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November 20, 2006

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Reference ID Created Released Classification Origin
06KYIV4315 2006-11-20 15:48 2011-08-30 01:44 CONFIDENTIAL Embassy Kyiv

DE RUEHKV #4315/01 3241548
P 201548Z NOV 06

C O N F I D E N T I A L SECTION 01 OF 03 KYIV 004315 
E.O. 12958: DECL: 11/19/2016 
REF: A. KYIV 4304 
     B. KYIV 4237 
     C. KYIV 4183 
     D. KYIV 4104 
Classified By: AMBASSADOR, FOR REASONS 1.4 (B) AND (D) 
 1. (C) Summary: Ukraine's recent progress on WTO-related 
legislation does not mark a shift in GOU policy, but rather 
demonstrates that fears of the GOU's lack of commitment to 
prompt WTO accession were overblown.  A fortuitous alignment 
of several political factors may have accelerated the 
process: President Yushchenko's surprise October 20 move to 
initiate the legislation helped to bring the issue front and 
center, while Prime Minister Yanukovych's upcoming visit to 
Washington gave the governing coalition an overriding reason 
to work quickly.  The GOU also successfully used a period of 
public debate to show that opposition to WTO was limited, and 
received strong backing on the issue from the Parliamentary 
opposition.  Fears that Russia could leapfrog Ukraine in 
joining the WTO, especially after the recent successful 
conclusion of the U.S.-Russia bilateral, and legislative 
horse-trading involving the budget may also have helped. 
Ukraine still faces several tall hurdles before reaching the 
WTO finish line, but it now seems to be back moving in the 
right direction.  End Summary. 
2. (C) Ukraine has made significant progress on WTO accession 
during the past several weeks, adopting 12 of 21 laws 
identified as required for accession and moving forward on 
several others (refs A-C).  Such action was to be expected if 
the GOU was serious in its stated commitment to complete all 
preparations for accession in 2006.  Nonetheless, cautious 
rhetoric and apparent stalling from PM Yanukovych and his 
team after they took power in August had raised doubts about 
the sincerity of that commitment.  This recent progress on 
WTO therefore does not mark a shift in the GOU's policy but 
could have been hastened by several factors, outlined below 
in what post sees as the order of relative importance to the 
WTO effort. 
Presidential Initiative 
3. (C) The leadership of the Presidential Secretariat, 
spearheaded by First Deputy Chief of Staff and former 
Minister of Economy Arseniy Yatsenyuk, seems to have been a 
major catalyst in speeding up passage of WTO-related 
legislation.  Sensing government delay in submitting the 
necessary bills to Parliament, the President forced the issue 
by submitting a near-complete package of legislation to the 
parliament on October 20.  At the time, Ministry of Economy 
officials were wading through a difficult Cabinet of 
Ministers clearance process, through which a wide range of 
interests were pushing hard to make their own changes to the 
draft laws.  The President's surprise move forced the team of 
Prime Minister Viktor Yanukovych, which had already promised 
results on WTO, to either act on the legislation or openly 
block it. 
Yanukovych Visit to Washington 
4. (C) While the President's initiative set the stage for WTO 
progress, support by the PM's office was both necessary and 
decisive.  Party of Regions and Socialist MPs, who had only 
weeks before spoken quite cautiously of WTO accession (ref 
C), suddenly expressed their absolute support and voted in 
favor of WTO-related legislation en masse.  Yanukovych's 
planned visit to Washington in early December likely played 
an important part; it is clear that directions came from the 
top to coalition members to support WTO-related legislation. 
Socialist MP Ivan Bokiy noted to Econ Counselor on November 
17 that the coalition government also felt responsible for 
providing deliverables prior to Yanukovych's trip and WTO 
legislation was one of those.  The substantial progress on 
legislation now allows Yanukovych to dispel worries that he 
is going slow on WTO or trying to synchronize accession with 
Russia (ref D).  While the third member of Yanukovych's 
"anti-crisis" coalition, the Communists, generally has 
opposed WTO legislation, even they apparently have been 
pressed not to block passage.  On several occasions, the 
Communists allowed bills to pass in a single reading by 
simply not voting.  Had they voted against, the bills would 
KYIV 00004315  002 OF 003 
have had to wait for a second reading. 
Public Consultations Helped Lay Groundwork 
5. (C) The passage of eight WTO-related laws on one day, 
November 16, was not so much a surprise development as the 
conclusion of a deliberative process.  The Yanukovych 
government had said since taking office that it would pursue 
WTO accession, but that it would consult first w
ith industry 
to avoid unnecessary economic harm.  As a result, during 
September and October the GOU held a series of public 
meetings with industry representatives in Kyiv and the 
regions.  Both GOU officials and American technical advisers 
described these meetings as overwhelmingly positive, a 
substantive "education" process that also revealed that the 
chief WTO opponents consisted of only a few of the most 
inefficient industries, like sugar producers. 
6. (C) The government was also determined to stage WTO 
"hearings" in Parliament, which took place on November 1, to 
allow MPs to publicly express their determination to help 
constituent industries.  The hearings thereby gave MPs some 
political cover.  Rather than delay the accession timetable 
as feared, these public meetings and hearings helped lay the 
groundwork for subsequent legislative action.  Following 
submission by the President and GOU in October, the bills 
took roughly a month to go through Parliamentary proceedings, 
Committee review, and one or two rounds of voting.  During 
this period, Ukraine's WTO negotiating team highlighted the 
tentative date of mid-December for the next WTO Working Party 
meeting to pressure MPs to make immediate progress. 
Opposition Remains pro-WTO 
7. (C) The positive role played by the opposition, especially 
Yulia Tymoshenko's bloc, has also been an important factor 
allowing for progress.  Given the lack of strong public 
support for accession, Tymoshenko could have tried to score 
political points by opposing WTO-related bills on the grounds 
that they would hurt the poor and economically vulnerable. 
(Comment:  Most observers believe the Ukrainian public 
neither strongly supports nor opposes WTO accession.) 
Instead, her party joined pro-Presidential Our Ukraine to 
counterbalance the Communists' opposition to WTO within the 
governing coalition and to create substantial majorities in 
favor of the legislation. 
The Bear in the Room 
8. (C) Fears that Russia could join the WTO before Ukraine 
have also helped to push the GOU into action.  GOU officials 
have said that they do not view the Russians as "competitors" 
when it comes to WTO accession (ref D), but common sense 
instructs otherwise.  Russia has repeatedly played hardball 
in its trade relationship with Ukraine, be it with threats 
over energy supply or bans on Ukrainian products such as milk 
and meat.  Talk of "synchronization" aside, most Ukrainians 
with whom we have discussed WTO did not want to see Russia 
join the WTO first, as this would allow Russia to make 
demands on Ukraine as part of its accession process.  The 
news of the U.S.-Russian WTO bilateral seems to have 
galvanized some in the GOU not to dawdle on WTO.  A concerned 
Socialist MP Bokiy specifically asked Econ Counselor on 
November 17 whether Russia might leapfrog Ukraine after 
signing its bilateral agreement with the United States.  On 
November 9, following news that Vietnam had completed its 
accession negotiations, President Viktor Yushchenko similarly 
cautioned, "There are only two large countries outside the 
WTO - Russia and Ukraine.  I do not want Ukraine to lag 
Backroom Deal over Budget 
9. (C) Press reports surfaced in early November claiming that 
progress on legislation might reflect a deal between 
Yanukovych and Yushchenko, whereby Yanukovych would agree to 
push ahead with WTO accession in exchange for Yushchenko's 
support of the government's proposed budget.  Regions MP 
Dmytro Sviatash hinted at such a deal to Econ Counselor on 
November 8.  Thus far, however, Yushchenko has remained 
KYIV 00004315  003 OF 003 
critical of the Yanukovych budget, and First Deputy Minister 
Azarov has already given ground to the Our Ukraine position 
on some procedural and substantive budget issues.   These 
developments undercut suspicions of a WTO-for-budget 
Mission Far From Accomplished 
10. (C) Ukraine has put a real dent in the outstanding work 
required for accession with its action on outstanding 
legislation.  Difficult issues, such as the bilateral 
agreement with Kyrgyzstan and negotiations over agricultural 
subsidies, remain unresolved, however.  Some of the remaining 
legislation affecting the agricultural sector will also face 
stiffer opposition from some MPs.  And there are signs that 
some of the bills already adopted by Parliament may not fully 
meet the expectations of Ukraine's WTO Working Party members, 
perhaps necessitating further Parliamentary amendments.  At 
the moment, however, the GOU has given a strong signal it is 
seriously committed to completing the last lap on its long 
journey to the WTO. 




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