VZCZCXRO9031
PP RUEHDBU
DE RUEHKV #1282/01 0901601
ZNY CCCCC ZZH
P 311601Z MAR 06
FM AMEMBASSY KIEV
TO RUEHC/SECSTATE WASHDC PRIORITY 8507
INFO RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 03 KIEV 001282 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 03/31/2016 
TAGS: PREL PBTS PINR PGOV ETRD PREF OSCE MD UP RS
SUBJECT: UKRAINE/MOLDOVA/TRANSNISTRIA: APPLYING POLITICAL 
AND ECONOMIC LEVERS TO RESOLVE BORDER STAND-OFF 
 
REF: A. KIEV 1160 
     ¶B. STATE 46997 
 
Classified By: Political Counselor Aubrey A. Carlson for reasons 1.4(b, 
d) 
 
¶1. (C) Summary:  MFA Romania and Moldova Division Counselor 
Cornelia Luskalova told us March 30 that the Ukrainian 
government (GOU) was planned to combine political and 
economic levers to return cross-border trade between Ukraine 
and Moldova/Transnistria to normal.  The GOU would urge the 
Moldovan government to reach out to Transnistria-based 
businesses in the hope that, based on their economic 
self-interest, the companies would pressure the Transnistrian 
authorities to allow companies to follow Moldovan government 
customs procedures and permit the flow of transit goods 
through Transnistria.  In the absence of a five-plus-two 
meeting, the GOU might also propose that five-plus-two 
intermediaries and observers (meaning without Moldova and 
Transnistria) meet in Kiev to discuss the current impasse on 
the border.  Luskalova again urged USG support for a proposal 
to relax customs requirements.  The media reported that 
Deputy Foreign Minister Andriy Veselovskiy replaced Dmytro 
Tkach as Ukrainian Ambassador-at-Large on Transnistria.  End 
summary. 
 
A Consolidation Period 
---------------------- 
 
¶2. (C) Luskalova, who said she had just come from an 
interagency group on Transnistria led by the National 
Security and Defense Council (NSDC), told us that a second 
meeting that day, chaired by First Deputy Prime Minister 
Stanislav Stashevskiy, would consider next steps on 
Transnistria at a higher GOU level.  Both groups were working 
on an action plan for the next one to two months.  Ukrainian 
government officials considered that the situation along the 
border with Moldova/Transnistria had stabilized and that, 
during this period, the Ukrainian government needed to apply 
a variety of political and economic levers to resolve its 
dispute with the Transnistrian authorities. 
 
¶3. (SBU) Luskalova informed us that, on the political front, 
the Ukrainian government intended to engage more vigorously 
with the U.S., EU, and Russia to influence the Transnistrian 
authorities.  On the economic front, the Ukrainian government 
would attempt to influence Transnistrian enterprises to 
register with the Moldovan government and observe the 
requirements of its customs agreement with Moldova. 
 
Obtaining Transnistrian Business Buy-in 
--------------------------------------- 
 
¶4. (C) Luskalova noted that the key to resolving the dispute 
with Transnistria was to have Transnistrian enterprises 
register with the Moldovan government.  Some fifteen large 
companies that depended on imports of raw materials from 
Western countries had registered, including the Sherif group 
of companies reportedly operated by Transnistrian leader Igor 
Smirnov's sons.  Luskalova noted that the companies that had 
registered also often had long-term supply contracts with 
foreign customers (note: so presumably would incur penalties 
if unable to meet delivery schedules). 
 
¶5. (C) Luskalova said the Ukrainian government was 
considering several innovative measures the Moldovan 
government could implement to get other companies to follow 
suit.  The suggestions could include: 
 
-- a letter from Moldovan President Voronin to heads of major 
Transnistrian enterprises explaining the registration 
procedures and personally guaranteeing reimbursements of 
Moldovan tax collections; 
 
-- an open meeting of the Moldovan Cabinet of Ministers 
somewhere near Transnistrian territory with an invitation to 
Transnistrian enterprises to attend and receive a briefing on 
registration procedures; and 
 
-- a joint session of the Moldovan and Transnistrian Chambers 
of Commerce. 
 
The Ukrainian government would also urge the Moldovan 
government to resolve Sherif's complaint over 
non-reimbursement of taxes when the customs protocol was in 
effect previously.  Finally, the Ukrainian government would 
ask the EU and U.S. to ask their companies that do business 
in Transnistria to request that their Transnistrian business 
partners observe Moldovan law. 
 
Modified Customs Procedures 
 
KIEV 00001282  002 OF 003 
 
 
--------------------------- 
 
¶6. (C) Luskalova also raised the Tkach proposal (ref B) to 
have Ukrainian customs officials inspect and clear shipments 
to facilitate movement of cargo across the border.  She said 
the Moldovan government had objected to the proposal as the 
transfer of sovereignty to another country, but had provided 
no alternatives. 
 
¶7. (C) Luskalova said the Ukrainian government was preparing 
to table the proposal formally.  In doing so, the Ukrainians 
would suggest that a Ukrainian-Moldovan joint protocol 
clearly specify the timeframe (of two to three months) and 
also have the EU Border Assistance Mission (EUBAM) observe 
the clearance process.  When we noted that the Moldovans were 
prepared to send their customs officials to conduct joint 
inspections with Ukrainian counterparts, Luskalova said 
Ukrainian customs had objected to the proposal as an 
infringement of Ukrainian sovereignty.  Kiev-based EU adviser 
on Transnistria Sabine Stoehr later advised us that, contrary 
to Luskalova's assertion, EUBAM Chief General Ferenc Banfi 
did not support the proposal. 
 
¶8. (C) Responding to our requests for clarification, 
Luskalova said Ukrainian determination to resolve the border 
stand-off was prompted by the losses of Ukrainian companies, 
which were incurring significant additional costs from the 
requirement to use longer routes that skirted Transnistria 
and loss of revenue at Odesa and other Ukrainian ports. 
Luskalova said a large metallurgical plant in Ribnitsa (note: 
probably the Moldovan Metallurgical Plant) in Transnistria, 
was preparing to shut down because it could not export its 
product and this would force hundreds of workers into 
unemployment, even if only temporarily.  Ukraine wanted to 
preserve the requirements of the customs protocol, but hoped 
to modify it to deflect potential criticism that Moldova and 
Ukraine were imposing an economic blockade on the 
Transnistrian region.  Under the proposal, Ukrainian customs 
would issue the appropriate documents, then fax copies to 
Chisinau.  When we noted that, if Ukraine were looking for a 
transitional arrangement, then various possibilities were 
likely, Luskalova said perhaps Moldova would have a proposal 
that did not involve the stationing of its customs officials 
on Ukrainian soil. 
 
¶9. (C) In a March 31 briefing for EU and U.S. diplomats, at 
which Ukrainian Ambassador-at-large for Transnistria Dmytro 
Tkach described in detail the progress of the Russian 
"humanitarian" convoy to Transnistria, Tkach also elaborated 
on GOU reasoning behind his proposal.  He stressed that 
Smirnov had only permitted 15 Transnistrian enterprises to 
obtain Moldovan registrations but, in 2003-2004 when the 
customs protocol had been in effect originally, 364 
enterprises had been registered.  The currently unregistered 
companies included an oil refinery and metallurgical plant 
whose profits contributed 50 percent to Transnistria's 
budget.  Suspension of their operations would contribute to a 
real humanitarian crisis, Tkach commented.  The Ukrainians 
had proposed, and the Moldovan government was ready to 
accept, a proposal for the previously registered companies to 
renew their registration via the Internet.  Once these 
companies were registered, a procedure would still be needed 
to allow their exports to receive the appropriate 
documentation.  Tkach said the Ukrainian proposal was 
designed to do this.  When Stoehr defended EU procedures with 
respect to Transnistrian imports, Tkach cracked that this was 
ground he had covered numerous times with her and EU special 
envoy Jacobovits; he would be happy not to ever have to 
repeat his defense again.  (Note:  This is likely to be 
Tkach's last briefing as Transnistria enovy, since DFM Andriy 
Veselovsky -- see below -- is reportedly replacing Tkach, 
effective immediately.  The appointment will finally allow 
Tkach to focus on his new responsibilities as Ukrainian 
ambassador to Hungary.) 
 
A Five-plus-Two Substitute 
-------------------------- 
 
¶10. (C) Luskalova on March 30, noting that Tkach had heard 
from OSCE Mission head William Hill that the Transnistrians 
and Russians were likely to refuse to participate in the next 
five-plus-two meeting scheduled for April 4-5, said the 
Ukrainians were likely to propose that a meeting of 
intermediaries and observers (i.e., without Moldova and 
Transnistria but with Russia) be held in Kiev in the first 
half of April.  The meeting would focus on a consideration of 
the border situation and next steps regarding the customs 
protocol.  At his March 31 briefing, however, Tkach said the 
Russians had rejected the Ukrainian proposal for a 
"three-plus-two" meeting. 
 
 
KIEV 00001282  003 OF 003 
 
 
Transnistria's Reaction 
----------------------- 
 
¶11. (C) Luskalova said a congress of deputies from all levels 
of the Transnistrian region (from village, district, and up) 
would meet March 31 to review Transnistria's status.  The 
anti-Ukrainian rhetoric in Transnistria was heating up, with 
ordinary Transnistrian residents beginning to view Ukraine as 
the enemy.  Luskalova said, contrary to some reports, 
Transnistrian official Valery Litskai had not notified 
Ukrainian government officials of his intent to visit Kiev. 
She discounted the possibility that he would, shrugging her 
shoulders and asking rhetorically what he might possibly 
accomplish.  She understood that Transnistrian leader Smirnov 
had also ordered Litskai not to visit Kiev. 
 
Bio Note: Veselovsky 
--------------------- 
 
¶12. (C) Veselovsky, who apparently still also heads the MFA 
Policy Department, is one of the MFA officials that FM 
Tarasyuk most trusts.  Tarasyuuk promoted him to deputy 
foreign minister, along with ex-Ambassador to NATO Khandohiy, 
in January 2006 when predecessors Shamshur and Dolhov were 
assigned respectively to be ambassadors to Washington and 
Berlin.  During the August 2000 summit in Yalta, Russian 
President Putin reportedly demanded that then-President 
Kuchma fire FM Tarasyuk, Veselovsky, and then head of 
military intelligence Smeshko for their supposed anti-Russian 
views.  Kuchma complied; two months later, Tarasyuk and 
Veselovsky (then also head of the Policy Department) were 
summarily removed.  Four and half years later, Yushchenko 
restored Tarasyuk to his old job , and Tarasyuk promptly 
recalled Veselovsky from his assignment as Ambassador to 
Egypt to resume the directorship of the Policy Department. 
We became well acquainted with Veselovsky when he was 
responsible for preparations for the December 2005 Community 
of Democratic Choice summit.  He comes across as a cautious 
bureaucrat who is likely to consult carefully with the U.S. 
and EU before adopting a position at the five-plus-two talks 
and will work to reach compromises among the parties. 
 
¶13. (U) Visit Embassy Kiev's classified website: 
www.state.sgov.gov/p/eur/kiev. 
Herbst