UKRAINE/MOLDOVA/TRANSNISTRIA: APPLYING POLITICAL

C O N F I D E N T I A L SECTION 01 OF 03 KIEV 001282 SIPDIS SIPDIS E.O. 12958: DECL: 03/31/2016 TAGS: PREL PBTS PINR PGOV ETRD PREF OSCE MD UP RS SUBJECT: UKRAINE/MOLDOVA/TRANSNISTRIA: APPLYING POLITICAL AND ECONOMIC LEVERS TO RESOLVE BORDER STAND-OFF REF: A. KIEV 1160 ¶B. STATE 46997 Classified By: Political Counselor Aubrey A. Carlson for reasons 1.4(b, d) ¶1. (C) Summary: MFA Romania and Moldova Division Counselor Cornelia Luskalova told us March 30 that the Ukrainian government (GOU) was planned to combine political and economic levers to return cross-border trade between Ukraine and Moldova/Transnistria to normal. The GOU would urge the Moldovan government to reach out to Transnistria-based businesses in the hope that, based on their economic self-interest, the companies would pressure the Transnistrian authorities to allow companies to follow Moldovan government customs procedures and permit the flow of transit goods through Transnistria. In the absence of a five-plus-two meeting, the GOU might also propose that five-plus-two intermediaries and observers (meaning without Moldova and Transnistria) meet in Kiev to discuss the current impasse on the border. Luskalova again urged USG support for a proposal to relax customs requirements. The media reported that Deputy Foreign Minister Andriy Veselovskiy replaced Dmytro Tkach as Ukrainian Ambassador-at-Large on Transnistria. End summary. A Consolidation Period -------------- ¶2. (C) Luskalova, who said she had just come from an interagency group on Transnistria led by the National Security and Defense Council (NSDC),told us that a second meeting that day, chaired by First Deputy Prime Minister Stanislav Stashevskiy, would consider next steps on Transnistria at a higher GOU level. Both groups were working on an action plan for the next one to two months. Ukrainian government officials considered that the situation along the border with Moldova/Transnistria had stabilized and that, during this period, the Ukrainian government needed to apply a variety of political and economic levers to resolve its dispute with the Transnistrian authorities. ¶3. (SBU) Luskalova informed us that, on the political front, the Ukrainian government intended to engage more vigorously with the U.S., EU, and Russia to influence the Transnistrian authorities. On the economic front, the Ukrainian government would attempt to influence Transnistrian enterprises to register with the Moldovan government and observe the requirements of its customs agreement with Moldova. Obtaining Transnistrian Business Buy-in -------------- ¶4. (C) Luskalova noted that the key to resolving the dispute with Transnistria was to have Transnistrian enterprises register with the Moldovan government. Some fifteen large companies that depended on imports of raw materials from Western countries had registered, including the Sherif group of companies reportedly operated by Transnistrian leader Igor Smirnov's sons. Luskalova noted that the companies that had registered also often had long-term supply contracts with foreign customers (note: so presumably would incur penalties if unable to meet delivery schedules). ¶5. (C) Luskalova said the Ukrainian government was considering several innovative measures the Moldovan government could implement to get other companies to follow suit. The suggestions could include: -- a letter from Moldovan President Voronin to heads of major Transnistrian enterprises explaining the registration procedures and personally guaranteeing reimbursements of Moldovan tax collections; -- an open meeting of the Moldovan Cabinet of Ministers somewhere near Transnistrian territory with an invitation to Transnistrian enterprises to attend and receive a briefing on registration procedures; and -- a joint session of the Moldovan and Transnistrian Chambers of Commerce. The Ukrainian government would also urge the Moldovan government to resolve Sherif's complaint over non-reimbursement of taxes when the customs protocol was in effect previously. Finally, the Ukrainian government would ask the EU and U.S. to ask their companies that do business in Transnistria to request that their Transnistrian business partners observe Moldovan law. Modified Customs Procedures KIEV 00001282 002 OF 003 -------------- ¶6. (C) Luskalova also raised the Tkach proposal (ref B) to have Ukrainian customs officials inspect and clear shipments to facilitate movement of cargo across the border. She said the Moldovan government had objected to the proposal as the transfer of sovereignty to another country, but had provided no alternatives. ¶7. (C) Luskalova said the Ukrainian government was preparing to table the proposal formally. In doing so, the Ukrainians would suggest that a Ukrainian-Moldovan joint protocol clearly specify the timeframe (of two to three months) and also have the EU Border Assistance Mission (EUBAM) observe the clearance process. When we noted that the Moldovans were prepared to send their customs officials to conduct joint inspections with Ukrainian counterparts, Luskalova said Ukrainian customs had objected to the proposal as an infringement of Ukrainian sovereignty. Kiev-based EU adviser on Transnistria Sabine Stoehr later advised us that, contrary to Luskalova's assertion, EUBAM Chief General Ferenc Banfi did not support the proposal. ¶8. (C) Responding to our requests for clarification, Luskalova said Ukrainian determination to resolve the border stand-off was prompted by the losses of Ukrainian companies, which were incurring significant additional costs from the requirement to use longer routes that skirted Transnistria and loss of revenue at Odesa and other Ukrainian ports. Luskalova said a large metallurgical plant in Ribnitsa (note: probably the Moldovan Metallurgical Plant) in Transnistria, was preparing to shut down because it could not export its product and this would force hundreds of workers into unemployment, even if only temporarily. Ukraine wanted to preserve the requirements of the customs protocol, but hoped to modify it to deflect potential criticism that Moldova and Ukraine were imposing an economic blockade on the Transnistrian region. Under the proposal, Ukrainian customs would issue the appropriate documents, then fax copies to Chisinau. When we noted that, if Ukraine were looking for a transitional arrangement, then various possibilities were likely, Luskalova said perhaps Moldova would have a proposal that did not involve the stationing of its customs officials on Ukrainian soil. ¶9. (C) In a March 31 briefing for EU and U.S. diplomats, at which Ukrainian Ambassador-at-large for Transnistria Dmytro Tkach described in detail the progress of the Russian "humanitarian" convoy to Transnistria, Tkach also elaborated on GOU reasoning behind his proposal. He stressed that Smirnov had only permitted 15 Transnistrian enterprises to obtain Moldovan registrations but, in 2003-2004 when the customs protocol had been in effect originally, 364 enterprises had been registered. The currently unregistered companies included an oil refinery and metallurgical plant whose profits contributed 50 percent to Transnistria's budget. Suspension of their operations would contribute to a real humanitarian crisis, Tkach commented. The Ukrainians had proposed, and the Moldovan government was ready to accept, a proposal for the previously registered companies to renew their registration via the Internet. Once these companies were registered, a procedure would still be needed to allow their exports to receive the appropriate documentation. Tkach said the Ukrainian proposal was designed to do this. When Stoehr defended EU procedures with respect to Transnistrian imports, Tkach cracked that this was ground he had covered numerous times with her and EU special envoy Jacobovits; he would be happy not to ever have to repeat his defense again. (Note: This is likely to be Tkach's last briefing as Transnistria enovy, since DFM Andriy Veselovsky -- see below -- is reportedly replacing Tkach, effective immediately. The appointment will finally allow Tkach to focus on his new responsibilities as Ukrainian ambassador to Hungary.) A Five-plus-Two Substitute -------------- ¶10. (C) Luskalova on March 30, noting that Tkach had heard from OSCE Mission head William Hill that the Transnistrians and Russians were likely to refuse to participate in the next five-plus-two meeting scheduled for April 4-5, said the Ukrainians were likely to propose that a meeting of intermediaries and observers (i.e., without Moldova and Transnistria but with Russia) be held in Kiev in the first half of April. The meeting would focus on a consideration of the border situation and next steps regarding the customs protocol. At his March 31 briefing, however, Tkach said the Russians had rejected the Ukrainian proposal for a "three-plus-two" meeting. KIEV 00001282 003 OF 003 Transnistria's Reaction -------------- ¶11. (C) Luskalova said a congress of deputies from all levels of the Transnistrian region (from village, district, and up) would meet March 31 to review Transnistria's status. The anti-Ukrainian rhetoric in Transnistria was heating up, with ordinary Transnistrian residents beginning to view Ukraine as the enemy. Luskalova said, contrary to some reports, Transnistrian official Valery Litskai had not notified Ukrainian government officials of his intent to visit Kiev. She discounted the possibility that he would, shrugging her shoulders and asking rhetorically what he might possibly accomplish. She understood that Transnistrian leader Smirnov had also ordered Litskai not to visit Kiev. Bio Note: Veselovsky -------------- ¶12. (C) Veselovsky, who apparently still also heads the MFA Policy Department, is one of the MFA officials that FM Tarasyuk most trusts. Tarasyuuk promoted him to deputy foreign minister, along with ex-Ambassador to NATO Khandohiy, in January 2006 when predecessors Shamshur and Dolhov were assigned respectively to be ambassadors to Washington and Berlin. During the August 2000 summit in Yalta, Russian President Putin reportedly demanded that then-President Kuchma fire FM Tarasyuk, Veselovsky, and then head of military intelligence Smeshko for their supposed anti-Russian views. Kuchma complied; two months later, Tarasyuk and Veselovsky (then also head of the Policy Department) were summarily removed. Four and half years later, Yushchenko restored Tarasyuk to his old job , and Tarasyuk promptly recalled Veselovsky from his assignment as Ambassador to Egypt to resume the directorship of the Policy Department. We became well acquainted with Veselovsky when he was responsible for preparations for the December 2005 Community of Democratic Choice summit. He comes across as a cautious bureaucrat who is likely to consult carefully with the U.S. and EU before adopting a position at the five-plus-two talks and will work to reach compromises among the parties. ¶13. (U) Visit Embassy Kiev's classified website: www.state.sgov.gov/p/eur/kiev. Herbst