VZCZCXRO9612
RR RUEHDBU RUEHIK RUEHLN RUEHPOD RUEHSK RUEHVK RUEHYG
DE RUEHKV #0524/01 0841446
ZNR UUUUU ZZH
R 251446Z MAR 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 7513
INFO RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE

UNCLAS SECTION 01 OF 02 KYIV 000524 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON UP
SUBJECT: LVIV BANKS ON ECONOMIC DIVERSITY, POLITICAL UNITY, 
AND EURO 2012 OPTIMISM 
 
REF: KYIV 337 
 
Summary 
-------- 
 
¶1. (SBU) While Lviv Oblast has felt some negative effects 
from the economic crisis, its diversified economy has 
protected it against large-scale layoffs and related social 
problems.  Lviv leaders say they feel the effects of the 
ongoing political battle in Kyiv, but that they have put 
aside politics to work together.  Preparations for the Euro 
2012 soccer tournament are a key component to Lviv's 
near-term economic development plans and provide an impetus 
for political cooperation.  The GOU has not yet provided 
budget support to Lviv for its Euro 2012 preparations, but 
Lviv officials are optimistic about their chances for hosting 
the tournament.  End Summary. 
 
Lviv Feels Economic Crisis, but Situation Not Dire 
--------------------------------------------- ----- 
 
¶2. (SBU)  During the Ambassador's March 19-20 visit to Lviv, 
Oblast Governor Mykola Kmit told him that, while Lviv is 
feeling the effects of the economic downturn, its economic 
diversity is helping to cushion the blow.  He said that 
because Lviv wasn't dependent on heavy industry, and small 
and medium enterprises account for more than 80 percent of 
the oblast's output, Lviv had more flexibility to respond to 
the crisis.  He added that the oblast had not been hit with 
large-scale layoffs that threaten other, more industrialized 
regions of Ukraine. 
 
¶3. (SBU) Lviv Mayor Andriy Sadoviy told the Ambassador that 
the city budget, while stretched, had not been broken yet, 
and the city was current on all its liabilities, including 
salaries to city employees.  He said, however, that the city 
would be unable to rely on traditional sources of revenue in 
2009, such as land sales, to patch holes in the budget, 
because the market has bottomed out.  In a meeting with the 
Ambassador, Peace Corps Volunteers serving in smaller towns 
in Lviv Oblast reported wage arrears for teachers, police, 
and other government employees, but said that any economic 
adversity in their towns was being met more by political 
apathy than a call to action against the government. 
 
¶4. (SBU) Governor Kmit said that the global economic downturn 
had derailed or delayed negotiations on some large-scale 
foreign investment in Lviv, but he was confident that it was 
only temporary.  Sadoviy, meanwhile, said that Lviv was 
looking inward for near-term investment, and did not 
anticipate any significant foreign direct investment in Lviv 
in the current economic environment. 
 
Lviv an "example of political unity" 
------------------------------------ 
 
¶5. (SBU) Governor Kmit told the Ambassador that Lviv's local 
political unity could be seen as a roadmap for Kyiv, and 
other oblasts, to follow. (Note: The Oblast council president 
and Mayor are from President Yushchenko's Our Ukraine (OU), 
and Governor Kmit is appointed by Yushchenko.)  Oblast 
council deputy president Lyudmila Kozak, a member of PM 
Tymoshenko's BYuT, echoed Kmit, saying that BYuT worked well 
with OU in Lviv.  She said that, while local politicians feel 
the echo of political turbulence from Kyiv, BYuT works 
closely with OU on the oblast council, and they have largely 
avoided political fights by ensuring that "the economic and 
social needs of Lviv are put first." 
 
¶6. (SBU) Kmit noted that in late 2008 the governor, mayor and 
oblast council worked closely together to raise communal 
heating prices, a politically difficult task.  By working 
across party lines, they were able to ensure that rising gas 
prices did not negatively affect oblast heating companies' 
viability. 
 
"Optimistic" That Euro 2012 Preparations on Track 
--------------------------------------------- ---- 
 
¶7. (SBU)  Both Mayor Sadoviy and Governor Kmit expressed 
confidence that Lviv would succeed in its Euro 2012 
preparations, and Kmit said that "despite our budget 
problems," Lviv is on schedule.  Sadoviy lamented that Lviv 
had as yet received no budget support from Kyiv for Euro 2012 
preparations, but said that he "remained optimistic" that the 
promised assistance would be delivered.  In the meantime, 
Sadoviy said, stadium construction has been started by 
AzovInteks, a construction company owned by Oligarch Sergey 
Taruta.  As Taruta is close with PM Tymoshenko, said Sadoviy, 
"maybe he can convince her to provide some funding." 
 
KYIV 00000524  002 OF 002 
 
 
 
¶8. (SBU) Lviv's 2009 city budget includes UAH one billion for 
stadium, airport, and other Euro 2012-related infrastructure 
projects, according to Sadoviy.  In addition, Pavlo Diminsky, 
owner of the local Karpat football club, recently signed a 
joint agreement with the Mayor and Governor for Karpat to 
provide UAH 600 million for stadium construction support. 
Finally, the Lviv city council on Friday, March 20, passed a 
resolution authorizing the issuance of up to UAH 300 million 
in "city bonds" to provide further funding for required Euro 
2012 projects. 
 
¶9. (SBU) Mayor Sadoviy stressed that Lviv must be a Euro 2012 
host to "represent Ukraine," as all the other host cities 
were Russian-speaking.  Volodymyr Kvurt, Lviv Municipal 
Council Secretary, perhaps put it best when he said that Lviv 
will be ready to host Euro 2012 "on the eve of the event...we 
hope." 
 
Local Government Reform -- Beating a Familiar Drum 
--------------------------------------------- ----- 
 
¶10. (SBU)  Administrative and local government reform remains 
a familiar refrain in the regions.  Sadoviy lamented that 
Kyiv takes all the money and authority it can from the 
regions, and called Lviv's budget relationship with Kyiv "the 
worst in a century."  Municipal Secretary Kvurt said that 
there remained a "huge chasm" between local and national 
governments in Ukraine.  He said that local governments had 
to deal with local problems, but lacked the authority and 
budgetary discretion to do so effectively. 
TAYLOR