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February 23, 2007

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Reference ID Created Released Classification Origin
07KYIV467 2007-02-23 15:48 2011-08-30 01:44 CONFIDENTIAL Embassy Kyiv

DE RUEHKV #0467/01 0541548
P 231548Z FEB 07

C O N F I D E N T I A L SECTION 01 OF 03 KYIV 000467 
E.O. 12958: DECL: 02/22/2017 
Classified By: Ambassador for reasons 1.4(a,b,d). 
1. (C) Summary:  Opposition leader Yuliya Tymoshenko arrives 
in the U.S. at a time when the feuding and deal-making 
between Ukraine's three major political forces is 
hamstringing policy-making and legislating.  The struggle 
between President Yushchenko and PM Yanukovych for political 
dominance and the right to define national security and 
foreign policy has continued.  After months of quiescence, 
Tymoshenko has returned to the ring as an active player, 
first making a one-time tactical voting deal with Yanukovych 
in January, now trying to forge a more strategic bond with 
Yushchenko/Our Ukraine (OU).  Tymoshenko's bloc (BYuT) holds 
the power to be the spoiler by playing the President and PM 
for her tactical advantage. Tymoshenko's end goal remains 
early parliamentary elections and a return to power.  Amidst 
talk of deal-making from all camps, and distrust on all 
sides, the political forces are also focused on how the 
Constitutional Court will weigh in on a myriad of questions 
about how the political system should function.  In spite of 
the political maneuvering, the primary gains of the Orange 
Revolution in societal attitudes, freedom of the press, and 
foreign and security policy remain intact. 
2. (C)  Messages/Themes: --Tymoshenko needs to hear from us 
that it is important for Ukraine's future that she act like a 
statesman in opposition and support national interests, not 
to be seen as only pursuing tactical advantage and a return 
to power. 
--The Yanukovych team will be the dominant force for at least 
the next six months, if not longer, and our goal should be to 
encourage good policy choices and constructive cooperation 
between key players to move the country forward.  She can 
play a responsible role promoting good policy choices or she 
can pursue tactical political advantage. 
--Tymoshenko often voices her support for tougher market 
reforms and NATO membership to western audiences, but chooses 
more populist themes at home; it will be important to 
encourage her to voice the same national interest messages in 
Ukraine and back up her words with actions. 
--Tymoshenko should use her opposition pulpit to offer 
constructive alternatives to current government positions and 
to encourage compromise on key issues in order to ensure that 
the interests of her voters -- and Ukraine as a whole -- are 
advanced.  For example, Tymoshenko could be encouraged to be 
a more active proponent of energy efficiency and foreign 
investment in domestic off-shore exploration to reduce 
dependency on Russian gas.  End summary and comment. 
Viktor and Viktor - how about Yuliya? 
3. (C) The dynamic between Yushchenko and Yanukovych, as the 
institutions of the presidency and premiership/cabinet 
struggled to define power and influence under the new rules 
of post-constitutional reform which came into play in 2006, 
was the key political factor in Ukrainian politics from 
August 2006 to January 2007, with Yanukovych playing the 
consistently winning hand.  After appointing Yanukovych PM in 
August, Yushchenko essentially ignored Tymoshenko, whose 
ratings consistently double his own, and focused nearly all 
his attention on reaching a modus vivendi with Yanukovych. 
Tymoshenko made him pay in January, when BYuT joined the 
coalition in overriding Yushchenko's veto on the new Cabinet 
of Ministers law which makes additional inroads on 
presidential authorities.  While Tymoshenko had tactical 
horse-trading reasons for the vote, along with an eye towards 
an eventual return as premier, she also clearly intended it 
as a wake-up call to Yushchenko, and a reminder that he 
depended on her to make the power of his veto, one of his few 
tools of influence left, stick. 
Getting back into the game, productively or not 
--------------------------------------------- -- 
4. (C) The CabMin vote handed Yanukovych a crucial victory 
and weakened Tymoshenko's claim to be the only political 
leader to have stayed true to the spirit of the Maidan, 
demonstrating her willingness to deal with Regions on dubious 
legislation in her pursuit of tactical advantage.  But it 
apparently also served as the intended wake-up call to 
Yushchenko, as he and OU finally engaged Tymoshenko and BYuT 
to work as a joint opposition to the Regions-led coalition. 
Tymoshenko's strategy remains focused on creating conditions 
in which Yushchenko could dismiss the Rada and call new 
KYIV 00000467  002 OF 003 
elections, which she feels confident would strengthen her and 
return a BYuT-OU alliance to office. 
5. (C) Nevertheless, Yushchenko's aversion to confrontation, 
her own aggressive street-fighter tactical instincts, and 
their mutual distrust and different agendas, are likely to 
complicate hopes for effective renewed cooperation. 
Moreover, Tymoshenko and OU are still trying to come to terms 
with what it means to be a successful and functioning 
opposition, especially with no natio
nal elections scheduled 
for three years.  BYuT does enjoy significant representation 
at the local and regional government level, both on councils 
and as mayors, especially in central and western Ukraine, 
which gives her political leverage to push for changes 
outside of Kyiv. 
6. (C) In Washington, she needs to hear that it is important 
for Ukraine's future that she take the high road and act like 
a statesman in opposition, support national interests, and 
help achieve results beneficial to the country, not only 
pursue tactical advantage with an eye solely on returning to 
power.  It is not clear Tymoshenko fully understands the 
constructive role an engaged opposition in a democracy can 
play, nor how achieving results even while out of power could 
advance her political fortunes.  Tymoshenko should use her 
popularity and pulpit to offer alternatives to current 
government positions and pursue constructive compromise on 
key issues to move Ukraine forward. 
NATO, MAP, and a possible referendum 
7. (C)  One issue which Tymoshenko has studiously avoided 
domestically, though not in speeches and op-eds abroad or 
private conversations, is Ukraine's national security 
interests and Euro-Atlantic aspirations.  While Yushchenko/OU 
too avoided NATO as an issue in the 2006 election cycle, that 
changed after the elections.  PM Yanukovych has set the 
current government policy as supportive of cooperation with 
NATO, but not actively pursuing membership via a Membership 
Action Plan (MAP).  While Yanukovych acknowledges the need 
for a public information campaign on NATO, he/Regions has not 
taken an active role.  A potential wild card in the medium 
future is a signature-based drive to hold a referendum on 
NATO and Single Economic Space (Yushchenko has appealed 
elements of the outdated 1991 law on refenda to the 
Constitutional Court, buying time).  Given the current lack 
of public support for NATO (roughly 25 percent), such a vote 
would fail.  Tymoshenko should be encouraged to demonstrate 
her statesman-like role by speaking more often to Ukraine's 
strategic direction and place in the world, and not only in 
economic terms (eventual EU membership, energy independence). 
Russia and the Gas Relationship 
8. (C) Relations with Russia, always complex, feature energy 
issues as the dominant factor, not to Ukraine's advantage. 
The Yanukovych Government managed to conclude a positive 
price deal for the 2007 winter season soon after coming to 
power ($130/thousand cubic meters of national gas), though at 
what cost to other national interests remains unclear. 
Russia clearly wants to take control of Ukrainian 
infrastructure, and they may have a Trojan Horse ally in Fuel 
and Energy Minister Boyko, a founder of the nontransparent 
RosUkrEnergo (RUE) middleman mechanism.  The GOU has floated 
ideas of forming a consortium with Russia to build expanded 
gas pipeline capacity to Europe, but has so far stopped short 
of allowing Russia any role in owning or managing the 
existing Ukrainian gas pipeline network. 
9. (C) Befitting her roots in the gas sector, the former "Gas 
Princess" Tymoshenko has taken a leading role in Rada 
criticism of government deals with Russia, both in 2006 and 
2007.  At BYuT's initiative, the Rada overwhelmingly approved 
a ban February 6 on the sale, transfer, or rental of 
Ukraine's energy infrastructure (namely pipelines) to anyone 
(but clearly aimed at Russian parties).  She often speaks of 
bringing greater transparency and openness to the energy 
sector but has initiated no action in the Rada in support of 
this goal.  Tymoshenko could be encouraged to be a more 
active proponent of energy efficiency and foreign investment 
in domestic off-shore exploration to reduce dependency on 
Russian gas. 
Pushing on Market Economics, investment climate 
--------------------------------------------- -- 
KYIV 00000467  003 OF 003 
10. (C) Ukraine's economy has performed well since the March 
2006 elections, with GDP growth near 7 percent and increased 
consumption spurred by rising social pension and wage levels. 
 As opposition leader, Tymoshenko's comments on the 2007 
budget did little to dispel the notion that she is a populist 
on economic policy, an image that arose during her stint as 
PM, when she raised social spending, advocated price controls 
on sugar, meet, and gasoline, and pushed "reprivatizing" 
former state enterprises sold at cut-rate prices to 
well-connected old-order oligarchs.   She winces at the term 
"reprivatization" and may better understand its deleterious 
impact on the investment climate toward the end of her PM 
tenure.  Tymoshenko does cast a useful critical voice on 
current GOU-proposed policies that may favor oligarchs rather 
than promote Ukraine's overall economic health, as well as on 
the shadowy nature of current energy supply arrangements. 
11. (C) Her Washington meetings give us an opportunity to 
push Tymoshenko to play a constructive role to achieve 
agreed-on goals of increased economic integration with Europe 
and the world, as well as policies that enhance the business 
and investment environment for U.S. and Ukrainian businesses 
alike.  We can also encourage Tymoshenko to build on one of 
her real accomplishments as PM in 2005, which was improving 
the government's tax and customs policies to eliminate a 
significant element of corruption and smuggling, and 
simplifying business registration procedures. 
12. (U) Visit Embassy Kyiv's classified website: 




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