C O N F I D E N T I A L SECTION 01 OF 02 KIEV 000335

SIPDIS

DOC FOR CLUCYK
DOE FOR LEKIMOFF

E.O. 12958: DECL: 01/26/2016
TAGS: PGOV PINR KDEM ETRD ENRG EPET UP WTO
SUBJECT: UKRAINE: YANUKOVYCH DISCUSSES GAS DEAL, RELATIONS
WITH RUSSIA, U.S., WTO

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


1. (C) Summary: In a January 24 meeting with opposition
Party of Regions leader Viktor Yanukovych and Rada Deputy
Taras Chornovil, EUR A/S Fried told Yanukovych the U.S.
supported Ukraine and would work with whatever
democratically-elected government the people of Ukraine
chose. The U.S. would judge any Ukrainian government by its
actions and support for reform. Fried expressed U.S. concern
about the lack of transparency in the January 4 natural gas
deal struck with Russia. While we understood the nature of
rhetoric during political campaigns, we expected that
anti-U.S. sentiments should not become a campaign tool.
Yanukovych said he shared U.S. concern about the gas deal,
and asserted that Ukraine's approach would have been stronger
if the parliament had been involved. Yanukovych said there
would be no change in relations with the EU, Russia, or the
U.S. should his Party of Regions participate in a ruling
coalition following March 26 parliamentary elections.
Ukraine would follow its own national interests but would not
view the West and Russia as opposing camps to play off one
another. On WTO, Yanukovych advocated a slower approach that
would protect Ukraine's industry. End summary.

U.S. will work with democratically-elected government
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2. (C) On January 24, Assistant Secretary Daniel Fried, NSC
Director Damon Wilson, and Ambassador met with opposition
Party of Regions leader Viktor Yanukovych and Regions Party
Deputy Taras Chornovil. Fried delivered to Yanukovych the
same message he had given to President Yushchenko, Prime
Minister Yekhanurov, and ex-Yushchenko ally Yuliya
Tymoshenko: that the U.S. supported Ukraine and would work
with whatever democratically-elected government the people of

Ukraine chose, and that the U.S. would judge any Ukrainian
government by its actions, including support for reform.
Turning to the January 4 natural gas deal with Russia, Fried
emphasized U.S. support for Ukraine and noted the Secretary's
strong statements on Russian actions. However, the U.S. had
concerns about the lack of transparency and the role of
RosUkrEnergo (RUE). The U.S. hoped Ukraine's relations with
Russia would be productive, but that Ukraine should be free
to decide how to build its international relations as an
independent country. The U.S. understood campaigns
and associated rhetoric, but Regions should take care not to
make it anti-American.

Yanukovych: Close to the U.S. on RosUkrEnergo
--------------


3. (C) Yanukovych said he shared USG concerns about
RosUkrEnergo's lack of transparency and unclear role in
Ukraine's gas market. He and the Party of Regions team first
became concerned when they saw how excited the Russians were
over the deal struck in early January with Ukraine.
Yanukovych blamed what he called an "inexperienced"
Yushchenko team for agreeing to permit RUE to be the sole
seller of gas to Ukraine. Relations with Russia were not
simple, he said, and a team needed thorough preparation
before entering into negotiations. Claiming to have
information on the conduct of negotiations, Yanukovych said
the inexperienced Yushchenko team operated from a position of
weakness. A more experienced government would have consulted
with Yanukovych and others in parliament, and would have
united all political forces before entering negotiations,
which might then have led to a "package" resolution. In such
a case, at minimum, the agreement resolving the gas crisis
would have been transparent and understandable, he claimed.
Yanukovych said he had reached out to Yushchenko to discuss
the gas crisis, but had been told Yushchenko was unavailable.
The result of Yushchenko's "blunder" was a gas deal with no
transparency and no legitimacy. Worse, the gas issue was not
resolved: "We will go back to this again," Yanukovych warned.
Yanukovych noted that he had learned through the media that
Yushchenko and PM Yekhanurov had withdrawn their signatures
from the September MOU with Yanukovych following the January
10 Rada vote to dismiss the Yekhanurov government over the
gas deal.

No Change in Relations with EU, Russia, U.S.
--------------


4. (C) Yanukovych said there would be no change in Ukraine's
relations with the EU, U.S. or Russia in the event the Party
of Regions formed the government after the March 2006
parliamentary elections. Yanukovych emphasized (without
elaboration) that a Regions government would uphold Ukrainian
national interests. He understood the importance of
strategic relations with the U.S., and Regions stood for
building strong relations with the EU in support of European
integration and strong relations with Russia. However, the
West and Russia were not opposing camps between which Ukraine
would choose. Regions Party Deputy Taras Chornovil expressed
concern over Ukraine's "geo-political orientation" under
Yushchenko. The GOU was issuing declarations "strictly"
oriented to the West, but their actions were contrary to
these declarations. For example, the RUE gas deal benefited
Russia but was hidden from the Rada and Western partners,
Chornovil asserted.


5. (C) Yanukovych told A/S Fried that he had held no
consultations with Russians in the last year, except one
meeting with Russian Ambassador to Ukraine Viktor
Chernomyrdin. Chernomyrdin had requested the meeting in
January 2006 to ask if Yanukovych and Rada deputies from the
Regions Party would support the motion to dismiss PM
Yekhanurov's Cabinet. Yanukovych said he told Chernomyrdin
that Regions would support the government, if Yushchenko
would recognize Regions as the opposition and reverse his
disavowal of the Memorandum of Understanding signed in
September to secure Rada approval for Yekhanurov as Prime
Minister. (Note: Yanukovych's explanation does not sound
quite right, as Yushchenko disavowed the September MOU only
after the Rada voted January 10 to dismiss the Yekhanurov
government, not before the vote.)

Regions Approach to WTO: First Identify Our Interests
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6. (C) The Party of Regions' approach to the WTO would also
be based upon "national interests," Yanukovych added, meaning
the protection of national manufacturers and the "national
market." Ukrainian manufacturing was vulnerable, yet the GOU
had not yet analyzed how WTO accession would affect it. This
was a mistake. Regions, however, would consider WTO
legislation after making clear what protections were required
by Ukrainian industry.


7. (C) Yanukovych said that Regions was ready to unite with
other parties in an effort to improve the economy and living
standards in Ukraine. Regions had talked with voters, who
said that whatever government won in March needed to govern
efficiently and effectively. Yanukovych now saw the need to
discuss the process for uniting various parliamentary
factions.

Chornovil takes the blame
--------------


8. (C) Chornovil explained that during the 2004 presidential
election, Yanukovych had had to "stand for Kuchma's sins."
As Yanukovych's campaign director, Chornovil took
responsibility for failing to distinguish his candidate from
Kuchma's deeds. The events of the past year -- for example,
Yanukovych's willingness to enter the MOU with Yushchenko in
September -- had shown Yanukovych to be different from
Kuchma.


9. (U) A/S Fried cleared this cable.


10. (U) Visit Embassy Kiev's classified website:
www.state.sgov.gov/p/eur/kiev.
HERBST