CHERNOMYRDIN: UKRAINE MUST PAY GAS DEBTS

C O N F I D E N T I A L KYIV 002485 SIPDIS E.O. 12958: DECL: 12/10/2018 TAGS: PREL PGOV ETRD PINR RU UP SUBJECT: CHERNOMYRDIN: UKRAINE MUST PAY GAS DEBTS REF: KYIV 2303 Classified By: Charge James Pettit. Reasons: 1.4 (b/d). Summary -------------- ¶1. (C) Viktor Chernomyrdin, in a meeting with the Ambassador, highlighted the importance of Ukraine paying its gas debts. He stressed that Russia was unwilling to subsidize Ukraine, adding: "if you like them, help them." Chernomyrdin is convinced Ukrainian leaders, mired in power struggles, are in denial about the dimension of the unfolding economic/financial crisis and unprepared to deal with it. End Summary. "They Are in Denial" -------------- ¶2. (C) Meeting with the Ambassador at our Embassy December 3, Russian Ambassador and former PM Viktor Chernomyrdin stressed that Ukraine's political leaders simply "do not understand" the dimension of the economic crisis. It is the first time they have faced a crisis of such scale, and "they are in denial." They are all fighting and jockeying; no one is focusing on the economic danger. There is little prospect of a 2009 budget or a meaningful emergency plan. The political leaders are strangely disengaged; "it's as if the crisis were far away." Chernomyrdin pointed to a picture of a 17th century Cossack battle scene on the Ambassador's table and disdainfully remarked: "they haven't come far." ¶3. (C) Chernomyrdin predicted the economic/financial crisis in Ukraine would last at least two years. February and March 2009 will be a crunch-time as Ukraine exhausts its financial reserves. Asked which of Ukraine's leaders was more on top of the situation, Chernomyrdin said that Tymoshenko had "a better understanding." The Party of Regions is disciplined and has "capable people" (he did not specify Yanukovych). Meanwhile, Yushchenko and the Our Ukraine party "don't offer anything." Yushchenko is erratic, can't unite the country, and demeans the authority of the presidency. His orders are ignored, which is "dangerous." Russia needs reliable partners. Chernomyrdin lamented that the political leadership was largely unchanged from his arrival eight years ago; the same people just keep changing seats. Gas: Ukraine must pay -------------- ¶4. (C) Ukraine's failure to pay recent arrears to Gazprom is a major problem, Chernomyrdin stressed. He recounted how Putin had reached an agreement on gas with PM Tymoshenko in Moscow October 2. Russia agreed to Tymoshenko's demand for Gazprom to bypass intermediary RosUkrEnergo. In return, Ukraine parastatal Neftohas would pay its arrears to RosUkrEnergo, which would in turn pay its arrears -- $1.5B -- to Gazprom. Ukraine/Naftohas has not lived up to the bargain. Instead, as every year since 2005, it is not paying its gas bill. Tymoshenko and Putin spoke of a three year phase-in for market pricing. Before that can happen, Ukraine must pay its arrears. "If you like them, help them" -------------- ¶5. (C) "Why should Russia subsidize Ukraine with cheap gas?" Chernomyrdin repeatedly asked. If the US wants to do so, fine; but Russia will not. If Russia is not paid for its gas, it becomes a burden on the Russian people. Russia does not have such a luxury at this time of economic crisis. Several times Chernomyrdin said (at first ironically, but each time more seriously): "you 'rich Americans' should give Ukraine the finances; if you like them, help them." Dismisses new GOU Framework -------------- ¶6. (C) Chernomyrdin dismissed a new framework the GOU has announced to improve interagency coordination of Russia policy, with National Security and Defense Council Secretary Bohatyriova empowered to lead new discussions with Russian counterparts. Existing frameworks are sufficient, Chernomyrdin said. Mechanisms for bilateral relations are already in place, such as the bi-national Presidential commission, its committees and sub-committees. ¶7. (C) Ambassador inquired whether Chernomyrdin thought Bohatyriova's assumption of the lead on Russia policy meant a diminution of the role of FM Ohryzko. Chernomyrdin thought it probably did. He finds the FM "difficult to understand." He faulted MFA for focusing on "internal things," (such promoting commemoration of Holodomor, the 1932-33 Terror Famine). NATO/MAP -------------- ¶8. (C) Ukraine has no claim on NATO membership if the process is based on fulfilling objective criteria, Chernomyrdin said. In any case, 70-80% of Ukrainians are opposed. Ukraine faces no threat; "no one will attack them." Yushchenko was disappointed no offer of MAP came at the December NATO Ministerial but remains convinced that "the Americans are eager to embrace him." Commenting on last August's events, Chernomyrdin observed that if Georgia did not have a "sick leader," nothing would have happened. Comment -------------- ¶9. (C) Chernomyrdin was emphatic about Ukraine's need to pay its gas debts. His repetition of points on this issue suggests that was the reason he sought the meeting. Now in his eighth year as Ambassador, Chernomyrdin retains influence, but less than when Kuchma, a close friend, was President. Given the length of his tenure, there are rumors that his time as Ambassador is drawing to an end. Some say his wife is ill and he would like to retire. Nonetheless he appeared in good spirits. He has noticeably lost weight in recent times, leading some to wonder about the state of his health. TAYLOR