UKRAINE'S DEPUTY PM ON MONEY LAUNDERING,

C O N F I D E N T I A L SECTION 01 OF 03 KYIV 000193 SIPDIS STATE FOR EUR/UMB AND EEB/OMA E.O. 12958: DECL: 02/04/2030 TAGS: EFIN ECON ENRG PGOV UP SUBJECT: UKRAINE'S DEPUTY PM ON MONEY LAUNDERING, ELECTIONS, IMF REF: KYIV 192 Classified By: Ambassador John F. Tefft for Reasons 1.4 (b) and (d) ¶1. (C) Summary. In a broad-ranging discussion with the Ambassador on February 2, Ukraine's Deputy Prime Minister Nemyrya expressed concern about Ukraine being designated as a high-risk country at the Financial Action Task Force (FATF) plenary meeting in Abu Dhabi in mid-February. Nemyrya also raised concerns about moves to change the presidential election law that, in Nemyrya's view, could disadvantage Prime Minister Tymoshenko. If elected, Tymoshenko would seek to form a new coalition in the parliament without calling parliamentary elections, Nemyrya stated, giving the new government eighteen months to work on reforms before 2012 parliamentary campaigns kicked off. Tymoshenko would also work quickly to bring the International Monetary Fund (IMF) back to Ukraine. Nemyrya appeared open to examining the need for a feasibility study before announcing a tender for Ukraine's planned nuclear fuel fabrication plant. The Ambassador also urged Ukraine to make a decision on the removal of highly enriched uranium by the end of March. End Summary. -------------- -- Money Laundering: Ukraine Looking for More Time -------------- -- ¶2. (C) Ukraine's Deputy Prime Minister Hryhoriy Nemyrya requested to see the Ambassador on February 2 to express concern about the mid-February FATF plenary session in Abu Dhabi, at which Ukraine would likely be named a high-risk country with regards to money laundering. Nemyrya asked for an additional six months to make changes to Ukraine's money laundering regime to bring it into compliance with FATF standards. Nemyrya stated that Prime Minister Tymoshenko and her government had worked hard to address deficiencies in Ukraine's money laundering regime, but that their efforts were blocked by the opposition as a result of the upcoming presidential election. He said that the GOU was willing to issue a letter of commitment to implement reform, including revisions to money laundering legislation. Nemyrya also offered to head Ukraine's delegation to Abu Dhabi if it would help show political commitment and result in a postponement of the decision to list Ukraine. The GOU would continue to make every effort to push legislative changes through the parliament in advance of the Abu Dhabi meetings; however, Nemyrya acknowledged that the short timeframe and upcoming presidential elections made it difficult to predict whether there would be positive results in the near term. ¶3. (C) Nemyrya also stated that Prime Minister Tymoshenko intended to resume efforts to finalize the draft Criminal Procedure Code and the new draft Law on the Procuracy. This would be one of the first tasks after the elections, he said. Both of these efforts would bring needed reform to the criminal justice system. -------------- - Concern About Attempts to Change Election Laws -------------- - ¶4. (C) Turning to the February 7 presidential elections, Nemyrya raised concerns about attempts by opposition Party of Regions parliamentarians to pass amendments to the election law. (Note: Ukraine's parliament voted in favor of election law changes the next day, February 3, and President Yushchenko has signed it into law (reftel).) Nemyrya argued that Party of Regions-supported changes would disadvantage Tymoshenko in the presidential elections on February 7. Nemyrya stressed that Tymoshenko, herself, had no plans to disrupt the election process in any way because election fraud would contravene her personal, very strongly-held, values. Nemyrya urged the international community to be vigilant against last-minute attempts to change the rules that would favor opposition leader Victor Yanukovych. -------------- Tymoshenko: Prefers to Form a New Coalition -------------- ¶5. (C) Tymoshenko would not seek early parliamentary elections if she won the presidency and would prefer to form a new governing coalition, according to Nemyrya. The KYIV 00000193 002 OF 003 government would then have at least eighteen months to work on the reform agenda before pre-election campaigning for the 2012 parliamentary elections started up. Tymoshenko saw this as the best scenario for the country, Nemyrya stated. -------------- IMF: Meetings with Strauss-Kahn in Davos -------------- ¶6. (C) On the sidelines of World Economic Forum meetings in Davos, Nemyrya said he explored options with IMF Managing Director Strauss-Kahn for gaining access to reserves held by the National Bank of Ukraine (NBU). The NBU continued to resist transferring money to the government, according to Nemyrya. As a result, the GOU needed to again ask for IMF intervention. Nemyrya had asked Strauss-Kahn to either: 1) issue an IMF press statement referring to its decision of December 30 to allow the NBU to lower its net international reserve floor by $2 b; 2) send a letter to NBU chairman Volodymyr Stelmakh urging cooperation with the GOU; or 3) make a phone call to Stelmakh to urge cooperation. ¶7. (C) Nemyrya reaffirmed that Tymoshenko was interested in moving forward with the IMF and economic reform as soon as possible after the elections. He was optimistic that an IMF technical team would travel to Ukraine immediately after the election to work with the Ministry of Finance and complete the third review of the IMF program. Nemyrya argued that the IMF should drop its demand that Ukraine pass a 2010 budget before the IMF would release the next tranche of funding. He argued that submitting a 2010 budget to parliament showed sufficient political intent and should be enough to satisfy the IMF. Nemyrya conceded that Ukraine may need to ask for additional funds beyond the $16.4 billion envisioned by the current program from the IMF. However, Nemyrya was confident that resumption of IMF lending would unlock other funds, for example from the European Union. -------------- Nuclear Fuel Fabrication Plant -------------- ¶8. (C) The Ambassador shared concerns about the tender process for Ukraine's planned nuclear fuel fabrication plant and urged the GOU to consider doing a feasibility study before reissuing the tender. Problems with the most recent tender draft, which had appeared on the Ministry of Energy and Fuel website but had not yet been issued formally, included: requirements for full scope supply; requirements to guarantee financing; and language regarding operating experience and licensing that work against Westinghouse and do not include attention to fuel economies or the importance of diversification. The Ambassador reported that Westinghouse would be unlikely to bid the deal if the conditions of the tender were not adjusted. Nemyrya said he had not been familiar with Westinghouse,s reaction, but he welcomed the information and would take it into consideration. --- HEU --- ¶9. (C) The Ambassador suggested that it would be important to have a decision on the issue of highly enriched uranium by the end of March, allowing for removal from Ukraine by the end of 2010. It would be good news to take to the nuclear security conference in Washington in April as well. Nemyrya did not have a substantive response but in turn noted that Ukraine was being helpful on other issues important to the USG. -------------- Comment -------------- ¶10. (C) Nemyrya was subdued during the meeting and appeared genuinely concerned about Tymoshenko's chances of winning the presidential elections. He wanted to send the message that Tymoshenko and her government had worked hard, including in the area of money laundering, but that they had been blocked at every turn in recent months by the opposition. In our assessment, it remains unlikely that the government will be able to push through any final reforms until after the new president and ruling coalition are in place. KYIV 00000193 003 OF 003 TEFFT