UKRAINE: ACTING NSDC SECRETARY ON ENERGY, RUSSIA

C O N F I D E N T I A L SECTION 01 OF 03 KIEV 002590 SIPDIS SIPDIS E.O. 12958: DECL: 07/03/2016 TAGS: PREL ENRG EPET ETRD MARR PGOV NATO RS UP SUBJECT: UKRAINE: ACTING NSDC SECRETARY ON ENERGY, RUSSIA RELATIONS, NATO REF: A. KIEV 400 ¶B. KIEV 57 Classified By: Ambassador for reasons 1.4 (b,d). ¶1. (C) Summary: In a free-wheeling conversation during Ambassador's July 3 introductory call, Acting National Security and Defense Council (NSDC) Secretary Volodomyr Horbulin focused on Russia and Russia's manifold impact on Ukraine. In contrast to its obvious behavior during the 2004 presidential election, the Kremlin had shrewdly and subtly worked to influence Ukraine's domestic political situation through the Russian language media and surrogates such as Nataliya Vitrenko and the "Ne Tak" bloc. The controversy in Feodosiya surrounding the arrival of U.S. military reservists had been one result. Despite Feodosiya, Horbulin declared the Ukrainian government (GOU) would stay the course with regard to NATO membership; PM-candidate Yuliya Tymoshenko also supported Ukraine's Euro-Atlantic course. Ukrainian electoral support for the Party of Regions had not been a sign of Ukrainian political support to Russia but a sound rejection in the East and South of President Yushchenko's leadership. To build a durable governing coalition, Horbulin opined that the Orange Coalition should allow Party of Regions to chair more parliamentary committees; allocation of responsibilities in Parliament after the 2002 elections provided a sound precedent for this approach. Ukraine was interested in the Single Economic Space only for its economic benefits, but was trying not to rebuff Russia and Russia's interest in establishing "supra-national entities" that threatened Ukrainian sovereignty. Horbulin listened with interest to Ambassador's suggestion that Ukraine issue a statement regarding energy security to counter possible Russian criticism at the G8 summit; he eagerly accepted Ambassador's offer to put him in touch with USG-funded energy experts. End summary. Russia and Domestic Politics -------------- ¶2. (C) Considered by many to be Ukraine's top strategic thinker, Horbulin agreed with former U.S. National Security Adviser Zbigniew Brzezinski's view, as related by Ambassador, that the relationship with Ukraine is one of the USG's top four strategic relations worldwide because of the impact that Ukraine's strategic orientation, whether to the West or to Russia, would have on Russia's internal development. Horbulin opined that Russia's internal political infrastructure would not change without a democratic Ukraine; conversely, a Ukraine that remained in Russia's orbit would serve to strengthen Russia's authoritarian tendencies. Today, building on its energy relations, Russia increasingly aspired to "great nation" status, seeking to consolidate its hold among the successor nations of the former Soviet Union. In post-Soviet space, a democratic Ukraine would become a major obstacle toward reaching this goal. ¶3. (C) Horbulin observed that Russia had ratcheted up its pressure after Ukraine's March elections, partly due to the electoral success of the Russia-oriented Party of Regions. During the 2006 election cycle, Russia had behaved more shrewdly and subtly than during the 2004 presidential election, providing media support and most probably financial support to favorable candidates and parties. Results of the parliamentary (Rada) elections, however, continued developments evident in the presidential elections. With the exception of the Communist Party, parties that ran on a pro-Russia, anti-NATO platform, like Nataliya Vitrenko's Progressive Socialist Party and the Social Democratic Party of Ukraine (United)-led Ne Tak! bloc, had failed to achieve the three percent threshold needed to obtain seats in the Rada. The electoral preferences of the East and South of Ukraine should not be seen as an endorsement of Party of Regions' or former PM Viktor Yanukovych's policies, but as a protest against President Yushchenko and his policies. Chairmanships to Party of Regions -------------- ¶4. (C) Asking us not to take notes on his next comments, Horbulin said that, in order to ensure that the Rada could function and the government coalition would be effective and durable, a good plan for distribution of Rada chairmanships needed to be worked out. He felt that Regions had a valid point in pushing to have more chairmanships. Horbulin recalled that, when President Yushchenko's Our Ukraine bloc had made an unexpectedly strong showing after the 2002 parliamentary elections, Our Ukraine had filled the chair of key influential Rada committees such as the Budget Committee and Committee on Freedom of Speech. Regions would recall the precedent that former President Leonid Kuchma's government KIEV 00002590 002 OF 003 had provided concession to Our Ukraine bloc because it had the largest plurality of seats in the Rada. (Note: The non-partisan Horbulin has spoken favorably of Regions previously. See ref B. In 2002, Our Ukraine filled the chairman's seat on a number of other committees that Horbulin did not cite, including the committees on human rights, culture and spirituality, legal policy, and with Borys Tarasyuk, now Foreign Minister, chairing the Committee on European Integration.) Russia and Ukraine's NATO Membership -------------- ¶5. (C) Horbulin said Russia continued to be active in Ukraine on a broad front. A recent example of Russia's influence was the anti-NATO hysteria, partially whipped up by the Russian language media, over the arrival of U.S. military reservists and construction equipment in the port city of Feodosiya on the Crimean Peninsula. The GOU had settled the situation down partly by bringing together all law enforcement agencies and having them work together as one unit to avoid violence in Feodosiya. This had been a good lesson, with other lessons still to be drawn (comment: including, presumably, some negative ones) in the GOU's handling of the situation. The July 3 observation of Navy Day in Sevastopol had proven that controversial events could take place without incident if handled properly. ¶6. (C) Horbulin emphasized that, in the aftermath of Feodosiya, Ukraine had not wavered from its Euro-Atlantic course. President Yushchenko had made this clear. The new government also had to reinforce this message with a clear statement of its intentions. Without naming names, Horbulin said, with respect to the key portfolios that President Yushchenko could fill on his own prerogative (such as the Ministers of Foreign Affairs and Defense),Yushchenko had candidates who would support the Euro-Atlantic course. If the next Prime Minister were a woman, Horbulin commented that he had no doubts regarding her orientation although, as a woman, "she had her prerogatives." Ambassador responded that President Yushchenko and the woman prime minister (Yuliya Tymoshenko) had to be united regarding both NATO and EU membership. ¶7. (C) Horbulin said, while Russia had grudgingly yielded on NATO membership first for the central European states such as Poland and then for the Baltics, Ukraine's NATO membership was qualitatively different, of another order of magnitude. While Ukraine did not object to Russia's efforts to ensure its security in a European framework, he could not understand why Russian did not allow Ukraine to do the same. Russia today enjoyed a closer and more fruitful relationship with NATO than Ukraine. U.S. aerospace company, Boeing, for example, had begun working in Moscow on a project which also involved Ukrainian engineers, to develop a wing using titanium alloys. (Note: The Russian firm, VSMPO-Avisma, leads the world in titanium production and supplies Boeing. Horbulin may be referring to Russian involvement in designing part of the new Boeing 787 "Dreamliner," a purely commercial venture.) Russia was now cooperating with a French company (note: possibly EADS, "European Aeronautics, Defense, Space") in the development of an "Airjet" passenger aircraft, which would be in direct competition with the Ukrainian-Russian An-128, but Ukraine had not made a single demarche in protest. Russia and EU Membership -------------- ¶8. (C) After Horbulin said Ukrainians were united on the benefits of EU membership, with even the Party of Regions supportive but only after Ukraine had joined the Russia-sponsored Single Economic Space, Ambassador inquired whether Ukraine could maintain the momentum to NATO or EU membership while still a member of the Commonwealth of Independent States (CIS) and other Russian-sponsored organizations. Horbulin answered that basic membership in the Single Economic Space (SES) (of Ukraine, Russia, Belarus, and Kazakhstan) free trade zone would not be an obstacle to EU membership. ¶9. (C) However, with respect to SES, Ukraine had to walk a fine line akin to "balancing on a razor blade," since free trade zones were only the first step to establishing the SES. The next step would be the creation of a range of supra-national entities, which, Horbulin implied, would be a real problem. Ukraine was sincerely interested in promoting closer economic cooperation particularly with Russia, with which it has strong economic ties, but also with Kazakhstan. While Ukraine was emphasizing the trade promotion and economic elements, Russia evidently had the creation of the supra-national organizations as its main goal with respect to KIEV 00002590 003 OF 003 SES. Ambassador said he hoped Russia would not view U.S. relations and its own relations with Ukraine as a zero-sum game, with one side losing if the other gained. Russia and Energy -------------- ¶10. (C) Horbulin stressed that energy was the number one national security concern. Energy policy, however, was more than just diversifying oil and natural gas supplies. It also involved efforts to promote energy efficiency and conservation. Energy policy required finding ways to solve problems in the coal mining sector, including in the Donbas region (of Donetsk and Luhansk regions),where accident rates were still unacceptably high. Any assistance to the coal mining sector would revise Ukrainian perceptions and have an impact politically as well, he suggested. Ambassador said the USG would continue and expand its assistance on coal mining safety and energy efficiency, as well as continuing providing expert advice to the Ministry of Fuels and Energy. ¶11. (C) Horbulin said he expected Russia to continue using the natural gas issue to achieve political ends. During the G8 summit, Russia was likely to do all that it could to convince the world that Ukraine was an unreliable transit country. Horbulin admitted that Ukraine had also contributed to this perception problem, which he had realized after he had begun delving into the question two weeks previously. He had no solutions now, but he would work on the problem with the NSDC staff and the new government. Horbulin recognized that Ukraine had displayed weaknesses in its negotiations with Russian over natural gas supplies. Ambassador agreed with this perspective and said two USG-funded energy experts had some suggestions on how Ukraine might overcome these deficiencies. Horbulin eagerly accepted Ambassador's offer to put him in touch with the energy experts. ¶12. (C) Horbulin continued that he expected Russian President Putin, during his G8 summit speech, to use Ukraine's alleged unreliability to support his proposals to find ways to deliver natural gas to Western Europe without transiting Ukraine. In addition to the pipeline project under the Baltic Sea, the proposals would include shipment of liquefied natural gas (LNG) through the Barents Sea and greater reliance on a southern route through Turkey and Greece. Ambassador suggested the GOU issue a statement before the G8 summit that would stress Ukraine's desire to ensure energy security for Western Europe. The statement would confirm Ukraine's commitment to ensure oil and natural gas transit according to transparent arrangements that met European standards and invite the Europeans and Russia to sit down with Ukraine to establish such arrangements. The statement would admit shortcomings of the past and commit to high standards in the future. Horbulin smiled, clearly pleased with Ambassador's idea, and said, while he could not make a decision on Ambassador's proposal, he would relay it to President Yushchenko. ¶13. (U) Visit Embassy Kiev's classified website: www.state.sgov.gov/p/eur/kiev. Taylor