Ukraine's Choice: Europe or Russia?

December 10, 2004

Unedited transcript prepared from a tape recording

Proceedings:
MR. SIKORSKI:  Ladies and gentlemen, I'm Radek Sikorski, Executive Director of the New Atlantic Initiative.  Welcome to the New Atlantic Initiative, welcome to the American Enterprise Institute.

When we started thinking about this conference some weeks and months ago in the group of the co-sponsors, the Friedrich Naumann Foundation, the Freedom House, International Republican Institute, National Endowment for Democracy, and Radio Free Europe/Radio Liberty, we knew that our topic of this conference on Ukraine will be topical and timely, but I confess, we didn't think it would be quite so timely.

With hindsight I have second thoughts about our title, "Ukraine's Choice:  Europe or Russia," because it now sounds to me, in view of what the Ukrainian people have done, a little patronizing.  I think the Ukrainian people in Kyiv were not choosing between Europe or Russia, they were choosing for themselves, for the kind of country they want to live in.  But I think you will forgive us for that, because I think it still makes sense.  There is a difference between a democracy and a managed democracy, and if Europe and Russia stands for that, then I think that still is the choice before Ukraine.

The title also suggests that somehow it's a zero-sum gain.  If Europe gains, Russia loses, and I don't think that's right.  I think Russia is going to benefit from deliberation and from greater democracy in Ukraine.

I'd like us to remember during our proceedings that it's not over yet, that the repeat second round of the election has to be observed and has to be certified, and has to go without a hitch before we have a new President in Ukraine.  There will be a backlash by the forces that don't want that to happen.  I would also like us to remember that whatever the falsifications there may have been in the second round, millions of people did vote for both candidates, and whoever wins will need to reunite the country.

I would also like us to think and come out with some conclusions about how to avoid the mistakes of reformers in other Central and Eastern European countries.  I was personally involved in the first fully democratically elected government in Poland after the fall of communism, and we made some serious mistakes, as a result of which the post-communists were back in power in Poland within two years.

Finally, I'd like to tell you that we have the great privilege to welcome the Chief of Staff of Candidate Yushchenko, Mr. Oleh Rybachuk, who will be with us for the final panel, so please stay to the end, and even if you have to leave now, please come back for our panel at 3 o'clock.

Also, at 5:30 we shall have a reception hosted by Freedom House at 1319 18th Street, where President Dine, President of RFE and Dr. Zbigniew Brzezinski will address us, as well as Mr. Rybachuk.

With that, I'd like us to start, and I'd like us to start by reliving some of the moments of the last two weeks as seen by European TV correspondents in Kyiv.  Please, let's have it.  Thank you.

[Video played.]

MR. SIKORSKI:  I'd like to thank the British Broadcasting for providing this digest.

I now call on Paula Dobriansky, the U.S. Under Secretary of State for Global Affairs, whose credentials on both democracy promotion and Ukraine we all know about, and then Oleh Shamshur, the Deputy Foreign Minister of Ukraine.

Please, Paula.

[Applause.]

MS. DOBRIANSKY:  Thank you, Radek.  And good morning, Ambassador and distinguished guests here.

After the events of the last three weeks, and on International Human Rights Day, today, December 10, it's difficult to imagine a more significant and relevant time to talk about Ukraine.  Radek and the American Enterprise Institute, you have assembled I think a very impressive group of speakers, and I'm confident that this conference will be both stimulating and very productive.

Ukrainians have taken a stand for democracy, and have a tremendous opportunity to turn that stand into a giant step forward for their country.  Yet at the same time they face an extremely delicate and precarious period.  We hope that each and every Ukrainian, leaders and citizens alike, will choose to seize the moment before them.  Fortunately, thus far, impressive numbers of Ukrainians have made heartening and even inspiring choices.  They chose to support a candidate in their country's presidential election, and they chose to vote.

Then when they became concerned by widespread and credible reports of fraud and abuse during the election process, they chose to defend their right to select their next leader democratically by standing up and speaking out in massive peaceful demonstrations, combating not only a corrupt process, but also sub-freezing temperatures.  Hundreds of thousands of Ukrainians chose to show their support for freedom and democracy, and they chose to do so peacefully, ignoring the destructive calls of a few for violence.

Many more choices lie ahead as Ukrainians and their leaders work toward and beyond the new vote scheduled on December 26.  For the United States, three of these choices are most important:  avoiding violence, upholding Ukrainian law and international democratic standards, and respecting the will of the Ukrainian people.  The danger of violence is real, and we have emphasized to all sides in the dispute the vital importance of avoiding the use of force.  Leaders in both the government and the opposition have a responsibility to preserve the peace, a responsibility that falls especially heavily upon Ukrainian government authorities.  Upholding Ukrainian law and international democratic standards is likewise essential.  The Ukrainian Supreme Court took a critical step in this regard last week when it invalidated an election that had been broadly condemned, and called for investigation and prosecution of electoral violations.

Moving forward, careful adherence to the law and to international democratic widely-accepted standards will be critical to the legitimacy of any leader, and whatever government that emerges from the processes now under way.  That legitimacy will likewise be vital to building a stable democracy in Ukraine.  Respecting the will of the people is also fundamental to democracy.  President Abraham Lincoln described our democracy as government of the people, by the people for the people.  The hundreds of thousands who have braved the bitter cold in downtown Kyiv and other cities have done so to defend this very principle.  All Ukrainians can be proud of their efforts.  All must work to ensure that the new balloting makes them equally proud.

The decisions that Ukraine's leaders and people take in these areas will have a profound impact upon their country's future, but what is happening in Ukraine is also of great importance to the United States.  If peace and democracy prevail, Ukraine can do enormous good for the cause of democracy in the region and around the world.  Ukrainians will become a model for standing up for what's right, for defending their rights as voters, for demanding their leaders be democratically elected.  Conversely, it would dampen the hopes of so many others if the new second round in Ukraine, a country of 47 million people in the heart of Europe, did not reflect the will of the people, and instead put in power leaders lacking legitimacy.

The success of democracy in Ukraine is also important to the United States because it will give Ukrainians the very opportunity to accelerate their country's political and economic development, deepen its integration in the Euro-Atlantic community, and enhance security and prosperity throughout the region.  Ukraine will continue to determine its own future and its relationships with other countries and international organizations, as it has done since independence in 1991, and good relations with both Russia and the West will be important to Ukraine, and to broader peace and stability.  But closer ties between Ukraine and the West will work down to the entire region's benefit as they contribute to erasing lingering dividing lines in Europe.

Because Ukraine is so significant to us, we have consistently spoken out and acted to encourage a free, fair and transparent election process, including in the campaign and on election day in Ukraine.  During the course of last year we stressed this repeatedly to our Ukrainian interlocutors.  We regret that this advice was not heeded, though we are pleased that Ukraine's Supreme Court has given its leaders and its people another chance.

We also provided roughly $13.8 million in assistance to support a free, fair, transparent election in Ukraine.  International observers and domestic election observers were a key component of this effort.  Importantly, as in all its similar assistance worldwide, the United States neither prescribed nor promoted any particular outcome, party or candidate.  Our efforts support a democratic process.

In the weeks since the flawed second round of the election on November 21, President Bush and Secretary Powell have expressed how disturbed we were by the conduct of the election and the importance of setting things right.  President Bush said that, "The validity of their election was in doubt, and that the international community is watching very carefully."  Secretary Powell made clear that, "We cannot accept this result as legitimate," and called on Ukrainian leaders to "decide whether they are on the side of democracy or not, whether they will respect the will of the people or not."

We have not been alone in these words and actions.  We have collaborated closely with our European partners in the OSCE and in NATO and in discussions with the European Union and through bilateral contacts.  We have welcomed greatly the efforts of European leaders including Polish President Kwasniewski and Lithuanian President Adamkus, and the EU Secretary General Solana, to mediate discussions between Ukraine's Government and opposition leaders.

We will continue to work together with our European friends to help Ukraine through this most challenging period in the spirit of transatlantic cooperation.  Most immediately we are supporting multiple efforts that will place thousands of international and domestic election monitors across Ukraine on December 26.  Their presence is critical to ensuring that the new voting is not marred by the abuses that tarnish the first and second round of last month's votes, and together with others in the international community we call upon the Ukrainian Government to organize a free, fair and open election that meets international democratic standards.

In Washington, D.C. there is a statue to the poet laureate Taras Shevchenko, who continues to serve as an inspiration for Ukrainian independence and freedom.  "Will there be truth among people?"  Shevchenko wrote 144 years ago, "There must be, otherwise, the sun will rise and set on fire the whole land."

The United States believes truth will indeed prevail in Ukraine today, and that the will of its people will be respected and reflected in its leadership.  Then the power of democracy and the power of the Ukrainian people will shine brightly.

Thank you for inviting me.  Thank you so much.

[Applause.]

MR. SIKORSKI:  Thank you very much, Paula, for these words, and thank you also for the policy, for what you've done and for what the U.S. Government has done, because it seems to me that you have been--the policy has been wise and deft at the same time.  You've managed to be pro-Ukrainian without being anti-Russian, and you've managed--who would ever have thought Ukraine would reunite the West?

[Laughter.]

MR. SIKORSKI:  But it has, and may this just be the first of such initiatives.

If I may now call on Oleh Shamshur, the Deputy Minister of Foreign Affairs of Ukraine.

[Applause.]

MR. SHAMSHUR:  Director, Madam Secretary, ladies and gentlemen, I am glad to have the privilege of addressing this distinguished audience due to the kind invitation of the New Atlantic Initiative.  And I would like to say that I'm especially pleased to see some old colleagues with who we've discussed this issue of Ukraine's place in Europe and Euro-Atlantic community for quite some time.  And I'm quite glad that we have a chance to discuss this issue in an entirely different context.

Quite understandably, under the circumstances, it hasn't been too easy for me to take the decision to come to the conference because too many crucial things are being decided back home right now.  For the very same reason, however, I thought it's important to be here with you today, and the recent developments in Ukraine have underscored the relevance of the topics put on the conference's agenda.

It should also be acknowledged that they present only a part of a long list of problems Ukrainian society is trying to find the answer to at this challenging of its history.

Critical mass of the democratic transformations that has been accumulating within the Ukrainian society for so long has finally manifested itself in an open and quiet unequivocal manner.  The drama of the Ukrainian election is still unfolding.  Major challenges lie ahead.  But some, albeit preliminary, conclusions could be drawn.  First of all, the contents of those events, as well as the keen attention they have commanded, in my view have become yet another confirmation of an important if not a unique place occupied by this country within the Euro-Atlantic area,  Maybe for the first time since Ukraine gaining independence, news from Ukraine has been forming the front pages and prime time of the international mass media.  With a mixed feeling of bewilderment, concern and admiration, the whole world has been watching the coming of age of the Ukrainian political nation.

Confronted with rather difficult circumstances due to the tense political struggle, massive irregularities and direct fraud is the course of the election campaign.  Ukrainian society and institutions have been passing their test for democracy.

Many Ukrainians have exercised their right to defend their views in a peaceful but quite persuasive way.  Their voices of discontent have been heard, opinions that they have expressed a difference for, form the basis for significant decisions taken by the different branches of the state power.  Within this context I will single out the ruling of the Supreme Court of Ukraine, denouncing the decision of the Central Election Committee on the outcome of the second round of election.

It has established a legal foundation indispensable for the completion of the election process in a free, fair and dignified manner.  It should be stressed that the Court referred in its ruling to the European Convention on Human Rights and other fundamental international treaties to emphasize protection of human rights and freedoms and the highest democratic values.  I believe that the role played by the courts of law at all levels throughout the election campaign has proved that the process of consolidation of the independence of the judiciary and the rule of law in Ukraine is well under way.  Encouraging, although not without the  (?)  changes are taking place in the Ukrainian mass media.  The majority of them are presently giving to the Ukrainian public accurate and multi-faceted picture of the current events.  On the other hand, this campaign has brought to light the existence of the rather large segment of the media ready to stimulate and cultivate prejudice and misconceptions, and of xenophobic  (?)  in character present in the collective consciousness of the sizable, as it has appeared, segment of the population.

I think that we in Ukraine should give the most serious consideration to this problem.  These manifestations run contrary to the tradition of tolerance deeply rooted in the modern Ukrainian society.  Ukrainians can be proud that political debate, even in the period of crisis, has been conducted by using exclusively peaceful means.  Latent decisions of the   (?)   is another proof of this strength.

At the same time no one should forget that the Ukrainian people is the main party and actor in the process of reform.  Thus, no agreement can last in the view of the people for the qualitative changes is ignored.

Let me refer to the title of the conference.  It poses, in my opinion, a bit bluntly--and Mr. Sikorski already addressed this issue--the question of the direction of Ukraine's further development in many senses, geopolitical, foreign policy one, but no less important, in more general terms, as to the choice of the model of a societal development.

This issue was quite salient during the present presidential campaign.  Initially it should be recognized that debate hasn't been too much about the foreign policy issues or choices.  Major contenders were running on the pro-European, at least, formerly pro-European platform while stressing necessity to develop relations with Russia though intensity, credibility and substance of their thematic pronouncements differed, and not infrequently, practical steps were not that consistent.  Quite significantly, the later stages of campaigning were marked by the proliferation of the publicity with entire Western overtones.  This was accompanied by the attempts to reduce the current people crisis to the East-West confrontation, the chasm between Western and Eastern Ukraine, followed by extremely dangerous encroachments on the territorial integrity of Ukraine.

I'd like to use this opportunity to stress that we must not disregard separatist sentiments surging in some parts of Ukraine, notwithstanding that they are, in my view, of mostly situational character and are generated by the election contest.  The separatist speculations have to be ceased immediately and resolutely.  Perpetrators are to be held responsible for their views and actions.  We count on the support of our international partners whom we expect to make every effort to prevent providing any external support to such activities.

In my opinion, the latest developments in Ukraine are about the choice, but they are definitely not about the choice with confrontation connotations and emergence of dividing lines.  They are, first of all, about the choice between free election and fraud, democracy and double or  (?)  standards, active participation in social life and social indifference.  They have brought an issue of the model of the societal development to the fore of public attention.  Now it is more evident than ever that if we bring the strategy for success means completion of the process of political and economic reforms, leading to the achievement of the highest democratic norms in social life, efficient system of governance, rule of law, creation of the full-fledged market economy, which should be sustainable and competitive internationally, ensuring corresponding living standards to the population.

All those components constitute the core of the policy that we call the European choice, or the policy of the European integration, which is for us the choice of the civilization of proportions.  Now we have an exceptional chance to bring fresh wind into the sails of our movement towards this goal.

It's important to stress that in Ukraine there is an ever-growing awareness that no one but us can do the job of building democratic and prosperous Ukraine, you want to see and to live in accordance with the principles I've just mentioned.  Time needed for the successful completion of this endeavor will depend predominantly, but not exclusively, upon the internal factors.  At the same time, position taken by our partners and the will to provide political backup and systematic assistance are of key importance in this respect.

Positive message and tangible support has never been more important now.  Continuation of the business as usual approach would be in no one's interest.  More generally, both Ukraine and enlarged Europe have been facing  (?)  task of determining realistic, forward-moving and more efficient model of their relationship, allowing for the constructive cooperation on the current basis and prompt resolution of emerging problems and disputes.  This daily routine shouldn't obscure the final objective, no matter how distant it may look now for many, Ukraine's integration into the European Union.  Post-enlargement fatigue cannot serve as an excuse for the absence of the   (?)  policy towards Ukraine.

With the present development of the democratic process in Ukraine, EU should depart from the usual policy of benign or not-so-benign neglect, keeping Ukraine at the margins of integration processes in Europe should be replaced with an active encouragement and engagement of Ukraine, maintaining with it a truer strategic dialogue.  Its seriousness and substance will also very much depend on the clearly-stated open-door policy.  Its absence will be no less conspicuous.  I have no doubts that integration to the Euro-Atlantic structures have been and will remain one of Ukraine's foreign policy strategic objectives, taking into account realities of the current security situation and the fact that the NATO and EU have been watching, perceive the Ukraine as guarantors of stability in Europe.  Success of the latest NATO enlargement, experience of the applicant countries, has played the role of the stimulus for our own integration endeavors.

I would mention two lessons that we received and perceived from enlargement.  Firstly, possession of the powerful armed forces is not sufficient to qualify.  Shared values count no less.  And secondly, no significant moment ahead can be achieved without concerted actors of all state actors involved.

Ukraine's claim for the membership should be well-substantiated.  Like in our relationship with EU, they are putting on the agenda the issue of upgrading its favor.  Its specific form will be defined in consultation with our partners.  One thing is though quite clear, it should correspond to the level already achieved in our relationship with NATO and take into account noticeable progress in many critical areas and domains of NATO Ukraine cooperation.

Not willing to prejudice or influence debate, I would like to address the question of conjunction which is present in the title of the conference.  Should we be using conjunction "or" while speaking about Ukraine's relationship with Europe and Russia?  The answer to this question cannot be simple almost by definition.  I would argue that the answer might be positive when you speak about societal choices and prospective security choices.  I believe that Ukraine is on its way to confirm its truly(?) and unmistakenly European identity.

Conversely, we should be thinking of rather both and construction when speaking about developing comprehensive bilateral relations.  Our relations with Russia are still important for both countries, their economies, their peoples, but they're also important for Europe, especially for its stability and security.

A democratic, stable and prosperous Ukraine will make a significant contribution to the prosperity and stability of the whole of Europe, and especially to its close neighborhood,  (?)  operating  (?)  of Europe without dividing lands.  At the same time it won't be redundant to reiterate an   (?).  To be truly constructive, Ukrainian-Russian relations, as our relations with any other agent of international relations, should be based upon unswerving adherence to such fundamental principles as mutual respect, non-interference in internal affairs.  It is especially important during the periods of historic change when many things are at stake, including the future of the interstate relations.  We value friendly advice.  We value international mediation from the West and from the East, but we also value restraint.  The final and thoroughly democratic settlement of the current situation, future direction of this country's development, can and will be determined by Ukrainians and Ukrainian people themselves.  To witness history being made by people is a really fascinating feeling.  I wish you a most interesting and stimulating session.

Thank you.

[Applause.]

MR. SIKORSKI:  Thank you very much.  I declare the conference open, and I ask our first moderator, Don Jensen, and the participants if you could please take your seats.  We shall examine Ukraine's economy converging with the European Union or with the common economic space, but I think in the light of recent events, we also should give the reformers some advice on how to overcome what may be a challenging period, and even with the enthusiasm on the streets now, we know from experience that whoever takes charge will only have a few months to start showing results, and if those results do not come through, then trouble ahead is certain.

With that in mind, I pass the mike and control to Don.  Please.

MR. JENSEN:  Good morning.  As Minister Shamshur and Radek just stated, in many ways the most important challenges for the country in the coming months lie ahead, and as we saw, of course, on the movie as well.

Ukraine's economic performance over the past year or so has been contradictory.  On the one hand wages have risen, GDP, according to the first two-thirds of the year, first eight months, has risen about 13 percent.  But at the same time the country has been plagued by the locked hand of oligarchic control over key industries, endemic corruption, the need for greater legal regulation, and in general, the need for a greater rule of law.

Overlaid upon this of course is the consequences, many of which are no doubt unpredictable right now of the current crisis, the problem of dislocation, the problem of reorienting the country toward a more prudent economic relationship with both Russia and the European Union and the West, as well as the other problems the country has confronted.

As several people have already suggested this morning, choices are important, individual choices are important, and that's attested to above all by the diverse experiences of countries as diverse as Uzbekistan to Russia, to Hungary, to Poland, to the Czech Republic, since the fall of the Soviet Union.

To my great relief we have a distinguished panel to talk about these matters this morning, and let me introduce them quickly, and their biographies are in your handout.  Larysa Denysenko is the Director of Transparency International, Ukraine, where she also directs the Department of Legal Cooperation with International Organizations at the Ukrainian Ministry of Justice.

Valery Pyatnyskyi is First Deputy Minister of Economy and European Integration of Ukraine.  Before that he worked for the Minister of Economic Relations and Trade and served in a variety of other distinguished posts.

Oleksandr Sushko is the Director of Center for Peace, Conversion and Foreign Policy of Ukraine.

And finally, Pawel Wolowski--they all have orange on, three of the four--the orange person in the middle is the Head of the Department for Ukraine, Belarus, Moldova and the Baltic States at the Centre for Eastern Studies in Warsaw.

We ask our speakers to speak for about 7, 8 minutes, and then we can turn, open the floor for questions and answers.  So, please, sir.

MR. PYATNYSKYI:  Dear ladies and gentlemen, good morning.  I have a special warrant to make the first presentation in this panel on issues related to the economic relations between Ukraine and our biggest neighbors, and today we have really a very special situation.  From one side we have Russia with one-third of our trade to Norway.  From another side we have European Union, also for one-third of trade to Norway.  And for us it's really the very important task today to specify what will be our policy towards development relations between these two powers.  So my issue, it's economy, and I think that in light of these events of Ukraine, the economy issue is also very important.

So before I speak of economic alternative in Ukraine, I would like to say a few words about the political framework of deciding between the alternatives.  Century by century, since Ukrainians started realizing themselves as a nation, the nation's struggle for own state century by century, crucified between the West and the East, and Ukrainians, paying a huge price at times, have been be persistent in getting independence.  It was declared on August 24, 1991, but until now Ukraine must defend the practical right to be independent in foreign and internal policy.

One vivid example.  A survey conducted by one of the well-known Russian mass media, Radio Echo Moscow, the question was:  Do you personally deep inside recognize such country, independent Ukraine?  About 30 percent of radio audience gave negative answer, and 52 percent accepted that the split in Ukraine is to Russian advantage.  The question is how people whose generations have been cherishing the hope for independence can react to show of sharing sovereignty.  The answer is too obvious.

Economic integration is another thing.  It's the road to equal competition in world markets and a stimulus for internal reform.  Only the integration, which I would stress first makes for Ukraine's greater involvement in the world trading economic relation based on equal rights; and second, wakes up market and democratic transformation generally responds to Ukrainian national interest.  It is absolutely clear that today, so to say, accreditation or making the country legitimate in the world market goes through the World Trade Organization.  That is why first and foremost task for Ukraine is to finalize negotiation and exceed to the WTO.

For me this is irrefutable truth, and being the chief negotiator for Ukraine on accession to WTO, I regard all external and internal economic factors from the angle how much they can speed up or hamper the accession.

Given this time point, the provision of agreement of single economic space stipulating accession of the participating countries to WTO on agreed-upon terms is fully unacceptable.  First of all, it first of all postpones our integration to the world trading system for a hard-to-determine period.  Second, it ruins all achievements of our bilateral negotiations.  Ukraine is in it's final stage of negotiations.  The work on the final working party report is under way.  The latest bilaterals took place a few days ago.  In parallel, we have finished bilateral negotiations with number of countries, and in comparison with other members of special, of single economic space, like Belarus and Kazakhstan, we are far ahead.

We are neck and neck with Russia, and it's nobody's secret that we are competing, and not only as it regards who first or faster accede to WTO.  We directly compete with Russia on a number of markets of goods.  I say even more, Russia, whose major export items are energy resources, this eternal wealth has more space for maneuvering.  Ukraine's exports are mainly sensitive goods, and its terms, Ukraine have no stand firm in defending its position in negotiations.  So why should we lay our cards on the table?

Besides the existent practice, (?)  can envisage a possibility for regional integrative grouping to accede to WTO since accession to markets of goods and services is to be negotiated with each and every country which accedes to WTO.

[Change to Tape 1, Side 2]

MR. PYATNYSKYI:  [Continuing] -- which should be part of difference in structure of economics of our countries.  Volumes of markets, a structural foreign commodity to nowhere, and trade partners--which is their term--have different at times country interests.  For this obvious reason, during the latest meeting of high-level group of November 19th, 2004, the parties, contrary to the provisions of agreement of single economic space I quoted earlier, agreed on independent accession to the WTO.

On the other hand, European Union doesn't hamper the progress.  On the contrary, it does much to create further conditions so it's relations with Ukraine can gradually progress, particularly free economic zones with accession to the WTO.  Custom union, as envisaged by a single economic space agreement for Ukraine will make free trade  (?)  with EU impossible.  Thus, EU will be obliged to create a free trade area with all parties in the customs union.  The EU will hardly be ready to do so.  Ukraine is far cry from being ready to say not to advantages of free trade with the biggest in the world solvent market with half a billion population.  The road to that market is through WTO on the one hand, and democratic and market reform on the other.  These two coincide with the strategic goals of state policy, and are made part of the bilateral agreements in partnership and   (?)  with EU and in particular Ukraine's membership in Council of Europe and OSE.

Foreign economic priorities are defended, not by reams of politicians, but economic realism.  It is false.  After May 1st, 2004 the EU became the biggest rate partner, and it's nearly one-third of our total trade to Norway, and the end of this year we expected that the overall turnover will be 60 billion U.S. dollars.

Second, it was the EU whose direct foreign investment was biggest in Ukraine, more than 50 percent, and thus Ukrainian economy is for European choice, and lately people in the street supported it.  Does it mean that we will cut down our trade relations with Belarus, Kazakhstan or with Russia, the second biggest trade partner after the EU?  By no means.  Creation of free trade area without exemptions and restrictions cleared in the agreement, single economic space, is to Ukraine's benefit.  It might result in increasing export of our agricultural products, food processing,  (?)  metallurgy products and so on and so forth.  But let's not do guesswork.  Let's regard economic aspects of today.

Unfortunately, free trade result exemption is only today's only declaration.  In the meantime the negative payment balance in trade with Russia grew by 40 percent in 2004, as compared to the same period of last year.  Russia has imposed restriction in trade with Ukraine for the amount of nearly half a billion U.S. dollars, and this year Russia started two more anti-dumping investigations against Ukrainian goods.

Metallurgy and machine building production makes a considerable share in Ukrainian exports as well as the chemical industry, which is a more sensitive item for the restrictive measures.  This is not the only way to argument which makes up speed up the WTO accession, and more involvement in European market.

It's unlikely for the integration process between Ukraine and three other parties to the single economic space to stop unless they become to double with your member countries.  This is more so that the single economic space agreement reached that countries should form this space on the norms and principles of the WTO.

The agreement also recognizes the right of parties to determine their participation in the process of formation of single economic space, taking into consideration the individual readiness for further deepening of integration process.  Nevertheless, it is surprising to see the following provisions, taking into account the difference in rates and charters of integration, the decision of finalizing the draft international agreements, and other documents are to be based on conditions that the relevant draft is agreed upon by not less than three participating countries, having no less than two-thirds of aggregate GDP.  So the conclusion may be made that three parties actually take over the right to decide for the fourth party, depriving in of the world and restricting its sovereignty.

It is absolutely out of the question, as I have already said.  Being guided by these considerations, the Verhovna Rada ratified single economic space agreement with one reservation, that Ukraine will participate in formation and function of single economic space within the boundaries of the Constitution of Ukraine.

Here I would like to briefly say about the second criterion which the integration process should  (?).  The thing is that integration process should be the engine of the market and democratic reform.  This is an important issue.  Maybe the one prevailing, at this stage, over the speculation of short-term economic benefits, because our state and economic system are in transition, so the final result and outcome will much depend on who is leading and assisting us along this road.  It's rather funny that there is no mention of neither a market principle of economy nor the democratic reform in the single economic space agreement.  And gradual implementation of economic reform is only needed for further deepening of multilateral economic cooperation.  You must agree that such a situation of four post-Soviet countries, two of which, Ukraine and Russia, are rated as partly free according to the Freedom House, and the other two, Kazakhstan and Belarus, as absolutely not free, will not contribute to the process of their democratization.  Even  (?)  integration from above speaks for itself, where establishment of quasi-national union with quasi government or administration doesn't require wide consultation with people and referenda.

Summing up, I have to say that there is practically no alternative for Ukraine.  On the one  hand, so-called single economic space, in all its parts, except for free trade area, threatens the national sovereignty and contradicts the Constitution of Ukraine, and thus according to the reservation made by Verhovna Rada, deep integration is excluded.  So free trade without exemption, it's not for the biggest partner, Russia--not the big advantage for our biggest partner, Russia.

I have to support the forecast made by the Deputy of Ukrainian Parliament   (?)   that a single economic space trade will be  (?).

On the other hand Ukraine is striving not only to expand foreign trade and markets, but implement democratic and market reform, laying foundation for further sustainable development.  The road to that is laid through the WTO and further integration through the Europe, together with all those who share our goals and knows how to share them, and will help us along this road.

Thank you.

[Applause.]

MR. JENSEN:  Pawel?

Why don't you allow our attendees to see all of you?  Why don't we just have the next three?  You can sit right there.  Thank you.

MR. WOLOWSKI:  Good morning, ladies and gentlemen.  I will speak about Ukraine's choice, Europe or Russia, some political and economic aspects.  So now four key points, which it seems to me the most important, that I will try afterwards to develop them.

So first, on the eve of the repeated round of presidential elections, Ukraine is standing at the pivotal point of its recent history.  Western values, democracy, human rights, social market economy, are championed by the opposition and a greater portion of the society.  If these people had their way, Ukraine may find itself on the way towards faster transformation and integration with the West, including the European Union and NATO.

Second point.  Two major factors may shock this scenario.  The first one is the policy of Russia, sticking to its zero-sum game logic, Russia sees closer relations between the West and Ukraine as a threat to its own strategic geopolitical interests.  Russia wishes to conserve the status quo in Ukraine, i.e., to preserve the system in which fundamental decisions, especially in the economy, are taken covertly without any public control.  The second factor is the interests of the political and the bureaucratic elite, who would like the existing familiar system to continue.  Their desire to keep influence and the fear of a system change and state reconstruction may effectively slow down the speed of future reforms.

The enlarged European Union has become Ukraine's prime economic partner.  You know about it from your data and the speeches.  The huge market of the EU-25 offers good prospects to Ukrainian exporters and investors.  Mutually beneficial asymmetric liberalization of trade and services between the EU and Ukraine may lead to a further increase in trade volume.  It may also be an impulse for Ukraine to undertake the effort to implement EU legislation and standards.

Four.  [Inaudible] of the election result.  The Russian Federation will remain Ukraine's principal political and economic partner.  Ukraine depends on Russian supplies of energy carriers, and the diversification of the sources of energy appears unlikely to take place, even in the long term.  Russia is determined to impose the conditions of economic integration within the single economic space on Ukraine.  This excess of Russia's efforts will depend on whether the new Ukrainian leadership is able to create and implement a long-term development strategy for the country, one that should include an energy security and a strategy as a key element.

So as for the prospects of relations with the EU, I would be brief.  I would say that in the case Yushchenko wins, there are three points that EU could do towards Ukraine.  First is the immediate adoption of the EU-Ukraine Action Plan, possibly subject to amendments.  We conclude the finishing of priority goals in mutual relations.  Second is adoption of maybe a political declaration expressing appreciation of the triumph of law and democracy, encouraging further reforms and pledging assistance in their implementation.  And third, it would be the recognition of Ukraine as a market economy by the EU.

As for the role of Russia, Russia is anxious to thwart all efforts to bring Ukraine closer to integration with Western structures, and it has been building various formal and informal ties between itself and Ukraine.  President Kuchma's retirement for office has galvanized Russia into taking various initiatives in this respect over the last two years.  This prevention of Western integration has involved anti-Western propaganda that Russia was able to spread due to its fairly robust presence in the Ukraine's major space, measures designed to create a negative image of Ukraine in the wider world, and Russia's own integration undertakings including the present single economic space project.  Economic cooperation is also of vital importance for Russia, especially with regard to the control of strategic sectors and   (?)   for energy resources exported to European markets.

However, the Kremlin's initiatives in this area have been less than successful.  Even though Russia is prepared to pay a fairly high price for Ukraine's participation in the integration process, Ukraine has not gone any farther than the prospect of formation of free trade area.

The presidential elections were a special challenge for the Kremlin, and a challenge which ended as a painful defeat for Russia.  Russia's responses to the developments in Ukraine suggest that Moscow is nervously trying to find a way out and not lose face.  Officials in Moscow will most likely accept the results of the poll on 26 December, also the victory of Yushchenko.

Under Yushchenko's leadership Ukraine will still be interested in maintaining good relations with Russia.  Nevertheless, the new style of politics will bring the country closer to Western standards, and at the same time making it less susceptible to pressure from Russia and more resistant to Russian integration projects.

As for the interdependence of EU and Ukraine, the EU market is very attractive to Ukraine.  It brings us better prospects than the much smaller market of Russia and  (?)  combined, and stimulates improvement of the quality of production and modernization of Ukraine's industry.  The EU is also a potentially attractive destination for Ukrainian investments.  It seems that Ukrainian businesses are eager to enter European markets and invest there, and the result of the changes in Ukraine, the investment climate in the country may also improve.  These two factors will be conducive to closer economic cooperation between Ukraine and the EU, especially if economic relations are gradually liberalized as envisaged in the EU-Ukraine Action Plan.  This may be a very powerful, positive impulse(?) for transformation in Ukraine.

Now, Russia is of course an unavoidable partner, and probably also--I'm still referring to the victory of Yushchenko--probably the expansion of Russian capital in Ukraine will continue.  When Viktor Yushchenko was the Prime Minister, it was I think the very best time for Russian investors in Ukraine.

So in order to reach conclusion, after the December 26th election Russia will continue to exert pressure on Ukraine aimed at the abandonment of any project of Western integration and at the acceptance of the Moscow model of integration.  Russia, in my opinion, has strong economic arguments to convince Ukraine of the necessity of such a choice.

It seems, however, that after the Orange Revolution and after the 26th, the real European choice is likely to gain importance in Ukraine.  If met with understanding and support from the EU, it could become in the near future, as a political product of both Ukrainian authorities and the society, a driving force in the democratic transformation and modernization of Ukraine.  Such a transformation means the realization of the EU's Copenhagen criteria would eventually, in my opinion, open the door for the EU membership of Ukraine.

Thank you very much.

[Applause.]

MR. JENSEN:  Ms. Denysenko,

MS. DENYSENKO:  Thank you very much, Mr. Jensen.

Dear colleagues, participants and organizers of this conference, one of the most important ideas I would like to address now is the following.  Multilateral foreign policy of Ukraine, which is not officially declared any more, it seems to be still in place.  It means that there is not real consistency, not real priorities, nor effective strategies or developments, but just separate action in several directions.  It is evident, if to analyze enormity of acts, speeches of politicians and public attitudes.

To speak about the last one.  According to the surveys which were done at the beginning of the year by UNDP Ukraine, the people of Ukraine has no strong opinion and preferences with regard to foreign policy of Ukraine in integration process.  During last year there is no real changes in people opinions.  About 51 percent support enlargement of European Union and integration of Ukraine into EU, mainly with higher education, people from cities, men more than women, younger people also support.

What is interesting is that about 30 percent of those who support integration with Russia as well as common economic space, shares their idea of integration with the European Union.  The main problem is the local information of European Union and policy of Ukraine with regard to European Union, especially on the popular matter.  Not consistent policy wider between the content of normative acts and information which came from political debates, populistic speculation, et cetera.

Now, let me say a few words about the activities of the government of Prime Minister Yanukovych and President of Ukraine, Leonid Kuchma in the field of foreign policy.  As far as I am a lawyer, I am presently interested in real facts and documents than what's of declaration.  But I should say, unfortunately, often in my country, the normative acts are just declaration also.  That's why I analyzed the international treaties, which were submitted by the  (?)  Minister of Ukraine and President to be ratified by parliament of Ukraine in 2003, 2004.

There are 133 treaties, the majority of which are bilateral treaties.  With regard to multilateral treaties, the majority of international treaties was in CIS and Council of Europe, mainly addressed the labor rights, or rights of minorities, women's right, ecology rights, and cooperation in the field of criminal law.  Four international treaties regarding the credit of the World Bank were ratified by the parliament.  They are credits for reform for tax inspection, control over tuberculosis and AIDS project.  And I should note that a lot of aspects of these treaties will criticize it as a potential window for corruption.  And then credit for Internet network development in Ukraine and credit for provision of acts of property rights on  (?).

At the same time there are a few treaties within commonwealth independent states, which were ratified.  For example, the treaty on common borders, on network or information center for products and services promotion, and the national markets of CIS countries, and treaty between Ukraine and Russia with regard to using a landing strip system of so-called Nitka [ph].  The most important agreement was ratified on the 12th(?) of April 2004 on the creation of common economic space.

In connection with this, I would like to put your attention on several points.  According to this treaty, Article I, II of the treaty, and chapter 2, 3 and 5 of the concept, it is supposed to be as obligatory for sides to carry out common foreign trade policy, creation of the same custom traffics, unification of trade policy with third countries, and common policy in the field of tariff and non-tariff regulations, protection on property rights, common rules for competition.  I am sure that enormous of these agreements and conception are not in compliance with the Constitution of Ukraine.  For example, especially this .9.1 Article, 92, and also with .1 part 2, Article also 92.

According to treaty and the concept of common economic space creation, especially agencies body of this urbanization organs, organs over national states power organs, but not the parliament of Ukraine, for example.  It is indicated in the Constitution, will carry out unified  (?)  and correlated tax money and credit currency and finance policy.  The decision of the bodies will be obligatory for all sides.  It's Part 5, Article 4 of this agreement.

Actually, in accordance with Part 2, Article 9 of the Constitution of Ukraine, the conclusion of international treaties, that contrary, the Constitution of Ukraine is possible only after introducing relevant amendments to the Constitution of Ukraine.  The treaty is contradicted with Constitution and rules ratified without any changes to Constitution which are required by law to be done before the ratification.

By the way, after ratification by parliament, this agreement--as I remember, the Minister of Economic and European Integration  (?)  application of his retirement.

And from May 2004 this agreement is the subject of the constitutional court review procedure, and yesterday, when I was in the plane I read in our newspaper the statement of Boris Gryzlov, Speaker of State Russian Duma, and he said that this common economic space is the one and only one perspective for Ukraine, no European Union, no other structures.

Now I would like to say about documents, Ukraine, European Union.  Their only one treaty is ratified by the parliament in 2003-2004.  It was a treaty or a resumption of the treaty between Ukraine and European Union on science and scientific cooperation.  But frankly saying, for the clear understanding situation on all types at connected this relation between Ukraine and European Union.  And my opinion, I attempt to expertise the order of the President of Ukraine and the relation of the Cabinet Minister of Ukraine.  I should note that the Cabinet Minister of Ukraine adopted 9 regulations, and the President adopted 20 orders during 2004 year period.  Most of this  (?)  related issues of technical assistance from structure of European Union, and personal staff of the different Ukrainian Steering Committee, which are in charge for Ukraine-EU relations.

However, among them, there are some that--an agency for solid implementation of European Union standards and adaptation of Ukraine legislation.  Here I would like to emphasize that a lot of legal acts issued on the issue by President and the Ukraine Government seem to be just declarations.  Those documents do not reflect the real content of Ukrainian obligations.  They purely  (?)  lack implementation mechanism, as well as a mechanism of control over the implementation.  Such an approach of Ukraine Government in legislation activity is traditional and actually reflects the Soviet legacy of decisionmaking process.

Now, pay your attention on one typical normative act issued by the Cabinet Minister of Ukraine.  The months before the ratification of the agreement and the creation OCES, the Cabinet Minister of Ukraine issued a regulation on measures to implement priorities of program on integration into European Union into solvent form.  The plan of action presented by this regulation mainly repeats some statements of the 2001 program.  I should say that this plan is very complicated and seems to be quite chaotic.  Frankly saying, this action plan reminds me of the words from the famous Russian novel, "Everything is mixed together, horses and people."  It is not just an allegory, believe me.  Most people and horses are in this plan, and even more, regulation of  (?)  industry and administrative justice; improvement of sales, service and quality of  (?); preventing money laundering and promotion of  (?)  power sources; an arrangement of European days in Ukraine, and development not less than 500 standards that will correspond with European international.  Why 500?  500 only?  What kind of standards?  The action plan does not suggest any answer for these questions.

Actually, the number of activities in differed fields not systemized in the clear way, unfortunately does not give the sense of strategies.  It seems that the plan is not feasible in such a short period of time.  It is unclear what will be our next steps really.  What are the criteria to the process?  Even more, in the action plan suggesting comparative Ukrainian European analysis or legislation in the area of intellectual property, government  (?)  customers' rights and power supervise.  These all have not to be   (?)   of Ukraine legislation and regulations, and reaches more important, the very details and complicated system of European regulations that has to be translated for comparative analysis.

I would like also to stress that those actions  (?)  to be the priorities for European integration for the year 2004.  So we can presume that somewhere, in more detail at least, of all actions, not only priority.

Well, it's not finished.  I should say several words about our election.  This election also heavily affected the topic of European Union as far as it was used in the context of West, including European Union versus Russia, like bad and good.  Usually such a discussion are not based on any kind of real analysis or data, but simply refers to Soviet Cold War attitudes.  It is evident not only in terms of discourse, but also in terms of real action of Mr. Yanukovych, Mr. Kuchma, Mr. Putin, Major Muscolusko [ph], as well as the Russian  (?)  in older Ukrainian and especially in  eastern regional during the election campaign.

It's strange for me to say it, but the only language that spoke truth about Orange Revolution, especially during first week, was Ukrainian.  I didn't expect too much from Russians, but it seems to me that most foreign journalists writing about Ukraine provides the analysis based on Russian news report, like Ukrainian revolution is nothing than a position between East and West, or it is a trait of   (?)  in Ukraine.  The same can be referred to the officials of European Union.  Mr. Solana came to Ukraine because, as he told, he's worried about the unity of the Ukraine and stability in Europe.  He noted that Kuchma has been changing  (?)  still President.  He only cares about stability and unity of the state and prosperity  (?)  people.  But he did not notice a democracy in the action of people who were protecting their rights to vote.  Here I am afraid is this reflection of Putin position, stability is better than democracy.

I believe that all the examples listed about witness, the Ukrainian Government during  (?)  did not care a lot about European integration.  As for me, integration is first of all understanding and sharing of European principles and values, which would be reflected in realistic benchmark on integration both the implementation and control.  To the current political situation in Ukraine, I hope that future Ukrainian President and government will shift traditional approach toward European cooperation in integration, and we wait very much for your observance.

Thank you very much.

[Applause.]

MR. JENSEN:  Thank you.

Mr. Sushko.

MR. SUSHKO:  Thank you, Mr. Chairman.  Thank you for inviting me to speak before this honorable audience, and the aim of my speech is to explain probably other dimension of the international aspects of Ukrainian economy.

I would like to concentrate upon the structural challenges, and what would be the major challenges for the new government of Ukraine, which is likely to replace existing one in economics sphere.

I would like to start from the notion that there is no clear division between economic policy and policy in Ukraine.  It is the key informal principle of the state  (?)  in Ukraine that the power and business is very integral thing.  Despite some formal measures provided by constitutions and laws, the reality gives too much evidence that big business in Ukraine cannot survive and develop without multiple linkages within the authority.  And this creates fundamental feature of all Ukrainian, this system, which is--it's too little to say it is corrupt, because corruption is just something wrong in a good system.

[Laughter.]

MR. SUSHKO:  But in Ukrainian system corruption, some merge of business and power is the essence of the system, so that is why it is really the big challenge for the new government to start something like civilized divorce of the business and power.  I couldn't imagine if this happens soon.  It's not so easy than for instance we can expect that the government will not--we have no more censorship or something like this.  But it is not about fast-track measures.  It is long-term task force government for the society to provide consistent   (?)  in this direction because for me the major choice of Ukrainian economy, as well as Ukrainian politics, not in the declaration or signing agreements with the West or with Russia, but in the structural futures.

If Ukraine has different structure from the West, from the European one, it just cannot be integrated, and this is a challenge for different state agencies from the top down, to start real policy to structural approximation the European model of economy.

Probably you know that such a phenomenon, political economy groups, is deeply rooted in existing model of Ukraine.  Some of them are regional like Dunyansk [ph] or Inprepitrol's [ph] groups.  Some others have no clear regional identity, using some party structures like Social Democrats United.  Some of them are sectoral, for instance, Metallurgy, Agrarians and so on.  So this is a structure of the political model, and unfortunately there is a clear evidence that the business and political interests are something undivided now.  Sometime probably we could expect that the divorce, which is needed, would be painful, but this policy is extremely needed to create new opportunities for Ukraine inside and outside.

It was a good definition provided by the World Bank recently, so-called "insider's economy."  So Ukrainian economy is economy for insiders, for those who not only live in Ukraine but also have strong linkages within authority.  So insiders economy is a key answer why it is so hard to integrate towards the West for Ukraine.  That is the answer why investment climate is so bad.

This system implies discrimination on foreign investors wherever they are from, Russian or Western, it doesn't matter.  The privatization of Kryvorizhstal metal plant this year was an excellent example of discriminatory tender.  As a result, state budget lost at least $800 million.  And Russian investors, as well as American investors, suggested the amount twice higher that it was paid by the national investor.

However, Ukrainian business is quite heterogenous.  It is not something just what I explained in terms of political economy groups.  There are some sectors and branches that were developed in more market-oriented style, and they are continuing to develop.  And it is very interesting for me personally to observe different reactions of different sectors of Ukrainian business on the issue of political crisis, on the issue of elections.  And it was very clear that that part of business which was built upon the principle of merging business and power was status oriented and supported Yanukovych.  But the new branches of business, especially middle range and small businesses, were totally favoring reforms favoring Yushchenko.

And it was clear, and it remains clear, that this new Ukrainian business has an ambition to change the rules of game in Ukraine, and that it is not true to say that it was just a revolution of students or   (?)   or people from the Western Ukraine.  It was a revolution of new generation of middle class.  It was the first time where we have seen a real action of Ukrainian middle class.  It is very good trend, in my opinion.

So the key challenges remaining following, structural development of the economy, which is really outdated.  Ukrainian economy is archaic, quite outdated in terms of structure, and this is a limited opportunity to expect rapid economic growth in the same, in existing model.  While the just big industries, model industries, are in the core of economy, it is very visible limitation of such a model.

Anti-corruption measures are needed now, and what we had before, what we had previous year, it was manipulation with anti-corruption idea, no real processes against real concrete corruptioners on the high level.  So my expectation is changes of such a policy.

The last point is again how to divide big business and power.  I think that the United States have such experience because here it was similar problems some decades ago.  Some European states have the same experience, and it is not just Ukrainian problem.  But it is now an obstacle, an obstacle of development, an obstacle of getting foreign opportunities, inviting foreign investors.

So I think these are long-term goals.  I'm not sure how far new Ukrainian Government will be ready to implement these measures, but it's clear that Ukrainian people which has done this revolution expects from this government not just phrases, but concrete measures in terms of building European Ukraine, which is something new, and we hope to have new government really ready to do this job.

Thank you.

[Applause.]

MR. JENSEN:  Thank you.  Let's take questions from the floor.  I will impose RFE rules, which is, please identify yourself and wait for the microphone to arrive before you ask a question.

If I pick a colleague it will look like insider moderation, but go ahead.

QUESTIONER:  Osta Pinoz [ph] with Radio Free Europe/Radio Liberty.  A few years ago there was a great deal of public attention to Kuchma's policy to swap equity shares for debt, and this was in terms of the Russian context, that Ukraine had enormous energy debts, and so equity shares of enterprises were going to be given to the Russians.  What percentage of equity now of large capital enterprises belong to Russians, whether they be the Russian Government or Russian private individuals, and what would the Ukrainian Constitution say and defend a Ukrainian enterprise that was now controlled by the Russians if Mr. Putin decided to nationalize the underlying shares the way he's doing with Yukos?

MR. JENSEN:  You're our power [inaudible].

MR.          :  I'm not an economist.  I'm a political analyst.  However, I can respond little.  So there is no clear data about the real share of Russian business in Ukrainian economy.  Why?  Because there is a huge number of so-called offshore investments which are really probably Russian investments.  If you see the official statistics provided by government of Ukraine, you see Russia is probably at the fifth or sixth place among foreign investors after the United States, Germany, Great Britain, Netherlands, Cyprus.

[Laughter.]

MR. JENSEN:  Or the Cayman Islands.

[Laughter.]

MR.          :  So this is a hard methodology question, how to evaluate the real share of Russian capital in Ukraine.  I've heard something from--I saw some Russian sources analysis, which say that Russia has about 40 percent of Ukrainian economy.  It's not true.  It's overestimation.

However, in some branches of the economy, Russian influence is higher.  The first of them is oil industry.  Oil industry is almost totally owned by Russians.

MR.          :  [Inaudible].

MR.          :  No.  Most of them are LUKOIL and TNK, but two-man oil company.  No Yukos.  Yukos did not invest in Ukraine at all as far as I know.

So this is a visible presence of Russian business, but as for your first question about the debts, I think at this time it's just more point of manipulation because the level of Ukrainian foreign debt are not so dangerous in terms of the size of GDP of Ukraine.  At present it is not a threat to national security or national economy, in my opinion.  Thank you.

MR. JENSEN:  Sir, you had a question?

QUESTIONER:  Andrew Behune [ph] from the U.S. Department of Commerce.  I was pleased to see that we almost have consensus on the issue of the common economic space versus movement towards the European Union and the West in general.  But I would like to pose a few questions that are related to the structure of the winning team, so to speak, or might be the winning team.  One phenomenon that we had seen in the buildup of the Yushchenko team was the joining of that team by Anatoly Kinakh, and supposedly a good portion of the entire West  (?)  the Union of Entrepreneurs.

I'd like to ask the question, what effect do you think that might have, if Yushchenko is the winner, on the acceleration of the structural changes, including the elimination, eventually eradication of corruption, et cetera, the fact that he has joined that particular team?

MR. JENSEN:  [Inaudible].

MR.          :  I just can say that the first concern of Yushchenko was to enlarge his coalition.  So it's--it's hard to predict.  Really, we know--we are aware about Mr. Kinakh's activities, and he is hardly to be defined as a reformer, very serious reformer.  But, however, he represents a group which is seeking for new game rules.  I'm not sure about all his intentions.  Probably he could join Yanukovych team.  It would be easier for him in terms of his loyalty, traditional loyalty.  But if he--

[End of Tape 1, Side 2, begin Tape 2.]

I think that he made his choice in favor of reforms, because the group he represents is a group of big business, but not--they are not involved now in the authority, and they are looking--probably they are looking for not restoration of the opposition but reconstruction of the model itself. And this is my hope.  I think it's---

MS.          :  And so it was about, Mr. Kena [ph], as I heard that Mr. Kena did his choice because the small and medium business people were in support Mr. Yushchenko and Mr. Kena he is chairman of a unit of enterprises and small medium business unit.  No?  Maybe, I'm mistaken.

MR.       :  [Inaudible.]

MS.       :  Interpreters, thank you.

MR. JENSEN:  Sir.  Right in the back.

MR. TROP:  My name is John Trop.  I write for a newspaper, the Post Eagle.  My question is for Larysa Denysenko.  I was wondering if she could elaborate a little bit more on Boris Grislov's comment that the Ukraine has only one place for its economic activity, and that's within the CER.  Could she dilate on that position of Grislov's?

MS. DENYSENKO:  Actually, it's very difficult for me explaining position of speakers of Russian State Duma.  But another thing, these speeches of Mr. Lushkov in [inaudible] Donetsk, and Mr. Grislov, Mr. Gironovsky [ph] in Donetsk and the State Russian Duma, I think it's a common position regulated by Putin to, maybe to separate my country.  Separate my country.  Because it's a beginning of this process.  Northeast and northwest regions were not separate.  And when Mr. Putin started this strategy on separatism in Ukraine, and Mr. Yanukovych continued it, and, as a result, eastern regions in Crimea also shared this idea of separatism.  And [inaudible] it's not true, not the real situation in Ukraine.

MR. JENSEN:  We have time maybe for one more question.  Yes, ma'am.

MS. BERSTENS: Hi, I'm Maryanna Kosinsova Berstens [ph].  Actually, I have two questions--I'm sorry, I have one question for Mr. Sushko and one question for Mr. Pyatnyskyi.  The question to Mr. Sushko is the following.  You have mentioned that you do not expect reforms to proceed very fast, even under Yushchenko [inaudible], because there are some problems, structural problems facing him.  One problem that you name is corruption.  What are the other structural problems that you believe would prevent Mr. Yushchenko from proceeding with reforms very fast?

And another question I have to me is for Mr. Pyatnyskyi.  One of the main problems the Ukraine economy right now is facing is, really, a huge fiscal deficit which increased by twofold in October.  And it looks like arms spending is going to be continued.  What measures is Ukrainian government going to take to prevent fiscal deficit from ballooning, and how basically do you think that the elections are going to affect Ukraine's growth rate?

MR. SUSHKO:  Thank you for the question.  I want to say that there are some different dimensions of the reforms.  There are some reforms that could be done very fast, for instance, cancel any sort of censorship, for instance, to provide the real media freedom.  And there are some other reforms that need much more time, probably not the one government to take undertake real reforms.

I think that, for instance, if we remember about the Italian story of fighting corruption, it took about two decades to implement real and realistic and more or less efficient model of anti-corruption fight.

So I do not expect Ukraine, even if Yushchenko is an angel, I do not expect final ultimate victory over corruption in the foreseeable future.  It would be a structural problem.  Now you see Ukraine among the most corrupt countries in the world, so this is for the long period to fight against.

And that is why it is not about Yushchenko's incapacity to do something.  It's just a real, realistic assessment of what should be done.  Thank you.

MR. PYATNYSKYI:  Thank you for the question.  I don't think that the situation in our fiscal system is so dramatic as you mentioned.  And during the last few years, we have very stable development of our economy and now we have the well-developed tax system--of course, also with some problems, with some discrepancies.  But in any case, we have a good situation in our international trade, and, as you know, we have figures now for 10 months of this year, and we have the trade surplus more than three and a half billion dollars, even for these 10 months.  Of course, a lot of--a number of populist decisions were adopted during this year, especially during the last few months, and it also will create some problems.  But in the budget for the next year, I think that we can reflect all these changes.  And basically, the situation in general, under control.

MR. JENSEN:  Thank you.  On that optimistic note, we will reconvene at 11 to talk about Ukrainian civil society.  Thank you, our guests.

[Recess.]
SUCCESSES AND FAILURES OF UKRAINE'S CIVIL SOCIETY

MR. SIKORSKI:  Ladies and gentlemen, let us take our seats, please.  I could ask the panelists to step forward please and take their seats.  And, now, Nadia, please, you're in charge.

MS. DIUK:  Yes, I would please ask my remaining panelists to please come and join us so that we can begin the very important task of discussing civil society.  Yes, I'm sure that Inna Pidluska and Adrian will join us as soon as they can, but I think get started because we have a lot of people on the panel.  It's a very important subject.  And I'm--all of our panel have very interesting things to tell us I'm sure about, so what's been happening in Ukraine.

Just a quick introduction on the subject of a civil society.  I mean, it may seem a sort of--we may take it for granted that what we've seen in Kiev in the last two weeks really is the result of a flourishing of civil society, but I hope that our panelists will be able to instruct us in the notion that really civil society is much more complex, and what we saw these two weeks in Kiev really was many years in the making and took a lot of effort from a lot of people, but thankfully it really has sort of come to a head in the last two weeks to produce what really has been a revolution in Ukraine.

But also, before we continue to talk about civil society as such, I just wanted to note that--I think Oleksandr Sushko also pointed out earlier today that this was a revolution also of the middle class.  It was also a revolution in terms of finally Ukraine achieving a sort of rule of law for the first time, and we saw a separation of powers in the way that the Supreme Court ruled on an extremely important fact.  Also, we saw on a very popular level, really, the birth or rebirth of a nation, the reclaiming of a capital city that for a long time really has not considered itself to be an integral part of the Ukrainian nation.  And with all of these many elements flying around, we have a lot of analysts here who are very well qualified to talk about many of these things.

And I will just briefly introduce them in the order in which I'd like them to speak.  Vyacheslav Briukhovetsky really is a veteran of the democracy movement.  From the short biography that you have in front of you, you really won't learn that he was one of the founder members of the Ruq, which arguably was probably the first major civic organization in Ukraine, established in 1989, and currently is the President of the Kyiv-Mohyla Academy, whose students you've been seeing in the streets of Kyiv, and I'm pleased to note that he was front of them leading them rather than encouraging them to stay at their desks in the last two weeks.  I think that's a very major achievement for the Academy.

Inna Pidluska also is fresh from Ukraine, and is the President of Europe XXI Foundation, has been working on civil society initiatives for many years now . Inna will tell us a little bit about some of the other--the efforts of other civic groups who could not be with us today.

Paula Schriefer of Freedom House has been working on democratization programs for many years now also, currently at Freedom House, but I'm pleased to note that she actually started her professional career at the National Endowment for Democracy.

The next person I would like to speak after that is Vladimir Kara-Murza of the Free Choice 2008 Committee of Russia.  And Vladimir will share with us some of his analysis of what's going on in Ukraine, and also I expect will be making some comparisons with his own country.  And we shall see whether we can at the end of that, say next year in Moscow maybe--or maybe not.

[Laughter.]

Then I would invite Roman Kupchinsky to speak and also, despite the fact that his biography is all of four lines, I would actually place Roman at the center of many initiatives in many different areas connected to Ukraine for many years.  And I would actually--I would like to dub him also one of the unsung heroes of the revolution.  And Roman will share with us some of his current research on aspects of civil society that people often get to hear about.  Let's leave it at that.

Then the final speaker will be Adrian Karatnycky, who I'm glad to see has joined us now.  Counselor and Senior Scholar at Freedom House.  Principal Analyst for Freedom in the World.  Also author of many articles on issues to do with democracy and specifically on Ukraine.  Author of--rather co-author of an extremely important book on the break up of the Soviet Union a few years ago.  Adrian will do a summary and also share some of his insights into civil society.

I would ask the panelists also to be brief.  We have many panelists and not much time.  So, Professor Briukhovetsky.

MR. BRIUKHOVETSKY:  Good morning, ladies and gentlemen.  During the last 15 years, I have visited this country 25, 30 times.  And it was for the first time in my life that yesterday I was asked from passport control officers not about where is Ukraine, how large is Ukraine, is it in Europe or in Africa?  Really, I have had a lot of such questions, even not so long ago.

The question was about Ukrainian election, Yushchenko and was he really poisoned, and all the things people know about students and so on.  So this is for the first time, and I was really very happy about this fact, because still months ago, both in Ukraine and beyond its borders, we mostly had complaints about the passivity of the Ukrainian nation, their political stance, of its use, and the slowing down of the process to do with the establishment of civil society in this outwardly peaceful poor Soviet region.

It seemed impossible that Ukrainians would be drawn into and turn out into the streets to protest the government's openly criminal deeds.  This was similarly confirmed by the failure of the Ukraine Without Kuchma campaign of 2000, during which several mass demonstrations in the capital resulted in practically nothing.  Only four years have passed since then, and today the whole world has discovered the mysterious Ukrainian nation.

What has happened?  Where can the origin of so-called Orange Revolution be found?  Why had almost no political scientist or politician foreseen in full measure such a course of events?  I can firmly state that the events were unforeseen even by the Power of the People Coalition, which united in its fold practically all opposition-minded segments of Ukrainian society.

One can, of course, heed the prophesy of acclaimed Ukrainian philosopher Hryhoryi Skovoroda who, back in 18th century, mused that although the Ukrainian nation is asleep, when it awakens...

Then there are the rational explanations.  We can begin with the controversial assertion that no revolution is currently taking place in Ukraine.  The revolution occurred back in 1989-91.  It was then that for the first time in its age-old history the Ukrainian nation obtained its independence, the foundation of which turned out to be lost and unattainable.  Intense changes took place in the organization of society, the economic infrastructure, ideology, and in the notion of national self-identification.  The process was quite painful and was accompanied by acute collisions, which even today affect the mood of the Ukrainian nation, especially of its elder generations.

But it's most significant consequence was the emergence of a new generation within the Ukrainian nation entirely dissimilar from any of its forebears.  Imagine if you can the meaning for Ukraine of the fact that the first rise was a generation that had attended school in the independent Ukraine from the grade one right up to graduation.

It is of little importance that we justifiably unhappy with the result of the Ukrainization of our schools.  I mean not Ukrainian language but first of all the instillment Ukrainian centric ideology which has yet to be successfully formulated.  It is important that the young generation has begun to identify itself within the structure of a broad concept of Ukrainian political nation.  Results were bound to have appeared.  A critical mass was not yet formed four years ago, because the students of the day still maintained a foothold in Soviet times.

We are today enjoying the fruits of the evolution of the Ukrainian nation, the origin of which date back to the revolution of 1989, '91.  A revolution can be stiffed, but the same cannot be said of the evolutionary process, and that's--was we succeeded in this.

That has happened in Ukraine.  The energy accumulated throughout centuries has been let lost thanks to the process of national self-identification that had transpired in the past 15 years.  It has multiplied due to the factor communist spirit of the Ukrainian government powers, which have not fathomed the changes that occurred among Ukrainians and still treat them as the Soviet people, and who [inaudible] at that.  It was a torrent of lies, falsification, and oppression poured onto Ukrainian society during the last decade, especially during the past five years that became a unique catalyst in the process of the maturation of civil society and national self-identification.  Another factor driving the November events in Ukraine was the birth of a middle class.  This is separate important topic.  If you compare the target audiences of the electoral campaigns of both main candidates, we can see that in general Victory Yanukovych targeted the intellectual lumpen.  A good illustrator here is the immediate collapse of the campaign teams of the pro-establishment candidate.

Victor Yushchenko's campaign, meanwhile, targeted the newly born middle class, which proved to be both more numerous and more steadfast in its belief that Mr. Yushchenko's electoral base.  The democratic part of Russian's political elite has admitted to be jealously watching the amazing process taking place in Ukraine.  It is, however, difficult for Russians to fathom the origins of the phenomenon and to come to terms with the fact that Russia is no longer the fashion leader in democratization process.  The thing is that regardless of revolutionary changes of a social nature that took place in the beginning of the '90s, the self identification of the average Russian hasn't undergone any change.

An empire-based mentality where Soviet is synonymous with Russian still rules the Russian today--the Russian soul today.  Especially painful for Russia is the notion that Ukraine as an object of dominating influence has been forever lost and setting itself instead in the capacity of a subject engaging in a relationship of equals.

What are the influences and possibilities of the Ukrainian origin movement?  Many can [inaudible] identify it.  I'll emphasize the two which in my view are the most important.

First, the irreversibility and quickening of the process of national self-identification of Ukrainians as a political European nation will become the motive force, both in economics and in the sphere of spiritual life.

Second, Ukraine will provide an example of emulation in the entire post Soviet era, and become catalysts for the democratization in Russia first of all.  Thank you.

MS. PIDLUSKA:  Good morning, ladies and gentlemen, dear friends, and colleagues.  I'm happy to be here, and happy to be able to address you with some thoughts and views from Ukraine's civil society.  I'm always delighted to have this opportunity to talk about Ukraine civil society, but time is very special and let me begin by saying thank you all for your interest in Ukraine.  It's very important for us to know that you care.  I'm very glad to be in this panel, chaired by Nadia from the National Endowment for Democracy, which has been a supporter of Ukraine civil society institutions for so many years.  And my words of thanks also go all the organizers of this distinguished event, and Adrian from Freedom House.

So, there were supposed to be many more of us representatives of Ukraine civil society institutions here on this panel today.  They all regret they couldn't come.  But believe me they have a very good reason to stay in Ukraine.  And their involvement there is very important.

So, I will try to mention what they have done as well what we all have done together. Our panel is called successes and failures of civil society of Ukraine.  So, let me start with successes perhaps.  Just enumerate those which I think are the most significant in the current context.

So, success number one, what's first and foremost we do have civil society.  This was still a question for many a couple of years ago, so it's not a question anymore, and I think this is a very good thing.  Ukrainian civil society has managed to organize itself, unite, mobilize itself, engage in the process of monitoring of transparency of the electoral process, of disseminating information in a very difficult situation where the media were not quite able to serve this function.  And most of all, Ukrainian civil society, and I am not talking about NGOs or political parties or institutionalized actors of civil society, managed to tell Ukrainians once again that they have human dignity, and they have to stand for their human dignity and protect their choice, and this I think is a great success.

It was also very significant for younger people.  Professor Briukhovetsky managed the younger generation, and I was really happy that many young Ukrainians, probably for the first time in their lives, were proud to be Ukrainians, to be part of the nation and part of the joint effort.  For them, it's a very significant lesson of democracy, which I hope they will not forget.

Success number two, which I would like to point to, is the growth in volunteer movement and grassroots initiatives.  People who never cared about things like civil society and who were quite skeptical when they were told about democracy now realized their voice matters.  Their help also matters, and I was really happy to see so many people who have nothing to do with politics before to get engaged in the process.

We mentioned before the roll of the small and medium business played.  We also could speak about the role of local communities, of local--of self-governance bodies, which also showed to people that people do not live in obelisks.  If you remember those calls for separatism, they were all made at the regional level, by regional leaders, mainly by regional level of obelisks, but people do not live in obelisks.  They live in communities and they understand that their role in those communities matters, and this growth in grassroots initiatives is really something which is encouraging.

So, the third point in terms of successes could probably be voter education and mobilization initiatives, and I am very happy to mention them here because we as an institution, as Europe XXI Foundation, were involved in co-founding one of them.  This is the I Know Campaign, which is "zeznayu"--I Know.  And the whole purpose was to make people aware of the voting procedure and make them alert about possible violations of the process, and it was very encouraging to get phone calls to our help line from hundreds of people who volunteered, who offered their help, who said that they noticed some violations and they wanted to report them, so who wanted to help other people to know how to find themselves on voters lists and those other things.  I'm sure that this voter education and mobilization campaign played a great role in encouraging people to try and defend their votes.

We could mention a lot of other initiatives, like [inaudible], like [inaudible], like monitoring initiatives in which hundreds of NGOs and non-NGOs, the grassroot groups, engaged in trying to observe the election process, not as official observers but just as people who cared.  And I think, again, this is a very good success.

Another success story was already mentioned before, that the whole process was so peaceful and it was a demonstration of people who wanted to preserve it peaceful, dynamic, friendly, and forward-looking.  Again, this is a very great success.

So the next one, I would again specifically come back to this issue, that's the growing role of NGOs in political processes and electoral processes, and not just monitoring NGOs, though their role cannot be underestimated.  All the colleagues from [inaudible] 2004 Coalition, primarily the Committee of Voters for Ukraine, whose leaders, unfortunately, they cannot be here with us today, and also other groups, like [inaudible] Human Rights group also supported by the National Endowment for Democracy, and other human rights groups collected huge volumes of pieces of evidence which were then used by the supreme court when the supreme court was to decide how to regard the elections in Ukraine.  Again, thousands of domestic observers also came from the NGO movements.  Again, we can mention the Committee of Voters of Ukraine and other institutions.

So the next piece of success, I think, is a very important one.  That's the change in the media and attitudes of journalists to their duties, their professional duty, and to the very notion of freedom of expression and freedom of speech.  I think it was very important that the country finally started getting proper news progress which provided objective, real coverage of what was going on.  And the very change in attitudes of leading journalists was a very significant signal they sent to all of their colleagues, and we were very happy for them and applauded them.

I could go on for ages listing what we have done so wonderfully and what has been done so wonderfully.  But what about the se