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Poland, Belarus & Ukraine Report: January 10, 2006

10 January 2006, Volume 8, Number 1
PARLIAMENT SACKS GOVERNMENT OVER GAS DEAL. Ukraine's parliament, the Verkhovna Rada, on 10 January voted to dismiss Prime Minister Yuriy Yekhanurov's government, accusing it of creating a "threat to national security" by striking a deal recently on Russian gas supplies to Ukraine in 2006.

The move appears aimed at dealing a blow to President Viktor Yushchenko and his allies ahead of the country's parliamentary elections in March.

The no-confidence motion was supported by a number of opposition lawmakers, including members of the Regions of Ukraine led by former Prime Minister Viktor Yanukovych and the bloc of former Prime Minister Yuliya Tymoshenko.

Two hundred and fifty deputies in the 450-seat parliament supported the motion, well in excess of the 226 needed for passage.

Ukrainian Fuel and Energy Minister Ivan Plachkov shunned the 10 January parliamentary debate. Foreign Minister Boris Tarasyuk and Oleksiy Ivchenko, the head of the state-run Naftohaz Ukrayiny oil and gas concern, were also absent.

The sacking of the cabinet took place after Yekhanurov attempted to convince lawmakers the terms of the deal were advantageous to Ukraine, and that the price Kyiv will pay for its gas supplies was reasonable. Yekhanurov also intimated that rival political groups had attempted to use the issue for political gain.

"The importance of the gas issue captivated our society so much that it was commented on even by people who due to their [lack of] professional qualities could not grasp the complexity and the scale of the problem of energy supplies to our country, and through some of these comments, certain Ukrainian figures harmed the country's interests, politically and economically," Yekhanurov told the Verkhovna Rada.

Yekhanurov might be forgiven for expecting that his cabinet would be praised, rather than scolded, for the gas deal.

Under the 4 January accord -- between Ukraine's oil and gas company Naftohaz Ukrayiny, Russia's gas monopoly Gazprom, and a Swiss-based intermediary -- Ukraine is to obtain 34 billion cubic meters of gas in 2006 from Russia for $95 per 1,000 cubic meters.

Gazprom initially demanded a price of $230 per 1,000 cubic meters in 2006. The deal also provided for a rise in the tariff Russia paid to Ukraine to transport its gas by pipeline to markets in Western Europe.

But critics of the gas deal -- including the very vocal Yuliya Tymoshenko, a former Yushchenko ally who was ousted in September 2005 on charges of abuse of office -- said the deal is valid for only the first six months of the year and will be revised upward after that.

They also slammed the government for making RosUkrEnergo -- an obscure Swiss-based intermediary created by Gazprom -- the monopolist responsible for gas supplies to Ukraine.

According to Ukrainian critics of the gas deal, Kyiv should not have reneged on an existing contract with Gazprom of 2002. That deal fixed both the transit tariff and the gas price at rates beneficial for Ukraine.

Instead of signing a new accord, they argued, Kyiv should have defended the old one before an international arbitration panel.

RFE/RL regional analyst Roman Kupchinsky said that today's move could have an impact on the 4 January gas deal, which has been finalized on the company level but has yet to be sealed with an intergovernmental agreement between Kyiv and Moscow.

"The major impact this is going to have will be on the agreements on gas sales between Russia and Ukraine," Kupchinsky said. "You have to remember that the gas sale is always agreed upon in two steps. One is an agreement between companies -- in this case, Gazprom and Naftohaz Ukraine -- and the second part is an intergovernment agreement between Ukraine and Russia on the same matter, on gas sales. Yekhanurov's government prepared a draft proposal, which has not been submitted yet to [Russian Prime Minister Mikhail] Fradkov's government, to the Russian government. The new government that comes in might be under tremendous pressure to reject the Russian, the Gazprom-type agreement and look for different solutions to gas problems."

The sacking of Yekhanurov's cabinet also presents Ukraine's political establishment with a serious legal puzzle: what to do now?

According to a constitutional reform that took effect on 1 January, it is the parliament that now has the critical say in forming a governing coalition and appointing a new cabinet.

But the reformed text stipulates that those new powers belong only to the legislature that is to be elected in March -- not to the sitting parliament.

Kupchinsky said the heated rivalry of politicians like Tymoshenko, combined with such political loopholes, create uncertainties about what will happen next.

"[Tymoshenko] was fired by the president," Kupchinsky said. "Here the parliament is taking advantage of the situation of the political reform that changed the political balance of forces in the country in 1 January. So now, parliament has the power to remove the government. They said that they will keep Yekhanurov in as acting prime minister, but we'll see what that means, what the implications will be in terms of the other ministries, of course."

It is difficult to say for the time being whether a new cabinet will be formed before the parliamentary vote on 26 March or whether Yekhanurov will remain as a caretaker until the elections.

For now, lawmakers have asked the government to continue work until a new cabinet is formed. (Jan Maksymiuk and RFE/RL Newsroom)

FIVE YEARS AND ONE REVOLUTION LATER, GONGADZE CASE GOES TO COURT. The trial of three former Interior Ministry officers for their alleged roles in the 2000 killing of journalist Heorhiy Gongadze opened briefly in a packed in the Ukrainian capital on 9 January before the presiding judge adjourned the proceedings until 23 January. Relatives of the slain journalist and their lawyers said they were "surprised" by Kyiv Appeals Court Judge Iryna Grygoryeva's decision to adjourn the trial for so long -- a move she announced after one of the defendants, former Interior Ministry officer Mykola Protasov, reportedly felt faint in the courtroom.

Reports from Kyiv said dozens of relatives, lawyers, and prosecutors were packing the tiny courtroom, which was too small to hold the crowd of reporters covering the event.

Journalists tried to force their way into the room during the recess, arguing that the hearings were open to the public and that all media should be allowed to attend the trial. But guards drove them back.

Among those who attended the trial was Gongadze's widow, Myroslava, who arrived on 8 January from the United States.

Addressing reporters outside the courtroom, she said those truly responsible for her husband's killing have not yet been arrested.

"I don't think this [trial] is enough, because these [three] people [defendants Valeriy Kostenko, Protasov, and Oleksandr Popovych] had no personal motives for killing Heorhiy," Gongadze said. "They were carrying out a criminal order. They had the option of not carrying it out. They could have saved their honor and they could have refused to follow the order, but they killed Heorhiy and they must be punished. The next step will be when the organizers of this crime are brought to justice. Their identities are known and they must be punished along with the people sitting in the dock today."

In comments made later to RFE/RL's Ukrainian Service, Myroslava Gongadze accused former Interior Ministry Oleksiy Pukach of being one of the main organizers behind her husband's killing.

"Pukach directly issued orders," she said. "Pukach took a direct part in this assassination. So far, nothing has been said [in court] about those who ordered the killing, and we intend to invite many witnesses who will be able to shed a lot of light on this case, even in this court session."

Pukach is wanted in Ukraine, but remains at large. His whereabouts are unknown.

Many in Ukraine suspect former President Leonid Kuchma and other top state officials of orchestrating the murder of Gongadze, who wrote about high-level corruption. Kuchma denies the accusations.

Current President Viktor Yushchenko, who took over from Kuchma following the 2004-2005 Orange Revolution, has publicly vowed to resolve the Gongadze case, calling it a priority.

Gongadze's mother Lesya has refused to the attend today's court hearings, saying she no longer has faith in the Ukrainian justice system.

In comments made on 8 January, she said she was disappointed with a 19 December preliminary hearing at which the judge reportedly turned down her request for an additional probe to help find those responsible for organizing the killing.

Addressing reporters before today�s session opened, however, Lesya Gongadze�s lawyer, Andriy Fedur, said he attached great importance to the hearings. "For me, it will be very important to see what kind of statements will be made and what kind of questions will be asked, whether the trial will be the same as it was on the 19th, when the prosecutor acted as the main defender of the accused, or whether it will finally consider the real subject," Fedur said. "So, for me personally, this will be a key court hearing."

The 31-year-old Gongadze was abducted in 2000. His beheaded body was discovered in a forest near Kyiv.

Gongadze's murder is believed to have played a key role in eroding public support for Kuchma and his government. (RFE/RL Ukrainain Service and RFE/RL Newsroom)

QUESTIONS RAISED ABOUT GAS-DEAL INTERMEDIARY. The solution to the ongoing gas conflict reached between Gazprom and Naftohaz Ukrayina, the Ukrainian state oil and gas company, announced on 4 January raises more questions than it does answers.

Gazprom head Aleksei Miller announced that an offshore company, RosUkrEnergo, will be the middleman for gas sales from Russia, Turkmenistan, Uzbekistan, and Kazakhstan to Ukraine. The company will sell a mixture of gas from these countries to Ukraine at a price of $95 per 1,000 cubic meters. Gazprom will sell RosUkrEnergo gas at $230 per 1,000 cubic meters.

RosUkrEnergo has previously acted as the intermediary for Turkmen gas sales to Ukraine. It took over the role of another offshore company formed in December 2001 in Hungary, Eural Trans Gas (ETG).

In December 2002, ETG signed contracts with Gazprom and Naftohaz Ukrayina to act as the intermediary for gas shipments from Turkmenistan to Ukraine. As the intermediary, they ensured payment of all transit costs and duties. The Ukrainian side paid ETG with 13 billion cubic meters of gas for its services. ETG then sold this gas on to Europe at substantially higher prices.

ETG soon came under suspicion in the media of being involved with Russian organized-crime figures. In July 2004, during a Ukrainian-Russian business forum in Yalta, then Russian and Ukrainian presidents, Vladimir Putin and Leonid Kuchma, respectively, announced that ETG would be replaced by a new company, RosUkrEnergo.

RosUkrEnergo was touted as a transparent successor to ETG and was registered in Zug, Switzerland on 22 July 2004. It consisted on the Russian side of Arosgas Holdings AG, named in the founding documents as a company "affiliated with GazpromBank" and GazpromBank itself, a wholly owned Gazprom subsidiary.

On the Ukrainian side, RosUkrEnergo is represented by Raiffeisen Investment AG, a member of the Raiffeisen central bank group. Raiffeisen Investment CEO Wolfgang Putschek stated that his company is not a partner in RosUkrEnergo, but merely manages the portfolios of a "number of private Ukrainian investors" in RosUkrEnergo, "The Moscow Times" reported on 28 July. Putschek refused to name these investors citing Austrian confidentiality laws.

When the new Ukrainian government of Viktor Yushchenko came to power in January 2005, one of the first acts of Prime Minister Yuliya Tymoshenko was to call for a criminal investigation into RosUkrEnergo, calling it a "criminal enterprise." Shortly afterwards, Oleksandr Turchinov, the head of the Ukrainian security service, the SBU, announced that a criminal case had been launched against RosUkrEnergo.

The investigation abruptly ended in mid-August 2005. Soon after Turchynov's removal as head of the SBU, the Ukrainian daily website reported on 21 September 2005 that the SBU officer in charge of the investigation of RosUkrEnergo, Andriy Kozhemyakin, was transferred from the case to other duties.

Gazprom has not come under any official scrutiny in Moscow for its role in the RosUkrEnergo or ETG gas schemes.

How the inclusion of RosUkrEnergo into the settlement of the Ukrainian-Russian gas conflict will play out in the West is not yet known, but it will raise many eyebrows in Europe and the United States. The U.S. FBI has been investigating RosUkrEnergo for some time now and European law-enforcement agencies are also aware of the allegations in this case. (Roman Kupchinsky)