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May 16, 2008

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Reference ID Created Released Classification Origin
08KYIV922 2008-05-16 14:56 2011-08-30 01:44 CONFIDENTIAL Embassy Kyiv

DE RUEHKV #0922/01 1371456
P 161456Z MAY 08

C O N F I D E N T I A L SECTION 01 OF 02 KYIV 000922 
E.O. 12958: DECL: 05/16/2018 
REF: A. KYIV 902 
     B. KYIV 903 
     C. KYIV 915 
Classified By: Ambassador for reasons 1.4(a,b,d). 
1. (C) Summary: Official Kyiv appears determined to sink into 
another round of political turmoil and infighting (reftels) 
that could last for months.  It will make our work here more 
difficult and could damage some of our short-term goals. 
However, it is critical that we not lose sight of our 
longer-term goals of solidifying democracy, hastening 
Ukraine's integration into European economic structures, 
promoting continued military and security structure reform, 
and supporting Ukraine's Euro-Atlantic aspirations and 
request for a NATO MAP.  Ukraine is an island of tolerance in 
an increasingly authoritarian neighborhood with a real chance 
to succeed in its ultimate ambition to join Europe.  If it 
fails, it is likely to be to Russia's advantage.  The Kremlin 
has made no secret of its opposition to Ukraine's westward 
path and of its tacit approval of continued political chaos 
and uncertainty.  We believe that U.S. policy is best-served 
by rolling with the short-term punches without taking our eye 
off the long-term prize of a Ukraine fully integrated into 
Europe.  End Summary. 
2.  (C)  Agreement on a new government and coalition, a more 
mature approach to governance by populist Prime Minister 
Tymoshenko, and a surprise request for a NATO Map at 
Bucharest led to cautious optimism that Ukraine was righting 
itself after a year of political turmoil and focusing again 
on long-term interests.  Although there were strains in the 
coalition from the start, both President Yushchenko and PM 
Tymoshenko seemed initially prepared to put the past behind 
them and again put Ukraine on a fast track to Europe.  In 
spite of public statements of commitment to the coalition, 
both sides now seem resigned to the fact that the coalition 
will not last. 
3.  (C)  Ukraine's successful accession to WTO on May 16 may 
be the first short-term goal to be complicated by this latest 
round of political squabbling (Ref C).  Five more pieces of 
WTO-related legislation remain to be passed by the 
Parliament.  This legislation was expected to be considered 
right after the May holidays by the Rada, which has been able 
to do little more than open and close each day without any 
legislative work done, although work continued again on May 
16, with the first of these five bills passed in a first 
reading.  As a result, Ukraine acceded to the WTO without 
fulfilling its commitments to pass this legislation, making 
its start as a WTO member rockier than it might and should 
have been.  The GOU has attempted a band-aid by ordering 
Customs to implement tariff levels in the WTO protocol, but 
this is a stop-gap measure of dubious legality and sure to 
cause confusion at the borders. 
4.  (C)  Squabbling over the leadership of the State Property 
Fund and the privatization of the Odesa portside chemical 
plant, along with the Government's unfortunate and 
indefensible decision to halt Vanco's exploratory drilling in 
the Black Sea (and possibly to reopen the Production Sharing 
Agreement) inevitably will have a chilling effect on foreign 
investment.  One U.S. law firm assisting a potential investor 
in the Odesa portside plant said that its clients and other 
investors are walking away in disgust from the process. 
Neither side appears willing to budge on resolving this 
issue, leaving Ukraine looking unstable to foreign investors 
and cutting the Tymoshenko Government off from potential 
revenues realized from privatization sales. 
5.  (C)  The push for a positive response in December to 
Ukraine's request for a MAP could also be jeopardized by this 
latest upheaval.  Euro-skeptics within NATO would like 
nothing better than to be able to use continued political 
turmoil in Kyiv to refuse Ukraine's request.  Although 
military reform would likely continue and Ukraine's 
newly-energized information campaign might still proceed, 
Kyiv's effort to convince some Europeans that they are ready 
for MAP is much less convincing against a background of talk 
about new coalitions, new constitutions, and another round of 
new elections.  Continued political turmoil could also hamper 
Ukraine's efforts to ramp up its preparations for the 
Euro-2012 soccer championship, possibly even leading to the 
selection of a new host.  It is generally agreed that the 
Ukrainians and their Polish co-hosts are well behind schedule 
6.  (C)  In spite of the political challenges to our 
short-term goals, it is the longer-term view of Ukraine that 
KYIV 00000922  002 OF 002 
is important.  With continued USG and European support, we 
can easily see Ukraine in 3-5 years as a full-fledged active 
member of WTO observing the rules, a NATO MAP country working 
toward full membership with a professional army rapidly 
closing in on NATO standards, a special partner of the 
European Union (enjoying the benefits of
a Free Trade 
Agreement), and a safer and more attractive place for U.S. 
and other foreign investors. 
7.  (C)  There is hope that short-term political instability 
will not damage these long-term goals.  Interestingly enough, 
in spite of the day-to-day political struggles and clashes of 
personal ambitions, all the major players continue to espouse 
a western future for Ukraine, a future that also includes 
good relations with Russia.  Ukraine continues to be a haven 
for Russian-speaking dissidents from neighboring Russia and 
Belarus; the number of foreigners registered here has doubled 
to 200,000 since 2003 -- and most from the CIS are not 
registered at all.  Many are coming here to take advantage of 
Ukraine's tolerant democracy, free press, and open society in 
order to pursue their professional careers.  Given Ukraine's 
past track record, even if new pre-term elections are called 
again, there is every reason to expect that the checks and 
balances in the system that prevented widespread fraud in 
September 2007, will again ensure that future elections are 
open and competitive. 
8.  (C)  Our best approach is to keep pushing Ukraine and its 
difficult leaders in the right direction -- toward Europe, 
democracy, and free markets -- while accepting that progress 
will be uneven.  The alternative is to leave Ukraine to its 
own devices and watch it slide back into Moscow's orbit, 
remaining an unstable buffer area between Europe and Russia 
that is completely dependent on Moscow.  In the near-term, 
Russia will continue to increase its power, wealth and 
ability to influence events in its far-weaker neighbors. 
Ukraine is in play; the question of whether it will move east 
or west has not yet been answered.  However, without USG help 
and support, it is likely that Ukraine's movement toward 
Europe will slow and even stop as it returns to Russia's zone 
of control.  It is in our interest and far better for our 
national security for Ukraine to succeed. 
9. (U) Visit Embassy Kyiv's classified website: 




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