VZCZCXRO4007
PP RUEHIK RUEHLN RUEHPOD RUEHSK RUEHVK RUEHYG
DE RUEHKV #0250/01 0361617
ZNR UUUUU ZZH
P 051617Z FEB 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 7219
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE

UNCLAS SECTION 01 OF 02 KYIV 000250 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/UMB, EEB/OMA 
 
E.O. 12958: N/A 
TAGS: EFIN ECON ETRD PREL PGOV XH UP
SUBJECT: UKRAINE'S TIGIPKO: ONCE AND FUTURE NBU CHIEF? 
 
REF: A) KYIV 169, B) KYIV 243 
 
Sensitive but Unclassified.  Not for Internet or 
Distribution Outside the USG. 
 
¶1.  (SBU) Summary. In a statement that may presage his 
return to higher office, former National Bank of Ukraine 
(NBU) Governor, Rada deputy, and influential commercial 
banker Sergey Tigipko declared on February 5 that the 
economic crisis in Ukraine is being consciously prolonged. 
He blamed inept crisis management, levying his strongest 
rebukes at the NBU for its exchange rate policies, the 
Cabinet of Ministers for its budget, and the three branches 
of government for their wavering.  The timing of his 
remarks was certainly chosen with care, as Tigipko is 
considered to be a top contender to take over the NBU from 
Volodymyr Stelmakh, should President Yushchenko decide to 
drop his support for the disgraced Governor.  Notable also 
is the statement's substance, as Tigipko's knowledge of 
financial matters and professionalism is generally 
acknowledged, particularly when compared to other leaders 
who have consistently failed to take necessary actions 
during the crisis.  End summary. 
 
¶2.  (SBU) Tigipko's criticisms, published in the February 5 
edition of Kontrakty magazine, focused primarily on the 
NBU, an institution Tigipko led until 2004.  In his 
manifesto-like statement, he suggested that Ukraine's 
problems could be solved "in several months, if the country 
had qualified crisis managers" in positions of 
responsibility.  Pointing to the NBU's policy of 
"releasing" the exchange rate "without taking other steps," 
Tigipko said that the NBU's authority as an impartial 
regulator has been lost, leading to a panic among 
depositors and widespread social tension.  He noted 
particular measures that the NBU should now embrace, 
including a greater allocation of liquidity for the 
interbank market to prevent an "unjustified exchange rate 
rush." 
 
¶3.  (SBU) "All three branches of power and the NBU have to 
seriously think about sustaining economic growth," said 
Tigipko, who insinuated that a lack of a coordinated 
response was prolonging the crisis.  Populism has taken 
important structural reforms off the table, even though 
some "clipping of the bushes during wintertime" is urgently 
needed in the budget and state pension system.  "All social 
payments must be totally frozen," Tigipko said.  Weak 
fiscal policy has inhibited a "growth and investment 
budget," necessary for long-term economic development. 
Pointing to Ukrzaliznytsia (the state Ukrainian railroad 
firm), highways, bridges, and other infrastructure 
projects, Tigipko stated, "Investment does not mean 
profiteering and instant gains;" rather, it is "momentum 
for growth."  "If we do nothing now, do not help 
investors," he warned, "later on such help will be of no 
use and there will be no one to help." 
 
¶4.  (SBU) Tigipko is widely rumored to be a potential 
replacement for NBU Governor Stelmakh, who the Rada voted 
to dismiss on January 26 by invalidating Stelmakh's 2004 
appointment as NBU head.  Although the Rada vote has no 
legal standing, it was seen as a symbolic slap in the face 
of President Yushchenko (Stelmakh's ally and friend) and 
the NBU, for its hamfisted handling of a severe currency 
devaluation and for corrupt bank refinancing practices (Ref 
A).  While parliament cannot legally dismiss Stelmakh or 
appoint his successor, it nonetheless attempted to install 
Tigipko in Stelmakh's place, barely failing in this effort 
by a few votes. 
 
¶5.  (SBU) The Rada vote has led to speculation by media 
analysts on Stelmakh's departure and even may have 
concentrated public opinion in favor of Tigipko.  In the 
February 5 edition of Ekonomicheskaya Izvestiya, an 
influential daily, editors conducted an online poll of the 
best potential choice for a new NBU chief.  Tigipko won in 
a landslide vote by the paper's informed readership, 
followed by his former NBU deputy and ex-Rada Speaker 
Arseniy Yatseniuk, who placed a distant second. 
 
¶6.  (U) Tigipko is a current Rada deputy and the chairman 
of Swedbank's Ukrainian subsidiary.  Previously, he was NBU 
Governor (2002-2004) and campaign director for Viktor 
Yanukovich during the 2004 presidential elections.  In 
2007, he sold two major Ukrainian banking assets -- TAS 
Kommertsbank and TAS Investbank -- to Swedish-owned 
 
KYIV 00000250  002 OF 002 
 
 
Swedbank AB.  The reported total of the transaction was 
$735 million dollars, a price some considered above market 
rate for the then 18th and 34th largest banks in the 
country. 
 
¶7.  (SBU) Comment.  To our ear, Tigipko has hit all the 
right notes with his statement.  Budgetary tightening, 
targeted investment, and greater transparency in the 
banking sector are urgent priorities for Ukraine that 
require strong, respected, and well-positioned leadership. 
Moreover, this message has come at a timely moment, as an 
IMF team, in Kyiv at least until February 6 to review the 
Fund's $16.4 billion package, is struggling to gain 
agreement with the NBU on a bank recapitalization and 
resolution framework (Ref B).  With Stelmakh gone until at 
least mid-February and the central bank in limbo, Tigipko 
may be positioning himself for a return to his erstwhile 
job.  At the very least, he is saying what needs to be said 
at a critical moment, while other leaders stand idle or act 
in ways that make the crisis worse.  End comment. 
 
TAYLOR