C O N F I D E N T I A L SECTION 01 OF 02 KIEV 000781

SIPDIS

E.O. 12958: DECL: 02/27/2016
TAGS: PREL PGOV ENRG RS UP
SUBJECT: UKRAINE: EX-PM TYMOSHENKO ON DOMESTIC POLITICS,
THE GAS DEAL

REF: KIEV 182

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


1. (C) Summary: Ambassador met ex-PM Yuliya Tymoshenko
February 26 to deliver concerns about her comments on a
contract by U.S. company Holtec to build a nuclear waste
storage facility in Ukraine (septel). The conversation
turned to domestic politics and the natural gas
supply/transit deal with Russia. Tymoshenko described the
still unrealized efforts to forge a coalition agreement with
Our Ukraine, complimented the organization of Socialist Party
leader Oleksander Moroz while disparaging that of Our
Ukraine, and laid out a case why Party of Regions leader
Viktor Yanukovych would be the leader with leverage if Our
Ukraine were to cut a post-election deal with his party.
Tymoshenko thought that Regions Party financier Rinat
Akhmetov had been well-spoken in his inaugural televised
appearance but thought the move had been a mistake, since the
rest of Ukraine outside Donetsk viewed Akhmetov as a
criminal, not a successful business executive. On the gas
deal, Tymoshenko largely rehashed arguments made in previous
meetings with Ambassador over the past two months: 1) she
wanted to annul the deal through action in Kiev-Pechersk
court but was being stymied by political pressure on the
judge; 2) she favored taking the Russians to Stockholm over
their abrogation of the August 2004 agreement; and 3) Ukraine
should pursue contracts with Central Asian countries and
needed international support. Ambassador reiterated the USG
views relayed to Government of Ukraine (GOU) officials: our
concern over the deal focused on RosUkrEnergo's (RUE) role;
the U.S. would support a GOU effort to renegotiate the deal
to remove RUE; and the U.S. would lend a hand to Ukrainian
efforts to garner European support. End summary.

Domestic politics a month before the election
--------------


2. (C) Ambassador inquired about the state of coalition
agreement discussions between Tymoshenko's bloc (BYuT) and
President Yushchenko's Our Ukraine bloc. Tymoshenko, who on
February 21 had unilaterally signed BYuT's own proposal for a

coalition agreement which included some conditions Our
Ukraine would likely not accept, replied that she had signed
the documents necessary for a deal to happen but that Our
Ukraine had not yet reacted, adding, "if they have problems
with our terms, they should say so." BYuT deputy leader (and
ex-SBU chief) Oleksandr Turchynov had reached out to Our
Ukraine campaign official Roman Zvarych February 25 with a
proposal to meet again, but as of February 26 Zvarych had not
returned the call.


3. (C) Tymoshenko noted that although central and western
Ukraine strongly favored a reunified Yushchenko-Tymoshenko
team, eastern Ukraine and Crimea saw the "Maidan" team as a
problem. As a result, BYuT's campaign in eastern and
southern Ukraine did not emphasize the potential for an
Orange reunification, since BYuT was targeting voters who had
supported Yanukovych in 2004. Socialist leader Moroz was
pursuing the same tactic, she added. Tymoshenko complimented
Moroz' campaign organization, in contrast to Our Ukraine's,
which she termed dreadful.


4. (C) Tymoshenko judged that Regions financier Rinat
Akhmetov had spoken well in his maiden public speech
televised February 20, but that Regions had made a mistake by
putting Akhmetov on TV. While Akhmetov was popular in
Donetsk due to "local boy patriotism," the rest of the
country perceived him as a criminal; this was even true in
Luhansk and Crimea, two strongly pro-Regions provinces.
Thus, most people watching Akhmetov would not have concluded
"good speaker" but, in contrast, would have thought "a major
criminal is poised to enter the Rada." Tymoshenko opined
that any effort by government authorities to go after
Yanukovych for his misdeeds would boomerang, boosting
Yanukovych's political standing, but that the authorities
should pursue Akhmetov for his crimes.

Gaming an Our Ukraine-Regions coalition
--------------


5. (C) Tymoshenko said that serious discussions between Our
Ukraine and Regions continued. Ambassador observed that
Regions' leader Yanukovych complained to him each time they
met that Yanukovych had not been able to have a serious
conversation with Yushchenko, while acknowledging contact
between the two parties. Tymoshenko claimed that, were
Yushchenko to cut a post-election deal with Regions,
Yanukovych would end up running the country. Such a
coalition would be deeply unpopular with Yushchenko's Orange
base, which would largely desert him. Without popular
support, Yushchenko would then lack leverage in dealing with
Yanukovych and Regions inside government. (Comment: This is
an interesting argument, perhaps with some merit.)
Rehashing old arguments on the gas deal
--------------


6. (C) Turning to the "terrible" gas deal with Russia,
Tymoshenko rehashed arguments used with Ambassador the past
several months (reftel). She continued to press a court case
in Kiev-Pechersk commercial court seeking to overturn the
January 4 contracts on the basis that NaftoHaz Chairman
Ivchenko had exceeded his authority; the case still had gone
nowhere, Tymoshenko alleged, because Yushchenko himself had
called the judge and asked that action not be taken.
Secondly, she wanted Ukraine to take Russia to the Stockholm
Arbitration Court for overturning the terms of the August
2004 agreement to provide gas at a fixed price of $50 per
thousand cubic meters through 2009. Finally, Ukraine should
negotiate supply deals with Turkmenistan, Uzbekistan, and
Kazakhstan and needed international support.


7. (C) Ambassador gave Tymoshenko the same U.S. positions she
had heard in previous conversations. The U.S. saw the gas
deal as a problem primarily due to the role of RUE.
Ambassador had told GOU leaders the previous week that if it
sought to renegotiate the deal without RUE, the U.S. would
support Ukraine. The USG would also help Ukraine as the GOU
went to the Europeans seeking support. Were the Pechersk
court to invalidate the January 4 deals, that would make it
easier for the GOU to seek renegotiation of the deal; it
currently appeared as if the GOU were vacillating, unsure of
what to do next. Regarding a Stockholm appeal, Ambassador
advised Ukraine to seek top-flight legal and technical
evaluation of all relevant agreements. Sanctity of contracts
notwithstanding, Ukraine would not get much political
sympathy from Western countries for attempting to insist on
paying $50 for gas the next four years.


8. (C) Ambassador noted several windows of opportunity for
Ukraine regarding gas supplies. Russia had made energy
security the signature issue of its G8 chairmanship. Russia
had also signed but not yet ratified the European Energy
Charter, which would give Central Asian countries access to
Russia's pipelines. France and others had spoken out on the
need for Russia to ratify the charter. In the end, the key
going forward was for the GOU to clarify its intent.
Tymoshenko ended the conversation quipping: "Give me a month
(the Rada elections are March 26), and everything will be
very clear."


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