircraft as part of the new state arms procurement program for 2011-2020.

Source: RIA Novosti

Russia's Putin Meets Ukraine's Yanukovych

FOROS, Ukraine -- Russian Prime Minister Vladimir Putin and Ukrainian President Vyktor Yanukovych held talks on a wide-range of issues Saturday in Ukraine.

Russia's Prime Minister Vladimir Putin, right, rides a Harley Davidson Lehman Trike as he arrives for the meeting with Russian and Ukrainian motor bikers at their camp near Sevastopol in Ukraine's Crimea Peninsula, 24 Jul 2010.

The meeting took place at Mr. Yanukovych's vacation home in the town of Foros on Ukraine's Crimea peninsula. Russian media reports say the talks focused on trade issues.

Prior to the meeting, Mr. Putin participated in a motorcycle rally near the port city of Sevastopol on the Black Sea coast of the Crimea peninsula. Mr. Putin roared to the rally on a Harley Davidson mortorcyle where he addressed thousands of motorcycle enthusiasts.

Mr. Putin's visit to the Crimea coincides with Russia's Navy Day, which is observed Sunday. Sevastopol is home to Ukrainian naval forces and to Russia's Black Sea fleet.

Speaking on Saturday Mr. Putin said it was symbolic of the friendship between Russia and Ukraine that both Russian and Ukrainian seamen will celebrate the Russian holiday.

The Russian base at Sevastopol was a major issue of contention between Russia and Ukraine after the break up of the Soviet Union.

Ukraine's previous government wanted the Russian fleet to leave after its lease expired in 2017. However after Mr. Yanukovych came to power in February, Moscow and Kyiv signed an agreement to extend the Russian lease by another 25 years to the year 2042.

Source: Voice of America

Saturday, July 24, 2010

What's Killing The Animals At Ukraine's Biggest Zoo?

KIEV, Ukraine -- Samka the rhino looks sad. When her longtime companion, Boy the elephant, died in April, she watched over his body for an entire day until it was taken away.

Boy's keepers give the elephant a cleaning in this 2009 photo.

Today, the elephant's pen sits empty. Boy is just one of several animals at Kiev Zoo — including a camel, a bison and a zebra — that have died in recent months, some in mysterious circumstances.

As the city carries out an official investigation, the deaths have prompted outrage and denial, with activists accusing the zoo of negligence and corruption and authorities pointing to an anonymous killer as the culprit.

Boy's death has brought fresh attention to a scandal that has been running for months. Serhiy Hryhoryev, a former zoo worker who runs a site campaigning for the rights of the zoo's animals, says the Indian elephant was underfed, kept in poor conditions and stressed by constant changes to the staff of handlers. "By the end, you could see his ribs," says Hryhoryev.

According to animal rights activists, the number of animals at Kiev Zoo has almost halved in the last two years; they accuse the zoo's authorities of shoddy management, corruption and neglect.

The claims stretch into city hall, with critics charging city officials of carrying out shady schemes to privatize the land the zoo is located on in the center of the Ukrainian capital. The zoo's management denies the allegations, as do city officials.

Many of the complaints focus on zoo director Svitlana Berzina, with critics accusing her and her associates of taking kickbacks and leaving the animals uncared for.

Andriy Kapustin, head of the Expert Council, a civic organization chronicling the animal-welfare violations at Kiev Zoo, described it as a "concentration camp" in a May 26 article he wrote for the weekly Levy Bereg.

Berzina denies all accusations of corruption and states that she has been exonerated by numerous investigations.

When questioned by TIME about the mysterious deaths at the zoo, Berzina claims that some of the animals could have been poisoned by "opponents" battling for control of the zoo.

Boiled eggs, which are not part of Boy's diet but were found in the elephant's enclosure after his death, could have been used to deliver poison, she says, as could a potato found with the camels.

She even has a suspect: a man in his forties with an earring. The Kiev police say they have no evidence of poisoning in Boy's case.

The zoo's troubles reach back to before Berzina took over in 2008. The previous year, the zoo — once the largest and one of the best regarded in the Soviet Union — was thrown out of the European Association of Zoos and Aquaria because of concerns over animal welfare.

A visit earlier this month reveals a zoo that has barely moved on from Soviet times, with its creaking, old rides and small, rundown pens and buildings. For years, Hryhoryev says, the zoo has drained huge sums of money from the city budget, "enough to build several zoos." But improvements have been thin and incomplete.

In May, city authorities finally responded to activists' calls for action, suspending Berzina and forming an investigative committee to look into the mysterious zoo deaths. Meanwhile, city hall has already washed its hands of any wrongdoing.

In a statement, mayor Leonid Chernovetskiy appealed to "anyone involved in the animals' deaths in any way" to stop using "our innocent little brothers" as "a stake in your cruel games."

But activists and opposition politicians say the mayor — who appointed Berzina to run the zoo — is a big part of the problem. In his Levy Bereg article, Kapustin suggests the animal's deaths may be a ploy by city authorities, in cahoots with the zoo's management, to reduce the zoo's animal stock as an excuse to move it from the "gold mine" that is the 84 acres of land the zoo sits on.

Opponents have long accused Chernovetskiy and his team of giving away tracts of land to family and associates in sweetheart deals. The council offices were raided in early July by the state security service as part of an investigation into irregular land deals.

City hall declined to comment to TIME on the claims, although officials have publicly denied allegations of improper land privatizations.

Opposition lawmaker Kyrylo Kulykov says an investigative committee in Ukraine's parliament has been set up to look into the broader problem of land corruption in Kiev, but it hasn't started working yet because of "political games."

"We are fighting with the whole state apparatus," says Hryhoryev, the activist. "None of this would have happened if there had been some kind of financial control [over zoo management]." Only when the rule of law is firmly established in Ukraine will the zoo's troubles end, he adds.

Until then, Ukrainians can only hope that the animals stop dying.

On a sunny day in early July, a young boy visiting the zoo runs off toward Boy's enclosure shouting: "The elephant's this way!" But when he gets there all he sees is Samka the rhino lying still and lonely in the neighboring pen.

Source: Time

Putin Rides Harley Davidson "Tricked Out" Trike At Ukrainian Bike Show

SEVASTOPOL, Ukraine -- Russian Prime Minister Vladimir Putin arrived to the bike show in the Ukrainian port of Sevastopol, riding three-wheeled Harley Davidson "tricked out piece of iron".

Russian Prime Minister Vladimir Putin rides a Harley Davidson.

The bikers, gathered at the 14th International annual bike show, welcomed premier who headed the line of bikers. He was riding posh Harley Davidson trike decorated with Russian and Ukrainian flags.

"Bike is the most democratic transport vehicle. Bike is the most daring, challenging as it gives its owner the tempting feeling of freedom, that is why one can say without any exaggeration, bike is a symbol of freedom," Putin said.

The image of the premier was totally matching the biker's one. He was wearing black jeans, black shirt, sunglasses and biker gloves.

"There are such tricked out vehicles, such tricked out pieces of iron, like the one that I ride today," Putin said.

The premier talked to bikers and put his autographs on several bikes.

"You came here, because you are free people, and you can go wherever you want," Putin said, adding it was deeply symbolic that people from all over the Europe gathered at the bike show.

Finally, before leaving the show Putin urged the bikers not to chase the wind.

"Say no to the mad ride," he said.

Source: RIA Novosti

Moscow Patriarch’s Visit To Ukraine Proving Counterproductive

KIEV, Ukraine -- Instead of generating pressure for an end to the independent Ukrainian Orthodox Church, the Russian church leader’s latest visit is in fact “provoking the growth of autocephalous attitudes” in Ukraine, according to an expert on religious affairs.

Patriarch Kirill’s current visit to Ukraine is having the opposite effect he intends.

In a commentary on, Aleksey Malyutin argues that Kirill does not understand that his repeated visits to Ukraine and his use of terms denigrating the independence of that country and its religious communities are having “exactly the opposite” impact the Russian patriarch intends.

It is one thing for Orthodox people in Ukraine “to have the Patriarch as a banner and symbol far away,” Malyutin says, but it is “an entirely different thing to constantly have to cope with his administrative interference,” the scandals involving his limousines and security details, and his “unsuccessful political declarations.”

“All this,” the commentator says, “inevitably leads to the devaluation of [Kirill as] the bright symbol of ‘church unity’ and to the undermining of the very idea of this unity.”

Indeed, Malyutin points out, “not one of the hierarchs likes such constant interference in his see,” whatever Kirill may think.

And as a result the very “frequency and length of the visits” of Kirill to Ukraine “deprive them of the exclusiveness or if one likes sensational quality and gradually reduce them to the level of protocol ritual,” a trend that means his current visit, all the hype of the Russian press notwithstanding “will be less successful than the one he made last year.”

In short, Malyutin suggests, Kirill is overplaying his hand in the religious sphere even more than Vladimir Putin is doing so in the political one, pursuing an approach that is so Moscow-centric that even those who would be willing to cooperate with the Russian center more closely are being driven away.

One reason for the counterproductive nature for Kirill’s approach, the religious affairs specialist says, is that the Russian churchman has shown no interest in going to Western Ukraine, “an inalienable part of his ‘canonical territory’” and the location of a large fraction of Orthodox parishes in Ukraine.

Kirill has tried to reach out to the faithful there by opening a Ukrainian-language version of the official site of the Russian Orthodox Church of the Moscow Patriarchate this month, but the patriarch has shown no interest in going to a place where Ukrainian national identity is strong and where few people would accept his ideas about a single “Russian world.”

Another reason for judging his visit counterproductive, Malyutin suggests, is that despite his reputation for diplomatic skill, Patriarch Kirill in this case is pushing too hard and too quickly for the “resolution of questions,” forgetting that the new rapprochement between Moscow and Kyiv is not proceeding as fast or as consistently as he may want to believe.

An example of such haste is Kirill’s designation of Kyiv as “synodical capital of the Moscow patriarchate” and Odessa as “one of his residences.”

Such statements are “paradoxical” given that “all this is taking place on the territory of the most independent part of the Moscow Patriarchate which independently creates sees, forms bishoprics, and elects a leader.”

As specialists have “frequently and justly noted,” Malyutin notes, “the level of the real independence of the Ukrainian Orthodox church of the Moscow Patriarchate exceeds the analogous measure not only in autonomous but even in autocephalous churches of ‘world Orthodoxy,’” something Kirill has failed to take into consideration.

Moreover, “the Ukrainian church question is very delicate, much more delicate than the question about the relations between Yanukovich and Putin.” That is because historically the Kyiv metropolitanate has been the “mother” see for the Moscow Patriarchate and because Moscow’s subordination of it in 1686 was anything but transparently legal.

Support for Ukrainian autocephaly has “deep roots” extending back to the 19th century and, after Ukraine regained its independence in 1991, these attitudes have only increased.

There is no going back, Malyutin argues, because “in the history of humanity there has not yet been a single empire which has not been subject to dismantling.”

And by his actions, Malyutin continues, Patriarch Kirill is “strengthening autocephalous attitudes within the Ukrainian Orthodox Church of the Moscow Patriarchate,” something that Kirill appears unable to understand given “the deeply rooted imperial stereotypes in the Moscow mentality in relation to Ukraine.”

But in Ukraine, he notes, people “perfectly well understand that the Ukrainian Orthodox church of the Moscow Patriarchate is the most powerful ‘symbolic capital’ of Ukraine because the 17,000 Ukrainian Orthodox parishes (of which almost 12,000 are part of the Ukrainian Orthodox Church of the Moscow Patriarchate) can tilt the balance in Orthodoxy as a whole.”

Consequently, “the latest change in the foreign policy conjunction hardly will lead mechanically to the destruction de facto of the autocephaly of the Ukrainian Orthodox Church of the Moscow Patriarchate.”

Indeed, Malyutin says, “the canonical status of the Ukrainian Church is more stable and fixed than the state status of Ukraine itself.”

Source: Window on Eurasia

Ukraine's Miners Threaten Strike

KIEV, Ukraine -- Ukrainian coal miners said they are about to go on strike unless the government comes forward with payments delayed since April, trade unions said.

An underground nuclear explosion in 1979 stopped coal production in the Young Communard coal mine in Ukraine. Workers at the mine have pumped water out of the site every day for the past 31 years.

The nuclear explosion trapped 95 percent of the radioactivity in the mine. Analysts believe radioactive material could contaminate the groundwater if workers stop their activity at the Young Communard mine.

Nikolai Kvach, the head of a miner's trade union in Ukraine, said his members have not been paid since April and are now threatening to go on strike, Russia's state-run news agency RIA Novosti reports.

"There are a few days left until a social explosion at the plant," he said.

Mine operators in Ukraine are struggling to pay employee salaries. Activists are working to pressure prosecutors in Kiev to launch legal action against the operators in an effort to force them to settle their debts.

Source: UPI

Ukraine To Double Trade Turnover With Russia

KIEV, Ukraine -- Ukraine plans to increase the trade turnover with neighboring Russia to more than 50 billion U.S. dollars by the end of 2010 from 25.8 billion dollars in 2009, Ukraine's Deputy Economy Minister Valery Muntiyan said on Friday.

Russian President Medvedev wants trade between Ukraine and Russia to reach $100 billion, annually.

"In the first half of 2010 the trade turnover between Ukraine and Russia has grown 68.2 percent compared with the same period of last year. Therefore, we believe that we are able to fulfill the task of increasing the volume of trade twice," Muntiyan told a press briefing in Kiev.

"Twelve joint commissions are working actively on different economic areas to expand Ukrainian-Russian trade activities, including the sectors of energy, transportation, communications, engineering, ship-building and aircraft manufacturing," he noted.

During a visit to Ukraine in May, Russian President Dmitry Medvedev stressed Ukrainian-Russian trade turnover should reach 100 billion dollars per year to meet huge potentials between the two countries.

Relations between Moscow and Kiev deteriorated during the presidency of pro-Europe Viktor Yushchenko.

Since Ukraine's new President Viktor Yanukovych came to power in February, 2010, the normalization of political ties between the two countries has resulted in an improvement of bilateral economic and trade cooperation.

Source: Xinhua

Friday, July 23, 2010

Problem With Stray Animals Shows Ugly Face Of Ukraine

KIEV, Ukraine -- If the lives of stray animals are a reflection of the society in which they live, then Ukraine is an ugly place whose international reputation is suffering as a result.

A dog recovers from sterilization in the basement of a state-run veterinary clinic on Yaroslavska Street in Kiev.

Despite taxpayer money and government programs, the number of homeless animals in Kyiv remains high and their treatment often brutal.

In a tiny basement of the state-run veterinary clinic on Yaroslavska Street in Kyiv, a dozen stray dogs are recovering not only from sterilization, but from human cruelty that has left some of their spines broken and eyes poked out. That’s not the worst of it. Beatings, poisonings, torture and murder of stray dogs are frequently reported.

Tamara Tarnavska, director and founder of the private SOS animal shelter in Pirogovo near Kyiv, is taking care of some 2,000 animals. The place used to serve as a slaughterhouse where “homeless animals were clubbed or beaten to death with metal sticks. Some were skinned while still alive,” Tarnavska said.

In 1996, in a documentary about the barbaric executions, Tarnavska, then a journalist, asked: “Can any country in Europe with such inhumane treatment of animals be called civilized?” She is still asking the same question, 14 years later.

“There is money in the budget, programs, laws in Ukraine, which are aimed to fight the problem,” Tarnavska said. “All Ukraine has to do is to make the current system work. But nothing is implemented.”

Although official statistics are lacking, rough estimates are that up to 30,000 stray animals – mostly dogs – roam Kyiv. “Up to 30 percent are pedigreed animals, thrown out as adults or puppies on the streets,” said Iryna Tereshchenko, head of Kyiv-based Youth Animal Protection League.

In 2007, the Kyiv City Council adopted a four-year program to combat the stray animal problem with an Hr 76 million budget. The program was aimed at massive sterilization, creation of animal shelters in every city district, and public education.

Animal protection groups say that if Kyiv would sterilize up to 15,000 animals per year, do a better job clearing the streets of trash and punish irresponsible animal owners, the problem would be easily manageable 5 to 7 years from now.

However, the 2007 program failed, with less than 3,000 animals sterilized in Kyiv last year. No officials want to answer questions about why the program failed or where the money went.

“We could easily sterilize up to 7,000 stray animals per year, but we received nothing for the entire program,” said Vadim Teplyuk, deputy director of a state-run veterinarian clinic in Kyiv’s Troeshina district. Other state-run ones are Animal Shelter in Borodyanka and the Center of Animal Identification.

Mismanagement is another issue. The taxpayer-supported Animal Shelter in Borodynka has 80 employees despite having only 500 animals. By contrast, Tarnavska said the private SOS shelter she runs has only 11 employees for 2,000 animal inhabitants. “For the money that Borodynka spends on salaries, bonuses and other ‘expenses,’ they could have sterilized thousands of dogs,” Tarnavska said.

Top secret

If Ukrainians ever decide to find out how their taxes are spent, they will most likely fail. It is easier to reach a member of parliament than to get statistical data from Borodyanka’s unwelcoming Animal Shelter.

To get in, a person first needs permission from the Kyiv City Administration, which directs inquiries to the shelter’s press service. If a journalist is asking, the questions have to be sent in advance. While waiting for the permission to arrive, questions are fielded by a rude press secretary, Iryna Golovina, who kept repeating over the telephone: “I will not say a word to you until the permission comes.”

It makes a person wonder who the shelter serves and what it is trying to hide.

Who cares?

Stray animals, which can be diseased and dangerous, don’t rank high on the list of government priorities.

“It is not about money, but human resources,” said Tereshchenko of the Youth League of Animal Protection. “There are almost no people who really care about this problem in Ukraine. All the failures come down to that.”

Among those who do care are committed volunteers.

“Often we are forced to pay for sterilization, for transportation of animals, even though we are not supposed to. I cannot afford it with my miserable pension,” said Tetyana Shvets, head of the Animal Protection Society in Kyiv's Shevchenkovsky district.

International best practices in solving the problem of strays involve these steps: massive sterilization; reasonable euthanasia; creation of numerous shelters; punishment for animal abandonment and abuse; and better trash pick-up to remove discarded food that sustains the homeless population.

A long way to go

“While there is trash all over the city, while Ukrainians with impunity throw out thousands of animals, while the Borodyanka shelter keeps catching random dogs instead of hordes, while there is no complex approach, no matter how many animals we euthanize or sterilize, the problem will remain unsolved,” Tereshchenko said.

Activists in Western European countries are joining their Ukrainian counterparts from July 26-31 to seek more humane treatment of animals in Ukraine. The publicity campaign is backed by the U.S.-based People for the Ethical Treatment of Animals, or PETA, which has an international presence.

“We will hold an action week for homeless animals," said Nadja Kutscher, a PETA representative in Germany. "We are asking people to turn to the authorities to urge them to apply humane and effective means to reduce the overpopulation – not cruel killings!”

Source: Kyiv Post

‘Orthodoxy, Autocracy, Nationalism?‘

KIEV, Ukraine -- The intertwining of church and state has deep roots in Ukrainian history. Before 988, the medieval Kyivan Rus was pagan until Prince Volodymyr converted to Christianity and ordered his subjects to adopt the same faith and undergo baptisms.

Religion is again used as political tool.

History professor Volodymyr Serhiychuk, from Kyiv’s Taras Shevchenko National University, said the Orthodox branch of Christianity was chosen for purely political reasons: “Unlike the Roman Catholic Church, which is independent from the state, the Byzantine church was fully patronized by the state.” The Byzantine Empire lasted from 323 to 1453.

Baptisms in the country were forced and sometimes violent as many people resisted the new religion. Many sacred pagan shrines were burned and pagan priests murdered while, for centuries to come, people secretly kept statues of pagan gods in their houses.

In later medieval times, as in the rest of Europe, the church played a huge role in state affairs. “In the 17th century, when part of Ukraine turned to the Russian empire, the Ukrainian Orthodox Church fell from [control by] Byzantium to Russia. In fact, Russians paid 2,000 rubles and numerous sable furs to Byzantine to get control of the Ukrainian church,” Serhiychuk said.

In the 19th century, Russian czar Nicholas I – who reigned from 1825-1855 – even enshrined an official ideology known as “Orthodoxy, Autocracy and Nationalism,” in which the state religion and autocratic elite protected each other’s status at a time when serfdom existed and poor people were treated more as property than human beings.

However, much of the western part of Ukraine, which was a part of the Austro-Hungarian Empire, remained partly Orthodox and partly Catholic– or Greek Catholic, with adherence to Rome while practicing Orthodox rituals. In contrast, Crimea was a Muslim stronghold and Jews were widely spread throughout Ukraine.

After the 1917 Bolshevik Revolution in Russia, communism became the new religion and atheism spread. In the 1920s and 1930s, most churches were either destroyed or turned into storehouses with many priests assassinated.

In post-Soviet Ukraine, closer ties between church and state were revived by President Viktor Yushchenko, in office from 2005-2010. Yushchenko set a goal of uniting the three branches of Orthodox Church in Ukraine. He also made numerous public and well-photographed church visits.

Yushchenko was closer to the Orthodox Church of the Kyiv patriarchy, unlike Yanukovych, who shows his devotion to Moscow patriarchy. A former member of the Communist Party, Yanukovych is resuming a Kyivan Rus-style cohesion of church and state.

“Religion is again used for politics as a tool of straightening the power of the state and bringing the people together, just like in Russia,” Anatoliy Kolodniy, professor of religious studies in Kyiv, said. “Let’s also not forget that Orthodoxy is a huge business.”

Source: Kyiv Post

Thursday, July 22, 2010

Israel, Ukraine Now Visa Free

JERUSALEM, Israel -- Israel and Ukraine signed an agreement canceling visas between the two countries.

Minister of Foreign Affairs Avigdor Lieberman and Ukrainian Foreign Minister Kostyantyn Gryshchenko on Wednesday signed a reciprocal visa cancellation agreement in Jerusalem.

The agreement, which means that Israelis and Ukrainians do not need visas to visit the other country, is "an expression of the good and stable relationship" between the two countries, Lieberman said.

It is the second such agreement Israel has signed. Israel and Russia have had a visa-free agreement for more than a year.

The Shas Party, a member of the coalition government, objected to the agreement, saying it would increase crime and prostitution.

Source: JTA

Putin To Visit Ukraine, Meet Yanukovych On July 24

MOSCOW, Russia -- Russian Prime Minister Vladimir Putin will visit Ukraine for talks with President Viktor Yanukovych on July 24, the Russian government's press service said on Thursday.

Russian Prime Minister Vladimir Putin

Putin and Yanukovych, who last met in Istanbul at the Conference on Interaction and Confidence Building Measures in Asia (CICA) summit in early June, are expected to discuss "current issues of Russian-Ukrainian cooperation and other questions of bilateral interest," the statement said.

In a 60th birthday telegram to Yanukovych on July 9, Putin praised Ukraine's efforts towards "strengthening friendly relations and mutually beneficial cooperation between Ukraine and Russia."

According to Yanukovych's press service, the president will meet on July 23 with Patriarch Kirill of Moscow and All Russia, who is on an eight-day visit to Ukraine.

Russia-Ukraine ties have strengthened significantly since Viktor Yanukovych replaced pro-Western Viktor Yushchenko as president in late February.

Source: RIA Novosti

Opportunity For E.U. Sway In Ukraine

BERLIN, Germany -- When Nico Lange arrived at the Kiev airport last month, border guards told him he was being expelled and deported to his native Germany.

Nico Lange

Mr. Lange, who is the director of the Ukrainian branch of the Konrad Adenauer Foundation, the research organization of Germany’s conservative Christian Democratic Union party, protested. The guards put him in a small detention cell and held him for 10 hours.

Mr. Lange, who had already been detained in April, contacted Chancellor Angela Merkel’s office, the Foreign Ministry and several European lawmakers in Brussels.

Finally, without any explanations or interrogations by the security services, he was released and, at least for now, he can remain in Ukraine, where he has been based for the past four years.

“Maybe the security services wanted to use me in order to set an example for other nongovernmental organizations,” said Mr. Lange, who has written trenchant analyses about the political situation in Ukraine.

The intimidation of Mr. Lange is not unusual in today’s Ukraine, a country where the euphoria of the 2004 pro-democracy Orange Revolution has evaporated. All the more reason, say analysts and diplomats, for the European Union and especially Germany to adopt a much stronger and united policy if they want to prevent Ukraine from sliding away from democracy and moving into the orbit of Russia.

“The great shame is that there is no actual German or European Union policy towards Ukraine,” said Jonas Grätz, security analyst at the Norwegian Institute for Defense Studies, Oslo. “Everything seems to be focused on the reset button with Russia,” a reference to the United States, and now the E.U., improving relations with Russia.

But by making Russia its priority among the countries east of its borders, the E.U. risks losing a still democratic and stable Ukraine, say analysts.

Since Viktor F. Yanukovich was elected the Ukrainian president last February and his Party of Regions took power, journalists, local and foreign nongovernmental organizations and independent television channels have come under pressure from the security services.

Last month, the authorities withdrew the broadcasting license from the 5 Kanal television station. If the decision is upheld, one of the last independent stations will go off the air.

Valery Khoroshkovsky, a media magnate and head of Ukraine’s security services, or S.B.U., is poised to take over the frequencies, a move that will increase even further the growing powers of the security services over the dissemination of news.

Mr. Yanukovich himself has proposed reintroducing “temnyky,” official guidelines for journalists. The abolition of the temnyky was one of the gains of the Orange Revolution.

The pressure on the media has become so intense that the 2010 Press Freedom Index published by Freedom House ranked Ukraine 115th out of 195 countries, alongside Kuwait and Mexico.

More significantly, relations between Ukraine and the Russian leadership, which had opposed the Orange Revolution and which has always supported Mr. Yanukovich, have greatly improved.

President Dmitri A. Medvedev agreed last April to supply Ukraine with cheaper gas in return for Russia keeping its Black Sea Fleet in the Crimea until 2042. Susan Stewart, an expert on Russia at the German Institute for International and Security Affairs in Berlin, estimates that Ukraine will save up to $40 billion over the next 10 years.

Ukraine and Russia later signed an agreement restoring the right of Russia’s counterintelligence services to operate on the base of the Black Sea Fleet, giving them an official foothold in Ukraine.

Ms. Stewart believes Russia’s policy toward Ukraine “is about re-establishing its hegemony in the region so as to become stronger vis-à-vis the West.” The Kremlin has resented Ukraine’s independence ever since the collapse of the Soviet Union in 1991.

Despite using Mr. Yanukovich’s election as an opportunity to entrench itself in Ukraine, Russia has made limited inroads into Ukraine’s economy. Mr. Grätz argues that Ukraine’s oligarchs, who dominate most sectors of the economy, are prepared to challenge this aspect of Russia’s influence.

They would lose out financially if Russian businesses took over the country’s energy resources and gas transit pipelines, which the Kremlin has long coveted.

This is where the E.U. could exercise some leverage. It is willing to offer Ukraine a free trade agreement provided the government embarks on major structural reforms. Such an accord would benefit some of the oligarchs; it would give them access to more markets and make their businesses more competitive.

Since Mr. Yanukovich says he is committed to bringing Ukraine closer to the E.U., Brussels should make any free trade negotiations conditional also on press freedom, an independent judiciary and the rule of law.

“After all, these are the values of the E.U.,” said Mr. Lange. “We should use conditionality in a much more forceful and convincing way,” he added.

E.U. diplomats say they have repeatedly tried to do this with all the leaders since the Orange Revolution, but with little success. The aftermath of that revolution was dominated by infighting between its leaders, Viktor A. Yushchenko and Yulia V. Tymoshenko.

They neglected economic and political reforms, failing to capitalize on their immense popular support and refusing to stamp out corruption. Ukraine is currently ranked 146th out of 180 countries in the annual Corruption Perception Index published by Transparency International.

“There is a massive sense of frustration in Brussels because no matter what the E.U. offers, it receives only empty promises by the Ukrainian authorities,” said Katinka Barysch, deputy director of the Center for European Reform in London.

When the E.U. offered recently to modernize Ukraine’s inefficient energy sector, there was enthusiasm by reformers but reluctance by the oligarchs. Modernization would mean transparency over supplies and prices, eroding the influence of the oligarchs. Russia also opposed the plan: it would make it more difficult to acquire parts of the energy sector.

No wonder then that Brussels is frustrated.

Nevertheless, the E.U., like Germany, is still too focused on Russia to really do something about Ukraine. Were Berlin to establish a separate strategy for Ukraine instead of always looking at the region through the prism of Russia, Europe might have a real chance in halting Ukraine’s slide away from democracy and into Russia’s sphere of influence.

Source: The New York Times