VZCZCXRO7585
RR RUEHIK RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHKV #2985/01 3440726
ZNR UUUUU ZZH
R 100726Z DEC 07
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 4516
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE
RUEHKW/AMCONSUL KRAKOW 0007
RUEHZG/NATO EU COLLECTIVE

UNCLAS SECTION 01 OF 03 KYIV 002985 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EB/IFD/OIA AND EUR/UMB 
STATE PLEASE PASS TO USTR FOR PBURKHEAD 
USDOC FOR 4201/DOC/ITA/MAC/BISNIS 
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK 
 
E.O. 12958: N/A 
TAGS: EINV ETRD EAID EFIN PGOV PL UP
SUBJECT:  UKRAINE: PLANNING FOR EURO 2012 SOCCER CHAMPIONSHIP 
LAGGING 
 
REF: WARSAW 01332 
 
KYIV 00002985  001.2 OF 003 
 
 
Sensitive But Unclassified. Not for Internet Distribution. 
 
¶1.  (SBU) Summary:  The 2012 European Soccer Championship (Euro 
2012), to be co-hosted with Poland, offers Ukraine opportunities to 
attract USD billions in foreign investment, improve the business 
climate, and make needed infrastructure upgrades.  The event, which 
attracts an immense following in Europe, also offers Ukraine the 
opportunity to showcase itself as a modern European country.  So 
far, however, the GOU has taken few steps to surmount the myriad 
challenges it faces in preparation for the championships.  The 
European soccer body organizing the event has even threatened to 
relocate the championship game from Kyiv because of a dispute over 
the construction of a shopping mall near the city's main stadium. 
The Executive Director for the European Business Association (EBA) 
at a recent EBA meeting noted that the government may be able to 
attract investment more effectively and move Euro 2012 plans forward 
once the political dust settles from the September Rada 
(parliamentary) elections.  A new government, and the President, 
will need to make Euro 2012 a top priority.  Ukraine is not in 
danger of losing the event, but the risk could emerge if the current 
lack of focus drags on far into 2008.  Such an embarrassment would 
be bad for Ukraine's political image in Europe and represent a 
wasted chance for needed investment and economic reform. End 
Summary. 
 
Ambitious Investment Goals 
-------------------------- 
 
¶2.  (U) Ukraine will co-host the 2012 European soccer championships 
with Poland (reftel).  Games are planned in Kyiv, Dnipropetrovsk, 
Donetsk and Lviv, with Odesa and Kharkiv serving as reserve 
locations.  Thousands of soccer fans from throughout Europe are 
expected for the three week spectacle.  The championship is an 
immensely popular sporting event in Europe, ranking only behind the 
Olympics and the soccer World Cup, and will give Ukraine the most 
media exposure it has experienced among ordinary Europeans since 
independence. 
 
¶3.  (U) On November 29, EconOff attended a Euro 2012 Task Force 
Meeting sponsored by the European Business Association (EBA).  Anna 
Derevyanko, EBA Executive Director, gave an overview of Ukraine's 
latest preparations for the event.  The GOU has acknowledged that 
Ukraine will need investment topping UAH 100 billion (USD 20 
billion) for improving and expanding transportation infrastructure, 
renovating and building new stadiums, and building more than 80 new 
hotels.  The GOU hopes that about 90 percent of the investment will 
come from private sources, both domestic and foreign. 
 
Planning Still Lacks Focus 
-------------------------- 
 
¶4.  (SBU) To date, however, the GOU's efforts to boost private 
investment for 2012 have been minimal.  Derevyanko said that few 
preparations had been made, despite looming deadlines.  The only 
concrete step she mentioned was approval of legislation to take 
effect on January 1 exempting imports earmarked for Euro 2012 
projects from customs duties.  She also highlighted coordination 
problems, noting two coordinating committees had been formed, one 
under the Presidential Secretariat, the other under the Prime 
Minister.  The extent to which both committees cooperate is unknown. 
 In addition to the two committees, a national agency responsible 
for coordinating Euro 2012 issues under the Ministry of Youth, 
Family, and Sports will begin work on January 1, assuming the Rada 
passes the 2008 budget on time before yearend.  The lack of a single 
central authority already has created problems.  For example, 
preparations have been moving forward faster in Odesa than in 
Donetsk, Dnepropetrovsk, and Kyiv even though Odesa is only a 
reserve venue. 
 
Investment Forums Held, Interest Only Lukewarm 
--------------------------------------------- - 
 
¶5.  (U) Euro 2012 investment forums have been held in Lviv, Kyiv and 
Odesa.  So far, a total of only eleven companies, however, have 
registered for Euro 2012 tenders.  Interested companies, according 
to Derevyanko, are required to submit registration applications to 
the Ministry of Economy.  There was agreement among the EBA 
meeting's participants that one of the major stumbles in Ukraine's 
bid was that the GOU had failed to make its tender procedures 
public.  A Citibank representative added that aspects of the tender 
 
KYIV 00002985  002.2 OF 003 
 
 
process for lenders remain unclear.  Another common complaint is 
that tenders are required even for small projects, worth less than a 
few thousand dollars.  According to a participant at the EBA 
meeting, however, winning a tender is easier than obtaining funding 
from the GOU because Ukrainian civil servants make direct government 
funding procedures very difficult. 
 
Stadium Construction Challenges Remain 
-------------------------------------- 
 
¶6.  (SBU) Alexander Litkovskyy, Siemens Program Manager, stated at 
the EBA meeting that a minimum of two years is needed to build all 
of the necessary stadiums.  The GOU will have problems completing 
the stadiums by 2010, a Euro 2012 deadline, if construction does not 
begin by March 2008, according to Litkovskyy. (Note:  President 
Yushchenko in late October made similar statements, and mentioned 
that prospects for hosting Euro 2012 would diminish if sports 
infrastructure is not ready in two years.  End Note.) 
 
¶7.  (SBU) Preparations for Kyiv's Olympic Stadium, where group 
games, a quarter final game and the championship game are planned, 
have lagged due to disputes over construction of a nearby shopping 
and entertainment complex, which limits the stadium's seating 
capacity and reduces its safety by reducing the number of exits in 
an emergency.  The Union of European Football Associations (UEFA), 
the organizer of Euro 2012, considers the shopping complex a safety 
hazard and threatened to remove the stadium from the list of venues 
scheduled to host games.  Yushchenko's August 31 presidential decree 
banned further construction near the Olympic Stadium, but razing the 
partially finished complex is likely to be an uphill battle for the 
GOU, the City of Kyiv, and UEFA.  The Yudzhyn (Eugene) construction 
company is financing the construction of the complex, 50 percent of 
which is controlled by "Smart Holding Ltd," itself owned by 
well-connected Russian businessman Vadim Novinsky.  On December 6 
the Kyiv City Council voted to move forward with the construction of 
the shopping complex and suggested building a new stadium on the 
outskirts of the city. 
 
¶8.  (SBU) On an optimistic note, Austrian Commercial Attache Clemens 
Machal noted at the EBA meeting that after the Euro 2008 
Championships end in Austria on June 29, UEFA will establish an 
office in Kyiv. Machal predicted UEFA would "rule with an iron fist" 
to move things forward. 
 
Hotels, Transportation Upgrades Needed 
-------------------------------------- 
 
¶9.  (SBU) One of the participants at the EBA meeting mentioned that 
Ukraine's hospitality industry and airports need overhauling to 
prepare for Euro 2012.  Private investment particularly will be 
needed to address the lack of hotel rooms in Ukraine.  The GOU 
expects 82 three star hotels to be built, but so far no plans have 
advanced largely due to private investors' concerns that these 
projects are not economically viable.  In addition, airports and 
transportation capacity between airports and city centers need to be 
upgraded to accommodate the large number of soccer fans who will 
visit.  Managing the flow of thousands of fans across the border 
with Poland will pose an additional administrative challenge, since 
Poland is due to join the EU's Schengen visa regime on January 1, 
2008, and this could complicate movement of some fans (particularly 
Ukrainians) from Ukraine to Poland. 
 
Comment 
------- 
 
¶10.  (SBU) Euro 2012 will give Ukraine a chance to showcase itself 
as a modern European country to an attentive European audience, as 
thousands will descend on the country and millions more throughout 
Europe will hear about Ukraine regularly via the media in the months 
before and during the championship.  The event could also attract 
the largest surge in foreign investment in Ukraine's history.  We 
would also expect that the games will give the GOU clout to push 
through many of the economic reforms that are needed to attract the 
high levels of FDI.  For example, the World Bank has pointed to Euro 
2012 as an impetus for reforming Ukraine's government procurement 
process immediately.  To date, however, the GOU has said all the 
right things about Euro 2012 but taken very little concrete action, 
and any action it has taken has been poorly managed and coordinated. 
 It is not too late for the GOU to change course, but it must do so 
soon after the new government takes office.  Ukraine is not now in 
danger of losing the championship, but the risk could emerge if the 
current slow pace of preparations continues far into 2008.  Such an 
 
KYIV 00002985  003.2 OF 003 
 
 
embarrassment would be bad for Ukraine's political image in Europe 
and represent a wasted chance for needed investment and economic 
reform. End comment. 
 
TAYLOR