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June 29, 2006

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Reference ID Created Released Classification Origin
06KIEV2530 2006-06-29 17:15 2011-08-30 01:44 CONFIDENTIAL Embassy Kyiv
DE RUEHKV #2530/01 1801715
P 291715Z JUN 06


C O N F I D E N T I A L SECTION 01 OF 02 KIEV 002530 



E.O. 12958: DECL: 06/29/2016 

Classified By: Ambassador for reasons 1.4 (b) and (d). 


1. (C) In his first meeting with Ambassador Taylor, Party of 
Regions leader Viktor Yanukovych criticized President 
Yushchenko for caving in to USG pressure to spurn Regions and 
bless the formation of an Orange coalition.  The Orange team 
was deeply divided and may not even be able to get its 
candidate elected as the new Rada Speaker, according to 
Yanukovych.  The Orange coalition, he predicted, would fall 
apart relatively quickly; when that happened, Yanukovych 
said, Regions -- emboldened by strong public opinion poll 
numbers -- would not form a new governing coalition but 
instead seek pre-term parliamentary elections.  The Regions 
chief was upbeat about possible Rada passage of legislation 
authorizing exercises in Ukraine between NATO forces and the 
Ukrainian military; the key was accenting "cooperation" with 
NATO instead of "NATO accession," which Yanukovych said the 
Ukrainian public largely opposed.  Yanukovych also argued for 
robust NATO cooperation with Ukraine's sizable defense 
industry.  Yanukovych predicted that Yuliya Tymoshenko would 
have little success as prime minister in passing legislation 
needed for Ukraine's WTO entry.  President Yushchenko had 
"perhaps two weeks" to revisit the gas deal with Russia; 
citing "sources," Yanukovych claimed that a big hike in the 
price of Russian natural gas would follow the G-8 summit. 
The Russians will be "super tough" with Tymoshenko on the 
price of gas, he predicted, and "Ukraine will suffer 
economically."  Speaking more broadly on relations with the 
Kremlin, Yanukovych stressed that it was important for 
Ukraine to "avoid senseless conflicts" with Russia. 
Approximately 20 percent of Ukraine's foreign trade was with 
Russia, and many products that would be snubbed by EU 
consumers had "traditional" niches in the Russian market. 
That said, Ukraine should not be subservient to Moscow and 
should, for example, not withdraw from the CIS; such a move, 
Yanukovych said, would only "delight" the Kremlin and 
disappoint the smaller CIS countries which look to Ukraine as 
a counterweight to Russia.  End summary. 

Politics: Yushchenko Wrong To Spurn Us... 

2. (C) In his first meeting with Ambassador Taylor, a 
relaxed-looking Party of Regions leader Viktor Yanukovych, 
speaking mostly in Ukrainian, emphasized on June 29 that 
President Yushchenko had made a major mistake by spurning 
Regions and blessing the formation of an Orange coalition. 
Yushchenko had been pressured to go Orange, Yanukovych 
asserted, by the USG; the president had not been 
"responsible" enough to stand up to Washington and argue for 
an Orange-Blue Grand Coalition.  The Orange coalition, 
Yanukovych said, had serious internal divisions, would be 
unable to make serious progress on economic reform, and, he 
predicted, was so feeble that it may not be able to get its 
candidate, Our Ukraine (OU) MP Petro Poroshenko, elected as 
the new Rada Speaker.  We wanted to unite with OU, Yanukovych 
said, but were rejected; the president, Yanukovych added, had 
"lost his chance." 

...And We Want New Elections 

3. (C) Yanukovych asserted that the Orange coalition would 
fall apart relatively quickly.  When that happened, he said, 
Regions would not form a new coalition government with OU but 
would instead seek new parliamentary elections.  Yanukovych 
explained that Regions' popularity rating had risen steadily 
in the weeks since the March 26 parliamentary elections, with 
nearly 44% of those polled (nationwide) expressing a 
favorable opinion of the party.  When the Orange coalition 
fell, there would be several parties willing to form a new 
coalition with Regions simply to avoid new elections; 
however, Regions' strong poll numbers indicated that forcing 
pre-term elections was the way to go. 

NATO: Cooperation Vice Accession 

4. (C) Responding to a question about whether the new Rada 
would pass legislation permitting NATO-member forces to hold 
joint exercises with the Ukrainian military in Ukraine, 
Yanukovych said that the passage of such legislation was 
possible as long as the text accented Ukrainian "cooperation" 
with NATO and not "entry" into the alliance.  The words "NATO 
accession" and "NATO entry" should be "dropped from the 
discussion"; cooperation, Yanukovych emphasized, was the way 
to gradually build support for the alliance within Ukrainian 
society, which he said still had a largely negative, 

KIEV 00002530  002 OF 002 

Soviet-era view of NATO.  Cooperation, he stressed, should 
not simply be limited to exercises but expanded to include 
Ukraine's formidable defense industry, which employed more 
than one million people and produced cutting-edge hardware 
like the Morozo
v Design Bureau's new BTR-4 and the AN-70 -- 
both projects worthy of NATO interest. 

WTO Legislation 

5. (C) On prospects for a new government passing legislation 
needed for Ukraine's entry into the WTO, Yanukovych predicted 
that Tymoshenko's team would, like the first time it was in 
power, get very little accomplished.  During her previous 
stint as prime minister, "Yuliya" had been needlessly 
provocative; she had tried to jam legislation through the 
Rada without public hearings, without input from the NGO 
community and without proper concern for domestic business 
interests, Yanukovych complained.  During his time as prime 
minister, Yanukovych boasted, the Cabinet of Ministers had 
worked quietly and carefully with a "number of partner 
countries" to pass WTO-related legislation; "we just didn't 
beat our chests about it in public," Yanukovych joked. 

Gas Deal: Need To Move Quickly 

6. (C) Yanukovych recapped his view of the events that led up 
to the January gas crisis and subsequent deal with Russia, 
stressing that Yushchenko had sent "squeaky mice who hid 
under their chairs" to deal with the seasoned "wolves" who 
represented Russia and Turkmenistan at the bargaining table. 
Now, time was of the essence: Yanukovych, citing his own 
"sources," said that a big hike in the price of Russian 
natural gas would come on the heels of the upcoming G-8 
summit in St. Petersburg.  Yushchenko had a small window of 
opportunity -- "perhaps two weeks" -- to revisit the gas 
agreement with President Putin; Yushchenko, however, was 
preoccupied with coalition politics.  As prime minister, 
Yanukovych added, Yuliya Tymoshenko will "make things worse" 
and do things that will "prompt Russia to raise prices even 
higher."  Moscow, he predicted, would be "super tough" with 
the pugnacious Tymoshenko and "Ukraine will suffer 
economically," Yanukovych said.  He declined any assistance 
from the U.S., saying he did not want the U.S. to "get in the 

Relations With Russia 

7. (C) Speaking more broadly, Yanukovych stressed that it was 
important to "avoid senseless conflicts" with Russia. 
Approximately 20 percent of Ukraine's foreign trade was with 
Russia, and many Ukrainian products had traditional niches in 
the Russian market -- products that EU consumers would likely 
snub.  Any deterioration in Kiev's ties with Moscow had a 
"painful impact" on Ukraine's economy, Yanukovych stressed. 
That said, Ukraine should not be subservient to Russia and 
should work with western companies to help diversify 
Ukraine's energy sources and curb its dependence on Russian 
oil and gas.  (Note: Yanukovych also asked for help with the 
EU; the Europeans, he asserted, were discriminating against 
Ukrainian products).  Moreover, Yushchenko was making a 
mistake by hinting that Ukraine should withdraw from the CIS. 
 Yanukovych related that senior Azeri, Kazakh and Uzbek 
officials had told him that Ukraine's withdrawal from the CIS 
would "delight" Moscow; Ukraine, Yanukovych stressed, helped 
provide balance to the organization, often uniting the 
smaller CIS countries -- including Belarus -- to check 
Russian interests, parry Russian efforts to sow division 
among the CIS states and generally "make Moscow nervous." 
Only Russia would win, Yanukovych said, if Ukraine withdrew 
from the CIS.  By "ruining" Ukrainian relations with Russia, 
Yushchenko had "untied Putin's hands" to lean on Ukraine. 




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