Identifier
Created
Classification
Origin
06KIEV1282
2006-03-31 16:01:00
CONFIDENTIAL
Embassy Kyiv
Cable title:  

UKRAINE/MOLDOVA/TRANSNISTRIA: APPLYING POLITICAL

Tags:  PREL PBTS PINR PGOV ETRD PREF OSCE MD UP RS 
pdf how-to read a cable
VZCZCXRO9031
PP RUEHDBU
DE RUEHKV #1282/01 0901601
ZNY CCCCC ZZH
P 311601Z MAR 06
FM AMEMBASSY KIEV
TO RUEHC/SECSTATE WASHDC PRIORITY 8507
INFO RUCNCIS/CIS COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
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)

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