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April 28, 2006

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Reference ID Created Released Classification Origin
06KIEV1711 2006-04-28 15:31 2011-08-30 01:44 CONFIDENTIAL Embassy Kyiv
DE RUEHKV #1711/01 1181531
P 281531Z APR 06


C O N F I D E N T I A L SECTION 01 OF 03 KIEV 001711 



E.O. 12958: DECL: 04/28/2016 

REF: KIEV 1662 

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

1. (C) Summary:  A subdued PM-hopeful Yuliya Tymoshenko told 
Ambassador April 28 that the scant progress in Orange 
coalition talks in recent days was much less significant than 
Our Ukraine efforts with Party of Regions to form local 
coalitions across the country.  News during the meeting that 
Our Ukraine, Regions, and the Chernovetsky bloc had just 
formed a majority in the Kiev municipal council made her 
point.  Echoing Socialist negotiator Yosyp Vinsky (reftel), 
Tymoshenko said the ultimate coalition composition "all 
depended on Yushchenko."  Her gut feeling was that President 
Yushchenko had not made up his mind but approved of the 
ongoing Our Ukraine-Regions local cooperation as a 
"vaccination," paving the way for a possible national 
coalition sometime in June.  She alleged that Regions' 
Political Council Chair Mykola Azarov had met Yushchenko 
recently to suggest that Moscow would be amenable to a 
favorable policy package on gas, nuclear, and border issues 
in exchange for an Our Ukraine-Regions coalition.  Up to 30 
Our Ukraine MPs, led by Katerynchuk and Stretovych, were 
forming an internal opposition faction prepared to walk out 
of Our Ukraine if an alliance with Regions were consummated, 
she claimed.  Comment:  While Our Ukraine negotiator Zvarych 
was cautiously upbeat earlier April 28 (septel), as Vinsky 
had been April 27 (reftel), Tymoshenko was uniformly gray, 
exhibiting uncharacteristic slumped body language, and 
murmuring repeatedly, "I don't know what will happen."  End 

A lady in pink in a gray mood 

2. (C) In an April 28 meeting with Ambassador, DCM and 
PolOff, a downbeat Tymoshenko discounted the importance of 
the two coalition documents signed April 25 (reftel).  The 
ongoing negotiations on a coalition document were moving 
ahead slowly and weakly, "without enthusiasm."  It was a 
"nightmare" dealing with Our Ukraine; Zvarych would come one 
day and then be a no-show, Bezsmertny the next and again 
disappear.  The parties had essentially agreed on technical 
issues, and the policy section was largely complete.  But the 
absence of a national coalition agreement had opened the door 
to chaos in the provinces, where local party representatives 
were disoriented.  Socialist leader Moroz, out of the 
hospital April 27, was trying to organize a meeting among 
Yushchenko, Tymoshenko, and himself; so far, there was no 
response from Yushchenko (note:  Yushchenko was in Latvia 
April 28). 

Our Ukraine and Regions form local coalitions 

3. (C) The real action, Tymoshenko stressed, was now 
happening at the local level, where local alliances were 
forming between Our Ukraine (OU) and Regions.  As if on cue, 
her cell phone rang; a Tymoshenko Bloc (BYuT) representative 
on the Kiev municipal council informed her that Our Ukraine, 
Regions, and the Chernovetsky bloc had just formed a 
65-person majority and elected the council leadership.  This 
culminated a string of similar alliances in neighborhood 
district councils across Kiev in recent days, Tymoshenko 
claimed, except where BYuT had an outright majority and could 
elect its own chair.  While outgoing OU Rada faction leader 
Martynenko was the formal OU leader in Kiev, OU insider Petro 
Poroshenko was the informal leader of the effort.  OU, 
Regions, and Chernovetsky's bloc formally had only 46 seats, 
but they had bought the loyalties of others.  BYuT council 
members had come under intense pressure to switch factions, 
she claimed, being offered $100,000 as a carrot on the one 
hand and being threatened with a loss of business from the 
municipality as a stick on the other.  Shaking her head, she 
said that OU had made a big mistake delivering Kiev into the 
hands of Regions. 

4. (C) Ambassador noted that OU figures claimed they had 
offered BYuT the chance to form an alliance in the Kiev 
council but that BYuT had turned them down (septels). 
Tymoshenko replied that OU's terms were that of a grand 
coalition:  OU, BYuT, and Regions.  BYuT had refused, just as 
it refused to join a national coalition involving Regions. 
BYuT had countered with a proposal signed by Tymoshenko and 
Moroz to form a trilateral coalition, but OU had refused in 
return.  The story was the same in the provinces, despite the 
joint instruction signed April 25 by Tymoshenko, Moroz and 
Bezsmertny; local branches of Our Ukraine were simply 
ignoring the document and moving ahead with Regions.  (Note: 
At the oblast level, Our Ukraine and Regions have formed a 
coalition majority in the Zakarpattya council.) 

KIEV 00001711  002 OF 003 

Little progress nationally, as Our Ukraine delays 
--------------------------------------------- ---- 

5. (C) The pressure on local BYuT council members mirrored 
that brought against deputy BYuT leader Turchynov and Rada 
deputy Kozhymyakin, continued Tymoshenko, who suggested that 
the legal machinations against the duo were connect
ed to the 
RosUkrEnergo (RUE) controversy.  BYuT had gone to court April 
27 to prevent an order for taking Turchynov and Kozhymyakin 
into preliminary custody.  Tymoshenko had not concluded 
whether Yushchenko had endorsed the gambit. 

6. (C) Tymoshenko believed that Yushchenko either had not 
made up his mind about what coalition to form or was dragging 
Orange negotiations out before making a deal with 
Yanukovych/Regions.  She subsumed the emerging OU/Regions 
local alliances as part of the second option, a type of 
vaccination shot to prepare the Ukrainian populace for an 
eventual national coalition, which she predicted could emerge 
as soon as June, if Yushchenko decided to go in that 
direction.  Either way, OU was clearly pursuing delay 
tactics; they had suggested the Rada should open on the last 
day possible, May 27 (note: a Saturday.  The Rada 
traditionally opens on a Tuesday). 

7. (C) Asked for his views, Ambassador said that the 
uncertainty could continue for several months, since 
Yushchenko was under no obligation to dismiss the Rada in the 
absence of a coalition; he only had the prerogative to do so 
sixty days ater the Rada convenes.  Nodding her head, 
Tymoshenko said, "They are spitting on the Constitution and 
laws."  Ambassador noted that Yushchenko's indecision could 
stem from his recognition that his leverage and influence 
would decline as soon as he made a decision on coalition 
formation.  Tymoshenko stressed that Yushchenko only enjoyed 
that leverage because BYuT had categorically ruled out a 
coalition with Regions, even though Regions continued to 
reach out to BYuT, since they too were frustrated in trying 
to engage wishy-washy Our Ukraine and saw BYuT as a clearer, 
more disciplined potential partner.  When Ambassador 
suggested an alliance with Regions would pose a political 
danger for either OU or BYuT, Tymoshenko immediately 
responded, "Worse: it would be political death." 

Regions quietly active 

8. (C) Tymoshenko said that Regions Political Council Chair 
Azarov had been quietly active in recent days.  He had 
visited several think tanks to impress upon them the 
advantages of an OU-Regions coalition for economic policy. 
Azarov had also met Yushchenko in an unpublicized meeting, in 
which Azarov had told Yushchenko -- not the other way around, 
she stressed -- that he (Yushchenko) should go to Moscow, 
work his contacts, and cut a grand deal in which Moscow would 
give Ukraine favorable terms on gas (stay at $95 per thousand 
cubic meters), nuclear fuel, and border issues in exchange 
for an OU-Regions coalition. 

Gas issue in play 

9. (C) Regarding RUE and the gas deal, Tymoshenko suggested 
another reason for OU delaying tactics was to reduce the 
window for a new government to renegotiate the January 4 deal 
before winter.  She predicted, however, that the information 
released April 27 identifying Dmytro Firtash, a known 
Mogilievich associate, as the primary listed Ukrainian 
shareholder in RUE would be just the beginning of additional 
revelations in coming days.  Ambassador suggested that the 
position of RUE worsened by the day.  A large, respected 
Western accounting firm had stopped working for them, worried 
about the sullying of their reputation; even Austria's 
Raffeisen Bank seemed to be seeking ways of cutting ties, and 
Firtash was clearly not the boss.  Flashing her lone smile of 
the session, Tymoshenko replied, "Firtash is likely a 
10-percent lieutenant." 

10. (C) Ambassador stressed the mutual interest of Ukraine 
and the U.S. on the gas deal remained the same:  Ukraine 
needed to escape from the RUE mechanism.  Tymoshenko 
immediately added, "and open an investigation."  Ambassador 
reiterated that getting free from RUE was most important. 
Tymoshenko nodded. 

Future options for the Our Ukraine project 

11. (C) Turning reflective, Tymoshenko said that, for his own 
good, Yushchenko needed to start thinking at least three 

KIEV 00001711  003 OF 003 

steps ahead.  Recent developments, including the local 
romancing of Regions and Yushchenko's indecision, had led to 
the development of a potential opposition faction within Our 
Ukraine of at least 30 MPs, led by Stretovych and 
Katerynchuk, who would be ready to part company if a national 
coalition with Regions transpired.  Another insider version 
she had heard in the aftermath of Yushchenko's April 19 
blow-up at his Presidential Secretariat staff was that he was 
considering shutting down the Our Ukraine project because of 
its poor performance in the elections.  In its place would be 
a new "For Yushchenko" bloc, to be led by his brother, Our 
Ukraine MP Petro Yushchenko.  That too would be a mistake, 
mused Tymoshenko, since it would toss out a known brand and 
require starting from scratch. 

12. (C) Comment:  If Yushchenko were to endorse a coalition 
with Regions and a significant portion of Our Ukraine MPs 
were to rebel, Yushchenko might not have much choice but to 
start from scratch to support his expected run for 
re-election in 2009.  Our Ukraine Chair Bezsmertny has told 
us he would similarly consider walking away from Our Ukraine. 
 We will follow up with Stretovych and Katerynchuk in the 
coming days for their perspective. 

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





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