UKRAINE: YATSENYUK'S FIRST VISIT TO WASHINGTON AS

C O N F I D E N T I A L SECTION 01 OF 03 KYIV 000973

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/24/2017
TAGS: OVIP PREL PGOV ETRD US UP
SUBJECT: UKRAINE: YATSENYUK'S FIRST VISIT TO WASHINGTON AS
FOREIGN MINISTER - SCENESETTER

REF: KYIV 924

Classified By: DCM Sheila Gwaltney for reasons 1.4 (b,d).


1. (C) Summary: Arseniy Yatsenyuk is familiar with Washington
as a former Economics Minister and acting and deputy head of
the Ukrainian National Bank, but his visit at the end of
April will be his first opportunity to discuss the full range
of foreign policy issues. With respect to the bilateral
relationship, Yatsenyuk will probably push for a firmer
signal on the timing of a U.S. presidential visit and bring
with him the draft of a "roadmap" on the way forward in
U.S.-Ukraine cooperative activity. He will want to discuss
the outlook for Ukraine's membership in WTO with appropriate
Washington interlocutors. For our part, we can urge Ukraine
to maintain the right approach in its relations with Russia
and Belarus and to exercise leadership in resolving the issue
of Moldova's break-away Transnistria region. Yatsenyuk's
visit comes during an ongoing political crisis in Ukraine
that at least temporarily complicates movement toward his
goals of advancing Ukraine's economic integration with the
world economy and strengthening his country's relations with
partners in NATO and the European Union. End summary.


2. (C) Message/themes for the visit:

-- We welcome the consistent messages from the President and
Prime Minister that Ukraine will stay the course with respect
to its European and Euro-Atlantic aspirations. We hope
Ukraine will also continue to exercise the strong regional
leadership started under your predecessor.

-- The current political crisis is an internal affair for
Ukrainians to resolve and we will not take sides, but we urge
you to find a democratic and peaceful solution that adheres
to Ukraine's laws and constitution. A state of prolonged
political uncertainty also endangers prospects for achieving
goals important to both the U.S. and Ukraine.

-- The USG's negotiators are working hard to move Ukraine's
WTO accession forward quickly. The Rada will need to make a
select number of legislative changes to implement existing
commitments by Ukraine to its WTO partners.

-- We share Ukraine's interest in highlighting energy
security and would welcome expanded dialogue. The GOU needs
to do its part by focusing on energy efficiency and opening
its domestic oil and gas sector to international expertise.

-- We are excited about the possibilities for cooperation
through the Millennium Challenge Corporation (MCC). For the
MCC compact, the next step is for the GOU to fund its
technical team. The anti-corruption Threshold program is
underway, but needs GOU attention to ensure implementation.

A Young, but Experienced, Compromise Candidate
-------------- -


3. (C) President Yushchenko nominated Yatsenyuk after the
Verkhovna Rada (parliament) repeatedly rejected the
president's first choice for foreign minister, and Yatsenyuk
was confirmed March 21 by a vote of 426 votes in favor (with
432 MPs present out of the Rada's complement of 450).
Yatsenyuk ascribed the successful vote (reftel) to his
acceptability to both camps (Presidential and Prime
Ministerial),but subsequently clearly showed his loyalty to
Yushchenko. Yatsenyuk demonstrated his priorities when he
elected to make his first trip abroad to Brussels, rather
than to Moscow as was traditional. After his April 16 visit
to Moscow, Yatsenyuk will complete the round of visits to
Ukraine's most significant partners with his visit to
Washington. The visit will be an introductory one for him,
but he is ready to discuss the full range of issues on the
U.S.-Ukraine agenda.


4. (C) Yatsenyuk's deep experience in economic issues
inclines him to stress economic objectives, but, as foreign
minister, he is committed to advancing Ukraine's relations
with the EU and NATO. With respect to the EU, Yatesnyuk is
edgy over the possibility that Ukraine might not join the WTO
this year, leading to an unacceptable delay in getting
started on an EU-Ukraine free trade agreement, the
center-piece of the EU-Ukraine "New Enhanced Agreement." He
will raise his concerns with appropriate Washington
interlocutors. We have reassured him the U.S. continues to
work hard to advance the Ukrainian WTO accession, but the
political wrangling in Kyiv could at some point theoretically
hamper parliament's ability to fix remaining legislation for
WTO. On NATO, Yatsenyuk moved quickly to secure a
ministerial meeting of the NATO-Ukraine Council at Oslo and
is pushing for the North Atlantic Council to visit Ukraine in

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July to mark the 10th anniversary of formal NATO-Ukraine
relations.

The Political Backdrop
--------------


5. (C) Yatsenyuk, who served as former Deputy Head of the
Presidential Secretariat before becoming FM, has kept a toe
in internal politics and tried to act to some degree as a
mediator in the current political crisis, although he does
not appear to be in the President's inner circle in this
battle. Nonetheless, he will be prepared to discuss the
domestic political scene, given Washington's expected
interest in the topic, and the possible impact that
prolongation of the crisis might have on achievement of
Ukraine's foreign policy goals. Following Yushchenko's April
2 decree dissolving the Rada and calling for early
parliamentary elections and the Rada and Government's refusal
to adhere to the decree, the President and Prime Minister
have been conducting almost daily closed-door meetings to
work on a political compromise. Such a compromise might
include an agreement on early elections at some later,
unspecified date; the amendment of laws, such as of the
controversial law on the Cabinet of Ministers; further
amendment of the constitution; and an agreement to adopt into
law a set of national priorities, both in terms of internal
and foreign policy.


6. (C) The Constitutional Court has been considering
Yushchenko's decree since April 17 at the request of the
majority coalition. Yushchenko and Yanukovych have said
publicly that they will respect the Court's ruling, and
Yatsenyuk told us privately that was the best solution.
Accusations from all sides of corruption, pressure, and
politicization are reflect in low public confidence in the
Court, with opinion polls showing less than 20% believe the
Court can issue an independent ruling. The gist of the
argument is whether the movement of more than 20 MPs from the
opposition to the majority in March was a violation of the
electorate's will and whether the President as guarantor of
the Constitution has the power and right to disband the Rada
as a result of this perceived violation. Both sides have
turned their supporters onto the streets, in what have been
mostly peaceful rallies on the Maidan and around key
government buildings. Security, military, and law
enforcement structures have been careful to remain
professional and outside this fray.

The Bilateral Agenda
--------------


7. (C) As part of his effort to set a definite policy course
at the Ministry, Yatsenyuk hopes to bring a draft of a
U.S.-Ukraine "roadmap" with him to Washington, based on our
response to President Yushchenko's January letter to
President Bush regarding the bilateral relationship, MFA is
working hard within the interagency process under a short
fuse to get the paper finalized in time for the trip. If it
is successful, Yatsenyuk will hand over the roadmap during
his Washington meetings with the suggestion that the
Bilateral Coordination Group review the roadmap and endorse
it. We have not yet seen a copy, but understand that it will
cover a broad set of bilateral activities.


8. (C) We continue intense engagement with the Ukrainians as
their WTO accession moves into the end game. Ukraine's
negotiators will meet with USTR during Yatsenyuk's visit and
a Working Party meeting will happen in mid-May. Although the
accession looks to be on track to be completed late this
year, one hitch could be that Ukraine's parliament will need
to pass some legislative changes to make their legislation
fully consistent with WTO and with the commitments Ukraine
made in their March 2006 bilateral agreement with the U.S.
Yatsenyuk will likely raise energy security, including a
possible U.S.-Ukraine-EU dialogue. Ukraine needs to do much
more on its own. While many major industry players are
investing heavily in energy efficiency, Ukraine still lags
badly in efficiency. After awarding an exploration block in
the Black Sea a year ago, the GOU still has not concluded a
Production Sharing Agreement with the U.S. firm Vanco, thus
sending a weak signal about Ukraine's openness to foreign
investment in the energy sector. On MCC, the Threshold
program to fight corruption has started implementation. For
the eventual compact program, the GOU is assembling its
technical team; the current hold-up is the GOU needs to
allocate funding for the team from its budget.


9. (C) Relations with Russia appear to be in a holding
pattern for the moment. Ambassador Chernomyrdin has
repeatedly offered to mediate in the current political
crisis, but otherwise the Russians have in public held back

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from any involvement. Ukraine saw its price for gas go from
$95/thousand cubic meters (tcm) to $130/tcm in 2007, and will
likely see the price go up to $180/tcm or more in 2008. Some
GOU officials have floated suggestions that they remove the
middleman RosUkrEnergo from the gas deal, but there
apparently has not yet been any decision by the GOU to pursue
this. Ukraine has also expressed perfunctory interest in the
Russian-led Common Economic Space (CES) trade bloc. However,
the GOU is not willing to accept Russia's current terms for
the CES, which include a supra-national governing body that
the Ukrainians feel would result in an unacceptable cession
of national sovereignty.


10. (C) Yatsenyuk will reiterate continuing Ukrainian
interest in hosting a visit of President Bush to Kyiv and
urge the Secretary also to consider making a second visit.

Ukraine's Regional Role
--------------


11. While the current political crisis has distracted MFA and
caused Ukraine to be less diplomatically active recently, we
can use this visit to make our expectations clear to
Yatsenyuk.

-- On Transnistria, we welcome Ukraine's renewed commitment
to the "5-plus-2" negotiating framework to move Moldova and
Transnistria toward fulfillment of the "Yushchenko Plan."

-- On Belarus, although we have heard less of late regarding
a possible Lukashenko-Yushchenko summit meeting in Kyiv, we
should reiterate that such a meeting serves to legitimize
Lukashenko while providing little benefit to Ukraine and
drawing the opprobrium of the international community. The
Ukrainians continue to argue that they will only agree to
such a meeting if the Belarusans agree to make progress on
several outstanding border issues, including Ukrainian access
to the Chernobyl site through Belarusan territory.

-- On the regional GUAM (for its members, Georgia, Ukraine,
Azerbaijan, and Moldova),we welcome Ukraine's continuing
support for the organization and look forward to the
Ukrainian parliament's ratification of the GUAM charter.


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