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09KYIV466, A View from the Window: Consular Elements of the Economic

March 16, 2009

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Reference ID Created Released Classification Origin
09KYIV466 2009-03-16 14:34 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Kyiv

VZCZCXRO3596
RR RUEHDBU RUEHIK RUEHLN RUEHPOD RUEHSK RUEHVK RUEHYG
DE RUEHKV #0466/01 0751434
ZNR UUUUU ZZH
R 161434Z MAR 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 7463
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFISS/DEPT OF HOMELAND SECURITY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
INFO RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE

UNCLAS SECTION 01 OF 03 KYIV 000466 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/UMB, EEB/OMA, CA/FO, CA/VO 
NSC FOR KKVIEN 
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK 
DEPT PLEASE PASS TO USTR FOR CKLEIN/PBURKHEAD 
DEPT PLEASE DISTRIBUTE WORLDWIDE 
E.O.12958: N/A 
TAGS: CVIS EFIN ECON ETRD KFRD XH PL UP
SUBJECT: A View from the Window: Consular Elements of the Economic 
Crisis in Ukraine. 
 
//////CORRECTED COPY ////ADDED CIS AND NATO EU COLLECTIVES/// 
 
Sensitive but Unclassified. Not for Internet Distribution. 
 
1.  (SBU) Summary: During the past several months, the Consular 
Section at Embassy Kyiv has seen changes that reflect the severe 
downturn in Ukraine's economy. As "economic crisis" became a 
ubiquitous refrain, the volume of nonimmigrant visa applications 
dropped noticeably.  Fraudulent cases increased as a proportion of 
total cases, and visa fixers have expanded their reach into the 
industrial regions of eastern and southern Ukraine. Ukrainian 
citizens at all levels are feeling the effects of the deteriorating 
economy, as illustrated by the narratives of visa applicants. If the 
crisis continues to deepen, increased fraud is likely to continue. 
The current drop in demand, however, has yet to significantly erode 
the 36 percent growth in demand that has occurred since FY 2005. End 
summary. 
 
-------------- 
By the Numbers 
-------------- 
 
2.  (SBU) The recent decline in nonimmigrant visa applications at 
Embassy Kyiv has paralleled a sharp deterioration in Ukraine's 
overall economy. The Consular Section witnessed a 36 percent drop in 
total applications during January 2009 as compared to January 2008, 
and a 43 percent decrease in B1/B2 applications during the same time 
period, indicating that business travelers and vacationers are 
curtailing their travel spending. Exchange Visitor applications have 
dropped precipitously (41 percent) from FY08 YTD to FY09 YTD. In 
particular, prospective Summer Work and Travel applicants seem to be 
more cautious about committing to travel plans. (Comment: For the 
fiscal year-to-date, however, total NIV demand is down only 11 
percent from last year and remains almost 37 percent over comparable 
figures from FY 2005. End Comment.) Demand for other types of visas 
has remained steady. The decrease in business travel is also evident 
in a sharp drop in the use of appointment slots available to 
applicants referred by the American Chamber of Commerce (AmCham) in 
Ukraine. In December 2008 and January 2009, these slots went 
virtually unfilled, in sharp contrast to past high demand for AmCham 
appointments. 
 
3.  (SBU) Reports from other foreign missions in Kyiv corroborate 
our observations of declining visa demand as the initial effect of 
the economic slump. Poland is a popular destination for Ukrainians, 
both due to proximity and family ties, yet the Polish Consul General 
reported that despite Poland's low 3 percent refusal rate, his visa 
officers have noted a 25 percent decrease in applications from this 
time last year. He chalked up the decrease to average Ukrainians 
tightening their belts, stating that "tourist trips are one of the 
first things to go." Our Canadian counterparts reported a 25 to 30 
percent decrease in applicants over the past few months. British, 
Swedish and French consuls also reported comparable drops in visa 
demand. 
 
------------------------- 
Fraud Expanding its Reach 
------------------------- 
 
4.  (SBU) Despite the dip in visa applications during January 2009, 
there has been a significant increase in the percentage of cases 
involving fraud. The Fraud Prevention Unit (FPU) reported a 147 
percent surge in total cases forwarded for additional scrutiny, and 
a 28 percent increase in cases of confirmed fraud from September 
2008 to February 2009, as compared with the same period a year 
earlier. Furthermore, cases where officers suspected false documents 
jumped by 63 percent. The Canadian, British, Swedish and French 
Consulates have also noticed an increase in fraudulent cases. 
 
5.  (SBU) Fraud trends in Ukraine have also shifted in a qualitative 
manner. Traditionally, the economically-depressed regions in western 
Ukraine have been the epicenter of consular fraud in the country. 
Recent FPU investigations indicate that visa fixers have expanded 
their market and territorial reach beyond western Ukraine, extending 
into southern and eastern Ukraine, as well as Belarus. (Note: 
Embassy Kyiv currently processes NIV cases from Belarus.) This 
dynamic is consistent with the fact that these industrial regions 
have born the brunt of the global financial crisis in Ukraine. 
 
6.  (SBU) Even the visa fixers are feeling the economic squeeze. 
Prices for fixed visa packages have reportedly dropped from as high 
as $12,000 in 2007-2008 to around $5,000 in 2009. At the same time, 
quality and sophistication of fraudulent documents have &#x000
A;deteriorated. This suggests decreased ability of applicants to pay, 
and may also indicate the entrance in to the "market" of less 
 
KYIV 00000466  002 OF 003 
 
 
//////////CORRECTED COPY///ADDED CIS AND NATO EU COLLECTIVES//// 
 
experienced document venders. 
 
7. (SBU) The jump in fraud has contributed to a seven percentage 
point increase in our B-1/B-2 refusal rate for the fiscal 
year-to-date. Our Canadian colleagues have noted an even sharper 
jump, with their refusal rate rising from 15 to 25 percent. 
 
-------------------------------------------- 
The Human Story: The Slump in Concrete Terms 
-------------------------------------------- 
 
8.  (SBU) NIV applicants' statements during interviews  offer a 
mosaic of narratives that reflect the economic outlook in Ukraine. 
These concrete infopoints put the crisis in human terms, among them: 
 
 
-One property owner lamented that his rental revenue in Kyiv has 
fallen by 50 percent. 
 
-Meanwhile, an HR manager from 3M reported that the company is in 
negotiations for better terms on their office lease, and that 15 
percent of their staff has been laid off. 
 
-The owner of a property management company boasted that despite the 
crisis, his company had only had to undertake "small" layoffs of 15 
percent. 
 
-A member of parliament from Donetsk affirmed that the metallurgy 
and chemical sectors are feeling the brunt of the crisis in his 
district, principally due to a decrease in export markets. 
 
-A foreign sales director from the large metals firm Donetsksteel 
claimed in mid-January that the company had avoided layoffs by 
reducing salaries. 
 
-One lawyer from a prominent firm reported that 20 attorneys in his 
firm have been transferred from real estate to litigation practice 
(primarily bankruptcy and creditors rights). 
 
-An applicant from an institutional investment company shared that 
her company had laid off 45 percent of its staff, and that no fresh 
money was coming into the country. 
 
-One recent Summer Work and Travel exchange program applicant 
actually requested a refusal, explaining that his family was no 
longer able to cover the cost of his travel and the fees of the 
exchange program placement agency. 
 
9.  (SBU) The human side of the crisis is also evident in increased 
interest in Consular Section jobs. Recent staff openings have 
attracted a much larger and more qualified applicant pool than in 
previous months, reflecting the scarcity of white-collar jobs and 
the high-demand for dollar-based salaries. A case in point: February 
2009 advertisements for an entry-level NIV Clerk position received 
significantly more applications than when the position was last 
advertised in summer 2008. Moreover, the Consular Section, as well 
as other sections within the Mission, has seen employees who 
resigned to pursue private sector jobs during last year's economic 
upturn actually return to seek their old Embassy jobs. (Note: The 
Human Resources Section noted that during FY2008 the Embassy saw an 
average of 2 resignations per week, but in the first half of FY2009 
there have been only 7 local staff resignations.) 
 
------------------------------------ 
COMMENT: Future Demand and Fraud Up? 
------------------------------------ 
 
10.  (SBU) The initial effect of the economic slump has been a clear 
though slight decrease in visa demand, with a strong up-tick in 
fraud. If the crisis continues to deepen, fraud will likely become 
even more endemic; however, it seems that the drop in applications 
is temporary. Already in February, visa demand has rebounded to 
above the February 2007 level. A continued growth in demand could be 
fueled in part by a small group of well-heeled Ukrainians hedging 
bets on the country's continued currency depreciation by spending 
savings on travel and leisure, thereby maintaining a Soviet-era 
tradition of investing in goods or services rather than holding on 
to currency as a store of wealth or value. Joining them may be an 
increasing number of still well-to-do (but now idle) applicants in 
former high-growth sectors such as construction and real estate who 
have indicated an inclination to take vacations precisely because 
the crisis has provided more time for leisure. The real motor of 
increased demand, although post's refusal rate and overstay rates do 
 
KYIV 00000466  003 OF 003 
 
 
////CORRECTED COPY//ADDED COLLECTIVE INFO//////// 
 
not yet reflect this, may well prove to be more applicants wanting 
to escape economic misery by seeking illegal employment in the U.S. 
 
TAYLOR

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