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06KYIV4132, UKRAINE: MINISTER DZHARTY ON VANCO PSA NEGOTIATIONS

October 27, 2006

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Reference ID Created Released Classification Origin
06KYIV4132 2006-10-27 15:26 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Kyiv

VZCZCXYZ0000
RR RUEHWEB

DE RUEHKV #4132 3001526
ZNR UUUUU ZZH
R 271526Z OCT 06
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 0206
INFO RHEBAAA/DEPARTMENT OF ENERGY WASHDC

UNCLAS KYIV 004132 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DOE FOR LEKIMOFF, CCALIENDO 
 
E.O. 12958: DECL: NA 
TAGS: EPET ENRG UP
SUBJECT: UKRAINE: MINISTER DZHARTY ON VANCO PSA NEGOTIATIONS 
 
Sensitive but Unclassified. Not for Internet Distribution. 
 
1.  (SBU) Ambassador called on Environment Minister Vasyl Dzharty 
October 26 to advocate for foreign investment in Ukraine's off-shore 
and to request an update on the GOU's Production Sharing Agreement 
(PSA) talks with U.S. company Vanco.  Dzharty stated he favored 
foreign investment for developing Ukraine's off-shore, and said he 
had nothing against Vanco or the company's winning of the March 
Kerch Bloc tender.  The award was not at issue.  Dzharty recognized 
that Vanco had included its most desired terms and profit splits in 
its draft PSA, and now the GOU and Vanco needed to find a compromise 
that was good for Vanco and for the GOU.  (Note: The Environment and 
Energy Ministries are the two lead ministries for PSA 
negotiations.) 
 
2.  (SBU) Dzharty said consultations to date had exhibited a "good 
positive tendency"; the number of GOU comments was decreasing with 
each new draft.  (Note: Vanco told us most GOU comments were 
cosmetic; fewer than ten were substantive.)  However, both sides had 
failed to consider relevant Ukrainian legislation in the Vanco PSA 
draft, Dzharty explained, and for this reason the Cabinet of 
Ministers had ordered on October 18 that a new working group write a 
GOU draft. 
 
3.  (SBU) The new working group, which would include a Vanco 
representative, would begin work October 30.  (Note: This is nine 
days sooner than the November 8 deadline given by the CabMin to form 
the group.  Vanco has confirmed it will attend the October 30 
session.)  Ambassador relayed that Vanco had told him they were 
ready to work quickly to keep to the aggressive work schedule laid 
out in its original bid.  Vanco was confident it could reach 
compromises with the GOU on all contested issues.  Ambassador 
expressed optimism that the draft PSA would be signed in December, 
as originally planned.  Dzharty replied that the PSA was a 
thirty-year project and "one shouldn't make haste when doing a big 
deal." 
 
Comment 
------- 
 
4.  (SBU) Dzharty appeared to understand that the PSA will be a 
negotiated agreement, which suggests his previously inflammatory 
press comments denouncing Vanco's initial proposal may have been a 
negotiating ploy.  While his comment on needing time to do the deal 
right sounds like sensible policy, it could also provide cover for 
the GOU to delay.  Whether the GOU is acting in good faith or is 
seeking to delay will be more clear during the course of the 
negotiations. 
 
Taylor

Wikileaks

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