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.

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Money Laundering: Ukraine Looking for More Time
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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.

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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.

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Tymoshenko: Prefers to Form a New Coalition
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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

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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.

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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.

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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.

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HEU
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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.

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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.

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TEFFT