2006-04-28 15:31:00
Embassy Kyiv
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DE RUEHKV #1711/01 1181531
P 281531Z APR 06
C O N F I D E N T I A L SECTION 01 OF 03 KIEV 001711 



E.O. 12958: DECL: 04/28/2016

REF: KIEV 1662

Classified By: Ambassador, reason 1.4 (b,d)

C O N F I D E N T I A L SECTION 01 OF 03 KIEV 001711



E.O. 12958: DECL: 04/28/2016

REF: KIEV 1662

Classified By: Ambassador, reason 1.4 (b,d)

1. (C) Summary: A subdued PM-hopeful Yuliya Tymoshenko told
Ambassador April 28 that the scant progress in Orange
coalition talks in recent days was much less significant than
Our Ukraine efforts with Party of Regions to form local
coalitions across the country. News during the meeting that
Our Ukraine, Regions, and the Chernovetsky bloc had just
formed a majority in the Kiev municipal council made her
point. Echoing Socialist negotiator Yosyp Vinsky (reftel),
Tymoshenko said the ultimate coalition composition "all
depended on Yushchenko." Her gut feeling was that President
Yushchenko had not made up his mind but approved of the
ongoing Our Ukraine-Regions local cooperation as a
"vaccination," paving the way for a possible national
coalition sometime in June. She alleged that Regions'
Political Council Chair Mykola Azarov had met Yushchenko
recently to suggest that Moscow would be amenable to a
favorable policy package on gas, nuclear, and border issues
in exchange for an Our Ukraine-Regions coalition. Up to 30
Our Ukraine MPs, led by Katerynchuk and Stretovych, were
forming an internal opposition faction prepared to walk out
of Our Ukraine if an alliance with Regions were consummated,
she claimed. Comment: While Our Ukraine negotiator Zvarych
was cautiously upbeat earlier April 28 (septel),as Vinsky
had been April 27 (reftel),Tymoshenko was uniformly gray,
exhibiting uncharacteristic slumped body language, and
murmuring repeatedly, "I don't know what will happen." End

A lady in pink in a gray mood

2. (C) In an April 28 meeting with Ambassador, DCM and
PolOff, a downbeat Tymoshenko discounted the importance of
the two coalition documents signed April 25 (reftel). The
ongoing negotiations on a coalition document were moving
ahead slowly and weakly, "without enthusiasm." It was a
"nightmare" dealing with Our Ukraine; Zvarych would come one
day and then be a no-show, Bezsmertny the next and again
disappear. The parties had essentially agreed on technical

issues, and the policy section was largely complete. But the
absence of a national coalition agreement had opened the door
to chaos in the provinces, where local party representatives
were disoriented. Socialist leader Moroz, out of the
hospital April 27, was trying to organize a meeting among
Yushchenko, Tymoshenko, and himself; so far, there was no
response from Yushchenko (note: Yushchenko was in Latvia
April 28).

Our Ukraine and Regions form local coalitions

3. (C) The real action, Tymoshenko stressed, was now
happening at the local level, where local alliances were
forming between Our Ukraine (OU) and Regions. As if on cue,
her cell phone rang; a Tymoshenko Bloc (BYuT) representative
on the Kiev municipal council informed her that Our Ukraine,
Regions, and the Chernovetsky bloc had just formed a
65-person majority and elected the council leadership. This
culminated a string of similar alliances in neighborhood
district councils across Kiev in recent days, Tymoshenko
claimed, except where BYuT had an outright majority and could
elect its own chair. While outgoing OU Rada faction leader
Martynenko was the formal OU leader in Kiev, OU insider Petro
Poroshenko was the informal leader of the effort. OU,
Regions, and Chernovetsky's bloc formally had only 46 seats,
but they had bought the loyalties of others. BYuT council
members had come under intense pressure to switch factions,
she claimed, being offered $100,000 as a carrot on the one
hand and being threatened with a loss of business from the
municipality as a stick on the other. Shaking her head, she
said that OU had made a big mistake delivering Kiev into the
hands of Regions.

4. (C) Ambassador noted that OU figures claimed they had
offered BYuT the chance to form an alliance in the Kiev
council but that BYuT had turned them down (septels).
Tymoshenko replied that OU's terms were that of a grand
coalition: OU, BYuT, and Regions. BYuT had refused, just as
it refused to join a national coalition involving Regions.
BYuT had countered with a proposal signed by Tymoshenko and
Moroz to form a trilateral coalition, but OU had refused in
return. The story was the same in the provinces, despite the
joint instruction signed April 25 by Tymoshenko, Moroz and
Bezsmertny; local branches of Our Ukraine were simply
ignoring the document and moving ahead with Regions. (Note:
At the oblast level, Our Ukraine and Regions have formed a
coalition majority in the Zakarpattya council.)

KIEV 00001711 002 OF 003

Little progress nationally, as Our Ukraine delays
-------------- --------------

5. (C) The pressure on local BYuT council members mirrored
that brought against deputy BYuT leader Turchynov and Rada
deputy Kozhymyakin, continued Tymoshenko, who suggested that
the legal machinations against the duo were connected to the
RosUkrEnergo (RUE) controversy. BYuT had gone to court April
27 to prevent an order for taking Turchynov and Kozhymyakin
into preliminary custody. Tymoshenko had not concluded
whether Yushchenko had endorsed the gambit.

6. (C) Tymoshenko believed that Yushchenko either had not
made up his mind about what coalition to form or was dragging
Orange negotiations out before making a deal with
Yanukovych/Regions. She subsumed the emerging OU/Regions
local alliances as part of the second option, a type of
vaccination shot to prepare the Ukrainian populace for an
eventual national coalition, which she predicted could emerge
as soon as June, if Yushchenko decided to go in that
direction. Either way, OU was clearly pursuing delay
tactics; they had suggested the Rada should open on the last
day possible, May 27 (note: a Saturday. The Rada
traditionally opens on a Tuesday).

7. (C) Asked for his views, Ambassador said that the
uncertainty could continue for several months, since
Yushchenko was under no obligation to dismiss the Rada in the
absence of a coalition; he only had the prerogative to do so
sixty days ater the Rada convenes. Nodding her head,
Tymoshenko said, "They are spitting on the Constitution and
laws." Ambassador noted that Yushchenko's indecision could
stem from his recognition that his leverage and influence
would decline as soon as he made a decision on coalition
formation. Tymoshenko stressed that Yushchenko only enjoyed
that leverage because BYuT had categorically ruled out a
coalition with Regions, even though Regions continued to
reach out to BYuT, since they too were frustrated in trying
to engage wishy-washy Our Ukraine and saw BYuT as a clearer,
more disciplined potential partner. When Ambassador
suggested an alliance with Regions would pose a political
danger for either OU or BYuT, Tymoshenko immediately
responded, "Worse: it would be political death."

Regions quietly active

8. (C) Tymoshenko said that Regions Political Council Chair
Azarov had been quietly active in recent days. He had
visited several think tanks to impress upon them the
advantages of an OU-Regions coalition for economic policy.
Azarov had also met Yushchenko in an unpublicized meeting, in
which Azarov had told Yushchenko -- not the other way around,
she stressed -- that he (Yushchenko) should go to Moscow,
work his contacts, and cut a grand deal in which Moscow would
give Ukraine favorable terms on gas (stay at $95 per thousand
cubic meters),nuclear fuel, and border issues in exchange
for an OU-Regions coalition.

Gas issue in play

9. (C) Regarding RUE and the gas deal, Tymoshenko suggested
another reason for OU delaying tactics was to reduce the
window for a new government to renegotiate the January 4 deal
before winter. She predicted, however, that the information
released April 27 identifying Dmytro Firtash, a known
Mogilievich associate, as the primary listed Ukrainian
shareholder in RUE would be just the beginning of additional
revelations in coming days. Ambassador suggested that the
position of RUE worsened by the day. A large, respected
Western accounting firm had stopped working for them, worried
about the sullying of their reputation; even Austria's
Raffeisen Bank seemed to be seeking ways of cutting ties, and
Firtash was clearly not the boss. Flashing her lone smile of
the session, Tymoshenko replied, "Firtash is likely a
10-percent lieutenant."

10. (C) Ambassador stressed the mutual interest of Ukraine
and the U.S. on the gas deal remained the same: Ukraine
needed to escape from the RUE mechanism. Tymoshenko
immediately added, "and open an investigation." Ambassador
reiterated that getting free from RUE was most important.
Tymoshenko nodded.

Future options for the Our Ukraine project

11. (C) Turning reflective, Tymoshenko said that, for his own
good, Yushchenko needed to start thinking at least three

KIEV 00001711 003 OF 003

steps ahead. Recent developments, including the local
romancing of Regions and Yushchenko's indecision, had led to
the development of a potential opposition faction within Our
Ukraine of at least 30 MPs, led by Stretovych and
Katerynchuk, who would be ready to part company if a national
coalition with Regions transpired. Another insider version
she had heard in the aftermath of Yushchenko's April 19
blow-up at his Presidential Secretariat staff was that he was
considering shutting down the Our Ukraine project because of
its poor performance in the elections. In its place would be
a new "For Yushchenko" bloc, to be led by his brother, Our
Ukraine MP Petro Yushchenko. That too would be a mistake,
mused Tymoshenko, since it would toss out a known brand and
require starting from scratch.

12. (C) Comment: If Yushchenko were to endorse a coalition
with Regions and a significant portion of Our Ukraine MPs
were to rebel, Yushchenko might not have much choice but to
start from scratch to support his expected run for
re-election in 2009. Our Ukraine Chair Bezsmertny has told
us he would similarly consider walking away from Our Ukraine.
We will follow up with Stretovych and Katerynchuk in the
coming days for their perspective.

13. (U) Visit Embassy Kiev's classified website at: