VZCZCXRO7603
PP RUEHDBU RUEHIK RUEHLN RUEHVK RUEHYG
DE RUEHKV #2166/01 1560955
ZNR UUUUU ZZH
P 050955Z JUN 06
FM AMEMBASSY KIEV
TO RUEHC/SECSTATE WASHDC PRIORITY 9713
INFO RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE

UNCLAS SECTION 01 OF 03 KIEV 002166 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: OREP PGOV PHUM PINR SOCI PREL ECON CASC KOCI
UP, RS 
SUBJECT: UKRAINE: CODEL BLUNT'S 5/29 MEETING WITH PRESIDENT 
YUSHCHENKO 
 
(U) Sensitive but unclassified.  Please handle accordingly. 
Not for Internet distribution. 
 
Summary 
------- 
 
¶1. (SBU) During a May 29 meeting with CODEL Blunt, President 
Yushchenko characterized Ukraine's economic growth as 
"strong" and predicted that a new Orange coalition government 
would be formed "in a couple of days."  Negotiations over top 
leadership positions had begun May 29 and should be complete 
within "a few days."  Eponymous bloc leader Yuliya Tymoshenko 
would serve either as Prime Minister or Rada Speaker, and 
Yuriy Yekhanurov would fill the remaining position; this 
leadership arrangement would cause some MP defections from 
the Orange camp, but Yushchenko asserted that the new 
government would be able to muster enough votes in parliament 
to pass legislation.  The new government, though Orange, 
would have "constructive relations" with the rival Party of 
Regions, the top vote-getter in the March parliamentary 
elections.  Yushchenko was downbeat on relations with Russia, 
stressing that Ukraine and Europe more generally needed to 
end their energy dependence on Russia.  One way to do that 
was to pump Caspian oil westward via the Odesa-Brody 
pipeline; another was to use Ukraine's pipeline network to 
move Kazakh and Turkmen gas to European markets.  Russian 
opposition to such competition would be fierce, Yushchenko 
explained, adding that USG support for energy diversification 
was critical.  Yushchenko asked for continued USG assistance 
in improving Ukraine's courts and police, both key tools in 
combating corruption.  He also stressed that his government 
had made important progress in curbing the anti-Semitic 
activities of the foreign-funded Inter-Regional Academy of 
Personnel Management.  Yushchenko reviewed his efforts to 
make it easier for foreign companies to do business in 
Ukraine, emphasizing that his government had cut red tape and 
abolished visa requirements for U.S. and EU citizens.  He 
assured the CODEL that Ukraine would place no new 
restrictions on adoptions by Americans and reiterated that 
Ukraine was committed to creating a transparent adoption 
system, though Kiev needed better post-placement reporting 
compliance by American families.  End summary. 
 
Yushchenko On: The Economy... 
----------------------------- 
 
¶2. (SBU) President Yushchenko met May 29 with a Congressional 
delegation led by House Majority Whip Representative Roy 
Blunt (R-MO) that included House Minority Whip Representative 
Steny Hoyer (D-MD), the Chairman of the House Democratic 
Caucus Representative James Clyburn (D-SC), Representative 
Rodney Frelinghuysen (R-NJ), and Representative Sam Graves 
(R-MO).  Yushchenko began the discussion by focusing on 
Ukraine's economy, noting that foreign direct investment and 
wages were rising and that economic growth was strong, up 
2.6% in April.  Government revenues during the first quarter 
of 2006 were up 23% over the same period last year, 
Yushchenko said, adding that 2005 government revenues rose 
51% over 2004, the last year of the Kuchma presidency. 
 
...Coalition Politics... 
------------------------ 
 
¶3. (SBU) Turning to politics, Yushchenko asserted that the 
greatest risk of creating a new Orange coalition was that it 
might "collapse."  To prevent that from happening, he 
explained, leaders from Our Ukraine (OU), the Socialist Party 
(SPU), and the Tymoshenko Bloc (BYuT) had been working on a 
detailed program that all three sides could accept and agree 
to implement; the negotiating had been particularly tough 
with the SPU, which opposed, for example, Ukraine's WTO entry 
and the privatization of state industries.  Yushchenko 
claimed that three sides had finally "worked out" a common 
program, but still needed "a couple of days" to reach 
agreement on "the personalities" for key positions in the new 
government.  Yushchenko related that, in the new Orange 
coalition, Yuliya Tymoshenko and Yuriy Yekhanurov would be 
either Prime Minister or Rada Speaker; there were "pluses and 
minuses" to Tymoshenko serving again as prime minister, 
Yushchenko said, adding that there were more than a "dozen" 
OU and BYuT MPs who would not support a Tymoshenko PM 
candidacy.  But even with those potential defections, he 
asserted, the new Team Orange could muster a majority of 243 
in parliament -- 17 more than needed to pass legislation. 
(Note:  Maintaining the Orange forces' 243-seat majority in 
the face of defections would require the defection of Regions 
or Communist MPs to the Orange side.) 
 
...Working With Party of Regions... 
 
KIEV 00002166  002 OF 003 
 
 
----------------------------------- 
 
¶4. (SBU) Yushchenko stressed that, though Orange, the new 
governing coalition would have "constructive relations" with 
the rival Party of Regions.  That party's interests, 
Yushchenko emphasized, would not be ignored.  Yushchenko 
explained that he had recently held a series of discussions 
with Party of Regions chief Viktor Yanukovych, reviewing a 
wide range of issues -- including Ukraine's possible 
membership in NATO.  Yushchenko characterized the discussions 
as "constructive," noting that Regions "wants to work with 
us" and that some Regions' MPs might wind up "moving into our 
camp." 
 
...Relations with Russia... 
--------------------------- 
 
¶5. (SBU) Yushchenko said that, generally speaking, it was 
still difficult for the Kremlin to acknowledge that Ukraine 
was a sovereign, independent country.  It was hard for Moscow 
to accept that it would have no say in who would become 
Ukraine's next prime minister, foreign minister, or, more 
importantly, first deputy prime minister for energy issues; 
all of these decisions would be made by Kiev alone. 
Characterizing energy ties with Russia as "highly 
politicized," Yushchenko stressed that Ukraine, and Western 
Europe, had to diversify energy supplies and reduce 
dependence on Russia.  One way to do that was to pump Caspian 
oil westward via the Odesa-Brody pipeline; another was to use 
Ukraine's pipeline network to move Kazakh and Turkmen natural 
gas to European markets.  (Comment:  The latter would only be 
possible if Russia offered open transit access to its 
pipelines, since Ukraine has no alternative connection for 
gas from Kazakhstan and Turkmenistan.)  Russian opposition to 
such competition would be formidable, Yushchenko said, and 
Moscow would exploit the EU's lack of a common energy policy. 
 USG support would therefore be critical, Yushchenko said, 
adding that "without such support, the projects are not 
feasible."  Yushchenko also noted to the Congressmen that an 
American firm (note: Vanco) had recently won a tender for oil 
exploration in the Black Sea, and added that he would like to 
see major U.S. firms work with their Ukrainian counterparts 
on aerospace projects. 
 
...Corruption and Anti-Semitism... 
---------------------------------- 
 
¶6. (SBU) Yushchenko asked for continued U.S. assistance in 
strengthening the independence of Ukraine's judiciary and the 
professionalism of its law enforcement community.  Yushchenko 
stressed that both the courts and the police were key to 
tackling corruption, one of Ukraine's major societal ills. 
 
¶7. (SBU) In response to a question from Rep. Hoyer, 
Yushchenko asserted that his government had made important 
progress in combating the anti-Semitic activities of the 
private, foreign-funded Inter-Regional Academy of Personnel 
Management, known by its Ukrainian acronym MAUP.  Yushchenko 
said that he had publicly condemned MAUP for its 
"intolerance" and had issued an administrative order barring 
civil servants from studying or working at any MAUP branch 
campus.  The Ministry of Education had been reviewing the 
credentials of all MAUP affiliates, and had closed six of 
them in March for violating the law.  Moreover, Yushchenko 
said, a criminal case had been opened against MAUP's 
notoriously anti-Semitic weekly newspaper, Personnel Plus. 
MAUP's leader, Hryhoriy Shchokin, had in early May asked him 
to halt the Ministry of Education's credential review -- a 
request that Yushchenko said he declined.  MAUP's activities 
would continue to receive scrutiny from the Presidential 
Secretariat, Yushchenko said, adding the government would 
 
SIPDIS 
make progress against MAUP "month by month."  Yushchenko also 
noted that Shchokin's openly anti-Semitic "Ukrainian 
Conservative Party" had been one of the "big losers" in the 
March parliamentary elections.  (Note:  The Ukrainian 
Conservative Party finished 31st out of 45 contending blocs 
and parties, getting 0.09% of the national vote.) 
 
...Helping American Business... 
------------------------------- 
 
¶8. (SBU) In response to a question from Rep. Frelinghuysen, 
who related that many of his Ukrainian-American constituents 
had found it very difficult to do business in Ukraine, 
Yushchenko recalled that when he took office, there were 
approximately 5,000 regulations that businesses had to comply 
with.  That number had been cut to about 3,000; further 
cutting of red tape was up to the Rada, which Yushchenko said 
needed to pass business-friendly legislation.  Yushchenko 
 
KIEV 00002166  003 OF 003 
 
 
stressed that his administration had, one year ago, 
eliminated visa requirements for the citizens of the U.S., 
EU, Japan and Canada; as a result, the number of people, 
including businessmen, visiting Ukraine during the past 12 
months had nearly tripled (as compared to the period May 
2004-May 2005). 
 
...and Adoptions 
---------------- 
 
¶9. (SBU) In response to a question from Rep. Blunt, 
Yushchenko stressed that Ukraine would place no new 
restrictions on adoptions by Americans and emphasized that 
Ukraine was committed to creating a transparent adoption 
system.  He said that the Ministry of Education had prepared 
a report for him calling for the establishment of a "feedback 
channel" to get information on the welfare of Ukrainian 
children adopted by American families.  The ministry report 
had asserted that the Ukrainian government had no information 
on "two-thirds" of the Ukrainian children adopted by 
Americans since Ukrainian independence.  Remarking that 
"two-thirds is a huge number," Yushchenko explained that his 
political opponents had publicly accused his government of 
permitting Ukrainian children to be sold to foreigners for 
use as involuntary organ donors.  Yushchenko stressed that 
his government needed information on all Ukrainian adoptees 
in order to effectively counter the "baseless allegations" of 
its political opponents.  He complained that some American 
families had failed to provide required post-placement 
reports and had ignored requests for such reports made by 
Ukrainian consular officials in the United States.  More 
transparency and mutual understanding were needed, Yushchenko 
said.  (Comment:  Since the beginning of May, the Ministry of 
Education is no longer involved in adoption issues, so it is 
likely that Yushchenko was referring to a somewhat dated 
report.  The Ukrainian government has never given Embassy 
Kiev overall non-reporting numbers as high as 66%.  It is 
true, however, that a September 2005 report by the Ministry 
of Education asserted that about two-thirds of the reports 
for children adopted in 2004 had not yet been submitted.) 
 
¶10. (U) The delegation cleared this cable. 
 
¶11. (U) Visit Embassy Kiev's classified website: 
www.state.sgov.gov/p/eur/kiev. 
Gwaltney