VZCZCXYZ0007
OO RUEHWEB

DE RUEHMO #0587/01 0611332
ZNY CCCCC ZZH
O 011332Z MAR 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6905
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

C O N F I D E N T I A L MOSCOW 000587

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/21/2018
TAGS: PREL PGOV ECON UP RS
SUBJECT: RUSSIA-UKRAINE RELATIONS: YUSHCHENKO AND
TYMOSHENKO IN MOSCOW

REF: A. MOSCOW 561
¶B. MOSCOW 265
¶C. MOSCOW 147

Classified By: Ambassador William J. Burns. Reasons 1.4 (B/D).

¶1. (C) Summary. After many last-minute changes and
rescheduling involving Tymoshenko's visit, the February 12-13
Putin-Yushchenko Intergovernmental Commission (IGC) convened
without Tymoshenko's participation. GOR officials expressed
dismay at the complicated dynamics between Yushchenko and
Tymoshenko, which required "delicate balancing" on its part.
The IGC session focused on an action plan for all areas of
the bilateral relationship for 2008, while two sensitive
issues -- NATO and gas -- loomed large. A recent series of
small-scale disagreements have also added to the friction.
Compounded by the Yushchenko- Tymoshenko feud, the
on-again-off-again gas deal between Russia and Ukraine is
continuing, with Gazprom threatening another cut-off unless
the debt is paid by March 3. Moscow analysts view bilateral
relations as hostage to Ukrainian domestic political games,
where different forces vie for a better position in next
year's presidential election through attempts to gain an
upper hand over deals with Russia. End summary.

Yushchenko-Tymoshenko "Farce"
-----------------------------

¶2. (C) Yushchenko made two visits to Moscow within two weeks
this month, for the February 12-13 IGC meeting, where he met
bilaterally with Putin, and the February 21-22 CIS Informal
Summit, where he did not (ref A). Yushchenko's travel was
punctuated by PM Tymoshenko's many-times-delayed visit.xxxxx, 
told us February 26 that the uneasy dynamics
between Yushchenko and Tymoshenko complicated the IGC
proceedings. He termed the situation "disappointing" at best
and "bewildering" otherwise. Tymoshenko, whose February 11
visit, one day before Yushchenko's to avoid the overlap with
him, was delayed till February 21 at Ukraine's request and
then was moved forward by one day for the same reason.
xxxxx said that GOR officials simply could not understand
how the president and prime minister of a country could work
effectively under such odd circumstances.xxxxx, the
GOR's goal was to conduct a meaningful dialogue with the
Ukrainian counterparts in all six commissions without making
the already delicate situation worse. The GOR, which had
prepared for Tymoshenko's participation in the IGC, had to
match the Ukrainian decision not to include her in its team
by pulling PM Zubkov from the session.

Putin-Yushchenko Bilateral
--------------------------

¶3. (C) The two presidents, during their three-hour long
"good" discussion, covered a wide range of bilateral issues,
notably the gas deal, NATO and the dispute over the two
countries' common history. Putin also urged Yushchenko to
take a more active role in the resolution of the Transnistria
conflict.xxxxx that Putin and Yushchenko clashed
over NATO and the GOU's initiatives on Ukrainian national
heroes. Putin was not convinced by Yushchenko's insistence
that Ukraine's request of NATO MAP was not intended to be
anti-Russian.

NATO: Painful and All Encompassing
----------------------------------

¶4. (C) Prior to the Putin-Yushchenko IGC meeting, the GOR
repeatedly expressed its displeasure with Ukraine's NATO bid.
In a January 23 statement on Ukraine's pending request for a
NATO MAP, the MFA warned that further expansion of NATO could
produce a serious political-military upheaval that would
affect the interests of Russia (ref B). Citing the 1997
bilateral agreement laying out the Russian-Ukrainian
strategic partnership, the statement stressed that the
potential integration of Ukraine into NATO would force Russia
to undertake "appropriate measures." During a February 8
meeting with the Ambassador, DFM Karasin said that the GOR
was "disappointed" with the GOU's move (ref C). A positive
decision in Bucharest, Karasin said, would force Russia to
take strategic counter-measures. In his February 14 annual
press conference, Putin lashed out against Ukraine's MAP
request, saying that the majority of Ukrainian citizens were
against their country's NATO membership but Ukrainian leaders
did not ask their opinion, "What kind of democracy is this?"
he asked.

¶5. (C) Ukrainian xxxxx told us that Ukraine's interest in closer

relations with NATO -- for the first time as a consensus
decision by the three top leaders of the country -- had
triggered a "deja-vu reaction" from the GOR, which had
surprised no one in Ukraine, and had provoked a genuine and
more mature public discourse on NATO in Ukraine. Although
the topic was "painful" for Russia and was discussed in every
bilateral meeting on every level, xxxxx argued that
the GOR's response had been to date less emotional than in
the early post-Orange years. xxxxx acknowledged that during
Ukrainian National Security and Defense Council Secretary
Bohatyreva's January 29 visit to Moscow, all Russian
interlocutors, including FM Lavrov, Duma Speaker Gryzlov and
other Duma deputies, had expressed hostility to the Ukrainian
move.

¶6. (C) Moscow analysts predict that Ukraine's domestic lack
of consensus on membership and the lack of coordinated
support among NATO member states, combined with a slow-moving
NATO bureaucracy, could make the issue a long-term sore spot
in the relationship. Some argued that an "excessive" push by
the GOU could catalyze radical "counter measures" from the
GOR, including a possible re-examination of the status of the
Black Sea Fleet and GOR-funded activities in and around
Sevastopol.

Gas: Scheming Abounds on Both Sides
-----------------------------------

¶7. (C) Many viewed the January 24 arrest of Semyon
Mogilevich as only the tip of the iceberg of murky,
high-stakes gas deals, given his alleged involvement with
RosUkrEnergo, which became the key middleman in Russian gas
exports to Ukraine after Russia briefly cut off the gas
supply to Ukraine in January 2006. xxxxx noted that PM
Tymoshenko made the removal of the chain of intermediaries
between Gazprom and Ukraine, as well as raising the gas
transit fee through the Ukrainian territory, the central
theme of her February 20-21 visit. Although Yushchenko and
Tymoshenko shared the same goal of removing intermediary
agents in the gas deal, xxxxx said, the latter insisted on
the immediate removal of RosUkrEnergo from the deal. GOR
officials found her, xxxxx added, inflexible and less
trustworthy than Yushchenko.

¶8. (C) According xxxxx, the GOR was particularly not
pleased with Tymoshenko's idea of the White Stream Pipeline,
considering it another attempt to bypass Russia in bringing
Central Asian gas to Europe. Russia values Ukraine as the
key link to Europe, which can work only if the two countries
are "united" and "consistent," he added. xxxxxtold us
that Putin and Yushchenko talked over the phone on February
26 to discuss Ukraine's growing arrears and the absence of
the 2008 contract. In the meantime, bickering between
Gazprom and Naftogaz is continuing as of February 28 -- just
another sign of the fragility of the energy deal between the
two countries.

¶9. (C) xxxxx said that Yushchenko wanted more
transparency but preferred to avoid measures which would
further increase the price. Moscow Carnegie Center experts
emphasized to us that the GOR's priority is to have Ukraine
as a reliable economic partner, which would guarantee that
Russian gas (mostly Turkmen and Uzbek gas that transits
Russia) would flow to Europe without disruption. All
interlocutors agreed that until Gazprom's leadership
re-shuffle ended, no long-term deal could be made.

Beyond Gas
----------

¶10. (C) In 2007, the increase in the volume of bilateral
trade between Russia and Ukraine to USD 32 billion disguised
a decoupling of certain Russian-Ukrainian industries.
According to xxxxx Russia is slowly consolidating the
production cycle to do away with imported parts from Ukraine
in the areas where traditionally the two countries were
interdependent, such as aircraft and machine building. With
Ukraine's aspirations to NATO membership, Russia has already
begun to reduce its cooperation in military and technical
fields, as well. xxxxx said, "The quiet process of
economic disengagement in many important areas is under way."

¶11. (C) Some experts noted that GOR officials are reluctant
to talk about Ukraine's 13-percent plus economic growth in
2007, which -- despite Kyiv's political turmoil -- easily
surpassed Russia's 6 percent. They also argued that WTO entry
could give Ukraine leverage in its dealings with Russia.
They predicted, however, that the new Schengen regime could
hurt Ukraine, particularly in its West, as new members would
replace Ukrainian workers in Western Europe. The rise of
unemployment in western Ukraine could create more disparity

among Ukrainian regions, giving eastern Ukraine, which is
better incorporated into the Russian economy, an advantage.

Mazepa: Not Only A Tchaikovskiy Opera
-------------------------------------

¶12. (C) Ivan Mazepa has recently been added to the long list
of historical figures about whom Russian and Ukraine quarrel.
Since the GOR's pronounced dissatisfaction with the GOU's
attempt to reclassify the Holodomor as genocide, and Roman
Shukevich as a Ukrainian national hero, other cases have
emerged:

-- the GOU agreed to award political asylum to St. Petersburg
journalist Andrushchenko. Two more Russian journalists have
requested asylum as well.

-- on February 1, Ukrainian political analyst Serhiy Taran
was barred from entering Russia at St. Petersburg's Pulkovo
airport. The February 5 MFA statement confirmed the incident
without giving a reason for the denial, although it cited the
December 2007 refusal of Ukrainian authorities to grant entry
to Ukraine to two Russian political "analysts" -- Dugin and
Zarifulin.

-- Ivan Mazepa, portrayed in Pushkin's tale and
Tchaikovskiy's opera as a boorish Ukrainian soldier, who
joined Swedish King Karl XII against Peter the Great, is at
the center of the current dispute. The GOR termed the GOU's
plan to build a monument to Mazepa "anti-Russian," while
xxxxx scoffed at the Ukraine's planned commemoration of the
300th anniversary of the Battle of Poltava as "absurd." Some
experts thought that the need to create a Ukrainian national
identity was understandable, but choosing controversial
figures as heroes would not resonate well with the Russians.

More to Come: Black Sea Fleet and the Crimea
--------------------------------------------

¶13. (C) The Ukrainian Embassy expressed frustration with the
sluggish pace of Black Sea Fleet negotiations. With its
current agreement set to expire in 2017, the transfer of the
fleet to another location should be a major issue on the
bilateral agenda. The GOR, however, has consistently
insisted that it is "premature" to discuss details.
xxxxx said that the bilateral Black Sea Fleet
sub-commission, with its 6th session completed on January 24,
produced negligible results. In the meantime, the GOR has
intensified activities in Sevastopol through pro-Russian and
Russian-funded NGOs.

Comment
-------

¶14. (C) With the political process still in flux in Ukraine,
and the presidential transition in Russia underway, the
bilateral relationship is on hold, with pivotal issues
deferred until after May.
Burns