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November 17, 2006

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Reference ID Created Released Classification Origin
06KYIV4298 2006-11-17 15:39 2011-08-30 01:44 CONFIDENTIAL Embassy Kyiv

DE RUEHKV #4298/01 3211539
P 171539Z NOV 06

C O N F I D E N T I A L SECTION 01 OF 03 KYIV 004298 
E.O. 12958: DECL: 11/17/2016 
REF: A. KIEV 3570 
     B. KYIV 4251 
     C. KYIV 4290 
Classified By: Ambassador, reason 1.4 (b,d) 
1.  (C) Summary. Defense Minister Hrytsenko told visiting EUR 
A/S Fried and Ambassador November 16 that President 
Yushchenko's remote style interfered with his effectiveness, 
that PM Yanukovych was the most reasonable of the Regions' 
team in office and that the U.S. was right to seek to work 
with him, and that the effort by some in Regions to unseat 
him as Minister to gain control of defense property had 
failed.  Providing a sobering analysis of the first 100 days 
of the Yanukovych cabinet in office, Hrytsenko said that the 
level of transparency, accountability, respect for rule of 
law, and checks and balances had degraded from the previous 
two orange governments, and in some respects was worse than 
in the latter Kuchma period.  Were he not to be Defense 
Minister, Hrytsenko said he would lead the NATO public 
education campaign, which needed to be focused on democratic 
values, not the military.  End Summary. 
Yushchenko's style prevents effective leadership 
--------------------------------------------- --- 
2. (C) Hrytsenko, who recently removed all the Orange 
Revolution pictures which previously had hung for 20 months 
on the walls of his office, replacing them with standard 
photos of the Ukrainian military in action, stated that 
Yushchenko's style and lack of connection to his ministers 
was a real impediment to effective leadership.  The lack of 
connection is less important now, with Yushchenko effectively 
reduced to only several ministers, but when there had been 
serious intra-orange fights in 2005 between Tymoshenko and 
Poroshenko, Yushchenko's detachment had been debilitating, 
assessed Hrytsenko. 
3. (C) As Commander-in-Chief, Yushchenko had only conducted 
three separate meetings with Hrytsenko in 21 months, not 
counting group gatherings or visits of foreign officials; in 
comparison, Kuchma met with Hrytsenko's predecessors one hour 
weekly.  "Yushchenko has no idea what is going on here."  On 
the flip side, Hrytsenko felt he had Yushchenko's full trust 
and could do whatever was necessary to push reform in the 
Ministry/Armed Forces. 
Yanukovych - most reasonable of Regions 
4. (C) Hrytsenko assessed Yanukovych as the "most reasonable" 
of the Regions team in power.  He agreed that Yanukovych 
wanted to be a leader of a sovereign country, not a Kremlin 
lackey, though questions remained whether Moscow held 
leverage over Yanukovych, perhaps documents relating to his 
criminal past.  The U.S. was right to seek to work with 
Yanukovych and invite him to Washington.  Hrytsenko stressed 
that he had never criticized Yanukovych, noting the only 
disagreement had been one of values/policy tactics over 
Yanukovych's MAP related statements at NATO Sept 14 (ref A). 
Hrytsenko claimed there had been five attempts to push 
questionable decisions against the law through the cabinet. 
Hrytsenko had taken on 5-6 other ministers, once for two 
hours, and another time for an hour and a half; eventually 
Hrytsenko's position won the day, with Yanukovych's support. 
5. (C) A Yanukovych-Yushchenko agreement must have saved FM 
Tarasyuk in the Rada's Nov. 15 review of the performance of 
Tarasyuk and Hrytsenko, thought Hrytsenko, since the 
expectation had been that Tarasyuk would be forced out. 
Yanukovych was seeking to work with Yushchenko, noted 
Hrytsenko, because he understood that his own ratings would 
inevitably drop as citizens reacted to the recent 200-300% 
rise in utility costs.  The more authority Yanukovych and 
Regions accumulated, the more responsibility and blame they 
would bear.  Pre-term elections in the spring of 2007 could 
not be ruled out, with a potential Constitutional Court 
gambit in play (ref C). 
6. (C) Hrytsenko caveated his positive assessment of 
Yanukovych by noting that Yanukovych also chose the people 
who were causing problems.  How to apportion 
responsibility/blame between him and his lieutenants was an 
open question, but Yanukovych knew exactly what was 
happening.  Yanukovych would tell western interlocutors what 
they wanted to hear.  The questions were whether his 
decisions were in line with those slogans, and whether a 
democratically elected and chosen leader was acting in the 
interests of democratic principles (see below). 
KYIV 00004298  002 OF 003 
Regions' attempt to remove Hrytsenko - greed, not politics 
--------------------------------------------- ------------- 
7. (C) Hrytsenko believed the high-water mark of efforts to 
unseat him had passed; "there is no way they will break me; I 
will never give up."  The removal effort, which he claimed 
was initiated by the circle around DPM/Finance Minister 
Azarov was only "2 percent" about NATO and policy; it was 
almost entirely about attempts to gain control of de
property (ref B).  When efforts to do so via the cabinet 
failed "because they were illegal," they resorted to 
blanketing the Ministry with investigators, and generating 
politically motivated corruption charges.  What was needed 
was a change in the Prosecutor General (note: Medvedko), who 
had done absolutely nothing to act against real corruption 
but was allowing his office to be used as a tool to make 
politicians vulnerable; that should not be tolerated. 
Unfortunately, such pressure had become a "real, daily 
practice."  (note: the PGO's office filed corruption charges 
against Interior Minister Lutsenko, another Yushchenko 
loyalist, November 14, leading to Lutsenko to respond 
publicly in similar terms as Hrytsenko did privately). 
100 days - significant slippage in governance 
8. (C) In addition to such pressure brought upon "Orange" 
Ministers, Hrytsenko provided a sobering, largely negative 
assessment of governance in the first 100 days of the 
Yanukovych government, in terms of slippage of key 
indicators: transparency, accountability, the rule of law, 
and checks and balances.  Certain "closed circles of power" 
and actions had emerged that were even worse than the 
standards of the Kuchma era, claimed Hrytsenko; the main 
focus of the Regions team was for control over property and 
funds, little else. 
9. (C) The first such circle was controlled by DPM/Finance 
Minister Azarov, who to an unprecedented extent now had all 
levers of financing under his control: the governmental 
financial transfers system; customs; tax authority; the Rada 
Budget Committee (previously always given to the opposition, 
even under Kuchma); the State Audit Committee; the Rada 
Accounting Chamber; and even the Prosecutor General's office, 
"through which means I'm not sure."  There was no opportunity 
for society, opposition MPs, or even other ministers to 
initiate inquiries or bring pressure for adjustments.  In the 
past, when there were holes in the budget, the PM/government 
could mandate adjustments to tax receipts.  Now, when it was 
clear there were budget gaps, there were none.  For example, 
the Prosecutor General's inadequate response to President 
Yushchenko's decree to investigate the manipulation of VAT 
refunds in August was to analyze the situation on August 1, 
four days before Yanukovych and Azarov assumed office. 
10. (C) A second closed decision circle covered fuel and 
energy.  While formally there should be lines from the PM to 
DPM Kluyev to Energy Minister Boiko and NaftoHaz, Hrytsenko 
had doubts that Kluyev was in the loop.  Certainly it was the 
case that the President was cut off from relevant 
information, as was FM Tarasyuk, who had legal obligations 
vis-a-vis agreements with other countries.  Before, other 
ministers in the cabinet were eventually brought into the 
picture (note: a reference to the January 2006 gas deal); in 
the current negotiations for Russian gas, there was no 
information, and no control.  Yanukovych had breached a red 
line even Kuchma never did when he said publicly that Ukraine 
might extend the Russian Black Sea Fleet presence beyond 
2017.  Posing a series of rhetorical questions, Hrytsenko 
asked: was that part of an unwritten deal with Russia for 
gas?  Who recommended Yanukovych say that?  And at what price 
to Ukraine's other national interests? 
11. (C) A third decision circle involved government property 
and the State Property Fund (SPF).  The SPF established the 
methodology for valuation of state property; the SPF issued 
licenses to the 4500 companies to assess real estate; and the 
2007 budget gave the SPF a monopoly right to sell property on 
behalf of the GOU.  Past cases like the 2004 Krivoryzhstal 
privatization showed the danger of a lack of transparency; 
Hrytsenko claimed that in 2006, the MOD had lost 176 million 
hryvnia ($35 million) in sale of MOD property without any 
return financing to the Armed Forces, as expected. 
12. (C) Hrytsenko's final example touched on opposition 
oversight rights in the Rada, which he asserted were now 
weaker than under Kuchma.  In addition to control of the Rada 
Budget Committee, there was the case of the commission 
proposed by Tymoshenko to investigate the threefold rise in 
household gas tariffs, unjustified since Ukrainian-produced 
gas was meant to cover household use, unconnected to the 
KYIV 00004298  003 OF 003 
(rising) price of Russian gas.  The Rada majority approved 
the commission, but installed their own person as chair, 
ensuring a non-investigation.  In contrast, even though 
Kuchma hated many Rada members and had something to worry 
about concerning the 2000 Gongadze murder, he had let the 
Rada's Gongadze Commission be led by the opposition. 
NATO info campaign - still stillborn 
13. (C) Hrytsenko said that if he were not Defense Minister, 
he would lead an effective public education campaign that 
could bring public support for NATO membership to above 50%. 
The challenge was akin to selling a candidate (note: 
Hrytsenko headed the policy shop for Yushchenko's 2004 
Presidential Campaign), but it could not be done out of the 
Ministry of Defense.  While Hrytsenko actively gave 
interviews in Kyiv and in provincial trips, as he had done in 
Kharkiv earlier November 16, the words of the Defense 
Ministers simply reinforced old stereotypes that NATO was 
about armies, as opposed to democratic values.  All the 
ministers in the government, Tarasyuk aside, simply avoided 
mention of the word NATO or of the necessary reforms 
associated with accession which would improve the country and 
people's lives. 
14. (U) A/S Fried has cleared this cable. 
15. (U) Visit Embassy Kyiv's classified website: 




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