UKRAINIAN ECONOMIC COUNSELOR DISCUSSES RUSSIA

C O N F I D E N T I A L MOSCOW 002295 SIPDIS WHITE HOUSE ALSO FOR USTR: WILSON, KLEIN AND HAFNER GENEVA FOR WTO REPS E.O. 12958: DECL: 09/04/2019 TAGS: PREL ETRD EPET RS WTO UA SUBJECT: UKRAINIAN ECONOMIC COUNSELOR DISCUSSES RUSSIA REF: A. MOSCOW 2277 ¶B. MOSCOW 1538 Classified By: DCM Eric Rubin for reasons 1.4 b&d. ¶1. (C) On August 13, econoff paid a courtesy call on Ukrainian Trade and Economic Counselor in Moscow Vladimir Zaritsky. During the meeting, Zaritsky became voluble on the matter of Russia and its "growing impunity in the region," especially as its economic power increases. He expressed concern regarding Medvedev's political statements, but emphasized that it is Ukraine's policy to be balanced and cautious in order to avoid a "Georgia scenario." ¶2. (C) Zaritsky then embarked on a laundry list of points of which he felt the USG should be aware. He stated that while Ukraine is Russia's fifth largest trade partner, they expect trade between the two countries to drop by 45% in 2009 due to the financial crisis. He noted that traditionally Ukraine's negative trade balance with Russia is billions of dollars, but as of June 2009, it was only USD 900 million. (Note: These lower trade figures reflect the much lower gas volumes Ukraine took this year. End note.) He added that while most economic issues between the two nations should be handled through the bilateral inter-governmental Committee on Economic Cooperation headed by the Prime Ministers, its existence does not seem to have prevented confrontations. In fact, Ukraine planned on sending a delegation to Moscow soon to discuss a recently announced safeguard duty of 28.1% against steel pipes. (Note: While the duty does impact Ukraine, it also affects the EU and China. End note.) ¶3. (C) Zaritsky noted that Ukraine is following Russia's WTO accession closely. He thought that Russia's decision to try to join in a Customs Union (Ref B) with Belarus and Kazakhstan was inappropriate. He stated that Russia was trying to delay accession to the WTO in order to introduce protectionist measures and simultaneously "blackmail the U.S. and WTO into giving Russia better terms." Zaritsky added that Ukraine joined the Working Party of Russia's accession as soon as it completed its own accession in May 2008. And, while Ukraine has not done so, "We stand ready to request bilateral negotiations at any time." ¶4. (C) Zaritsky went on to note that, first and foremost, Ukraine wants stability in the gas sphere. He felt that although Russia has no real reason to do so, it was doing everything possible to delay negotiations on gas payments in order to force Ukraine to negotiate during the cold season. He believes it is because Russia does not like the fact that the EU is discussing how to help Ukraine modernize its gas transportation system. (Note: These comments predate recent positive announcements by Gazprom and by Ukrainian PM Tymoshenko on Russian-Ukrainian gas relations (Ref A). End Note.) Zaritsky went on to praise the Nabucco pipeline, saying that it would mean diversification and added that Ukraine was willing to help in its construction as it has experience with gas transportation and pipe building. He also called the North and South Stream pipelines examples of Russia's attempts to expand its economic influence throughout Eastern Europe. ¶5. (C) Comment: Zaritsky obviously saw the meeting as an opportunity to vent frustrations about a challenging neighbor he has to deal with professionally each day. We thought this perspective might be of interest to those who follow the Russia-Ukraine relationship. End Comment. Beyrle