UKRAINE: AMBASSADOR IN LVIV HEARS VIEWS ON EURO

C O N F I D E N T I A L KYIV 000455 SIPDIS SIPDIS E.O. 12958: DECL: 03/24/2016 TAGS: ECON PGOV PHUM UP SUBJECT: UKRAINE: AMBASSADOR IN LVIV HEARS VIEWS ON EURO 2012, NATO, AND NEED FOR MORE LOCAL AUTONOMY Classified By: Ambassador for reasons 1.4 (b) and (d). ¶1. (C) Summary and Comment: During a February 19-21 visit to the city of Lviv in western Ukraine, the Ambassador met with the First Deputy Oblast Governor Valery Pyatak, Lviv Mayor Andriy Sadoviy, and a group of young local politicians representing the political parties Pora, Svoboda, Ukrainian People's Party (UNP),Reforms and Order, and Kostenko-Plyusch in the municipal or oblast councils. They were generally optimistic that preparations for the 2012 UEFA European Football Championship would be successful, but all noted serious challenges with transportation infrastructure and expressed a general desire for greater fiscal and political autonomy from the national government. Given that this was a western Ukrainian audience, not surprisingly, all supported closer ties with the EU and NATO. ¶2. (C) Comment: All agreed with the Ambassador that private investment would be crucial to the successful outcome of Euro ¶2012. We are concerned, however, by the sense in Lviv that the central government will wait until the last possible moment to provide the needed support and resources to local authorities to address related infrastructure problems such as needed improvements to the Lviv airport. In fact, some are now arguing that the matches scheduled to be played in Lviv will be transferred to Odesa which has a better airport and more developed infrastructure. Many also expressed concern that Ukraine needed a strong information campaign to inform the Ukrainian public at large about the political nature of the alliance and long-term benefits of closer ties with NATO for Ukraine. End Summary and Comment. Few Comments on Lviv Governor's Surprise Resignation -------------- -------------- ¶3. (C) Emboffs were informed hours prior to the scheduled meeting with Oblast Governor Petro Oliynyk on February 19 that his deputy Valery Pyatak would sit in for him because of Oliynyk's urgent travel to Kyiv. Soon afterwards, media sources announced that Oliynyk, who had held the post since 2005, had submitted his resignation and there was speculation that he was forced to resign by Presidential Secretariat Chief of Staff Viktor Baloha. Pyatak told Ambassador Taylor that he was representing the oblast in his capacity as deputy governor until President Yushchenko issued a decree accepting Olinyuk's resignation. (Note: President Yushchenko accepted Olinyuk's resignation on February 20. End note.) Pyatak did not give any more details on the resignation and focused his discussion on economic themes. Lviv Mayor Andriy Sadoviy explained in a separate meeting that the resignation was not yet official, but seemed to expect that Yushchenko would accept the resignation and expressed hope for a good replacement. There was little additional comment on the governor's resignation at the meeting with the young politicians. Voldymyr Hirnyak from the UNP faction of the Lviv Municipal Council said that there were three possible candidates for the governorship and added that media reports that he was forced by Kyiv to resign reminded him of the Kuchma Era. (Note: On February 26, the media reported that businessman Mykola Kmit will soon be named as the new governor and, according to the presidential website, former governor Oliynyk had been appointed as a presidential advisor. End note.) Preparations for Euro 2012 -------------- ¶4. (C) While all the interlocutors were optimistic that Lviv would be ready for the 2012 UEFA Championship to be co-hosted by Ukraine and Poland, there was a consensus that much needed to be done - and quickly - to prepare for the games. The First Deputy Oblast Governor, Mayor, and young politicians all highlighted the urgent need to develop infrastructure for the event - especially Lviv's airport. Mayor Sadoviy explained that the city will have to accomplish 30-40 years of work in a period of 2.5 years at an estimated cost of 800 million USD (4 billion UAH) with only 300 million USD (1.5 billion UAH) expected from the government. Sadoviy complained that the cities in Ukraine hosting the games needed more funding, but tax revenues collected locally were going back to the central government. Sadoviy complained that the Ministry of Transportation had delayed the handover of the airport in Lviv to the city preventing work on a new terminal to accommodate the expected influx of visitors for the games. He criticized the National Agency for Preparing and Hosting the 2012 European Soccer Championship formed by the Cabinet of Ministers in October 2007 and headed by Yevhen Chervonenko for lacking the authority to accomplish its mission. (Note: There were recent reports in the media that UEFA was considering moving the venue of the games from Lviv SIPDIS to Odesa. The reports have not been confirmed. End note.) ¶5. (C) Deputy Governor Pyatak said that the current organization to prepare for the games was not working well and that the central government needed to make hosting the 2012 games a top priority. He felt the government must establish clear lines of authority to avoid waste and duplicated efforts. Echoing Mayor Sadoviy, Pyatak highlighted the need to improve Lviv's transportation infrastructure, especially the airport. Among the young politicians, Petro Adamyk of the Pora faction warned that the city's committee responsible for preparing for the games had collective responsibility, but that no one person was accountable for results. He added that the biggest hindrance was with the central government where responsibilities had not been clearly delineated. Adamyk echoed the concerns raised by the mayor and deputy governor that the local government needed to retain at least 50 percent of the tax revenues collected in the oblast to improve infrastructure. Oleh Nimchynov of the Kotsenko-Plyusch Bloc said that the mayor needed to do a better job of listening and responding to concerns from city council members and to increase the participation of private business. Markiyan Ivashchyshyn of the Pora Party complained that government corruption was the biggest problem and that he did not expect to see any progress for at least a year until the public becomes alarmed, thereby forcing the government to mobilize its efforts. All agreed on the need to stimulate private investment and thought that the games would help Ukraine move closer to Europe. Local Governments want more Revenues and Authority -------------- -------------- ¶6. (C) There was consensus among all the interlocutors that that the central government should allow oblast and local governments to keep more tax revenues. Mayor Sadoviy complained that 80 percent of the taxes collected by local governments went to Kyiv, leaving local authorities with too little to fund education, social services, and utility infrastructure. He felt a 50/50 split would be equitable and cited the recent gas explosion of a building in Lviv (resulting in one fatality) as an example of the poor state of the city's infrastructure. Deputy Governor Pyatak emphasized the need for the oblast to have more control over the budget to support education and other services to the local governments in the oblast. Volodymyr Hirnyak, a member of the UNP faction of the Lviv Municipal Council, echoed the mayor's suggestion that Lviv retain 50 percent of its tax revenues while Oleh Bas of the Reforms and Order Party and Andriy Khomytskiy called for broader reforms to the tax system including changing the provisions on property and income taxes. ¶7. (C) Mayor Sadoviy lamented that too much power was concentrated in Kyiv and felt that it was "absurd" that he did not have control over the police, tax collectors, and emergency response services. When asked about possible changes to the constitution that would shift more power to local government, the mayor complained that the central government needed to understand that cities and local governments carry most of the burden of Ukraine's social and political problems. He said that elected oblast officials, including the governor, should be more accountable to voters and expressed hope for open voter lists in the future. Deputy Governor Pyatak said that Ukraine is moving towards a constitution with a fully proportional system, but said that as long as city and regional councils are elected directly, the government needs to look at other models, like the Polish system, before making a final decision on a system of directly electing oblast governors. From the young politicians, there was a consensus supporting the devolution of authority to local governments and general hope that constitutional reforms currently under consideration would move in that direction. Strong Support for NATO and Euro Integration -------------- ¶8. (C) All of the interlocutors expressed support for closer ties with the EU and NATO. Mayor Sadoviy believed that NATO accession would help to convince the rest of the country that closer ties to the West would be good for Ukraine. The Deputy Governor stated that NATO and EU accession would be good for the entire country, but acknowledged that Lviv Oblast's historical ties with Poland gave it a different perspective and more positive view towards NATO than other parts of the country. All of the young politicians expressed support for NATO and EU accession, but views on the specifics were varied. While representatives from the Kotsenko-Plyusch Bloc and UNP stated unqualified support for NATO accession, members from the Pora Party noted that the U.S. had to continue making its case for the political and not just the military aspect of NATO to convince the Ukrainian public at large. In addition, they noted that the recent recognition of Kosovo by the U.S. and many European countries could complicate matters because Slavs will tend to side with the Serbians. The nationalist Svoboda faction member stated that his party will support NATO but also said that Ukraine needed to thoroughly consider its options, including involvement in the EU's rapid reaction force, and that Ukraine should not ally itself too closely with any alliance. ¶9. (U) Visit Embassy Kyiv's classified website: www.state.sgov.gov/p/eur/kiev. Taylor