Ukraine Reporter's Widow Blames Ex-President

KIEV, Ukraine -- Eleven years after a Ukrainian investigative journalist was abducted and killed, his widow finally has faint hope that the masterminds of the murder will be brought to justice.

Former President Leonid Kuchma is slated to go on trial on charges of abuse of office in connection with the killing of Heorhiy Gongadze in the coming months.

Prosecutors contend Kuchma gave illegal orders to his subordinates that eventually led to Gongadze's death.

"I believe that Kuchma is to blame for Gia's death," Gongadze's 39-year-old widow Myroslava said, using Heorhiy's nickname. "Kuchma ... and the machine for settling scores with political opponents and journalists."

She spoke late Thursday by telephone from Washington, where she and her two daughters have been given political asylum.

Kuchma denies the allegations and says key evidence — tape recordings in which he allegedly conspires against the journalist — was doctored.

On Sept. 16, 2000, Heorhiy Gongadze got into what he thought was a taxi, and was then joined by three others and driven outside Kiev.

He was beaten and strangled, his body doused with gasoline and burned.

Gongadze's beheaded body was discovered in a forest outside Kiev several months later.

Experts believe Gongadze was decapitated after his death.

Journalists, activists and friends will hold a rally in Kiev in Gongadze's memory later Friday.

The killing of Gongadze, who crusaded against official corruption, triggered months of protests against the president, a movement dubbed "Ukraine without Kuchma."

Those protests were seen as a precursor to the 2004 Orange Revolution, which overthrew the fraud-tainted victory of Kuchma's protege Viktor Yanukovych.

But Yanukovych returned to power after winning presidential elections last year and many observers were surprised when Kuchma, his former mentor, was charged under Yanukovych's watch.

Some say the case against Kuchma is Yanukovych's attempt to boost his own popularity by portraying himself as a leader committed to the rule of law.

Gongadze, who was 31 when he was killed, was a harsh critic of Kuchma's rule who founded an online newspaper that exposed corruption by senior government officials.

Three former police officers were convicted of involvement in Gongadze's killing and sentenced to lengthy prison terms in 2008, and another top law enforcement officer, former Interior Ministry general Olexiy Pukach, is currently on trial.

Pukach has confessed to killing Gongadze.

During his closed-door trial, Pukach claimed that he killed Gongadze at the behest of Kuchma and other senior government officials.

Kuchma's lawyers dismissed the accusations as an attempt by Pukach, who faces life in prison, to deflect blame from himself.

Gongadze's widow moved to the U.S. several months after his death with their twin daughters Nana and Salome, now 13, after she discovered that her phone was being tapped and she was under constant surveillance.

Gongadze, also a journalist, continued her career in the U.S. working for Voice of America's Ukrainian service.

Myroslava Gongadze said it makes no difference to her whether Kuchma explicitly ordered her husband's murder, or merely wanted to scare him.

"Gia is dead, my children have been deprived of a father, me of a husband and friend, and society of a good journalist," she said.

For that, Kuchma must be punished, she insisted.

"If Ukraine calls itself a democratic country, this must happen," she said.

Ukraine President Signals He May Yield On Tymoshenko

KIEV, Ukraine -- President Viktor Yanukovych hinted Friday he might yield to increasing Western pressure and end the trial of former Prime Minister Yulia Tymoshenko by changing Ukraine's criminal code.

Speaking at a conference in Yalta, Mr. Yanukovych distanced himself from the trial of the opposition leader, calling it "very painful."

He said he hoped that the criminal code would be "modernized" this year.

Political analysts said such an overhaul could decriminalize the article under which Ms. Tymoshenko is being tried.

The criminal code dates to 1962, when Ukraine was part of the Soviet Union, the president said. "That, undoubtedly, is nonsense," he said, according to a transcript of his remarks posted on his website.

The prosecution of Ms. Tymoshenko on abuse-of-office charges over a gas deal she struck with Russia in 2009 has threatened to hamper Mr. Yanukovych's push for deeper economic and political ties with the European Union.

Senior European politicians have warned that the failure to free Ms. Tymoshenko could lead to refusal by parliaments of some EU states to ratify an association agreement.

The trial judge called an unexpected two-week pause in proceedings Monday, three days after a joint letter to Mr. Yanukovych by Secretary of State Hillary Clinton and EU foreign policy chief Catherine Ashton raised concerns about the case.

Analysts said the recess gives Mr. Yanukovych an opportunity to find a way out of the prosecution of Ms. Tymoshenko, a longtime rival.

She accuses him of carrying out a political vendetta and using the trial to remove his leading opponent from the political scene.

EU Enlargement Commissioner Stefan Fule said after a meeting with Mr. Yanukovych on Friday: "We have been fully assured about his commitment to finding a solution," Reuters news agency reported. "We would like to see her being fully a part of political life," Mr. Fule said.

Russia's leaders have tried to tempt Mr. Yanukovych with an offer of lower gas prices, which Ukraine has long sought, in return for his agreement to take Ukraine into a Moscow-led customs union.

On Friday, Russian Prime Minister Vladimir Putin said Mr. Yanukovych's declared aim of joining the EU is "completely unrealistic," Interfax news agency reported.

Mr. Yanukovych, who will travel to Moscow on Sept. 24, repeated his rejection of Russia's offer.

Dealmaking In Frontier Markets: Ukraine

KIEV, Ukraine -- Ukraine, the former Soviet State, is ranked at a difficult 145 for doing business on a report compiled by the World Bank earlier this year, well below many of its frontier market peers.

ne senior financial adviser said: “Ukraine can be a tough, tough place to do business”.

But there is still potential for deals to be done, with plenty done already this year. Real GDP is forecast to grow by 4.5% this year and by 4.9% in 2012, according to the IMF.

Agricultural industries dominate Ukrainian deals, given the country’s expansive tracts of fertile soil and relatively well-developed agribusinesses.

Deals also take place in extraction, consumer and financial sectors.

Biggest deals this year

The sale of state-owned telecoms firm Ukrtelecom to Austrian investment firm EPIC for $1.3bn was the largest piece of M&A in the country this year.

The privatisation deal was agreed at the turn of the year, with EPIC the only bidder for the privatisation tender after rivals were excluded by the government. The deal was tied up in March.

Another significant deal was the $537m purchase of Donetsk Electrometallurgical Plant, a Ukrainian steel plant, by Russian coking coal and steel producer Mechel.

Citigroup worked on a project for a Korean-based consumer electronics firm to establish an on-shore presence in Ukraine earlier this year.

The firm previously had sales in the country north of $500m per year up until the financial crisis, although it saw its earnings slump by half in the downturn.

Citi helped the firm to establish a local presence, then provided corporate banking services, including cash and liquidity management, working capital financing, foreign exchange risk management and hedging strategies.

Fernando Iraola, head of global subsidiary for Western, Central Eastern and the CIS at Citi, said: “It was an industry trend. Many of the company’s competitors looked to do the same thing".

First, to protect their business locally, and secondly to continue driving sales and market share in Ukraine.

It gets them closer to their distribution channels and gives them a better understanding of their businesses.

“We came in as a banking partner to help them to understand the local market environment and to provide them with services and solutions that contribute to business expansion on the ground and also plug into global strategy.

“Our knowledge of the local market makes us pretty unique in terms of what we could bring to the relationship.”

Several bankers said Ukraine would continue to see a steady flow of deals, primarily in the agricultural, industrial and consumer space.

International consumer firms are following a trend to enter the Ukrainian market by setting up local subsidiaries or partnering with local firms, meaning plenty of corporate banking activity in the country is yet to come.

Fitch Ratings earlier this year upgraded Ukraine's economic outlook to "positive" from "stable", maintaining its B rating, citing government progress in reducing the country's budget deficit.

The UEFA Euro 2012 football tournament, due to be hosted in Poland and Ukraine, has already brought added investment to the country, and could add more as a result of the economic benefits of hosting the competition.

Swiss bank UBS has generated the most in fee revenue from mergers and acquisitions in Ukraine, having taken $53m in fees since 2005, according to Dealogic.

BNP Paribas entered the Ukrainian market in 2006 when it bought a 51% stake in local bank UkrSibbank.

The French bank later upped its stake to 99.9% in 2010. Crédit Agricole and Societe Generale have offices in Kiev.

Deutsche Bank has operated a subsidiary in Ukraine since 2009, having first opened a representative office in the country in 1993.

Credit Suisse has a representative office in Kiev. Citibank has operated a subsidiary in Ukraine since 1998.

Having a partner in the country can help to smooth a deal, in order to help you to negotiate the local political and legal environment – which can be choppy.

Jon Clark, oil and gas transaction leader at Ernst & Young, said: “Most people successful in investing in emerging markets do so with a local partner. Instead of coming in to take 100% of a project, you take a majority stake.

“You have to be careful when picking local partner with the new UK bribery act. If someone you’re associated with has done something they shouldn’t, you’re in trouble too. If you have a local agent and they’re paying bribes, you can’t say ‘it wasn’t me, it was my local agent’.

“Diligence on your partners has always been important, it’s now more important under the bribery act.

Corporate hospitality in Ukraine can be an interesting experience for deal makers, according to Edward Bibko, head of capital markets at Baker & McKenzie.

He said: “In the CIS region, there is a very strong cultural idea that if guests come you need to provide hospitality for the entire stay. If people come to London to do a deal then maybe you'll have one dinner out with them. In the CIS they feel strongly that they have to programme every minute of your time there.”

While on the deal, the group of investment bankers and lawyers were taken by their clients to stay with a settlement of Cossacks in an agricultural region of eastern Ukraine.

A group of Cossacks put on a show for the visitors, in which Bibko volunteered to have a man whip branches out of his hands with a bull whip.

He said: “He’d come running at me and pretend to do it, and I thought I would lose an eye or hand but I wouldn’t flinch.”

Some advisers note that clients in Ukraine can, at times, be partial to a drink. One comments: “They just love to drink. We decided that we weren’t going to let them bring out the vodka until at least 5pm. The management kept saying; ‘wouldn’t it be more pleasant if we brought out the vodka?’ when we were in diligence meetings.

“At 5pm they finally brought it out and we had to do an elaborate toast where each organisation has to give a toast.”

Ukraine Says 'Fair' Price For Russian Gas Is $230 Per 1,000 Cu M

KIEV, Ukraine -- Ukraine believes that the fair price for the purchases of Russian natural gas should be standing at $230 per 1,000 cubic meters, Ukrainian Energy Minister Yuriy Boyko told country's TV channel Inter on Saturday.

The minister said Ukraine pays $355 per 1,000 cubic meters of gas during the third quarter of this year and the price is expected to rise to some $400 in the fourth quarter.

Ukraine, he said, is currently buying the Russian gas at a higher price comparing to other European countries and the figure of $230 was calculated in line with the price that Germany pays Russia, minus transit fees across the Ukrainian territory.

The 10-year gas export contract with Russia, signed in 2009, ties the price for gas to oil prices, which have been rising recently boosting Ukraine's bill.

Former Prime Minister Yulia Tymoshenko is now on trial for signing the deal, and Kiev is at pains to revise it.

Boyko also said that the current gas disagreements between Russia and Ukraine would not disrupt Russian gas deliveries during the coming winter like it happened in January of 2009.

Ukraine transits around 80% of Russia's Europe-bound gas.

Russia, which supplies around one fifth of Europe's gas, briefly shut down supplies via Ukraine's pipeline system at the start of 2009 during a dispute with Kiev over unpaid debt.

Kiev Should Be Considered As Future EU Member Says Azarov

YALTA, Ukraine -- Kiev's accession to the European Union in the future is inevitable and should be reflected in the political association agreement between Ukraine and the EU, Prime Minister Mykola Azarov said on Saturday.

Kiev intends to integrate with Europe and plans to sign a political association agreement by the end of 2011, which will lead off formation a free trade area with EU.

However, Europe still undecided whether to include the prospect of Ukraine's membership in the EU in the association agreement or not, which in fact is just a bureaucratic dispute, said Azarov.

"We definitely need to include, if we think about the future. Let's remember what China was 30 years ago, and then look for at least 10 years ahead. Ten years later, our current disputes would seem absolutely pointless. But we have to finish this discussion," said Azarov.

Ukraine Proposes Alternative To South Stream

YALTA, Ukraine -- Ukrainian President Viktor Yanukovych has proposed building one more gas pipeline across his country instead of the planned South Stream project bypassing it.

Analysts say Russia is unlikely to support the idea because its goal is to minimize transit risks for its gas deliveries to Europe.

Yanukovych said South Stream will cost 25 billion euros.

"We propose a flexible solution that makes the construction of the South Stream pipeline unnecessary," he said Friday at Yalta European Strategy (YES), an international network that promotes Ukraine's European integration.
"If built on land across southern Ukraine, it will cost five times less," Yanukovych said.

According to one Gazprom executive speaking on the sidelines of an investment forum in Sochi, it would be economically inexpedient to build South Stream across Ukraine.
The proposed route of the pipeline is across the Black Sea from Beregovaya in Russia to Bulgaria and on to Western Europe.
"One could lay a gas pipeline via Yevpatoria in the Crimea towards the Black Sea, but this seems illogical when one can build it directly [across the sea]," Valery Golubev, deputy CEO of the Russian energy giant, said.
He thinks that Ukraine's proposal has no economic advantages.
Like Nord Stream, the South Stream gas pipeline is aimed at reducing Russia's dependence on transit across Ukraine.
If the two pipelines are built, Ukraine will lose a substantial part of its transit revenues.

Yanukovych's proposal is apparently an attempt to expand the range of possible compromises and facilitate the sides' efforts to resolve their gas dispute.

"Russia has absolutely no interest in Ukraine's proposal," Vasily Tanurkov, an analyst with the Veles Capital investment company, told RIA Novosti.

"The reason is simple: the whole purpose of South Stream project is to avoid transit risks. If costs were the only consideration, we would not have proposed it at all; we would have invested in repairing the Ukrainian gas transportation system."
"Ukraine is dreaming of more gas pipelines running across its territory," Vitaly Kryukov, an analyst with investment and financial group Kapital.
"But South Stream will be most likely built. It is an important project and the political decision has been made." Russia's long-term strategy is simple: to end its dependence on transit countries, Kryukov said.
"Such statements are an attempt to demonstrate to the international community that Russia is not acting rationally," Tanurkov said.

he price of gas is the main issue Ukraine and Russia have been debating in the last few months.

Ukraine, which currently pays $354 per 1,000 cubic meters, argues that the price is too high.

Russia is ready to negotiate a lower price if Ukraine makes it an interesting proposal, for example, if it agrees to join the Customs Union of Russia, Kazakhstan and Belarus or to sell its gas transportation network.

So far, Ukraine has refused to do either, dragging out the pricing debates for over two years.

"Ukraine can influence the decision on the South Stream project only if it agrees to sell its gas transportation system," Tanurkov said. "If it does, Russia could abandon South Stream."

Vitaly Kryukov believes that Ukraine is not ready to do this now and that in a year or two Russia would lose the desire to buy.

"Moreover, there will be elections in Ukraine and so a possible change of government," Kryukov said.

"It would be safer for Russia as a gas supplier to build pipelines bypassing transit countries and to pass on buying Ukraine's gas transportation grid."

The sides will likely seek a new gas compromise at their talks on September 24, when President Yanukovych will come to Moscow at the invitation of Dmitry Medvedev.

Ukraine PM Says EU's Tymoshenko Stance "Immoral"

YALTA, Ukraine -- The European Union's threat to scrap planned free trade and association agreements with Ukraine if it jails former prime minister Yulia Tymoshenko is immoral, Prime Minister Mykola Azarov said on Saturday.

uropean diplomats said this week the EU wanted to see Tymoshenko, who is under arrest and on trial over abuse-of-office charges that she says are politically motivated, free and politically active.

Otherwise, they said, EU members could refuse to ratify the free trade and political association agreements that the two sides hope to initial in December.

"Such global, serious issues as Ukraine's European integration ... are so important that linking them to a particular trial is not just incorrect but immoral," Azarov told reporters in the Ukrainian Black Sea resort of Yalta.

EU enlargement and neighbourhood policy commissioner Stefan Fule said this week he had received assurances that Ukraine would find a solution to the Tymoshenko case by reclassifying her alleged offence as one that is not a felony.

Azarov declined to comment on whether that would happen but said he was optimistic about planned deals with the European Union.

"I am convinced that commonsense will prevail in our relations and that the free trade agreement and the association agreement will be signed," he said.

Tymoshenko, 50, the fiercest political opponent of President Viktor Yanukovich, is accused of illegally forcing state energy firm Naftogaz into the 2009 gas deal with Russia's Gazprom.

She has dismissed all charges as a political vendetta by Yanukovich who beat her narrowly in a 2010 presidential election.