UKRAINE: OVERHAULING THE PRESIDENT'S MEN -

C O N F I D E N T I A L SECTION 01 OF 03 KIEV 003919

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E.O. 12958: DECL: 10/11/2016
TAGS: PGOV UP
SUBJECT: UKRAINE: OVERHAULING THE PRESIDENT'S MEN -
YUSHCHENKO'S NEW TEAM COMPLETE, FOR NOW

REF: A. 05 KIEV 3508

B. KIEV 3866

C. KIEV 3755

D. KIEV 3130

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


1. (C) Summary. With the appointment of Industrial Union of
the Donbas (IUD) executive Vitaly Haiduk as National Security
and Defense Council (NSDC) Secretary October 10, the overhaul
of President Yushchenko's team which started September 16
with the appointment of Viktor Baloha as Presidential
Secretariat Head is complete for now, Baloha told the media

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October 10. In a sign of a concerted effort to rationalize
the Presidential team, Yushchenko also dismissed over 30
non-staff advisers, including his former inner circle of
"dear friends" Oleksandr Tretyakov, Vira Ulyanchenko, and
Myhailo Doroshenko. At the same time, he sent a clear signal
of dissatisfaction with Our Ukraine (OU) by appointing his
first Presidential Secretariat Head Oleksandr Zinchenko as an
adviser, over OU's vocal protests.


2. (C) Comment: While Haiduk's appointment will have
substantive impact, particularly on energy policy,
Zinchenko's return as a Presidential adviser 13 months after
he resigned as Presidential Secretariat head, charging
Yushchenko's inner circle with corruption, has more symbolic
resonance. Yushchenko appears to have consciously moved away
from both his former "dear friends" inner circle and Our
Ukraine insiders who consistently provided him with bad
advice, poor management, and an eroding political base over
the past 18 months, in favor of less "orange" but stronger,
more professionally competent personnel. Yushchenko's beefed
up team will serve as a more weighty counterpart defending
Presidential prerogatives and policies vis-a-vis Yanukovych's
assertive Cabinet of Ministers, though it could also act as a
potential bridge to the main Donetsk clan (IUD quietly
supported Yushchenko in 2004 but knows fellow Donetskans
well). With the revolving personnel door around Yushchenko,
the next question on many people's lips is how long Borys
Tarasyuk will last as Foreign Minister, with Presidential
Secretariat Deputy Head Oleksandr Chaly waiting in the wings

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to take over at MFA (septel to follow). End Summary and
Comment.

All The President's Men Now Includes an Energy Heavyweight
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3. (C) While the most recent speculation over the NSDC
Secretary position had centered on Yuliya Tymoshenko, with OU

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heavyweights Roman Bezsmertny and Yuri Yekhanurov previously
mentioned, Yushchenko in the end opted for billionaire
business executive, Presidential Campaign contributor, and
Donetsk native Vitaly Haiduk, defacto owner of a 49.9% stake
in IUD (which boosted his net worth to $1.7 billion,
according to the KYIV Post's 2006 list of richest Ukrainians,
tied for sixth with fellow IUD magnate Serhiy Taruta).
Haiduk, whom Yushchenko nearly appointed Deputy PM for Fuels
and Energy December 30, 2005 on the eve of the gas crisis
with Russia, twice served as Energy Minister and once DPM for
Energy under the premierships of Yushchenko and Yanukovych.
Haiduk thus brings significant management and energy policy
expertise to Yushchenko's newly-overhauled team.


4. (C) Haiduk's chief of protocol at IUD, Vadym Doroshenko,
told us October 11 that Haiduk joined Yushchenko's team in
order to help with national "damage control" and to prevent
"one political force and one businessman - Regions and
Akhmetov - from taking over the country." Haiduk's agenda,
according to Doroshenko, would focus on energy issues:
countering Boiko's pro-Russian schemes, that could eventually
result in Russian control of gas infrastructure through
various cut-out companies and mechanisms; plus pushing energy
diversification, including more substantial offshore
exploration in the Black Sea and the Odesa-Brody project.
Doroshenko dismissed the possibility of Yushchenko's team
establishing a productive working relationship with the
dominant Donetsk clan, predicting that low-scale political
sniping would continue indefinitely.


5. (C) Note: Haiduk, like Tymoshenko, was a vocal critic of
the January 4 gas deal. While they were gas business rivals
in the late 1990s, Tymoshenko told Ambassador during June
coalition negotiations that, should she become Prime
Minister, she would ask Haiduk to be Energy Minister. Haiduk
was also publicly rumored to be on the short list for
NaftoHaz Chief, though neither position materialized after
the early July break-up of the Orange Coalition. In 2003,
Haiduk tussled with current Energy Minister Boiko (then
Naftohaz Chief) over the fate of Odesa-Brody and the creation
of RosUkrEnergo, leading to Haiduk's dismissal from his

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position as DPM and Minister of Energy.


6. (C) While there has been speculation since early 2006 that
Haiduk was seeking a way to enter politics and might harbor
political aspirations, his appointment, rather than
Tymoshenko, Bezsmertny, or Yekhanurov, avoids politicizing
the NSDC at a time of institutional jousting between the
Presidential Secretariat and the Cabinet of Ministers.
Haiduk replaces Acting NSDC Secretary Volodymyr Horbulin, who
could not be appointed as Secretary since he is past the
statutory retirement age for Ukrainian civil servants (65).
Haiduk paid tribute to Horbulin (NSDC Secretary from 1996-99)
in his initial comments to reporters October 10, calling him
the "patriarch of the NSDC who created much effort and energy
to its creation." Haiduk vowed to employ professionals and
prevent the NSDC from becoming a political club.


7. (SBU) Bringing further order to a formerly chaotic
universe of personalities around Yushchenko, Presidential
Secretariat head Baloha announced that Yushchenko had

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dismissed 32 non-staff advisers October 9. This included
former "dear friends" considered closest to Yushchenko
personally - former first aide Tretyakov, KYIV governor
Ulyanchenko, and Ukraina Moloda editor Doroshenko - as well
as a hodge podge of occasional policy advisers, including
Russians Boris Nemtsov and Vyacheslav Kantor and ex-German
Ambassador Dietmar Studemann, and celebrity personalities
such as footballer Andriy Shevchenko, ex-boxer Vitaliy
Klychko, and opera singer Volodymyr Hryshko.

Signs of Yushchenko's Strain with Our Ukraine?
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8. (C) At the same time, Yushchenko signed a decree
appointing his first Presidential Secretariat Head Zinchenko
as a Presidential adviser. Zinchenko's return was more of a
surprise than Haiduk's appointment, since Zinchenko had
denounced corruption in Yushchenko's inner circle at the time
of his early September 2005 resignation, triggering the
collapse of the Tymoshenko government (ref A). His
appointment could only be taken as a slap in the face of key
Our Ukraine insiders whom Zinchenko had denounced, including
Tretyakov and Petro Poroshenko; Our Ukraine immediately
demanded that the Zinchenko appointment be rescinded, but
Baloha refused (note: in contrast, Baloha quickly backtracked
on his recent appointment of Vasyl Baziv as his adviser.
After the media complained that Baziv had been involved in
the infamous temnyki issued from the Presidential Secretariat
under feared Kuchma Presidential Administration head Viktor
Medvedchuk, Baloha acknowledged his mistake and dismissed
Baziv after three days).


9. (SBU) Ihor Kolyushko Presidential Adviser and Head of the
Secretariat's Institutional Development Service, told us

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October 4 that the new Secretariat leadership carried into
office a strong sense of distrust towards Yushchenko's
previous team. OU party leaders like Poroshenko had long
followed their own interests without supporting Yushchenko,
claimed Kolyushko, who characterized OU's recent announced
(although not implemented) decision not to join a broad
coalition but to go into opposition (ref B) as the latest
such move of self-preservation. (note: Kolyushko who joined
the Secretariat in November 2005 after the first shakeup, is
affiliated politically with the Reforms and Order Party,
which split from the rest of the Our Ukraine bloc in late

2005. Several Reforms and Order politicians, including
fellow Presidential adviser Taras Stetskiv, have been
mentioned in speculation about possible efforts to create a
new pro-presidential reformist political force separate from
Our Ukraine).


10. (SBU) Yushchenko met with "orange" ministers in his
cabinet October 10 subsequent to the announcement of Haiduk's
appointment. Health Minister Polyachenko told the press
later that the orange ministers had told Yushchenko that they
had decided to resign from the Yanukovych cabinet, and that
the official announcement would be made in the coming days.
In contrast, Defense Minister Hrytsenko and FM Tarasyuk made
clear they served at the pleasure of the President and had no
plans to resign. The current intentions of Interior Minister
Lutsenko, a former Socialist who did not want to serve under
Yanukovych but remained in place at Yushchenko's insistence
in August (ref D),remain unclear. However, at this point,
with Yanukovych still talking publicly about a new coalition
agreement about to be signed and no public announcements from
Yushchenko about the fate of the "orange" ministers, it is
anyone's guess as to what will happen next.

Which way will Yushchenko's New Team Go?
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11. (C) Baloha himself has taken on a far more prominent
public role than either of Yushchenko's two previous
Presidential Secretariat heads Zinchenko (Feb-Sept 2005) or
Rybachuk (Sept. 2005 - Sept. 2006),including assuming the
primary mouthpiece role once Yushchenko's former press
secretary/head of the Presidential press service Iryna

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Herashchenko resigned, replaced by a lower key journalist who
assumed only the press secretary role. In reorganizing the
Presidential Secretariat, Baloha placed the press shop,
advisers, and the president's own office under his direct
control. Powerhouse First Deputy Head Yatsenyuk, formerly
the well-respected Minister of Economy and now Yushchenko's
representative to the Cabinet of Ministers, oversees the
other four deputy heads, as well as the services for
information policy, analysis, security and defense, social
and economic development, and cooperation with the Rada.
Baloha and Yatsenyuk's arrival in September effectively
sidelined first deputy Ivan Vasyunyk, whose previous
expansive empire was trimmed to just the Secretariat's
services for political analysis and preservation of cultural
heritage.


12. (C) Comment: The string of heavyweight appointments
Yushchenko has made since September 16, particularly Baloha,
Yatsenyuk, Deputy Head Chaliy (foreign policy),and now
Haiduk at the NSDC - share stronger reputations for
managerial competency than long-standing loyalty to
Yushchenko or strong affiliation with Our Ukraine. Haiduk
and Chaliy enjoy a particularly close link, serving together
as IUD executives in recent years; Doroshenko suggested to us
October 11 that Yatensyuk is loosely affiliated with the IUD
team as well. While IUD is now a business rival to Regions'
financier Rinat Akhmetov's Systems Capital Management and
quietly supported Yushchenko in 2004, the Donetsk groups
share common roots and know each other well. Both Haiduk and
Chaliy are pragmatists who could more easily reach out to
Regions than Our Ukraine figures; Yanukovych praised Haiduk's
appointment. That said, Haiduk confidente Doroshenko claimed
that the first order of business for Haiduk and the rest of
Yushchenko's new team would be drawing lines and resisting
Regions' encroachments, not reaching out and building
bridges. The ultimate key, as always, rests with Yushchenko.


13. (C) Note: Despite Baloha's public statements October 10
that there is no thought being given to replacing FM Borys
Tarasyuk, and Doroshenko told us that there was no overt
promise made to Chaliy regarding the MFA, IUD expects Chaliy
eventually to replace Tarasyuk at the MFA "once the Rada
takes action," (i.e., a vote to dismiss Tarasyuk). Septel
will examine that possibility and the implications for policy.


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