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February 27, 2006

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Reference ID Created Released Classification Origin
06KIEV781 2006-02-27 15:55 2011-08-30 01:44 CONFIDENTIAL Embassy Kyiv
This record is a partial extract of the original cable. The full text of the original cable is not available.


C O N F I D E N T I A L SECTION 01 OF 02 KIEV 000781 


E.O. 12958: DECL: 02/27/2016 

REF: KIEV 182 

Classified By: Ambassador, reason 1.4 (b,d) 

1. (C) Summary:  Ambassador met ex-PM Yuliya Tymoshenko 
February 26 to deliver concerns about her comments on a 
contract by U.S. company Holtec to build a nuclear waste 
storage facility in Ukraine (septel).  The conversation 
turned to domestic politics and the natural gas 
supply/transit deal with Russia.  Tymoshenko described the 
still unrealized efforts to forge a coalition agreement with 
Our Ukraine, complimented the organization of Socialist Party 
leader Oleksander Moroz while disparaging that of Our 
Ukraine, and laid out a case why Party of Regions leader 
Viktor Yanukovych would be the leader with leverage if Our 
Ukraine were to cut a post-election deal with his party. 
Tymoshenko thought that Regions Party financier Rinat 
Akhmetov had been well-spoken in his inaugural televised 
appearance but thought the move had been a mistake, since the 
rest of Ukraine outside Donetsk viewed Akhmetov as a 
criminal, not a successful business executive.  On the gas 
deal, Tymoshenko largely rehashed arguments made in previous 
meetings with Ambassador over the past two months:  1) she 
wanted to annul the deal through action in Kiev-Pechersk 
court but was being stymied by political pressure on the 
judge; 2) she favored taking the Russians to Stockholm over 
their abrogation of the August 2004 agreement; and 3) Ukraine 
should pursue contracts with Central Asian countries and 
needed international support.  Ambassador reiterated the USG 
views relayed to Government of Ukraine (GOU) officials:  our 
concern over the deal focused on RosUkrEnergo's (RUE) role; 
the U.S. would support a GOU effort to renegotiate the deal 
to remove RUE; and the U.S. would lend a hand to Ukrainian 
efforts to garner European support.  End summary. 

Domestic politics a month before the election 

2. (C) Ambassador inquired about the state of coalition 
agreement discussions between Tymoshenko's bloc (BYuT) and 
President Yushchenko's Our Ukraine bloc.  Tymoshenko, who on 
February 21 had unilaterally signed BYuT's own proposal for a 
coalition agreement which included some conditions Our 
Ukraine would likely not accept, replied that she had signed 
the documents necessary for a deal to happen but that Our 
Ukraine had not yet reacted, adding, "if they have problems 
with our terms, they should say so."  BYuT deputy leader (and 
ex-SBU chief) Oleksandr Turchynov had reached out to Our 
Ukraine campaign official Roman Zvarych February 25 with a 
proposal to meet again, but as of February 26 Zvarych had not 
returned the call. 

3. (C) Tymoshenko noted that although central and western 
Ukraine strongly favored a reunified Yushchenko-Tymoshenko 
team, eastern Ukraine and Crimea saw the "Maidan" team as a 
problem.  As a result, BYuT's campaign in eastern and 
southern Ukraine did not emphasize the potential for an 
Orange reunification, since BYuT was targeting voters who had 
supported Yanukovych in 2004.  Socialist leader Moroz was 
pursuing the same tactic, she added.  Tymoshenko complimented 
Moroz' campaign organization, in contrast to Our Ukraine's, 
which she termed dreadful. 

4. (C) Tymoshenko judged that Regions financier Rinat 
Akhmetov had spoken well in his maiden public speech 
televised February 20, but that Regions had made a mistake by 
putting Akhmetov on TV.  While Akhmetov was popular in 
Donetsk due to "local boy patriotism," the rest of the 
country perceived him as a criminal; this was even true in 
Luhansk and Crimea, two strongly pro-Regions provinces. 
Thus, most people watching Akhmetov would not have concluded 
"good speaker" but, in contrast, would have thought "a major 
criminal is poised to enter the Rada."  Tymoshenko opined 
that any effort by government authorities to go after 
Yanukovych for his misdeeds would boomerang, boosting 
Yanukovych's political standing, but that the authorities 
should pursue Akhmetov for his crimes. 

Gaming an Our Ukraine-Regions coalition 

5. (C) Tymoshenko said that serious discussions between Our 
Ukraine and Regions continued.  Ambassador observed that 
Regions' leader Yanukovych complained to him each time they 
met that Yanukovych had not been able to have a serious 
conversation with Yushchenko, while acknowledging contact 
between the two parties.  Tymoshenko claimed that, were 
Yushchenko to cut a post-election deal with Regions, 
Yanukovych would end up running the country.  Such a 
coalition would be deeply unpopular with Yushchenko's Orange 
base, which would largely desert him.  Without popular 
support, Yushchenko would then lack leverage in dealing with 
Yanukovych and Regions inside government.  (Comment:  This is 
an interesting argument, perhaps with some merit.) 
Rehashing old arguments on the gas deal 

6. (C) Turning to the "terrible" gas deal with Russia, 
Tymoshenko rehashed arguments used with Ambassador the past 
several months (reftel).  She continued to press a court case 
in Kiev-Pechersk commercial court seeking to overturn the 
January 4 contra
cts on the basis that NaftoHaz Chairman 
Ivchenko had exceeded his authority; the case still had gone 
nowhere, Tymoshenko alleged, because Yushchenko himself had 
called the judge and asked that action not be taken. 
Secondly, she wanted Ukraine to take Russia to the Stockholm 
Arbitration Court for overturning the terms of the August 
2004 agreement to provide gas at a fixed price of $50 per 
thousand cubic meters through 2009.  Finally, Ukraine should 
negotiate supply deals with Turkmenistan, Uzbekistan, and 
Kazakhstan and needed international support. 

7. (C) Ambassador gave Tymoshenko the same U.S. positions she 
had heard in previous conversations.  The U.S. saw the gas 
deal as a problem primarily due to the role of RUE. 
Ambassador had told GOU leaders the previous week that if it 
sought to renegotiate the deal without RUE, the U.S. would 
support Ukraine.  The USG would also help Ukraine as the GOU 
went to the Europeans seeking support.  Were the Pechersk 
court to invalidate the January 4 deals, that would make it 
easier for the GOU to seek renegotiation of the deal; it 
currently appeared as if the GOU were vacillating, unsure of 
what to do next.  Regarding a Stockholm appeal, Ambassador 
advised Ukraine to seek top-flight legal and technical 
evaluation of all relevant agreements.  Sanctity of contracts 
notwithstanding, Ukraine would not get much political 
sympathy from Western countries for attempting to insist on 
paying $50 for gas the next four years. 

8. (C) Ambassador noted several windows of opportunity for 
Ukraine regarding gas supplies.  Russia had made energy 
security the signature issue of its G8 chairmanship.  Russia 
had also signed but not yet ratified the European Energy 
Charter, which would give Central Asian countries access to 
Russia's pipelines.  France and others had spoken out on the 
need for Russia to ratify the charter.  In the end, the key 
going forward was for the GOU to clarify its intent. 
Tymoshenko ended the conversation quipping:  "Give me a month 
(the Rada elections are March 26), and everything will be 
very clear." 

9. (U) Visit Embassy Kiev's classified website at: 




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