Luzhkov will not be forced to appear in court on election results hearings

It seems that Moscow’s ex-mayor Yury Luzhkov will not be dragged to court in handuffs after all, since that he has been removed from the list of interested parties on A Just Russia’s lawsuit after failing to appear at two consecutive court hearings.

“Luzhkov’s expulsion from the list of interested parties has been a complete surprise for us,” A Just Russia representative Alexander Bekhov said.He also noted that the court denied A Just Russia’s petitions on calling in 19 high-placed officials of the old Moscow government as witnesses.

“The court will start examining the lawsuits on merits on Nov. 15, although we have already called for judge Magzhanova’s removal in view of her actions,” Bekhov said.

A Just Russia is demanding the anullment of the 2009 City Duma election because they think Yury Luzhkov, then Moscow mayor, used his official position to rig the election result.

Reactionary rally takes to Moscow's streets

The stark colours of the white, gold and black imperial flag with seek to replace the rainbow stripes of Russia’s gay community at a reactionary rally this Saturday.

Narodny Sobor (The People’s Congregation) is rallying against newly-legalised gay rights marches and promoting its understanding of family values.

The conservative values of the Russian Orthodox Church should help Russia’s population thrive and avoid the negative influence of what they describe as the collapse of Western Civilization.

And marchers have been spurred into action by the recent European court verdict allowing gay pride marches in Moscow.

They said this ruling is one of many which threatens Russia’s moral values – which have already been damaged by malign influences – and needs to be reconsidered by an alternative court.

Several civic movements including veterans, family groups and religious organisations, headed by Narodny Sobor, are ready to stand up for their values.

As usual the main threat to Russia’s future generations is seen from the West, with its unacceptable values of liberty and tolerance.

“We support the idea of creating an alternative European Court that could reconsider the original decision,” Alexander Lapin, head of the Moscow department of Narodny Sobor,said. “We believe it’s wrong that the Constitution puts international legal regulations above national ones. This is the way to impose us to their will.”

However, changing the Russian Constitution is not in the group’s plans – and their planned international court will be explained at Saturday’s rally.

Other issues that worry organisers are the promotion of immorality in the media, sex education in schools, and far too much porn, bad language, booze and tobacco on the nation’s screens.

The second protest against gay marches held in Moscow this week doesn’t seem to bother Nikolay Alexeyev, who won the pro-gay verdict in Strasbourg.

“Let them protest. It’s not going to result in anything. There is the Court decision, that doesn’t allow Russia to adopt any laws prohibiting gay marches. All this is just a PR opportunity for these people,” Alexeyev said.

The gay community has never rallied against its opponents. “I’ve never questioned people’s right to hold meetings against gay-pride marches. Freedom of assembly is one of the rights guaranteed by the Constitution” Alexeyev said.

Watch Out For The Bus: Ukraine's Deputy PM Is Driving

LVIV, Ukraine -- Ukraine's deputy prime minister may have a hard time moonlighting as a chauffeur in another life, after crashing into a police car while driving a bus in the western city of Lviv.
Charged with overseeing the Euro-2012 football championships which Ukraine is organising with Poland, Deputy Prime Minister Boris Kolesnikov arrived in Lviv to examine buses manufactured by a local factory to be used during the matches.

Minutes after taking the wheel for a spin around the area, Kolesnikov hit a police car parked nearby, dragging it some 20 metres (65 feet).

Although the police car was empty and nobody was hurt, a bumper was mangled and a light smashed in the incident.

"What happened?" Kolesnikov asked, in the presence of several reporters.

"Nothing serious, drive on," a factory executive replied.

The chauffeur of the bus, however, was not amused.

"How can anybody drive like that?" he asked. "One must take the size of the bus into account."

Ukraine President to skip traffic in helicopter

KIEV, Ukraine -- President Viktor Yanukovych isn't letting traffic on the way to the office get him down any more. He's rising above it. Literally.
In the coming months, a helicopter will begin chauffeuring Yanukovych to the center of Kiev from his suburban residence and back.

Yanukovych's chief of staff Serghiy Lyovochkin says the president is doing the capital a favor by unclogging the streets that he currently travels in his motorcade.

Police close off entire avenues for that.

The move may anger ordinary Ukrainians who accuse the government of corruption and wasting state funds, especially if Prime Minister Mykola Azarov also gets a chopper, as Lyovochkin said might be the case.

Lyovochkin refused to say how much the presidential helicopter would cost.

Old-School Mayor Battles Ukraine's Ruling Party

ODESSA, Ukraine -- The incumbent mayor of the Black Sea port of Odessa faces the political battle of his life this weekend in an election showdown against Ukraine's pro-Russian president.
Polls show mayor Eduard Hurvits is on track to obtain 13 per cent of the popular vote on Sunday, with the candidate nominated and heavily financed by Ukraine's ruling Party of Regions, Aleksy Kostusev, likely to gather in some 32 per cent.

Despite long odds, Eduard Hurvits says he may yet still win. If not, he vows to go down swinging against President Viktor Yanukovych, the Party of Regions head.

'I am a patriot, and these people will destroy Odessa,' Hurvits said in an interview with the German Press Agency dpa. 'I will fight to the end for my city.'

Hurvits, 62, is one of Ukraine's few surviving old-school regional politicians. He entered high politics in the early 1990s and has managed to hang on right up through the present, without having to rely on the support of any of the country's major political parties.

Mayors and city councils in Ukraine's heavily industrial Russian-speaking east and south answer, overwhelmingly, to Yanukovych's Party of Regions.

Elected officials in the more rural and Ukrainian-speaking north and west are, as a rule, loyal to one or more of the country's opposition parties.

Odessa, a multicultural city proud of its Yiddish-tinted dialect of Russian, and with a long-established tradition of ignoring the capital's orders if they interfere with local commerce, is an exception, rejecting both camps to remain loyal only to itself.

Hurvits has been the leading cheerleader of Odessan independence over the years, stymieing central government efforts to gain control over Odessa customs duty revenues. He has even bypassed Ukraine's Foreign Ministry to advance trade links between Odessa and neighbouring states.

One recent row between Kiev and Odessa is over the central authorities' plan to ship 8,500 tons of state-owned hazardous chemicals to England via a railroad line running through the centre of the city. Odessa's city hall's has flatly refused to let the train cars through.

With one week left before the mayoral election in Odessa, Party of Regions billboards and television spots outnumber those of other candidates by roughly three to one. The Regions ads hammer a simple theme: For years Hurvits has embezzled city funds, associated with organized crime, and done little for average Odessans.

Hurvits denies all accusations of wrongdoing and argues Yanukovych and Regions are unhappy with Odessa's traditions of independence and freedom.

Kostusev, a former economics minister, laid out the Party of Regions plan at a recent Odessa railroad managers' meeting.

'My goal is to give, finally, our beloved city the professional government it deserves, a leadership that will work to the public good,' he said. 'Enough of old-boy politics and inside deals!'

Railroad staff applauded politely, although some in the auditorium back rows chatted on mobile phones during a subsequent question-and -answer session. But if some Odessans are lukewarm towards Kostusev, others say that Hurvits 14 years in office should be enough for any man.

Hurvits devoted most of his last Saturday before elections to making stump speeches next to apartment buildings in a working-class neighbourhood and meeting with hundreds of low-income fellow Odessans.

He braved a barrage of unpleasant questions.

'Why is my electricity cut off all the time?' shouted a sailor.

'Can't you do something about cars driving through our courtyard to get around traffic jams?' demanded a housewife.

'How am I supposed to live on a pension of 90 dollars? My utility bill alone is more than that!' complained a pensioner.

Twice groups of potential voters surrounded Hurvits and his three bodyguards to register loud and irate complaints.

'I understand them, they're frustrated, things are difficult, the government doesn't have much money,' a visibly tired Hurvits said later.

'I don't know what I will do if I lose this election,' he said. 'I just don't know.'

Harper Accused Of Exaggerating Ukrainian Genocide's Death Toll

KIEV, Ukraine -- Prime Minister Stephen Harper is being accused of exaggerating this week the extent of the 1932-33 famine that was declared a genocide by Canada's Parliament two years ago.
Harper indicated on both days of his first-ever journey to Ukraine that "almost" 10 million people died in what is known as the Holodomor — or "death by starvation."

Critics, while stressing that the death toll of the famine caused by Soviet dictator Josef Stalin's policies is massive and remains one of history's great crimes against humanity, said the true figure is roughly a third of Harper's.

"I find it regrettable that Stephen Harper and other leading Western politicians are continuing to use such exaggerated figures for Ukrainian famine mortality," University of Melbourne historian and demographer Stephen Wheatcroft told Postmedia News in an email.

"There is absolutely no basis for accepting a figure of 10 million Ukrainians dying as a result of the famine of 1932-33. No reputable demographer accepts this," stated Wheatcroft, who puts the figure at around 3.5 million.

"None of the Ukrainian, Russian or Western historians, who are experts in this area, who have looked at the detailed evidence and have an ability to understand numbers, would support such a figure."

Harper spokesman Dimitri Soudas said Friday "nobody" can be sure how many died.

"To minimize this act of genocide by claiming exaggeration is quite sad because there are a number of published estimates," Soudas wrote in an email.

Harper made two references to the famine while in Ukraine.

"Some 10 million people, up to 10 million people, and we'll never know the numbers for sure, (were) killed, and killed through the deliberate plans of their own government," he said at the joint news conference in the capital city of Kyiv while sitting next to President Viktor Yanukovych.

On Tuesday, Harper raised it again while speaking to students at a small Catholic university in Lviv, in Ukraine's nationalist heartland.

"Now as you know almost as many — or you may know — almost as many Ukrainians died in the Holodomor during the 1930s as there were Canadians alive at that time," he told them.

During the time of the famine there were approximately 10.6 million Canadians, according to Statistics Canada.

Ukrainian Canadian Congress president Paul Grod sent out a statement after Tuesday's event that actually exaggerated Harper's claim.

"Harper emphasized the genocidal nature of the Holodomor and commented that more people were killed during that horror than were alive in Canada at that time," Grod wrote.

Grod referred Postmedia News to University of Quebec historian Roman Serbyn, who in the introduction to a 2008 essay referred to estimates ranging from three to 10 million. But attempts to reach Serbyn were unsuccessful.

Yale University historian Timothy Snyder said most "scholarly estimates" range from 2.5 to four million. He estimates that 3.3 million ethnic Ukrainians died in the entire Soviet Union during the 1932-33 famine.

Snyder, author of the newly published book Bloodlands: Europe between Hitler and Stalin, said he found Harper's estimate "surprising" given that a January report commissioned by the previous Ukrainian government concluded there were 3.9 million deaths.

University of Alberta historian John-Paul Himka wrote in a 2008 academic journal that the 10 million figure is arrived at only by including the children who would have been born if not for the famine.

The true victims of Soviet dictator Josef Stalin's brutal policies, should be "unsullied by falsehood" and inflated figures not be used as a "political tool," Himka argued.

"I find it disrespectful to the dead that people use their deaths in a ploy to gain the moral capital of victimhood. To this end, they inflate the numbers."

Is Ukraine Moving Back Into Russia's Embrace?

KIEV, Ukraine -- When hundreds of thousands of Ukrainians took to the streets to protest an allegedly fraudulent presidential election in 2004, the resulting revote was supposed to herald a new era of democracy in the former Soviet republic.
Six years after the Orange Revolution, the object of all that public rage, Viktor Yanukovych, is in power, using heavy-handed tactics that he insists are crucial to getting the country's government and economy under control. But critics fear he is reversing Ukraine's path to democracy and turning the nation back toward Russia.

Ukraine, a nation of 46 million wedged between Russia and the European Union, was trumpeted as a beacon of democracy in a region of authoritarian leaders when demonstrations against Yanukovych's 2004 victory forced another election, which went to pro-Western Viktor Yushchenko.

But Yushchenko's term was widely considered a failure, marked by his inability to overhaul the country's suffocating bureaucracy and overregulated economy or to tackle endemic corruption. Any potential progress was also hampered by constant squabbles with his former Orange ally, then Prime Minister Yulia Tymoshenko.

At this year's election in February, Yanukovych — once tagged a Russian stooge — scored a stunning victory to become Ukraine's fourth President. He pledged to bring an end to political wrangling, stabilize the country's wobbly economy and repair relations with Russia while seeking European integration.

Since his triumph in a vote widely acknowledged as free and fair, Yanukovych has been quick to stamp his authority. In the past seven months, he has consolidated power by installing a loyal government, appointing allies to key posts in state structures like the state security service (formerly known as the KGB), and, earlier this month, he welcomed a constitutional-court ruling that handed him even more sway, including the power to hire and fire the government at will.

"Ukraine and society is tired of life in those conditions ... [which] resulted in economic collapse and poverty," Yanukovych said.

He has pledged to use these new powers to push through much needed overhauls. To be sure, his main achievement so far has been to stabilize the economy, which suffered a catastrophic 15% plunge in 2009. He has also put an end to destructive infighting, which in turn has sped up decision making.

But opponents claim he is also undermining the democratic gains of recent years, monopolizing power, clamping down on the opposition and curbing press freedoms. They accuse him of getting too cozy with Moscow and attempting to follow the pattern of Russian Prime Minister Vladimir Putin, who crushed his opponents and muzzled the media during his two terms as the country's President.

"[Yanukovych's] political culture is to grab more and more power," Hryhoriy Nemyria, a top aide to Tymoshenko, tells TIME. "He is mimicking Russia."

In the months since Yanukovych took office, a number of former senior officials from Tymoshenko's government have been put in detention or under investigation on charges of corruption and abuse of office. The former Prime Minister says the charges are trumped up; the government counters that it's fighting graft.

Journalists complain of their managers cutting reports that may be critical of the administration, while media monitors say press coverage of Ukraine's government is becoming more deferential. As a result, the country has dropped 42 places to 131 on Reporters Without Borders' annual press-freedom index, which was released on Oct. 20.

But while many analysts see ominous signs that Yanukovych is heading down an authoritarian path, others suggest things aren't so clear-cut, pointing out that the President these days cannot ignore Ukraine's newly active civil society.

"It's not a steamroller; he's responsive to criticism," says Adrian Karatnycky, a senior fellow at the Atlantic Council in Washington, D.C. "He's aware of the potential of society, which was the lesson of the Orange Revolution."

There's no denying, however, that Yanukovych has swung his country toward its former Soviet overlord. Since taking office, he has declared Ukraine a nonaligned country, putting an end to longstanding efforts to join NATO — a goal of all of his predecessors that had enjoyed mixed popular support and irked Moscow.

In April, he signed a controversial deal to extend the stay of Russia's Black Sea fleet on Ukrainian territory until 2042 in return for cheaper gas supplies. Yanukovych says the previous administration's failures forced him into the gas trade-off to keep Ukraine's crucial steel mills and chemical plants pumping.

Strong leadership and good relations with Russia bring much needed stability, he says, but European integration remains the main strategic goal.

Critics, however, claim the President's commitment to Europe is illusory and say that he has given the Kremlin too much too quickly, edging Ukraine toward the point of no return. "Russia views the Black Sea fleet deal as an appetizer," Oleh Rybachuk, Yushchenko's former chief of staff, tells TIME.

"They are now trying to get the maximum, which for Russia means total control." Now Moscow is pushing hard for further integration, including mergers of the countries' nuclear-energy, aircraft-building and, most crucially, gas industries.

The West, one of the most vocal celebrants of Ukrainian democracy's victory over Russian-backed authoritarianism in 2004, has been more subdued in its reaction to criticisms against Yanukovych.

Senior U.S. officials, including Secretary of State Hillary Clinton, have only gently nudged him on press freedoms, leaving some opposition leaders and civic activists to worry that the U.S. is trying to preserve friendly relations with Russia by treading lightly in Ukraine.

Meanwhile, Europe, beset with its own internal troubles, professes satisfaction at the stability of Ukraine's current government after years of infighting. "Ukraine is seeing a period of political stability, based on a strong parliamentary majority," said Herman Van Rompuy, president of the European Council, after meeting Yanukovych in September. "This enables Ukraine to move forward with important reforms."

Yanukovych is adamant that he doesn't have to choose between the West and Russia. But right now he is negotiating with the E.U. on a deep free-trade agreement at the same time that Russia is pushing him for more industry tie-ups. Soon it could become clearer where Ukraine's President has decided to put most of his chips.

Harper To Push Ukrainian President On Human Rights

KIEV, Ukraine -- Prime Minister Stephen Harper made an emotional visit to a controversial shrine here Monday before meeting President Viktor Yanukovych to discuss, among other things, a slide in human rights since the February presidential election here.
Harper appeared to be fighting back tears after standing solemnly before the "sad memory of childhood" statue of a young, bone-thin girl with braids.

She symbolizes the many children who were among the millions who died during the 1932-33 famine, which has been recognized by the Canadian parliament as a genocide perpetrated by former Soviet dictator Joseph Stalin.

The two monuments were constructed at the request of Ukraine's previous government, which was pro-West and hostile to Moscow. But Yanukovych, eager to woo Russia, has removed any reference to the famine — known as the Holodomor — from the presidential website.

Harper also laid a wreath at a Soviet-era "Park of Glory" that honours the heroes of the battle against the Nazis during the second world war, and was greeted by a Ukrainian honour guard that included soldiers wielding sabres with Cossack-style precision.

"There are issues that are of concern to Ukrainian-Canadians and to the government of Canada involving issues of human rights and the rule of law," Harper said in Montreux, Switzerland, Sunday after the conclusion of the two-day Francophonie summit.

Harper and Yanukovych are expected to announce a youth mobility agreement that will ease the way for young students to visit Canada.

Several members of the Ukrainian-Canadian community attended Monday's events.

With Ukraine's Blessing, Russia To Beef Up Its Black Sea Fleet

MOSCOW, Russia -- Moscow's upgrade to its Black Sea Fleet – headquartered with Ukraine's blessing at Sevastopol – could make waves around the Black Sea, where NATO has a strong presence.
Just a year ago Ukraine was insisting that Russia would be required to vacate the Crimean naval base of Sevastopol when its old lease expired in 2017. That would have posed serious problems for Russian Navy's Black Sea Fleet, which is headquartered there.

But today, after pro-Moscow President President Viktor Yanukovych took office in February, Russia appears completely secure in its military foothold on Ukrainian soil until at least 2042.

In a quiet announcement Monday, Moscow revealed that – with Ukrainian consent – it will "upgrade" its Black Sea fleet over the next decade with at least 18 new warships, including six new frigates, six submarines, two giant troop-landing ships, and new squadrons of naval aircraft.

"I am quite sure that the Russian Black Sea fleet will stay in Ukraine till doomsday," says Kirill Frolov, an expert with the official Russian Institute of Commonwealth of Independent States.

The Russian naval upgrade is likely to cause waves around the Black Sea, which is bordered by NATO members Romania, Bulgaria, and Turkey, as well as Ukraine and Georgia.

The NATO aspirations of Ukraine and Georgia, both former Soviet republics, had stirred strong concerns in Moscow. But with NATO rules stipulating that member countries may not host non-NATO foreign military bases on their soil, Mr. Yanukovych's agreement to prolong Russia's grip on Sevastopol would seem to block Ukraine from even considering joining the alliance for decades to come.

Since the narrow electoral victory Mr. Yanukovych in February, Ukraine's previous pro-Western drift has gone into sharp reverse. The Slavic neighbors now seem headed into a full strategic embrace.

Under former President Viktor Yushchenko, Ukraine was committed to quickly joining NATO, but Mr. Yanukovych put an end to that last April by quietly closing down the government commission that was preparing for the move.

According to an agreement last week between Russian Defense Minister Anatoly Serdyukov and his Ukrainian counterpart Mikhail Yezhel, Kiev is now on board with Moscow's wish to restore the potency of its Black Sea naval arm.

Until now, the Black Sea fleet has been mostly rusting at anchor in Sevastopol since the collapse of the USSR almost two decades ago.

When Russia and another NATO aspirant, Georgia, fought a brief summer war in 2008, Ukraine – which sympathized with Georgia – complained about the use of Black Sea fleet warships deployed against Georgia from Ukrainian territory without Kiev's permission.

Russia now says it will inform Ukraine about any future movements of the fleet in advance. Some Ukrainian analysts say that's not enough.

"If the fleet is situated on Ukrainian territory, any actions it makes should take Ukrainian interests into account," says Andrei Yermolayev, director of the Sofia Center, an independent think tank in Kiev. "I think Ukrainian military specialists, security experts and politicians have to be given facts about the modernization. We have a right to know what are Russia's plans, goals, and strategy."

Last week the two defense ministers also agreed to broaden military cooperation, including holding joint war games in Russia's southern region next summer.

"We think that modernizing the Black Sea Fleet is beneficial for Ukraine as well as Russia," says Mr. Frolov of the Russian Institute of Commonwealth of Independent States. "First, Russia is paying an enormous rent for the use of this base. Secondly, the fleet not only protects Russia but also Ukraine."
Last April, when Yanukovych agreed to extend the Russian Navy's lease on Sevastopol by 25 years in exchange for a 30 percent discount on Russian natural gas, the Ukrainian opposition in parliament hurled smoke bombs and denounced the deal as "a black page in Ukrainian history."

But protests Monday were muted, with Ukrainian analysts pointing out that the bargain to retain the Russian fleet in Sevastopol remains widely popular among Ukrainians – polls show that about 60 percent approve – and many hope the Russian presence will yield further economic benefits.

"I don't think anybody is very indignant about the Russians modernizing their fleet," says Viktor Nebozhenko, director of Ukrainian Barometer, an independent Kiev think tank.

"It's their own business. It would become intensely popular among Ukrainians if they decided to build some of those new ships in [the languishing Soviet-era military shipyards near the Ukrainian port of] Nikolayev," he adds. "We need the jobs."

Tymoshenko: Fake Ballot Papers Printed In Kharkiv

KIEV, Ukraine -- The Batkivschyna (Fatherland) party's leader Yulia Tymoshenko has said that fake ballot papers have been printed in Kharkiv for the upcoming local elections.
According to the statement, an employee of the Folio Plius printing plant telephoned the Kharkiv headquarters of the Batkivschyna party at about 07:00 on Saturday to inform it that fake ballot papers for the local elections were being printed at the printing plant without a government contract.

According to the statement, representatives of the party's headquarters found the fake ballot papers when they went to the printing plant and managed to seize some of them.

"They seized what they could seize - cut and uncut ballot papers printed on large sheets of paper - and it is already clear that the Folio Plus printing plant did not have an official contract to print ballot papers," Tymoshenko said.

She added that European institutions as well as local international and local election observers have been informed about the incident.

Tymoshenko is also demanding that President Viktor Yanukovych and the Prosecutor-General's Office launch a criminal case in connection with the illegal printing of ballot papers in Kharkiv.

As Ukrainian News earlier reported, Odesa mayoral candidate Valeriy Pesetskyi has said that fake ballot papers could be printed at the Chornomorie printing publishing house.

Local elections in Ukraine are scheduled for October 31.

Yanukovych Forecasts Opening Of 27 Modern Perinatal Centers In All Regions Before 2014

KIEV, Ukraine -- President Viktor Yanukovych is forecasting that 27 high-technology perinatal centers will be opened in all regions of Ukraine before 2014.
In particular, according to Yanukovych, the first such a center should be opened in Kirovohrad by June 1, 2011.

«in the other regions, the centers should be opened in the period of 2011-2013,» the press service quoted Yanukovych as saying during an expanded working meeting of the committee on economic reforms, which focused on healthcare.

According to Yanukovych, the government should allocate money for financing these centers under the «Reproductive Health of the Nation» program.

He also stressed that he would take personal control of this issue and that every regional governor would report top him on the issue.

According to the press service, one of the first centers to be opened will be in Kirovohrad because it is one of the regions that presently need to modernize and where it is extremely necessary to open medical institutions.

In this context, Yanukovych noted the opening of a radiological building at the Kirovohrad oncological dispensary on Friday and stressed that this dispensary met the highest international standards.

The Presidential Administration’s first deputy head Iryna Akymova has said that implementation of the national project for creation of high-technology perinatal centers in all the 27 regions of Ukraine would require UAH 310 million ($39 million).

According to Akymova, this project is very pressing because the child mortality rate in the country is 2.4 times higher than the child mortality rates in the European Union and the maternal mortality rate is 3-4 times higher.

Main Control And Revision Office Of Ukraine: Tymoshenko's Government Misspent $4.5 Bln USD Of IMF Funds In 2009

KIEV, Ukraine -- Following the international auditors, the Main Control ad Revision Office of Ukraine (MCROU, Public Spending Inspection)revealed the results of its internal audit of the Ukrainian government's financial activity in 2008-2009.
As the Head of MCROU Petro Andreev announced at a press conference, Yulia Tymoshenko's government directed more than 36.1 bln UAH ($4.5 bln USD) received from the International Monetary Fund in 2009 to finance the current needs of the state budget instead of covering the external debt, as it was prescribed by the agreement with the IMF.

The total amount of Yulia Tymoshenko's government violations in spending Ukraine's public funds in 2008-2009 reached 53 bln UAH ($6.6 billion USD), according to MCROU's report. According to Mr. Andreev, a large part of the funds laundered from the State budget was spent on Ms. Tymoshenko's presidential election campaign.

In addition, the State Treasury of Ukraine illegally provided loans to the Pension Fund, amounting to 42.1 bln UAH ($5.4 bln USD). The State Treasury also placed large deposits in selected commercial banks, including 6.4 bln UAH (equal to $0.8 bln USD), $1.165 bln USD, and 97 mln EUR from the State Budget funds.

These funds were placed either with the reduced interest rates or interest-free.

Mr. Andreev also mentioned the violations concerning funds obtained under Kyoto Protocol. He referred to the purchase of emergency ambulances at a price that was inflated three-fold. Additionally, Andreev mentioned nationalization of the bank "Kiev" as another example of the abuse of national budget.

The international audit, referred to recently by numerous international media, was conducted by three US-based companies, Trout Cacheris PLLC, Akin Gump Strauss Hauer & Feld LLP and Kroll Inc., and was released on October 14.

Subsequently, two lawsuits were filed in the UK and US courts with the aim to claim back the money misspent by Yulia Tymoshenko's government from various companies which had been found involved in the money laundering schemes.

Putin Visit Raises Speculation About Gas Deal To Merge Gazprom, Naftogaz

KIEV, Ukraine -- Experts said Russian Prime Minister Vladimir Putin isn’t coming to Ukraine for nothing. Russian Prime Minister Vladimir Putin is coming to Kyiv, and once again he’s got gas on his mind.
Russia’s most powerful man will meet his Ukrainian counterpart, Mykola Azarov, during the seventh session of the Ukrainian-Russian intergovernmental committee on economic cooperation on Oct. 27.

And although the official visit has received hardly any hype, the last time the two men met, during the sixth session of the same committee in Sochi, Russia, last April, Putin shocked financial markets and foreign governments alike by proposing a merger of the countries’ state oil and natural gas companies.

This time, one of the subjects of talks will also be gas – in particular, changes to bilateral gas agreements, Russian Ambassador to Ukraine Mikhail Zurabov told journalists.

Shortly after Azarov’s boss, the Moscow-friendly Ukrainian President Viktor Yanukovych, came to power in February, Kyiv extended the Russian navy’s presence in Ukraine’s autonomous region of Crimea for another 25 years in exchange for a cheaper gas price, which nevertheless continues to climb.

Then Putin began proposing all kinds of far-reaching integration projects such as the unification of the two countries’ nuclear industries, aviation sectors and, most importantly, their state gas companies – Gazprom and Naftogaz Ukraine.

More recently, Azarov has publicly complained that Ukraine needs an even lower gas price from Gazprom, leading to speculation as to what Kyiv would offer Moscow in return next.

Ukraine depends on the Russian state-controlled gas giant Gazprom for the majority of the gas used by its export-oriented industry, some of which directly competes with Russian companies.

Since Putin came to power in Russia, first as president in 2000 and now as premier, the Kremlin has done little to conceal its use of gas and oil exports to control former satellite countries and influence individual governments of the European Union.

Despite fears that Gazprom, which accounted for 17 percent of world gas production in 2008, would swallow up its much smaller Ukrainian counterpart Naftogaz, officials in Kyiv have denied any intention of allowing this to happen.

Instead, most of the statements coming out of Kyiv since Putin’s April proposal have suggested the creation of an “international” consortium to manage and invest in Ukraine’s international pipeline, which delivers about 80 percent of Russian gas exports to Europe.

When asked for more details about Putin’s Oct. 26 visit to Kyiv, Naftogaz spokesperson Olena Yurieva said she could neither confirm nor deny whether any agreements were to be signed.

A top official at Ukraine’s Energy Ministry, speaking on condition of anonymity, said no new gas deal would be announced.

However, more than one Kyiv-based gas analyst told the Kyiv Post that Putin was not coming to Ukraine for nothing.

Volodymyr Omelchenko, a gas analyst at the Kyiv-based think tank Razumkov Center, said there is a 50 percent chance that Putin and Azarov will announce some kind of a deal.

“The most realistic scenario is some kind of a joint venture to control Ukraine’s pipelines,” he said. Some kind of European entity would likely be involved to deflect criticism of a Russian takeover, he added.

But the current authorities in Kyiv are divided in their attitudes toward greater Russian involvement in Ukraine’s gas sector.

“If Azarov had his way, a merger deal would have already been signed,” Omelchenko said. But there are also the industrialists like [billionaire Rinat] Akhmetov and others who don’t want the Kremlin monopolizing pricing, and the gas-sector wing like [businessman Dmytro] Firtash and [Energy Ministry Yuriy] Boyko, who want to maintain control over sales and distribution,” Omelchenko said.

Mykhailo Gonchar, a Ukrainian gas analyst, said more likely is a protocol of some kind being signed: “It wouldn’t have any legal force but it would be one step further than the unilateral declaration made following the last session in April.”

As evidence that something is brewing, Gonchar noted that Gazprom has been on the prowl for a public relations company in Kyiv to promote the impending deal.

“The Ukrainian public still feels negative about the idea of Gazprom controlling its gas pipelines, so the idea is to soften this position through PR,” he said.

Serhiy Pashinsky, an opposition lawmaker who sits on parliament’s fuel and energy committee, said he doesn’t expect anything on Oct. 27 except more hype: “I think what we’re going to see is another witch-doctor dance by Putin intended to dispel all the evil spirits from Ukrainian-Russian relations.”

Russia, Ukraine Sign Accord On Military Fleet

KIEV, Ukraine -- Just months after the ex-Soviet nations agreed to extend Russia's Black Sea Fleet’s lease in Sevastopol for another 25 years once the current one expires in 2017, defense ministers of Russia and Ukraine signed another deal to regulate the fleet’s upcoming overhaul in Crimea.
"Under the deal, the Russian side is committed to annually inform the Ukrainian side about the exact number of its personnel, equipment and weapons of the Black Sea fleet based on Ukrainian territory," Ukraine's Defense Ministry said in a statement.

The deal was signed during the bilateral talks immediately after Crimea hosted the 59th meeting of the council of defense ministers of Commonwealth of Independent States members.

Describing the deal as remarkable and significant, Russia’s Anatoly Serdyukov said that the new document would allow the fleet to maintain their weapons and personnel at the levels stipulated in the 1997 Russian-Ukrainian accords on the Black Sea Fleet.

The move is aimed at modernizing Ukraine’s Soviet-era’s armed forces fleet.

Russia has also confirmed that the two nations would soon plan to boost cooperation on joint military exercises.

Previously, Russian Navy Commander Admiral Vladimir Vysotsky had said that diesel-electric submarines as well as 15 new combat ships would be reinforced in the fleet by 2020.

Russia, Ukraine To Regulate Size Of The Black Sea Fleet

YALTA, Ukraine -- Moscow and Kiev will soon sign an agreement regulating the upcoming overhaul of Russia's Black Sea Fleet, the Russian defense minister said on Wednesday.
"This new document will allow the Black Sea Fleet to maintain the number of personnel and weaponry at the levels stipulated in the 1997 Russian-Ukrainian accords on the Black Sea Fleet," Anatoly Serdyukov said after a meeting of CIS defense ministers in Ukraine's Crimea.

Russia's Black Sea Fleet is stationed in Ukraine's port of Sevastopol under a lease agreement. Moscow and Kiev recently signed a deal extending the lease on the fleet's base in Sevastopol for 25 years after the current lease expires in 2017.

Russia is seeking to bring its ageing Soviet-era fleet up to modern standards as part of a larger effort to modernize its armed forces.

At present, the Black Sea Fleet has about 40 operational vessels, including a single diesel-electric submarine, but most of them are slated for decommissioning.

Russian Navy Commander Admiral Vladimir Vysotsky earlier said that the fleet would be reinforced with 15 new combat ships and diesel-electric submarines by 2020.

Ukraine: A Nation On Guard

KIEV, Ukraine -- When his efforts as a leading youth activist helped bring about the pro-democracy Orange Revolution that swept Ukraine in 2004, Yevhen Zolotaryov thought the former Soviet republic had made a decisive move away from neighbouring Russia and towards closer engagement with the west.
Today he sees much more work that lies ahead. “We could not have envisioned that such a big risk to democracy would emerge again,” Mr Zolotaryov says starkly.

Eight months into the presidency of Viktor Yanukovich – whose original ambitions for the top job were derailed by the Orange Revolution – Mr Zolotaryov is one of many opposition politicians, journalists, democracy activists, business people and foreign officials who worry that political and media freedoms are being rolled back.

Some suggest the new leadership is defaulting back to the heavy-handed system of the pre-Orange era in which big business, politics, pervasive corruption and remnants of Soviet rule are intertwined; others say it is trying to ape the “managed democracy” of Vladimir Putin, Russia’s prime minister.

“It does look like Ukraine is moving backwards,” Steven Pifer, former US ambassador to Kiev, told a radio audience this month.

Mr Yanukovich’s team say they are merely restoring stability after the bickering and chaos that followed the revolution – and with which many Ukrainians were fed up. That may be so. But the result has been a boosting of his powers relative to those of parliament and the judiciary, the arrest of opposition officials and a more active internal role for the security services.

The opposition fears the administration will use its expanding influence to manipulate regional elections on October 31, further bolstering its hold on the country.

The consequences reach well beyond Ukraine’s borders and its 46m citizens. As Europe’s largest country by area (excluding Russia’s European portion), its fifth most populous and home to some of the continent’s most crucial energy infrastructure, Ukraine’s choice of allegiance, and political system, has wide geopolitical significance.

Kiev has therefore been wooed on one side by the European Union and the US – which hope it could become a beacon of democracy on post-Soviet turf – and on the other by Russia, which is seeking closer ties between the two Slav nations.

Moscow’s ambitions are about more than a common history and Slavic roots. As Zbigniew Brzezinski, former US national security adviser, once famously quipped: without Ukraine, Russia stops being an empire with a foothold in Europe.

Since Mr Yanukovich took office last February in the imposing presidential building up in the hills overlooking central Kiev, Russia has pushed even harder to pull Ukraine into an economic union of former Soviet republics. The arrival of a Moscow-friendly leader is also seen as a chance for Russia to gain control over Kiev’s strategic natural gas pipeline, which serves much of Europe.

The west has been cautious. The EU is offering a free trade and association agreement, but it and the US have refrained from publicly criticising Mr Yanukovich, fearing that criticism could alienate him and push Kiev further towards Moscow.

The opposition bemoans such hesitation. “Ukraine needs the international community’s attention today like never before,” says Yulia Tymoshenko, the former prime minister beaten to the presidency by Mr Yanukovich. She alleges that “political technologies” – or dirty tricks – now common in many former Soviet states are being used against the opposition.

These range from legislative restrictions on who can take part and manipulating commissions that oversee elections, says Ms Tymoshenko, to creating “clone” parties with the same names as genuine ones in order to confuse voters.

February’s narrow result was declared broadly fair by international observers. However, since then the new administration has taken swift and systematic steps to entrench the power of the president and his allies, according to its critics.

Among the measures highlighted is the bending of constitutional rules to allow Mr Yanukovich to assemble a parliamentary majority. Parliament has since taken on a largely rubber-stamp role.

A controversial agreement Mr Yanukovich negotiated in April, to secure reduced gas prices from Moscow in exchange for extending Russia’s lease on Ukraine’s port of Sevastopol, was ratified in 40 minutes.

Then the government moved to overturn the post-2004 constitution, which had shifted powers from president to prime minister, arguing that its adoption was invalid. The claim was unanimously upheld by the constitutional court – but only after four of its 18 members resigned last month, some hinting they were under pressure, to be replaced by Yanukovich loyalists.

Oleh Rybachuk, a former deputy prime minister, says the Yanukovich team has completed a “hostile take­over of power, whose purpose is as yet unclear”.

Certainly, the opposition has come under pressure. Half a dozen of Ms Tymoshenko’s former senior officials have been arrested or are under investigation. The Yanukovich team says simply that these moves are part of an overdue crackdown on corruption.

There are also concerns about the media. Ukrainians lament that news broadcasts are starting to resemble their Russian counterparts. Mr Yanukovich is portrayed in Putinesque fashion, ordering officials to sort out problems bequeathed by the previous government.

The opposition, says Natalia Ligachova, head of Telekritika, a media monitoring group, now gets much less airtime.

In its annual press freedom index released on Wednesday, the Paris-based Reporters Without Borders dropped Ukraine 42 places to 131st, alongside Iraq, Algeria and Cameroon.

Two channels critical of the new government recently lost many of their frequencies following a legal case brought by a rival, Inter, that is ultimately owned by Valery Khorosh­kovsky, a business tycoon who in March was appointed head of the SBU security service.

Mr Khoroshkovsky, who also sits on the judicial body responsible for appointing and firing judges, says his business interests are now being managed by his wife. Speaking to the Financial Times, he insists he did not abuse his political power and played no active role in challenging the frequencies of the other channels.

Pressure is being exerted by the SBU on foreign non-governmental organisations, however . In June, Nico Lange, head of the Ukraine office of the Konrad Adenauer Foundation, a conservative German political foundation, who had published a critical report on recent developments, was detained for 10 hours on arrival at Kiev airport.

He avoided being expelled on “national security” grounds only after telephone diplomacy involving the office of Angela Merkel, German chancellor.

Last month, SBU officers visited projects supported in Ukraine by the pro-democracy network of George Soros, investigating whether the US billionaire’s organisation was funding political parties.

Mr Khoroshkovsky says the checks on NGOs were the routine enforcement of a law prohibiting foreign funding of political parties. He dismisses allegations of democratic rollbacks as “made up”, saying these had “become a cult [for the opposition] that reached the level of absurdity”.

The president himself vigorously denies any systematic assault on democratic freedoms. “Regarding any pressure, I would like to have evidence,” Mr Yanukovich told reporters this month. Serhiy Lyovochkin, the president’s chief of staff, says the opposition are making exaggerated claims in an attempt to discredit the administration.

That said, international concerns about democracy in Kiev and its rapprochement with Moscow are growing. In an October 14 phone conversation Joseph Biden, US vice-president, told Mr Yanukovich of the importance of free and fair elections, and media freedom, as signs of Ukraine’s commitment to democracy and European integration.

He added that process of constitutional reform should include checks and balances that served the interests of all Ukrainians.

But some foreign investors and diplomats, as well as local businessmen and intellectuals, privately suggest that a period of firm rule, after the dysfunctional governance and public disillusionment that followed the Orange Revolution, might be no bad thing.

The administration has drawn up an ambitious economic reform agenda aimed at improving Ukraine’s 142nd place (alongside Gambia, Honduras and Syria) out of 183 in the World Bank’s “ease of doing business” rankings, which measure factors such as regulation, property rights and commercial dispute resolution.

One tycoon says an ideal scenario would be a strongman president who ruled for an extended single term, drove through economic reforms, then handed over to a democratic system. The danger is that – as Russia has shown – authoritarian rule is hardly a guarantee of reform.

T  he prospect of an improved economy might explain why Ukraine’s influential oligarch business elite have muzzled the media they control. More likely, say critics, is that business interests that supported Mr Yanukovich stand to gain; those out of favour keep their mouths shut. “Big business in Ukraine doesn’t really support European goals” of openness and transparency, says Mr Rybachuk.

Whatever the real nature of Ukraine’s new regime, however, there are reasons to believe attempts to establish a Russian-style “managed” democracy may fail.

It is not clear that Ukrainians will, like Russians, agree to trade political freedoms for higher living standards. The authorities may find it tough to deliver their side of such a bargain, without Russia’s energy wealth or the abundant credit and high steel prices that fuelled Ukraine’s growth before the global financial crisis.

“The Russian vertical of power is supported by a powerful economic base, of oil and gas,” notes one analyst.

Ukraine also faces a more fundamental contradiction. For now, the Yanukovich team insists it is committed to far deeper links with the EU than Russia is. Opinion polls show many Ukrainians favour moving towards Europe. But Stefan Füle, EU enlargement commissioner, says closer integration depends on continued progress on democratic values.

“Our position is helping the Ukrainian authorities to reach European standards . . . but also making it absolutely clear that, this being the basis of our relationship, we could hardly have any negotiation here.”

The big question is whether Ukrainians are ready to defend their freedoms – if necessary on the streets, as in 2004. A recent poll by the International Foundation for Electoral Systems found a majority of Ukrainians either concerned or alarmed about reversals of rights.

Other polls record a plunge in ratings for Mr Yanukovich – but also for the opposition, suggesting a more general disillusion.

That is not a sentiment shared by Mr Zolotaryov. “Many people felt tired of politics. But I think that tiredness will pass when there are new repressions,” says the one-time revolutionary. “Repression makes you forget you’re tired.”

Ukraine Set To Leapfrog Russia In EU Visa Terms

BRUSSELS, Belgium -- The European Union is preparing to offer Ukraine an Action Plan on visa-free travel in November. But there is little prospect of a similar deal with Russia for now.
EU Observer understands that the European Commission has drafted the Ukraine plan, which is to be adopted by EU foreign ministers in Brussels (25 October) on Monday and formally unveiled at an EU-Ukraine summit in the EU capital on 22 November.

An EU diplomatic source said there is a "great" chance the EU ministers will take the step.

The Action Plan itself is a list of EU demands for Ukraine reforms on issues such as document security or repatriation of irregular immigrants. The open-ended plan does not give a deadline but some in Kiev dare to hope it could be put in place in time for the Euro 2012 football championships in Ukraine and Poland.

The technical EU document is seen as a political breakthrough in Ukraine which has been pleading, without success, for an EU enlargement perspective for the past five years.

"It means that the Schengen or Berlin visa wall will sooner or later be demolished," Ukraine's ambassador to the EU, Kostiantyn Yelisieiev, told this website, referring to the EU's passport-free Schengen zone.

"It would be very important for the morale of Ukrainians. My grandfather died in the Second World War to liberate Europe from the Nazis and to provide freedom of movement for his grandsons and granddaughters. If my grandfather asked me today, why did he die - I would be able to say 'Now I finally have the right to travel freely across Europe'."

Russia has in recent months also been clamouring for the EU to lift visa requirements. But EU officials say that Moscow is unlikely to see any concrete developments at its respective EU summit also in Brussels in December.

Russia at its previous EU summit in May rejected EU proposals for "Common Steps" on visa liberalisation - a tailor-made EU package in which both sides would have set out operational steps to take on visa-free travel, rather than the EU dictating terms as with Ukraine.

Moscow instead gave Brussels a visa waiver memorandum offering to drop visa requirements "overnight" if the EU reciprocates. It has stuck to its offer publicly and privately ever since, despite the fact that it ignores basic EU legal requirements on easing travel restrictions.

"You can basically put it in the bin," an EU official said on the Russian memorandum. "The Russians have painted themselves into a corner by putting the visa waiver on the table because now it is very hard for them to accept that the technical steps have to be taken first."

Russian President Dmitry Medvedev speaking after a three-way summit with French and German leaders in the French resort town of Deauville on Tuesday accepted the EU rebuttal. "Everybody knows we have to cancel the visa regime and we understand we can't do it straight away," he said, according to Reuters.

For his part, France's Nicolas Sarkozy said: "From my point of view, in 10-15 years the vision that we should have is a common economic EU-Russia space, end of visa requirements and a common security concept."

An EU diplomatic contact said it is unclear to Brussels whether or not Russia is genuinely interested in visa-free or if its visa demands are part of a more complicated diplomatic "dance" in which it wants EU concessions in another area instead.

"They already have what they want - easy travel conditions for diplomats and businessmen," the source said.

The contact added that the Deauville meeting is a "kick in the teeth" for the EU's recently anointed foreign policy chiefs Herman Van Rompuy and Catherine Ashton: "It's not clear to us whether they were even informed about Deauville, let alone invited."

Czechs Arrest Tymoshenko-Era Economy Minister

PRAGUE, Czech Republic -- Police in the Czech Republic say they have arrested former Ukrainian Economy Minister Bohdan Danylyshyn on the basis of an international warrant alleging abuses while in office.
Danylyshyn served as minister in the previous government, led by Yuliya Tymoshenko.

He is the most senior Tymoshenko-era official to be accused of a crime since Viktor Yanukovych defeated her in a two-way presidential runoff in February.

Since Yanukovych took office, Ukrainian authorities have also detained a former director of customs under Tymoshenko's administration and a former CEO of state-run energy giant Naftogaz.

Tymoshenko has called the arrests politically motivated.

Danylyshyn was detained late on October 18, according to Czech Police.

"Basically, the international arrest warrant states a suspicion of committing the crime of failing to execute [his] responsibilities in the management of another party's property and that this occurred in the year 2007, when the man was alleged to have given preference to one of the firms [in a tender] and allegedly inflicted damages on Ukraine of more than 1.3 million euros," Czech Police spokeswoman Pavla Kopecka said.

The charges, filed in August, stem from alleged actions during the sale of assets of Boryspil International Airport.

Kopecka added that there has been no decision yet on whether Danylyshyn would be handed over to Ukrainian authorities.

The Ukrainian Interior Ministry reportedly confirmed the arrest.

Ukrainian Human Rights Activist, Journalist Protest Police Searches

KHARKIV, Ukraine -- A Ukrainian human rights activist and a journalist say they have been subject to police searches of their apartments or offices designed to put pressure on them over their activities.
The incidents concern activist Dmytro Groisman of the central city of Vinnytsya and journalist Petro Matviyenko of Kharkiv, in the east.

Groisman, the coordinator of Vinnytsya Human Rights Group, said he was in Kyiv on a business trip when his flat in Vinnytsya was searched by police on October 15. He said police were investigating him for spreading pornography.

He told RFE/RL on October 18 that the case was connected with his Live Journal blog, which included a link to a video, widely distributed on the Internet earlier this year, showing clips of three Russian opposition activists having sex.

In his blog entry, posted in May, Groisman commented that Russia's FSB security service was spying on the three.

Groisman said police also searched the office of Vinnytsya Human Rights Group and removed documents and financial reports.

He said police had a court order to search his apartment but not the office.

"It was robbery, without a court order," Groisman told RFE/RL.

"Instead of viewing the office of Vinnytsya Human Rights Group, they have started to take out all our equipment, all files. Their purpose was to get to our database of refugees and victims of torture."

Vinnytsya police have not commented on the case. Prosecutor-General's Office spokesman Yuriy Boychenkosaid his office will check whether it acted legally, adding that the answer is likely to be ready within 10 days.

Ukraine's Helsinki Human Rights Union has described the case as a "gross violation" of Ukrainian laws. The group's chairman, Yevheniy Zakharov, informed the accusations of spreading pornography were only a pretext.

In a separate development, Kharkiv police on October 15 searched the apartment of journalist Petro Matviyenko, the deputy of missing editor Vasyl Klymentyev.

Matviyenko, deputy editor of "Novyy Styl" newspaper, said police took away computers, including a lap top belonging to his child.

"All my documentation is there, including my sources, my articles and my drafts, my private correspondence, thus my privacy is being infringed [upon]."

Matviyenko told the police are punishing him for the fact that he is trying to publicize the case of Klymentyev, who went missing in Ukraine in August.

Previously Matviyenko criticized the investigation into Klymentyev's disappearance as a "farce."

Investigator Valery Lehenevsky, who chaired the police group that searched Matviyenko's flat, declined to comment about the case.

Deputy Interior Minister Leonid Zyma promised on October 18 that he would explain the situation within a few days, when the police commission overseeing the Klymentyev investigation will arrive in Kharkiv from Kyiv. Earlier the police promised to check all versions of Klymentyev's disappearance.

Both Groisman and Matviyenko have asked for international assistance to protect their dignity.

CIS Defense Ministers To Meet In Ukraine

MOSCOW, Russia -- A CIS defense ministers meeting will be held on Wednesday in Crimea, Ukraine, the Russian defense minister's press secretary said.
The meeting will be headed by Russian Defense Minister Anatoly Serdyukov.

Delegations from Azerbaijan, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan and Ukraine are expected to take part in the meeting.

"According to the agenda of the meeting, it is planned that over 20 issues of cooperation between military departments of the Commonwealth State will be discussed," Irina Kovalchuk said.

The ministers will analyze the results of implementing of a military cooperation concept between CIS countries up to 2010 and results of work of the of CIS Defense Ministers Council working bodies in 2010.

Venezuela's Chavez In Ukraine For Aerospace Talks

KIEV, Ukraine -- Venezuelan President Hugo Chavez was in Ukraine on Monday for talks on aerospace cooperation.
Chavez was scheduled to meet with Ukrainian President Viktor Yanukovych, and later tour the Antonov aircraft assembly plant in the capital Kiev.

Ukraine is keen to find buyers for Antonov, a producer of cargo and passenger aircraft.

Chavez was is on a two-week international trip devoted to increasing trade between Venezuela, and European and Middle Eastern nations. The visit to Ukraine is his first.

Over the weekend, Chavez met with Belarusian President Aleksander Lukashenko that saw the signing of an agreement on oil.

The deal will see Venezuelan crude transported to the landlocked former Soviet republic via a pipeline running across Ukraine from the Black Sea, for the first time giving Belarus an alternative to importing oil from Russia.

Chavez was in Russia last week for talks with the Kremlin on possible arms deliveries to Venezuela, and possible construction of a nuclear power plant in Venezuela by Russian engineers.

The Venezuelan leader is scheduled to travel onwards from Ukraine to Iran, Syria and Portugal.

Video-Blog Diplomacy Could Trap Medvedev

MOSCOW, Russia -- President Dmitry Medvedev has introduced an innovative way to conduct foreign policy — video-blog diplomacy.
On Oct. 3, Medvedev recorded a video message to the Russian and Belarussian people. He made clear that the Kremlin no longer views Belarussian President Alexander Lukashenko as Russia’s strategic partner. Medvedev basically called for a regime change in Minsk.

Sending powerful video-blog messages to neighboring states and their leaders has become a drill for Medvedev.

In August 2009, a few months before the presidential election in Ukraine, Medvedev bluntly called for a freeze in relations between Russia and Ukraine until Ukrainian voters replaced their “anti-Russian president,” Viktor Yushchenko. They did, and Russian-Ukrainian relations are back to normal.

This strategy has the advantage of publicly identifying laudable foreign policy objectives. It provides a direct channel of communication with broad audiences in the target states and Russia.

In his video-blog messages, Medvedev is presenting the Kremlin’s foreign policy as grounded more in moral imperatives and less in realpolitik.

He is rallying international and domestic support behind his positions— and thus campaigning for leadership at home and abroad, boosting his self-esteem.

But there is a downside to the video-blog diplomacy. It could turn out to be a high-stakes bet, front-loaded with risks of failure, especially when taping a video blog predates strategy development.

Once you publicly unveil the desirable policy outcomes, you deny yourself the advantage of a strategic surprise. You are locked into a strategy that is basically being developed on the go.

You no longer have the luxury of making a timely U-turn. Your policy options are further constrained by the public appeal to moral values, all but precluding a face-saving deal to avoid failure.

Medvedev’s call for a regime change in Kiev was successful largely because the Ukrainian political winds had already been blowing in Moscow’s favor. Yushchenko had such low ratings that his defeat was all but a given.

This is hardly the case in Belarus, where the “last dictator of Europe” stands a good chance of being re-elected without resorting to electoral fraud. The Kremlin would then be forced to deal with Lukashenko.

Lukashenko will surely challenge Medvedev’s video-blog diplomacy. Let’s hope that Medvedev has a strategy to deal with the aftermath.

Official Role For Russian Splits Ukraine

KIEV, Ukraine -- Ukraine's opposition leader vowed Sunday to resist giving the Russian language official status.
Former Prime Minister Yulia Timoshenko said her BYuT faction "will do everything we can to defend Ukraine against the introduction of Russia as a second state language," .

Under proposed legislation, Ukrainian would remain the only state language, but restrictions would be lifted on the use of other languages spoken in the country, including Russian, Bulgarian, Romanian and Hungarian, granting them official regional status.

Many of the country's top politicians, including Prime Minister Mykola Azarov, cannot speak Ukrainian, and President Viktor Yanukovych is himself a novice speaker.

Russian is still used in much of the republic, especially in the east, the Crimea and the capital Kiev, and there is a strong movement to protect the rights of Russian speakers, the report said.

Ukraine's Stalled Power

KIEV, Ukraine -- This winter many Ukrainians may have to choose between putting food on the table and heating their homes. On top of the worst recession in modern history, the country faces an immediate 50% increase in household gas bills. State-subsidized gas has just come to an abrupt end.

What's particularly infuriating is the fact that Ukraine sits on potential gas reserves that would rival those in many Gulf States. But successive governments have done next to nothing over the past 20 years to verify and exploit these resources.

According to a report issued by BP in June, Ukraine has proven natural gas deposits of 0.98 trillion cubic meters—enough to make the country self-sufficient in gas for the next 20 years.

A further two to 32 trillion cubic meters of shale gas may lie close to the Polish border, and up to 8 trillion cubic meters of coal-bed methane gas may be in the Donbas basin, according to estimates made last year by former President Viktor Yushchenko's energy advisor Bohdan Sokolovsky and the Ukrainian government's National Agency for Energy Resource Management, though these reserves have yet to be commercially proven.

The Crimea also holds new natural gas fields, and the Black Sea has its own potential for off-shore hydrocarbons.

But instead of trying to exploit these potential domestic energy sources, Kiev has for decades weaned Ukraine's industry on cheap, plentiful gas imported from Russia and Central Asia.

Meanwhile, foreign investors who might be tempted to help Ukraine develop its own domestic energy sources have, time and again, been scared off by a mercurial business environment and fickle governments.

Ukraine can no longer afford this complacency. In the first quarter of this year, Russia's Gazprom again hiked the prices it charges to Ukraine's cash-strapped state gas company, Naftohaz Ukrainy, meaning its tab soared to $305 per thousand cubic meters from $50 per thousand cubic meters in 2005.

According to investment bank Troika Dialog, that's just $2 less than Gazprom's European customers pay, even though Kiev buys gas at the Russian-Ukrainian border and thus doesn't have to pay the Asian, Russian or Ukrainian gas transit fees.

With the price of natural gas set to plummet over the next five years, Gazprom knows it will face stiff competition in Europe, both from natural gas importers and from producers of domestic shale gas.

Russian gas is very expensive to extract and transport, particularly from the newer fields in northern and central Siberia. Plentiful Ukrainian gas less than 800 kilometers from Europe's border, coupled with a ready-built pipeline network to transport it, perhaps explains why Naftohaz is being pursued so ardently by its northern neighbor.

The failure of successive Ukrainian governments to validate, quantify and exploit these reserves is nothing less than a betrayal of national interests. Major energy companies such as Shell, BP, Marathon, Exxon Mobil, and Total, along with various Ukrainian politicians, have tried for years to negotiate deals for serious prospecting.

However, president after president has failed to ratify the bills, and so the plans for geological surveys remain in their drawers. Most recently, Kiev has stalled progress by removing a key clause from Ukraine's rules governing production-sharing agreements in public/private partnerships.

Without the clause, the government can change the basic financial terms of contracts with foreign investors at any point. As Shell's general manager, Patrick Van Daele, recently told the Kyiv Post, if the clause is not replaced, "nobody in his right mind will be willing to come and invest here." The legislation currently awaits President Viktor Yanukovych's signature.

You'd think the European Union would want to prod Kiev in the right direction, given that it could have in Ukraine a potential Gulf state on its own doorstep, and—at last—a major rival to Russian supplies. But, privately, many EU officials appear relieved that Ukraine's leaders seem to have put EU membership on the back-burner.

As Europe slowly turns its back, Russia's influence grows.

So time is running out for the Ukrainian people. The current government is centralizing its power, even as the argument for real Ukrainian democracy has never been greater. Government transparency, accountability, and the rule of law would foster a safe and predictable environment for foreign energy investors.

And in Ukraine's ability to exploit its own resources lies not just financial prosperity, but true independence and security to boot.

Ukraine's Yanukovych Vows Resolute Fight Against Poverty

KIEV, Ukraine -- Ukraine's President Viktor Yanukovych urged Ukrainians on Sunday to take joint efforts to stem poverty in the ex-Soviet republic where every fourth person was living beyond the poverty line according to data of the Labor Ministry.
Yanukovych addressed the nation on the occasion of International Day for the Eradication of Poverty, which is celebrated on October 17 in the world, the Ukrainian president's press office said.

"The reduction of the poverty level and its eradication depend on resolute efforts by every citizen who is indifferent to the fate of those who are suffering from poverty. That is why, I am addressing representatives of state authority, socially responsible business and deputies of all levels and urging them to do their best to stem this social evil," Yanukovych said.

According to Yanukovych, joint efforts could propel "Ukraine into the group of the most developed and prosperous countries in the world."

According to data of the Ukrainian Labor Ministry, 26.4% of Ukrainians are living beyond the poverty line.

Doctors Charged Over Illegal Kidney Trade

KIEV, Ukraine -- Three Ukrainian doctors have been charged with removing kidneys from victims of human trafficking for sale to wealthy foreigners for up to $200,000 US per kidney, Ukraine’s interior ministry said on Friday.
The doctors, who have been arrested, “were part of an international criminal group whose members had for a long time trafficked people from Ukraine into one of the southern ex-Soviet nations,” it said in a statement.

It said authorities had identified more than 30 victims of the alleged illegal transplant ring, including “citizens of Ukraine, Moldova and Uzbekistan who had been trafficked abroad.

“(Each of them) came back home without a kidney, thus becoming disabled,” the ministry statement said.

It said buyers paid $100,000 to $200,000 per kidney.

The ministry did not name the country where the organs were removed from the victims or say whether the buyers travelled there for transplants.

Most of the recipients were from a country where Ukrainians had “emigrated en masse in the early 1990s”, it said, in a possible reference to Israel.

The Interior Ministry said suspected members of the crime ring had bought real estate worth over $1 million apiece and spent lavishly on luxury cars and trips abroad.

If convicted, the doctors face prison terms of up to 12 years.

Will Ukrtelecom Sale Be Honest?

KIEV, Ukraine -- The auction of the state-owned fixed—line telephone monopoly due Dec. 28 will be the nation’s biggest since Kryvorizhstal was sold for a record $4.8 billion.
Ukraine’s government on Oct. 13 formally launched a privatization tender for a controlling stake in fixed-line telephone monopoly Ukrtelecom, the sale of which has long been stalled due to political gridlock.

The auction, to be wrapped up by Dec. 28, sets the stage for the nation’s biggest auction since top steel mill Kryvorizhstal was bought for a record $4.8 billion by the world’s largest steel group, ArcelorMittal.

With a starting price of $1.3 billion, the Ukrtelecom sale is likely to raise badly-needed fresh cash to cover stretched state finances. But don’t expect the biggest bidders to line up for Ukrtelecom, let alone a record-making sale price.

The sale is proceeding with controversial restrictions that threaten to exclude leading global telecommunications companies from the bidding.

As the first big sell-off of state property under President Viktor Yanukovych, who took power on Feb. 25, the Ukrtelecom sale is being watched closely to gauge how transparently privatization will be conducted under his leadership.

Concerns exist that valuable assets could be sold off at below-market prices to well-connected oligarchs, as happened when Yanukovych served as prime minister from 2002-2004 and again from 2006-2007.

It was, after all, in 2004 when Yanukovych served as premier that the Kryvorizhstal steel giant was first privatized for $800 million to two billionaire oligarchs, despite bids nearly twice as high by steel groups.

The winning bid then was by a consortium backed by longtime Yanukovych supporter Rinat Akhmetov, Ukraine’s richest man, as well as billionaire Viktor Pinchuk, son-in-law to then President Leonid Kuchma.

The Kryvorizhstal steel mill was renationalized and resold after the Orange Revolution by the government, then headed by Yulia Tymoshenko. It was and is still regarded as Ukraine’s only successful and clean privatization.

Five years later, fears are running high now that Yanukovych could try to limit competition for Ukrtelecom, ensuring that it ends up in the hands of chosen business allies.

On Oct. 13, Oleksandr Ryabchenko, head of Ukraine’s State Property Fund, expressed hope that at least $1.5 billion would be raised when the winning bid was chosen. But he admitted that competition could be limited by the tender conditions.

Top European telecoms companies that have to various degrees expressed interest in Ukrtelecom over the years – including Deutsche Telekom and Norway’s Telenor – are prohibited from taking part in the tender because they are more than 25 percent government-owned. Telecoms that hold more than a 25 percent market share in Ukraine are banned from bidding by another condition.

Oleksandr Bondar, former head of Ukraine's privatization agency, said the conditions were created to exclude some bidders. "The thing is being put together in an entirely unprofessional manner," Bondar said.

In a note to investors, Kyiv-based investment bank Dragon Capital concluded that the restrictions would boost tender chances for domestic billionaires and Russian bidders. ”We consider domestic business conglomerate System Capital Management and Russia’s AFK Sistema, which owns domestic cellular operator MTS, the most likely bidders for Ukrtelecom,” Dragon said.

System Capital Management is the business holding of Akhmetov.

Ryabchenko insisted that the tender restrictions were required by Ukrainian legislation, but neither he nor other top officials could explain why Yanukovych’s dominant ruling coalition could not change the legislation ahead of the tender to boost competition in the auction, and, in turn, generate more cash for budget coffers.

“We do not have the right to sell Ukrainian assets to other states. This is not privatization,” Ryabchenko said.

Meanwhile, Serhiy Lyovochkin, head of the presidential administration, stressed that the Ukrtelecom sale would be transparent. He also defended the bidding restrictions citing national security concerns and described Ukrtelecom as a “strategic” asset that provides telecommunications to much of the country, including government and military.

But Lyovochkin could not explain how such national security concerns could be minimized if Ukrtelecom is sold to private business interests, including Russian oligarchs who are strongly influenced by the Kremlin. “That’s a good question,” Lyovochkin said in at an Oct. 13 briefing in response to a question.
Experts say Ukrtelecom is a highly bureaucratic and mismanaged corporate dinosaur which has been milked of its profits and has sharply lost value in the past decade. It has fallen decades behind European peers in terms of introducing new telecoms technologies.

But it still controls about 80 percent of the fixed-line market in Ukraine, a country of 46 million citizens, as well as a major share of the nation’s telecommunications backbone.

It holds the country’s sole 3G license, has only a relatively small mobile business after its leading mobile phone company was sold off in 2003 to Russia’s MTS at a fire sale price of about $200 million.

Today, that mobile phone business is valued at billions of dollars, more than Ukrtelecom will itself be sold for. Moreover, the MTS mobile business in Ukraine generates perhaps hundreds of millions of dollars in profits annually, while Ukrtelecom mustered only $6 million in the first half of this year.

Without a strong mobile business of its own, Ukrtelecom has gradually lost clientele, revenues and profits. Corporate and private clients have increasingly turned to better quality services provided by privately-owned mobile and fixed-line operators.

Yanukovych Turns Up Heat On Rival

KIEV, Ukraine -- Ukrainian authorities attacked the previous government of Yulia Tymoshenko by releasing an international report that alleges several hundred million dollars were misspent during her term.
The Ukrainian authorities raised their attacks on the previous government of opposition leader Yulia Tymoshenko to an international level on Oct. 14, when an all-star team of U.S. lawyers and investigators released a report alleging that several hundred million dollars were misspent during her latest term as prime minister, from the start of 2008 to March 4.

The 176-page report by two U.S. law firms, Trout Cacheris and Akin Gump Strauss Hauer & Feld, as well as detective firm Kroll, suggested that members of Tymoshenko’s government made big bucks from kickbacks and money laundering using foreign shell companies.

The investigation also alleges that the ex-prime minister’s team diverted state money to her presidential election campaign, which she lost to President Viktor Yanukovych on Feb. 7.

The firms – known for their work protecting the images of some of Yanukovych’s business and political allies in the past – were hired by the Ukraine’s government to audit their predecessors.

The investigators and Yanukovych’s government touted the report as evidence of his commitment to fighting Ukraine’s endemic corruption.

They said it represents the first serious attempt to get to the bottom of graft in a country that hears many corruption allegations among politicians, but has seen no high-level conviction.

But the opposition claims the investigation is a smear campaign aimed at discrediting Tymoshenko and her allies.

They say it is the latest in a string of attempts to clamp down on critics and opponents of Yanukovych, who they say is taking Ukraine on an authoritarian path.

The report doesn’t name Tymoshenko, but investigators made clear that they considered her to be at the center of many allegations.
The report picked six cases which it said “were selected in order to provide a survey … of suspect government actions during the stated period of time.”

The investigators blamed Tymoshenko’s government for misappropriating taxpayers’ money when buying sugar, vaccines, importing cars and even selling carbon credits to other countries.

In one of the more serious allegations, the report claims that 200 million euros out of the 320 million euros Ukraine received for selling Kyoto protocol carbon credits were spent on pensions instead of being used exclusively to finance environmental projects.

Two lawsuits have already been filed in the West in connection with the results of the investigation.

The Ukrainian Emergency Ministry on Oct. 11 filed a lawsuit in a court in the United Kingdom against British firm Legal Business Consultants accusing it of being a part of an international conspiracy allegedly involved in the sale of 27 depreciated medical vehicles to the ministry at inflated prices.

In the end the cars were allegedly decorated with Tymoshenko banners and used during her electoral campaign.

On Sept. 17 Ukrvaktsina, a state-run entity within Ukraine’s Ministry of Health, filed a court action in a U.S. court charging Ukrainian firm Interfarm, along with U.S. based Olden group, of selling overpriced vaccines to Ukrvaktsina, linking the conspiracy to the Tymoshenko government.
Hryhoriy Nemyria, a former deputy prime minister and a close adviser to Tymoshenko, said the report is politically motivated. He denied large-scale corruption in the government, but said he couldn’t comment on the specific cases until he had studied the accusations more thoroughly.

“Instead of reforming the Ukrainian economy they are engaged in a witch hunt of the opposition. We denounce these findings. They are obviously politically motivated,” Nemyria said.

Nemyria pointed out that these firms had only looked into the work of Tymoshenko’s government, and not Yanukovych’s from 2006-7.

The representatives of the three firms that did the report denied this to be a witch hunt and said they do not have any agenda behind.
Kroll and Akin Gump are not new to Ukraine.

After the murder of journalist Georgiy Gongadze, Kroll was hired in 2001 by then-President Leonid Kuchma’s son-in-law Viktor Pinchuk to probe the case.

In the end the firm issued a report saying Kuchma wasn’t involved, which was widely viewed an attempt to absolve him from suspicion arising from alleged discussions he had with senior officials about dealing with the journalist.

Akin Gump lawyers have also had experience working in Ukraine.

The firm’s lawyers have in the past defended Ukraine’s richest oligarchs and strongest Yanukovych’s backers – Rinat Akhmetov, Ukraine’s richest man, and gas tycoon Dmytro Firtash.

At times these firms have pressured investigative journalists who write stories about both Ukrainian businessmen by threatening to file lawsuits against them.

Both Kroll’s and Akin Gump’s representatives said they have clients around the world but denied having any conflict of interest in this investigation and added that in their findings there were guided by facts.

While normally such cases are handled by the Ukrainian domestic state prosecutors and investigators, in this case the government decided to add more international flavor – and legitimacy – to that by filing the lawsuits to western courts that bear more credibility than Ukrainian ones.

Volodymyr Fesenko, director of the Kyiv-based Horshenin Institute think tank, said the new government is looking to create an image for itself as an anti-corruption crusader, as well as to discredit the opposition.

The report doesn’t mention Tymoshenko or any of her top lieutenants, but investigators left no doubt as to who was the focus.

“In our report one can see a list of transactions that lead to Tymoshenko,” said Mark Macdougall, a partner at Akin Gump, at the press conference in Kyiv on Oct. 14.

“I think we’ll hear some names down the road. And that’s when politics will start.” said Fesenko.
When asked how much tax payers’ money was and will be spent on the U.S. lawyers and investigators, Plato Cacheris with Trout Cacheris law firm said “it was much less than the money stolen” and would not elaborate further.

In turn, Ukraine’s Finance Ministry also refused to reveal any details, calling it a commercial secret.

A senior government official said that $2 million in state budget funds had been spent on the first stage of the audit.

The official, speaking on condition of anonymity because he was not authorized to comment on the issue, said the aim was to recover a sum up to 100 times larger than the firms’ fees.

The official added that two further stages of investigations are planned, which will cost roughly the same each.

“So far we have done what we needed to. But there is a high possibility the Cabinet will ask us to do some other things,” Cacheris said.

European Parliament President: Ukraine Must Strictly Adhere To Democratic Standards

KIEV, Ukraine -- Ukraine and the European Union will continue to develop bilateral relations with Ukraine adhering to democratic standards, President of the European Parliament Jerzy Buzek announced in Brussels Wednesday, during a press conference after his meeting with Ukrainian Prime Minister Mykola Azarov.
He noted that government officials and EU structures have regular meetings with Ukrainian government members. The next such meeting will be held on November 22, during the EU-Ukraine summit in Brussels.

Preparations for this summit became one of the topics at Wednesday's talks.

During the final press conference, Jerzy Buzek stressed that the close relationships that developed between the EU and Ukraine in recent years may continue to evolve, if the parties strive to achieve mutual compatibility of political and economic systems.

Buzek said he believes that Ukraine should adhere to democratic norms and standards not only in words but in deeds.

It is important not only for the development of relations between the EU and Ukraine, but also for Ukraine itself, he said.

According to the European Parliament head, the agenda of the bilateral relations has very many important things to be discussed at the next EU-Ukraine summit.

Among them there is continuation of negotiations on concluding an association agreement between Ukraine and the EU, establishment of a bilateral in-depth and comprehensive free trade area, and the issue of visa-free entry of the Ukrainian citizens to the EU.

Ukraine Government Probe Implicates Rivals

KIEV, Ukraine -- Ukraine's government issued a raft of corruption allegations against the country's former prime minister Thursday—a move certain to step up tensions with her supporters who say the country's new president is creating an authoritarian state.

a new twist in Ukraine politics, the government of President Viktor Yanukovych has used Western expertise in leveling charges against his rivals.

Investigators released a report researched and written by U.S. private detectives and attorneys who have lately been employed by the country's political elite to burnish its credentials.

The report takes aim at officials who served under former Prime Minister Yulia Tymoshenko, a charismatic populist heroine of Ukraine's 2004 Orange Revolution who was defeated in elections at the beginning of the year and has since seen a number of allies arrested or investigated for corruption or mismanagement.

Ms. Tymoshenko, a longtime arch rival of Mr. Yanukovych, has called the investigations politically motivated.

Political analysts said the latest attack on Ms. Tymoshenko may backfire, since voters in Ukraine have in the past viewed corruption allegations as a public-relations tactic used to destroy opponents.

Ms. Tymoshenko's political career got a boost in the 1990s when she was briefly jailed on corruption charges that were later dropped.

"This is not an attempt to fight corruption," said Oleh Rybachuk, a former chief of staff in Ukraine's presidential administration. "It is a strategy to destroy their lifelong opponent [Tymoshenko]. She's no angel, but this is a selective approach."

Mr. Yanukovych's chief of staff, Serhiy Lyovochkin, denied any political motivation in the investigation, which has so far cost more than $2 million, and which officials say aims at retrieving stolen funds to state coffers.

The firms that compiled the report—the law firms Akin Gump Strauss Hauer & Feld, and Trout Cacheris, and the investigative firm Kroll Inc.—worked for five months in London, Washington and Kiev on the report.

The investigators deny their work is politically driven, and say they were retained to do research into genuine suspicions of unethical behavior.

The investigators compiled 2,000 pages of exhibits to back up allegations, and two civil suits have already been filed in the U.S. and U.K. against companies that allegedly aided corrupt government officials in skimming public funds.

While the report doesn't link Ms. Tymoshenko to any alleged theft, it does accuse some high-level officials around her.

The report says Ms. Tymoshenko steered hundreds of millions of dollars of budget money to boost her popularity before presidential elections that swept her out of power this year, when she was defeated by Mr. Yanukovych, whose allies in Parliament then fired her as prime minister.

Among the more serious charges, the report says Ms. Tymoshenko authorized the sale last year of about €320 million ($443 million) in carbon credits under the Kyoto Protocol framework, and used most of the proceeds to cover a shortfall in Ukraine's pension fund.

Although some has been returned to segregate accounts earmarked for environmental projects as directed by the Kyoto agreement, about €200 million hasn't.

The report also accused the Tymoshenko government of buying 1,000 imported vehicles for the Ministry of Health shortly before the elections, and using them mainly as a mobile advertising gimmick for her campaign.

The report accuses Ms. Tymoshenko of diverting money from a state stabilization fund for banks and steering it into an unrelated program to provide funding for 6.4 million citizens to register and formally own their plots of land.

Hryhoriy Nemyria, former deputy prime minister and a top adviser to Ms. Tymoshenko, declined to comment on specific allegations, saying he hadn't had a chance to review them.

But he denied any widespread corruption in her government, and called the report a smear campaign conducted under the guise of a professional investigation.

He noted that investigators looked only at the Tymoshenko government, without looking at Mr. Yanukovych's own role as prime minister from 2006 to 2007.

"These American firms are being used by a government widely accused of backsliding on democracy in a smear campaign to help cement their rule," he said.

The investigators said they necessarily limited the scope of their research to a few cases of concern to Ukrainian law enforcement and Finance Ministry officials.

They said they hope the report will stand on its merits and the vast amount of credible evidence gathered.

The report accuses officials in Ms. Tymoshenko's government of enriching themselves by acting as intermediaries in government purchases of vehicles, medical products, vaccines and 22,000 tons of sugar needed to replenish the country's supplies this year after they were sold off in the summer of 2009.

Mark MacDougall, who headed the investigation for Akin Gump, said the investigation ranged far outside Ukraine to the state of Oregon, the U.K., Latvia, Israel and the Seychelles, where it found "the use of extensive classic offshore money laundering structures."

Investigators said the findings give a rare glimpse into some of the methods of government graft in a country where allegations are plentiful but proof is usually scarce.

They allege that the cases were part of a wider pattern of malfeasance in Ms. Tymoshenko's government, and that its profile of a half-dozen cases was part of an "effort to provide a survey or cross-section of suspect government transactions during the stated period of time."

"From the start, our job has been to establish the facts," Mr. MacDougall said. "Every material finding in the report is backed by hard evidence."

Kroll and Akin Gump have in recent years been retained by top businessmen and politicians in other high-profile matters in Ukraine.

Kroll was in 2001 employed by a party backed by oligarch Viktor Pinchuk, son-in-law of Mr. Yanukovych's political patron, then-President Leonid Kuchma, to look into the killing of investigative journalist Georgiy Gongadze in 2000.

Mr. Kuchma had allegedly been caught on a tape recorded by a bodyguard discussing with leading officials how to deal with the journalist.

Although the U.S. government determined parts of the tape were authentic, Kroll produced a report maintaining Mr. Kuchma wasn't involved in Mr. Gongadze's killing.

Though some lower-level security service officers were ultimately convicted in the killing, the planners never were.

Government Of Ukraine Audit Uncovers Corrupt Practices In Past Financial Operations

KIEV, Ukraine -- The Government of Ukraine announced today that a team of international auditors has completed the initial stage of its independent audit of Ukraine's state finances and operations.
The audit revealed evidence of fraud and misapplication of government funds from 2008 to the first quarter of 2010.

The team of lawyers and forensic investigators led by the Washington, DC law firm of Trout Cacheris, PLLC examined a group of transactions by various government bodies.

The audit found evidence of the use of offshore shell companies, sham contracts and other international money laundering mechanisms in transactions involving private parties and the previous administration, as well as the unlawful misapplication of funds, resulting in the waste and misuse of government assets and the enrichment of private parties.

The largest instance of misconduct they have uncovered involved the unlawful misapplication of 2.3 billion hryvnias (euro 200 million) obtained through the sale of carbon credits under the Kyoto Protocol.

High-ranking officials used these funds to conceal massive deficiencies in Ukraine's pension system shortly before the 2010 presidential election.

The audit also uncovered instances in which offshore shell companies and sham transactions were employed to sell automobiles and pharmaceuticals to the government at highly inflated prices; the use of state credit to purchase 1,000 vehicles which were distributed for political gain; manipulation of transactions with the sugar reserve; and the unapproved use of funds to carry out a land registration program to gain political favor in advance of the recent presidential elections.

Lead audit attorney Plato Cacheris of Trout Cacheris and co-counsel Mark MacDougall of Akin Gump Strauss Hauer & Feld noted that today's announcement is another example of how the Ukrainian leadership is committed to exposing corruption.

"Today's report reveals a pattern of impropriety in transactions involving several levels of the Ukrainian government from 2008 through the first quarter of 2010. We are continuing our investigation and will share additional findings once those investigations are completed," MacDougall said.

Ukrainian Telecoms: Crossed Wires

KIEV, Ukraine -- One of eastern Europe’s longest privatisation sagas may finally be drawing to a close. But there is no happy ending in the story of the sell-off of Ukrelecom, Ukraine’s fixed-line telecoms operator.
After missing opportunities to privatise it in better times - when sentiment in financial markets and in telecoms was more favourable - Kiev is selling Ukrtelecom at a difficult moment, when the government’s debts give it little manoeuvre room. Worse, Ukraine is imposing conditions that could limit its chances of getting a decent price.

Legions of investment bankers have visited Kiev and tried to talk telecoms since the Ukrainian parliament approved privatisation 10 years ago and the government sold around 7 per cent of Ukrtelecom to the company’s staff and local stock market investors.

But successive administrations failed to go ahead with the planned sale of remaining 93 per cent. Sometimes, the proposed partners weren’t right; at other times it was the price. And always Ukrtelecom’s powerful bureaucrat-managers, along with their political allies, wanted to keep control.

Along the way, the government in 2003 sold off UMC, a successful mobile business Ukrtelecom owned jointly with Deutsche Telekom and the Dutch group KPN. Russia’s Sistema Group was the fortunate buyer, securing control of UMC for only around $200m.

Now, president Viktor Yanukovich (pictured) seems have bitten the bullet on Ukrtelecom itself with his government on Wednesday formally launching a privatisation tender that is due to be completed by December 28.

But these are bad times to be selling a big asset in eastern Europe, where the post-crisis economic recovery is struggling. Ukraine has pulled out of deep recession only with the help of a $15bn IMF assistance package. The debt-laden government badly needs money - and everybody knows it.

Ukrtelecom controls about 80 per cent of Ukraine’s fixed-line market. But the real attraction - and the key to its $1.3bn-plus estimated price tag - may be in its ownership of Ukraine’s only 3G mobile phone licence and a small mobile business.

In any case, controversial tender restrictions threaten to cut leading global telecoms out of the bidding. One rule bans companies in which a government owns more than 25 per cent; that rules out west European operators such as Deutsche Telekom and Norway’s Telenor.

Another condition prohibits bidders with a share of over 25 per cent of Ukraine’s telecoms market. That could rule out Vimpelcom, the Russian company that controls Ukraine’s largest mobile business, which might otherwise be a strong bidder, though perhaps not Sistema, which is second in the market. Vitaliy Shushkovsky, an analyst at Renaissance Capital, said, “It is clear that these conditions limit the potential number of participants.”

The restrictions are expected to boost tender chances for domestic billionaires and Russian bidders. In a note to investors, Kiev-based investment bank Dragon Capital said: “We consider domestic business conglomerate System Capital Management and Russia’s AFK Sistema, which owns domestic cellular operator MTS, the most likely bidders for Ukrtelecom.” System Capital Management is the holding company of Rinat Akhmetov, Ukraine’s richest man and a long-time Yanukovich backer.

Officials suggest that foreign bidders with state shareholders are being excluded on security grounds. But they have not explained why foreign private sector bidders in countries where the state intervenes often in the economy - as in Russia - would be acceptable.

The sale is Yanukovich’s first large privatisation since he took office in February. How he handles these issues will be an important test of his promises to run the economy even-handedly, without favouring his friends in big business.

The prospects for fair play do not look good.