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