UKRAINE: KERCH -- VERY LITTLE ORANGE IN THIS

C O N F I D E N T I A L SECTION 01 OF 02 KIEV 001552 SIPDIS SIPDIS E.O. 12958: DECL: 04/18/2016 TAGS: PGOV PREL ECON SCUL UP SUBJECT: UKRAINE: KERCH -- VERY LITTLE ORANGE IN THIS CRIMEAN "HERO CITY" Classified By: Political Counselor Aubrey Carlson for reasons 1.4(b,d) ¶1. (SBU) Summary: Kerch, one of the most ancient cities of Ukraine and a key industrial center for the Crimean peninsula during the Soviet period, now finds itself a remote backwater of independent Ukraine, famous recently only because in late 2003 a territorial dispute between Ukraine and Russia flared over a tiny sandbar of an island (Tuzla) in the Kerch Strait. Kerch is struggling to recreate itself, as recently re-elected, third-term Mayor Oleh Osadchiy (Party of Regions) relies on a corrupt, Soviet-style, government-led approach to development. Hopefully, a U.S.-funded information access program will help increase the flow into Kerch of more enlightened values and approaches. End summary. Twenty-Six Centuries Old but struggling -------------- ¶2. (U) We visited the Crimean Autonomous Republic city of Kerch April 6-7 to open a Library Electronic Access Project (LEAP) Internet center at the Belinsky Central City Library, which was opening on the same day the library celebrated its 150th anniversary. Kerch, located on the eastern tip of the Crimean peninsula, dates back to the founding of the city of Panticapaeum by Greek colonists from Miletus in the 6th century BC. In the 13th century, Kerch was a Genovese trade center called Cerchio; in 1475, the Crimean Tatars seized it and renamed it Cherzeti. In the 1774 Peace Treaty of Kuchuk-Kainarji after the Russian invasion of Crimea under Catherine the Great, the Ottoman Empire ceded Kerch and the fortress of Yenikale to Russia. In 1855, during the Crimean War, British forces devastated the city. During World War II, thousands of Kerch's defenders died in the Ajimushkay catacombs fighting against the German occupation of the city. In 1973, the Soviet Union designated Kerch a hero city, one of 12 in the Soviet Union, for its resistance to the Nazi war machine. (Note: The other hero cities in Ukraine are Kiev, Sevastopol, and Odesa.) ¶3. (U) Today, Kerch, a city of 156,000, still struggles to remake itself in independent Ukraine. During the Soviet period, Kerch was a center of industrialization in Crimea and contributed a quarter of the peninsula's budget. Iron ore works took advantage of nearby mines, a shipbuilding plant produced double-hulled supertankers and warships, and the city had a thriving fishing industry. Now much of the industry is shuttered or under-used. Kerch was once at a strategic nexus between the Black Sea and the Sea of Azov, closer to the Soviet heartland than other parts of the Ukrainian SSR. Now Kerch is for the most part a quiet backwater located in one of Ukraine's furthest corners. ¶4. (SBU) Nonetheless, Kerch has managed to regularly make the headlines in recent years because of ongoing border disputes between Ukraine and Russia in the nearby Kerch Strait and Azov Sea. Starting in fall 2003, Russian construction of a causeway extending three miles into the strait from the Taman Peninsula to within 100 meters of Tuzla threatened encroachment on Ukrainian territory and created the most serious confrontation between Russia and Ukraine since the 1991 breakup of the Soviet Union. The immediate crisis was defused by December 2003 after intervention by Presidents Kuchma and Putin, but the border issue remains unresolved, and Tuzla is frequently cited by Ukrainians worried about Russian provocations. Economic Development Plans -------------- ¶5. (U) Kerch's out-of-date website (www.kerchrada.gov.ua) describes its economic problems frankly. It notes that an outflow of skilled workers occurred in the 1990s (almost 10 percent of its population since 1989). While the website claims large-scale industries are recovering, the city apparently also pinned its hopes for future development on a 2000 presidential decree establishing a special economic zone (SEZ) at Kerch's commercial port. Not reflected on the website is the fact that Ukraine's budget passed in March 2005 abolished all SEZs in the country, putting into serious doubt the website-described, six-year, 57-million-USDollar project to construct facilities and infrastructure for a trade and industrial center within the zone. ¶6. (U) We saw little evidence of economic activity in Kerch during our visit. The shipyard was operational, evidenced by the sound of hammering and welding, but apparently at a low level. There was no evidence of any ongoing construction in the city, in sharp contrast to Kiev, whose landscape is dotted with construction cranes. Local residents told us that the only local outlet of a national or international chain was a Ukrainian supermarket; only one shopping center KIEV 00001552 002 OF 002 had been opened in the city. Wage arrears at the large enterprises continued to be a problem, and electricity and water supply failures were frequent. Short-sighted Greed by a Long-Term Mayoral Don -------------- - ¶7. (C) Local residents and Crimea-based journalists were critical of Kerch Mayor Oleh Osadchiy's leadership, particularly with respect to economic development. They described him as an authoritarian figure, in the mold of Kiev ex-Mayor Omelchenko or Moscow's Luzhkov, with a tight hold over the city administration and a city council that largely rubberstamped his decisions. The city-owned television station and newspaper carried frequent and favorable coverage of Osadchiy's activities. A local surgeon, a Crimean Tatar resident in Kerch for a decade, cautioned us not to repeat his frank comments about Osadchiy, saying Osadchiy would pressure the hospital to fire him if his comments reached became known. Our contacts also suspected Osadchiy of behaving like Omelchenko and Luzhkov by steering city construction projects to a company owned by his son-in-law. ¶8. (C) The surgeon and a local journalist both characterized Osadchiy as short-sighted and told us that in 2004, investors had approached Osadchiy with an offer to purchase the local airport, now lying unused, but did not follow through due to Osadchiy's demand for a heavy bribe for the right of purchase. (Note: All of Crimea now is served only by the airport in the Crimean capital, Simferopol, three hours by car or seven hours by train from Kerch.) Osadchiy's demands might have also been behind a developer's decision to construct a waterslide in another town, and not in Kerch. The Future -------------- ¶9. (SBU) With 80% of Kerch residents ethnically Russian, Kerch's electorate like the rest of Crimea voted overwhelmingly in favor of Party of Regions and parties of similar ilk in the March 26 parliamentary and local elections. Whatever his faults, Osadchiy was returned handily to office, as was his Party of Regions, which took 31 seats in the 50-seat city council. Natalya Vitrenko's bloc was in second place, with six seats, followed by Bloc Kunitsyn (a recent Crimean PM) with five. The Communist Party, Ne Tak Bloc, and the "For Union" (Za Soyuz) party each received two seats. The Tymoshenko bloc also received two seats; pro-Presidential Our Ukraine bloc received none. ¶10. (SBU) The old-thinking tendencies of the city government's leadership were not necessarily reflected at lower levels. Belinsky Library director Lyudmila Popova was honest, hard-working, and dedicated to improving library services for Kerch residents, according to a Peace Corps volunteer working at the library. Popova's LEAP proposal was only one of 13 awarded from a field of about 100 proposals. At the library Internet center opening, Popova arranged for a recitation by five children to Osadchiy, present for the dedication, of why they also needed to have computers at the neighboring children's library. She then followed up with a direct appeal to Osadchiy, much to his evident disgruntlement. We heard later that he committed to providing five computers for the children's library. The Internet centers will have the potential of exposing a new generation of Kerch's citizenry to more progressive approaches to solving their city's problems. ¶11. (U) Visit Embassy Kiev's classified website: www.state.sgov.gov/p/eur/kiev. Herbst