ACTION REQUEST: POSSIBLE FAILURE OF THE

C O N F I D E N T I A L USNATO 000391

SIPDIS

E.O. 12958: DECL: 10/21/2018
TAGS: PREL MARR NATO PARM PGOV UP
SUBJECT: ACTION REQUEST: POSSIBLE FAILURE OF THE
NATO-UKRAINE TRUST FUND

REF: A. STATE 111716

B. KYIV 1257

C. KYIV 782

D. STATE 34695

E. 06 KIEV 2279

Classified By: CDA W.S. Reid III
for reasons 1.4 (b) and (d)


1. (C) This is an Action Request. Please see paragraph 8.


2. (C) Summary: After ongoing failures by Ukraine to meet its
obligations, the United States-led NATO Ukraine Trust Fund is
one month away from becoming the first Partnership for Peace
Trust Fund in NATO's history to fail. The project as
currently constituted, which provides for the destruction of
MANPADS, small arms/light weapons and munitions, must end by
31 December 2008. Any decisions on the survival of the
project and a possible extension must be taken no later than
November 14 in order for the NATO Maintenance and Supply
Agency (NAMSA) to have sufficient time to shut down the
project by the end of 2008. USNATO requests Department
concurrence with the NAMSA proposal to formally notify
Ukraine of its deadline, on the understanding that the United
States, NATO, donor nations, NAMSA, and Ukraine will all
continue efforts to seek a resumption of delivery of weapons
for destruction before the project is forced to close. End
Summary.


3. (C) After close to a year of failures by Ukraine to meet
its obligations (reftels),the United States-led NATO Ukraine
Trust Fund is one month away from becoming the first
Partnership for Peace Trust Fund in NATO's history to fail.
The project, as currently constituted, must end by 31
December 2008. The NATO Maintenance and Supply Agency
(NAMSA),the implementing agent for the trust fund, has
advised USNATO that any decisions on the survival of the
project and a possible extension must be taken no later than
November 14 in order for NAMSA to have sufficient time to
shut down the project by the end of 2008.


4. (C) The NATO-Ukraine Trust Fund demilitarization project
to destroy 1,000 Man-portable Air Defence System (MANPADS)
missiles, 15,000 tons of munitions and 400,000 SALW in
Ukraine is the first phase of a planned 12 year project to
destroy 133,000 tons of munitions and 1.5 million SALW. The
project, which was initiated in January 2006 at Ukraine's
request, is led by the United States with funds provided by
17 nations and the European Union. The aims of the project
and the obligations of Ukraine and NAMSA, as NATO,s
Executing Agency, were laid out in an Implementing Agreement
signed by both parties in November 2005. All 1,000 MANPADS
were successfully destroyed between July and September 2006.
The SALW element was initiated in January 2007 with the aim
of destroying 185,000 weapons in 2007 and the balance by the
end of 2008. However, to date, less than 135,000 SALW have
been destroyed because of the restrictions placed on the
release of weapons by the Cabinet of Ministers at the
insistence of the Ministries of Economics and Finance who
consider that these weapons are an asset that should be
retained with a view to selling them. Since this problem was
identified in mid-2007 all efforts to overcome the impasse,
in Kyiv, Washington and Brussels have been ineffective.


5. (C) NAMSA has written to USNATO to share that the
Ukrainian Ministry of Defense will resubmit the case by 30
October to the Cabinet of Ministers. The MOD will present a
redrafted justification based on the need for Ukraine to
fulfill its international obligations, and the poor economic
logic in seeking to sell these weapons. NAMSA has also
shared with USNATO the text of a letter to PM Tymoshenko
highlighting that failure to meet this mutually agreed
commitment is likely to have a negative effect on potential
donors to future assistance projects.


6. (U) Donor assistance to this project has been diverse,
including funding from 14 Allies (Bulgaria, Canada, Germany,
Hungary, Iceland, Latvia, Lithuania, Luxembourg, the
Netherlands, Norway, Slovakia, Turkey, United Kingdom, and
the U.S.),and five Partners (Austria, Ireland, Sweden,
Switzerland, and Ukraine). This project has also been a first
test case of the concept of EU funding for a NATO PfP Trust

Fund activity.


7. (C) NAMSA advises that in order to meet the end of 2008
deadline it needs to start the process of closing down the
project if deliveries of SALW earmarked for destruction have
not resumed by November 14. If SALW deliveries resume, and
the United States agrees the project should continue for an
additional year, we will have to provide confirmation to
NAMSA and notify the donors.


8. (C) Action Request: NAMSA has requested United States
approval, as lead nation, for the NAMSA General Manager to
write to the Ukrainian Defense minister, notifying him that,
after consultation with the Lead Nation, it will be necessary
to begin the closure of the project unless SALW deliveries
resume by 14 November. USNATO requests Department
concurrence with this proposal, on the understanding that the
United States, NATO, donor nations, NAMSA, and Ukraine will
all continue our efforts to seek an end to the impasse until
the project is forced to close. We understand from Embassy
Kyiv that a clause along lines of: "... although continuation
of project with funds already committed by partners could
allow for project to draw down beyond December 31, 2008"
might allow for greater flexibility in handling the situation
should deliveries of SALW fail to recommence. We offer this
suggestion for Washington's consideration with the
observation that such an approach would likely require
positive assent from each of the donors for their respective
funds to be used in this way. End Action Request.


9. (C) USNATO would like to again suggest that this issue
become the subject of seventh-floor conversations with
Ukrainian counterparts. Ukraine's reputation at NATO has
already been buffeted by internal political developments. A
NATO Trust Fund failure would attach Ukraine's failure to the
NATO Alliance brand, something that could well be highlighted
by critics of MAP for Ukraine. The NAMSA deadline falls just
after the November 12-13 meeting of NATO and Ukrainian
defense ministers in Tallinn, and less than three weeks
before NATO foreign ministers gather to consider the issue of
MAP for Ukraine. Both ministerial gatherings could be buoyed
from an announcement that a solution has been found, and that
Ukraine is working successfully with the NATO Trust Fund to
meets its obligations.


10. (SBU) Attached are texts of three pieces of key
correspondence received by USNATO on October 20:

A: NAMSA's October 20, 2008 e-mail to USNATO requesting
guidance
B: Text of an October 3 Ukrainian MOD letter to NAMSA
restating the MOD's commitment to completion of the project
and its intention to reapproach the Cabinet of Ministers by
October 30.
C: Text of a September 11, 2008 letter from the NAMSA General
Manager to PM Tymoshenko requesting her personal involvement
in resolving the impasse.

BEGIN TEXT OF CORRESPONDENCE:

-------------- --------------
TEXT OF THE OCTOBER 20 E-MAIL SENT TO USNATO BY THE
NAMSA DIRECTOR FOR LOGISTICS PROGRAMS AND OPERATIONS
-------------- --------------


Dear Mr. Greaney,
NAMSA's General Manager wrote to the Prime Minister of
Ukraine on 11 September (attached) outlining the problems
surrounding the Trust Fund project and requesting her
intervention to prevent the failure of the project. Last
week we received the attached reply signed by Deputy Minister
of Defence, I.L. Montrezor, writing on the instructions of
First Vice-Prime-Minister O.V.Turchynov. It is the first
time we have received in writing a plan to break the
longstanding deadlock over releasing SALW for demil. The
Ministry of Defence proposes to resubmit the case to the
Cabinet of Ministers with a redrafted justification based on
the need for Ukraine to fulfil its international obligations;
and to prepare a case proving the impracticality of
renovating the weapons for sale. They intend to submit the
relevant papers to the Cabinet of Ministers by 30 October.

As this is the first time we have received such a positive
response in writing from the Ministry of Defence, it is an
encouraging development. Before responding, we need guidance
from you as the representative of the Lead Nation.
In response to your recent informal discussion with NAMSA, we
have reviewed an exit strategy for this project. As it is
currently constituted, the project must end on 31 December

2008. Taking into consideration the need to send notices of
termination to contractors at least 30 days in advance, the
need to give a minimum of 30 days notice to our employees in
Ukraine and to close down our office in Kiev, the deadline
for deciding whether to continue or terminate the project
should be 14 November.
We propose that NAMSA should start the process of closing
down the project if deliveries of SALW earmarked for
destruction have not resumed to Kamyanets-Podilskyy by that
date. If you agree that, in the event of SALW deliveries
resuming, the project should continue for an additional year
(as previously discussed) we will need your formal
confirmation so that we can take action to revise the budget
and the various agreements through which the project is
constituted.
We propose that our General Manager should reply to the
Deputy Minister's letter stating that, after consultation
with the Lead Nation, it will be necessary to begin the
closure of the project unless SALW deliveries resume by 14
November. We would therefore appreciate your early agreement
to this action, in coordination with NATO International
Staff.
Finally, and for your information, the EWI arrived in Odessa
on 14 October and is awaiting customs clearance. It will
stay there until this issue is resolved.

Regards,
Linda Bird

Linda Bird
RADM, SC, USN (ret)
NATO Maintenance and Supply Agency (NAMSA)
Director Logistics Programmes and Operations
352 3063 6502
lbird@namsa.nato.int

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TEXT THE UKRAINAIN DEFENSE MINISTRY'S LETTER TO NAMSA:
-------------- --------------

Office in Ukraine
Mr. STEVE BROWN
Kurska 13 "Z", Kyiv, 03049 Ukraine

Dear Mr. Brown
The Ministry of Defence of Ukraine presents its compliments
to You and would like to express gratitude for understanding
of challenges the Ukrainian society faces currently.
I would like to inform, that under the instruction by the
First Vice-Prime-Minister of Ukraine O.V.Turchynov of 26
September 2008 No.46658/1/1-08, consideration of Your letter
and providing information regarding continuation of work to
implement the terms and conditions of the Implementing
Agreement between the Cabinet of Ministers of Ukraine and the
NATO Maintenance and Supply Organisation (NAMSO) to
demilitarize man-portable air-defence systems, small arms and
light weapons and conventional ammunition, has been imposed
on the Ministry of Defence of Ukraine.
In order to implement the above mentioned agreement, a
purchase order LU-UM/4500161657 of 17.10.2006 was signed by
the Ministry of Defence of Ukraine, the State Enterprise of
the Ministry of Defence of Ukraine "Ukroboronleasing" and
MANSA to demilitarize 400 thousand small arms.
108 308 weapons had been demilitarized in 2007. During the
first half of 2008, some 24 519 small arms have been
demilitarized. The total volume of the demilitarized small
arms is equal to 33.2 per cent of the planned.
The Ministry of Defence of Ukraine had established the Centre
of materiel demilitarisation (town of Kamyanets-Podilskyy)
through the State Enterprise &Ukroboronleasing8. At
present, works at the named Centre for its intended purpose
have been suspended.
The Ministry of Defence of Ukraine works to find ways of
unconditional fulfilment of the international obligations of
Ukraine.

In the opinion of the experts of the Ministry of Defence of
Ukraine, fulfilment of the Implementing Agreement and
ensuring the Ukraine's image of a reliable partner can be
achieved in two ways:
by initiating the repeated approach to the Cabinet of
Ministers of Ukraine (with providing a relevant economic
justification) to consider the issue of approving the draft
List of small arms earmarked for demilitarization in line
with the Implementing Agreement with total number of about
260 thousand weapons;
by writing off the small arms earmarked for destruction
according to the Implementing Agreement, after preparation of
economical justification proving impracticality of renovation
(capital repairs),and enlisting the small arms in the
general list of wear and tear materiel subject to approval by
the Ministry of Defence of Ukraine.
Aimed at continuation of work connected with the discussed
issue, it is planned to prepare a technical and economical
justification of inefficiency of repairs as well as further
storage of the defined quantity of the small arms, followed
up with preparation of the necessary documents for
demilitarization by 30 October 2008.
After completion of the above coordination procedures, the
Ministry of Defence of Ukraine plans to resume work of the
Centre of materiel demilitarisation (town of
Kamyanets-Podilskyy) through the State Enterprise
"Ukroboronleasing" to its full capacity.
Besides, it is expected to extend the completion date of the
contract LU-UM/4500161657 of 17.10.2006 signed by the
Ministry of Defence of Ukraine, the State Enterprise of the
Ministry of Defence of Ukraine "Ukroboronleasing" and NAMSA.
Please inform the General Manager of the NATO Maintenance and
Supply Agency (NAMSA) Mr. Karl-Heinz Mnzner about aspiration
of the Ministry of Defence of Ukraine to complete
demilitarization of the small arms in the framework of the
NATO Partnership for Peace Trust Fund Demilitarization
Project.
Yours respectfully
Deputy of the Minister of Defence of Ukrain signed
I.L.MONTREZOR
Executor: Khokhol H.V.
Tel. 271-12-27
004357 *

-------------- --------------
TEXT OF NAMSA GENERAL MANAGER'S LETTER TO PM TYMOSHENKO:
-------------- --------------


Karl-Heinz MNZNER
Major General (Ret)
General Manager

G/2008/486 11 September 2008

Her Excellency Ms Yulia Tymoshenko
Prime Minister of Ukraine
Cabinet of Ministers of Ukraine
12/2 Hrushevsky Street
01008 Kyiv
Ukraine

The NATO Maintenance and Supply Agency (NAMSA) presents its
compliments to the Government of Ukraine and to you
personally.

I am writing to request your assistance in securing the
release for destruction of Small Arms and Light Weapons
(SALW) within the framework of the NATO Partnership for Peace
(PfP) Trust Fund demilitarization project to destroy 1,000
Man-portable Air Defence System (MANPADS) missiles, 15,000
tonnes of munitions and 400,000 SALW in Ukraine. This is the
first phase of a planned 12 year project to destroy 133,000
tonnes of munitions and 1.5 million SALW.

The project, which was initiated in January 2006 at
Ukraine,s request, is led by the United States with funds
provided by 17 nations and the European Union. The aims of
the project and the obligations of Ukraine and NAMSA, as
NATO,s Executing Agency, were laid out in an Implementing
Agreement signed by both parties in November 2005.

The 1,000 MANPADS were successfully destroyed between July
and September 2006. The SALW element was initiated in
January 2007 with the aim of destroying 185,000 weapons in
2007 and the balance by the end of 2008. However, to date,
less than 135,000 SALW have been destroyed because of the
restrictions placed on the release of weapons by the Cabinet
of Ministers at the insistence, we understand, of the
Ministries of Economics and Finance who consider that these
weapons are an asset and should be retained with a view to
selling them.

Since this problem was identified in mid-2007 all efforts to
overcome the impasse, by NAMSA and the Lead Nation in
cooperation with the Ministry of Defence of Ukraine, have
proved ineffective. Failure to meet this mutually agreed
commitment is likely to have a negative effect on potential
donors to other projects . The result will be that not only
this project and its remaining phases will fail, but further
support to Ukraine,s efforts to reduce the threat from its
very substantial munitions and weapons stockpiles will be
jeopardised.
May I therefore respectfully request your personal
involvement in resolving this fundamental issue at the
earliest opportunity. May I also assure you of our continued
support and best efforts to secure a successful outcome to
all aspects of the demilitarization project.
Copy to:
Mr Vikto Baloha
Head of Secretariat to
The President of Ukraine
11 Bankova Street
01220 Kyiv
Ukraine

END TEXT OF CORRESPONDENCE
VOLKER