C O N F I D E N T I A L SECTION 01 OF 02 KIEV 002530

SIPDIS

SIPDIS

E.O. 12958: DECL: 06/29/2016
TAGS: PGOV PINR SOCI MARR ECON PREL RS UP
SUBJECT: UKRAINE: AMBASSADOR TAYLOR'S FIRST MEETING WITH
OPPOSITION LEADER VIKTOR YANUKOVYCH


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

Summary
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1. (C) In his first meeting with Ambassador Taylor, Party of
Regions leader Viktor Yanukovych criticized President
Yushchenko for caving in to USG pressure to spurn Regions and
bless the formation of an Orange coalition. The Orange team
was deeply divided and may not even be able to get its
candidate elected as the new Rada Speaker, according to
Yanukovych. The Orange coalition, he predicted, would fall
apart relatively quickly; when that happened, Yanukovych
said, Regions -- emboldened by strong public opinion poll
numbers -- would not form a new governing coalition but
instead seek pre-term parliamentary elections. The Regions
chief was upbeat about possible Rada passage of legislation
authorizing exercises in Ukraine between NATO forces and the
Ukrainian military; the key was accenting "cooperation" with
NATO instead of "NATO accession," which Yanukovych said the
Ukrainian public largely opposed. Yanukovych also argued for
robust NATO cooperation with Ukraine's sizable defense
industry. Yanukovych predicted that Yuliya Tymoshenko would
have little success as prime minister in passing legislation
needed for Ukraine's WTO entry. President Yushchenko had
"perhaps two weeks" to revisit the gas deal with Russia;
citing "sources," Yanukovych claimed that a big hike in the
price of Russian natural gas would follow the G-8 summit.
The Russians will be "super tough" with Tymoshenko on the
price of gas, he predicted, and "Ukraine will suffer
economically." Speaking more broadly on relations with the
Kremlin, Yanukovych stressed that it was important for
Ukraine to "avoid senseless conflicts" with Russia.
Approximately 20 percent of Ukraine's foreign trade was with

Russia, and many products that would be snubbed by EU
consumers had "traditional" niches in the Russian market.
That said, Ukraine should not be subservient to Moscow and
should, for example, not withdraw from the CIS; such a move,
Yanukovych said, would only "delight" the Kremlin and
disappoint the smaller CIS countries which look to Ukraine as
a counterweight to Russia. End summary.

Politics: Yushchenko Wrong To Spurn Us...
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2. (C) In his first meeting with Ambassador Taylor, a
relaxed-looking Party of Regions leader Viktor Yanukovych,
speaking mostly in Ukrainian, emphasized on June 29 that
President Yushchenko had made a major mistake by spurning
Regions and blessing the formation of an Orange coalition.
Yushchenko had been pressured to go Orange, Yanukovych
asserted, by the USG; the president had not been
"responsible" enough to stand up to Washington and argue for
an Orange-Blue Grand Coalition. The Orange coalition,
Yanukovych said, had serious internal divisions, would be
unable to make serious progress on economic reform, and, he
predicted, was so feeble that it may not be able to get its
candidate, Our Ukraine (OU) MP Petro Poroshenko, elected as
the new Rada Speaker. We wanted to unite with OU, Yanukovych
said, but were rejected; the president, Yanukovych added, had
"lost his chance."

...And We Want New Elections
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3. (C) Yanukovych asserted that the Orange coalition would
fall apart relatively quickly. When that happened, he said,
Regions would not form a new coalition government with OU but
would instead seek new parliamentary elections. Yanukovych
explained that Regions' popularity rating had risen steadily
in the weeks since the March 26 parliamentary elections, with
nearly 44% of those polled (nationwide) expressing a
favorable opinion of the party. When the Orange coalition
fell, there would be several parties willing to form a new
coalition with Regions simply to avoid new elections;
however, Regions' strong poll numbers indicated that forcing
pre-term elections was the way to go.

NATO: Cooperation Vice Accession
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4. (C) Responding to a question about whether the new Rada
would pass legislation permitting NATO-member forces to hold
joint exercises with the Ukrainian military in Ukraine,
Yanukovych said that the passage of such legislation was
possible as long as the text accented Ukrainian "cooperation"
with NATO and not "entry" into the alliance. The words "NATO
accession" and "NATO entry" should be "dropped from the
discussion"; cooperation, Yanukovych emphasized, was the way
to gradually build support for the alliance within Ukrainian
society, which he said still had a largely negative,

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Soviet-era view of NATO. Cooperation, he stressed, should
not simply be limited to exercises but expanded to include
Ukraine's formidable defense industry, which employed more
than one million people and produced cutting-edge hardware
like the Morozov Design Bureau's new BTR-4 and the AN-70 --
both projects worthy of NATO interest.

WTO Legislation
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5. (C) On prospects for a new government passing legislation
needed for Ukraine's entry into the WTO, Yanukovych predicted
that Tymoshenko's team would, like the first time it was in
power, get very little accomplished. During her previous
stint as prime minister, "Yuliya" had been needlessly
provocative; she had tried to jam legislation through the
Rada without public hearings, without input from the NGO
community and without proper concern for domestic business
interests, Yanukovych complained. During his time as prime
minister, Yanukovych boasted, the Cabinet of Ministers had
worked quietly and carefully with a "number of partner
countries" to pass WTO-related legislation; "we just didn't
beat our chests about it in public," Yanukovych joked.

Gas Deal: Need To Move Quickly
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6. (C) Yanukovych recapped his view of the events that led up
to the January gas crisis and subsequent deal with Russia,
stressing that Yushchenko had sent "squeaky mice who hid
under their chairs" to deal with the seasoned "wolves" who
represented Russia and Turkmenistan at the bargaining table.
Now, time was of the essence: Yanukovych, citing his own
"sources," said that a big hike in the price of Russian
natural gas would come on the heels of the upcoming G-8
summit in St. Petersburg. Yushchenko had a small window of
opportunity -- "perhaps two weeks" -- to revisit the gas
agreement with President Putin; Yushchenko, however, was
preoccupied with coalition politics. As prime minister,
Yanukovych added, Yuliya Tymoshenko will "make things worse"
and do things that will "prompt Russia to raise prices even
higher." Moscow, he predicted, would be "super tough" with
the pugnacious Tymoshenko and "Ukraine will suffer
economically," Yanukovych said. He declined any assistance
from the U.S., saying he did not want the U.S. to "get in the
middle."

Relations With Russia
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7. (C) Speaking more broadly, Yanukovych stressed that it was
important to "avoid senseless conflicts" with Russia.
Approximately 20 percent of Ukraine's foreign trade was with
Russia, and many Ukrainian products had traditional niches in
the Russian market -- products that EU consumers would likely
snub. Any deterioration in Kiev's ties with Moscow had a
"painful impact" on Ukraine's economy, Yanukovych stressed.
That said, Ukraine should not be subservient to Russia and
should work with western companies to help diversify
Ukraine's energy sources and curb its dependence on Russian
oil and gas. (Note: Yanukovych also asked for help with the
EU; the Europeans, he asserted, were discriminating against
Ukrainian products). Moreover, Yushchenko was making a
mistake by hinting that Ukraine should withdraw from the CIS.
Yanukovych related that senior Azeri, Kazakh and Uzbek
officials had told him that Ukraine's withdrawal from the CIS
would "delight" Moscow; Ukraine, Yanukovych stressed, helped
provide balance to the organization, often uniting the
smaller CIS countries -- including Belarus -- to check
Russian interests, parry Russian efforts to sow division
among the CIS states and generally "make Moscow nervous."
Only Russia would win, Yanukovych said, if Ukraine withdrew
from the CIS. By "ruining" Ukrainian relations with Russia,
Yushchenko had "untied Putin's hands" to lean on Ukraine.
Taylor