C O N F I D E N T I A L SECTION 01 OF 03 KIEV 001480

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/13/2016
TAGS: PGOV PHUM PINR SOCI PREL ECON ETRD ENRG OREP
RS, UP
SUBJECT: UKRAINE: CODEL FRIST MEETING WITH YULIYA TYMOSHENKO


Classified By: Ambassador for reasons 1.4 (b) and (d).

Summary
--------------


1. (C) In an April 13 meeting with CODEL Frist, former Prime
Minister Yuliya Tymoshenko averred that Ukraine's March 26
elections showed the desire of the Ukrainian people for a
renewed Orange coalition government. Thanking Senator Frist
for encouraging Team Orange reconciliation, Tymoshenko
stressed that she sincerely wanted to work again with
President Yushchenko; he still viewed her, though, as a
"rival, not a partner." Asked about prospects for an Orange
coalition, Tymoshenko said she expected to sign a protocol
about forming a majority coalition in three-way talks later
that day. A key question looking forward, Tymoshenko said,
would be whether Yushchenko was prepared to appoint "only
highly professional people" to key government posts (i.e.,
not her bitterest rivals from the Our Ukraine camp).
Tymoshenko vigorously defended her record as prime minister,
taking credit for the Kryvorizhstal privatization and
dismissing her critics as "monsters of the old system."
Tymoshenko argued that Ukraine would never be truly
independent until it curbed its dependence on Russian energy
supplies; the country needed to cut consumption, tap domestic
gas reserves, make new deals with Central Asian suppliers,
and diversify nuclear fuel sourcing. She blasted the January
4 gas agreement with Russia, calling it a "fundamental
surrender" to Moscow that she would "like to rectify." In
exchanges with Senators Gregg and Burr, Tymoshenko said that
she as prime minister would support granting more licenses to
foreign banks, characterized the Ukrainian judicial system as

"very weak," and asserted that combating corruption required
more than "just lip service." End summary.

Elections
--------------


2. (C) Senate Majority Leader Bill Frist (R-TN), Senator Judd
Gregg (R-NH), Senator Richard Burr (R-NC) and Ambassador, met
April 13 with former (and leading candidate to be the next)
Prime Minister Yuliya Tymoshenko. Senator Frist
congratulated Tymoshenko on Ukraine's recent democratic
elections and on her political bloc's strong showing in the
parliamentary (Rada) elections. Senator Frist urged
Tymoshenko to seek a way to achieve agreement on a Rada
majority with her erstwhile Orange Revolution partners --
President Yushchenko's Our Ukraine and the Socialist Party.
The Majority Leader said the U.S. supported a revived Orange
coalition as the coalition that carried the strongest promise
for the kind of political and economic reforms that the U.S.
favored.


3. (SBU) Tymoshenko accepted Senator Frist's compliment
regarding Ukraine's recent democratic elections, stressing
that the Ukraine's March 26 parliamentary and local elections
had been the most "free, democratic and transparent"
elections in the country's post-independence history. The
Ukrainian people, she said, had expressed their desire to see
an Orange coalition government. Only an Orange team, she
emphasized, would be able to "finish what we started on the
Maidan." A non-Orange coalition, Tymoshenko added, would
change Ukraine's foreign and domestic policies for the worse.

...Coalition Formation...
--------------


4. (C) Thanking Senator Frist for expressing support for
Orange rapprochement, and for steadfast American support of
democracy in Ukraine, Tymoshenko related that she "sincerely"
wanted to work again with President Yushchenko. Their
September 2005 falling out had been a "tragedy." However,
Tymoshenko said, the Ukrainian people had given them "another
chance." Tymoshenko had assured Yushchenko that she would
support his re-election bid in 2009 and "not be his
competitor." She asserted, though, that Yushchenko still
viewed her as a "rival, not a partner" -- a misperception
that she hoped to correct. Responding to a question from
Ambassador, Tymoshenko said that at three-way coalition talks
later in the day she would likely sign a protocol about
forming a coalition government. (Note: News reports
indicated the protocol would be signed late April 13 by
Tymoshenko, Our Ukraine's Bezsmertny, and Socialist leader
Moroz).


5. (SBU) In a dig at rivals in Our Ukraine, Tymoshenko said
she hoped that Yushchenko would be prepared to accept "only
highly professional people" in senior positions in the new
government and not the people "who had failed to show such
professionalism last time around." She did not want to head
a patchwork government that would "fail in six months" and

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provide Yushchenko "with an excuse" to form a new coalition
with Yanukovych's Party of Regions. Noting that the CODEL
would see Yushchenko later in the morning, Tymoshenko asked
Senator Frist to convey her "warmest regards."

...Record as Prime Minister...
--------------


6. (SBU) Senator Frist urged Tymoshenko, if she became Prime
Minister, to do her best to improve Ukraine's business and
investment climate. In response, Tymoshenko stressed that
she would do whatever she could. She vigorously defended her
record as premier, arguing that her government had annulled
"5,000 regulations" that had hindered economic growth and
facilitated corruption, reduced taxes on importers, and
simplified import procedures. Tymoshenko took credit for
putting in motion Ukraine's first transparent, successful
privatization of a large state enterprise, the Kryvorizhstal
steel works. In a jab at Yushchenko, she quipped that there
had been "no others since then." Tymoshenko emphasized that
she "understands what it takes" to attract foreign
investment. She acknowledged that it was tough for foreign
companies to do business in what she called Ukraine's
"post-Soviet bureaucratic system built on corruption and
criminal clans." Tymoshenko added that she would meet on
April 17 with the American Chamber of Commerce in Kiev.


6. (SBU) Senator Frist advised Tymoshenko that the GOU should
tread carefully in the area of reprivatization and adhere to
market-based economic policies. Tymoshenko replied that her
alleged zeal for reprivatization and anti-market policies was
overstated. She joked that "only five percent" of what her
detractors said should be taken seriously. Charges that she
was an economic populist who favored "excessive
reprivatization" were "myths" made up by the "monsters of the
old system" to curb her political power. Tymoshenko stressed
that she had been a businesswoman in the years following
Ukraine's independence and knew that price-fixing was bad
policy; "any sober person knows that the market should set
prices," she said, adding that only courts -- and not the
government -- should resolve property ownership disputes.

...Energy Security...
--------------


7. (C) Turning to energy issues, Tymoshenko asserted that
Ukraine would "never be truly independent" unless it reduced
its dependence on Russian energy supplies. Russia attached
"political conditions" to energy agreements that undermined
Ukraine's sovereignty, she stressed. Tymoshenko complained
that 90 percent of Ukraine's oil refineries were
Russian-owned, that 100 percent of Ukraine's nuclear power
plant fuel was supplied by Russia, and that, in the wake of
the January gas deal, Russia now supplied all of Ukraine's
natural gas. All of this, she groused, amounted to "energy
terrorism."


8. (C) Tymoshenko said that Ukraine could curb its dependence
on Russia, for example, by aggressively using conservation
methods to cut consumption, tapping domestic gas reserves,
forging new gas supply agreements with Turkmenistan,
Uzbekistan and Kazakhstan, and diversifying nuclear fuel
supplies (by working with U.S. companies like Westinghouse).
Russia would not interfere with the transit of Central Asian
gas to Ukraine, she smiled, "because Russian gas transits
Ukraine" on the way to markets in Western Europe. Tymoshenko
blasted the January 4 gas deal, calling it a "fundamental
surrender" to Moscow that she would "like to rectify." All
it would take, she asserted, "is the political will" to
become energy independent; regrettably, she said, "political
elites here" had deliberately opted for dependence on Russia.

...Banks, Corruption and Judicial System...
--------------


9. (SBU) Senator Gregg commended Ukraine for its recent
successful exercise in democracy and urged Tymoshenko to work
with like-minded pro-democracy forces to continue to
strengthen Ukraine's democracy. Senator Gregg said Ukraine,
like any country, needed a strong banking system, a judicial
system based on rule of law, and a tough approach to
corruption if it wanted to attract foreign investment on a
large scale. In response, Tymoshenko stressed that:

-- She as prime minister would support granting more licenses
to foreign banks, though she acknowledged that there would be
a powerful protectionist banking lobby in the next Rada;

-- Ukraine's judicial system was "very weak" and badly in
need of thorough reform; and,


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-- Combating corruption was a matter of "political will,"
which needed more than "just lip service" from government
leaders.

...And Being a Female Politician in Ukraine
--------------


10. (SBU) In response to a question from Secretary of the
Senate Emily Reynolds, Tymoshenko commented that it was not
easy for women to succeed in the tough world of Ukrainian
politics. Tymoshenko noted, for example, that she and many
of her top lieutenants had spent time in prison (note:
Tymoshenko was incarcerated for 41 days in 2001 in a
tax-related investigation before being released without being
formally charged). Still, Tymoshenko said, women brought
"love and inspiration" to the political process; she hoped to
see more "strong women" in politics. She asked Reynolds to
convey her best regards to the female members of the U.S.
Senate.


11. (U) CODEL Frist did not have an opportunity to clear this
cable.
Herbst