US-Ukraine Business Council

UKRAINE BUSINESS NEWS - ELEVEN ARTICLES

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1. UNITED STATES FIRM IMTC-MEI L.L.C. WINS TENDER TO BUILD
NEW PASSENGER TERMINAL AT LVIV AIRPORT

Interfax Ukraine, Kyiv, Ukraine, Wed, November 4, 2009

2. AMB TEFFT'S EXPECTED CONFIRMATION POSTPONED AS
SENATE FOREIGN RELATIONS COMMITTEE DID NOT MEET
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Wed, Nov 11 , 2009

3. UKRAINE'S LEADERS FAIL TO OVERCOME FUNDING IMPASSE
By James Marson, The Wall Street Journal, NY, NY, Wed, Nov 11, 2009

4. UKRAINE PM SEES DIFFICULTIES WITHOUT IMF TRANCHE
Reuters, Kiev, Ukraine, Wed, Nov 11, 2009

5. UKRAINE CONTINUES DEVELOPMENT OF SECURITIES
REGULATIONS: NEW RULES FOR ISSUERS AND INVESTORS

Ukraine Law Alert, Squire Sanders, Kyiv, Ukraine, Tues, Nov 10, 2009

6. RECENT EVENTS ON THE OIL PRODUCTS MARKET AND OIL REFINING INDUSTRY OF UKRAINE, INTERVIEW WITH LEONID KOSYANCHUK
Interview with Leonid Kosyanchuk, Former director of Department for Oil, Gas and Oil Refining Industry of the Ministry of Fuel and Energy of Ukraine
By Oksana Liven, “EnergoBusiness” magazine, Kyiv, Ukraine 04 Oct 2009

7. GLOBAL CARBON MARKETS STRUGGLING TO EMERGE
FROM COMMUNISM'S RUBBLE
Perhaps the greatest legacy of the excess credits will be the additional negotiating clout they will give Russia and Ukraine in the climate talks in Copenhagen.
By Paul Voosen, Greenwire, The New York Times, NY, NY, Mon, Nov 9, 2009

8. FIONA HILL NAMED DIRECTOR OF THE CENTER ON THE UNITED
STATES AND EUROPE (CUSE) AT THE BROOKINGS INSTITUTION
Steven Pifer to be Brookings Senior Fellow with focus on arms control and non-proliferation.
Brookings, Washington, DC, Wed, October 28, 2009

9. DAMON WILSON APPOINTED NEW ATLANTIC COUNCIL VICE PRESIDENT
International Security Program Director Provides Critical Leadership
Atlantic Council of the United States, Wash, D.C, Sept 17, 2009

10. DAVID J. KRAMER JOINS GERMAN MARSHALL FUND OF THE
UNTED STATES AS SENIOR TRANSATLANTIC FELLOW
Former Assistant Secretary of State will study Russia, Wider Europe
German Marshall Fund, Washington, D.C., April 27, 2009

11. UNITED STATES INSTITUTE OF PEACE TAPS FORMER DIPLOMAT WILLIAM B. TAYLOR JR. TO HEAD UP POST-CONFLICT PEACE AND STABILITY OPERATIONS CENTER IN WASHINGTON, D.C.
United States Institute of Peace (USIP), Wash, D.C., Mon, Sep 14, 2009
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1. UNITED STATES FIRM IMTC-MEI L.L.C. WINS TENDER TO
BUILD NEW PASSENGER TERMINAL AT LVIV AIRPORT

Interfax Ukraine, Kyiv, Ukraine, Wed, November 4, 2009

KYIV - The auction commission of the Ukrainian Transport and Communications Ministry has named U.S. company IMTC-MEI L.L.C. the winner of a tender for the construction of a new passenger terminal for Lviv international airport state company.

The head of the State Aviation Administration, Oleksandr Davydov, said at a press conference in Kyiv that the U.S. company has proposed to pay UAH 4.9 million for the right to build the terminal. He said that the initial price was UAH 1 million, and the auction bid increment was UAH 100,000.

Davydov said that an investment agreement with the winner would be signed within two weeks. According to the conditions of the agreement, the investor is to invest over UAH 1 billion in the construction of the terminal. The terminal should be built in the terms foreseen by UEFA. The approximate term for the completion of the construction is August 2011.

Davydov said that no later than three months before the completion of the terminal construction, the authorities and the investor would sign an agreement on the transfer of the airport complex to the management of the U.S. company for 30 years. In 30 years, the airport will be returned to state management or
transferred to an investor under a new agreement.

As reported, in September the Ukrainian Transport and Communications Ministry prolonged a tender to select an investor to build a new terminal at Lviv airport until November 4, 2009.

FOOTNOTE: IMTC-MEI L.L.C. is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org. Sean T Regan, Ph.D, CCE, CEP, MRICS, Vice President International Operations, IMTC-MEI, serves on the USUBC board of directors and is head of the IMTC-MEI operations in Ukraine and the region. USUBC offers our congratulations to Sean Regan and his colleagues at IMTC-MEI L.L.C. on winning the tender to build the new passenger terminal at the Lviv Airport.
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2. AMB JOHN F. TEFFT'S EXPECTED CONFIRMATION POSTPONED
AS SENATE FOREIGN RELATIONS COMMITTEE DID NOT MEET

U.S.-Ukraine Business Council (USUBC), Wash, D.C., Wed, Nov 11 , 2009

WASHINGTON, D.C. - The expected confirmation yesterday, November 10th, of Ambassador John F. Tefft, by the U.S. Senate Committee on Foreign Relations, to be the next U.S. Ambassador to Ukraine, did not take place as the meeting of the Committeee was postponed for one week. Ambassador Tefft was nominated by President Barack Obama on September 30, 2009 to be Ambassador to Ukraine. A hearing on his nomination took place on October 8, 2009.

Ambassador Tefft has been waiting-in-the-wings for the past four weeks for a business meeting of the U.S. Senate Committee on Foreign Relations to be scheduled. He will not have to wait at least one more week.

LINKS: Amb Tefft's nomination by the White House: http://www.usubc.org/news/obamaadministration_093009.php).
Amb Tefft's hearing before U.S. Senate Committee on Foreign Relations: http://www.usubc.org/news/johnftefftstatement_100809.php).
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3. UKRAINE'S LEADERS FAIL TO OVERCOME FUNDING IMPASSE

By James Marson, The Wall Street Journal, NY, NY, Wed, Nov 11, 2009

KIEV -- A meeting between top Ukrainian government officials and a senior aide to the president Tuesday failed to resolve the political deadlock threatening to cut off International Monetary Fund lending.

The government still insists there is hope for a compromise on the social-spending increase signed into law by President Viktor Yushchenko, the major stumbling block to continued IMF cooperation.

But despite pressure from Prime Minister Yulia Tymoshenko's government, the European Commission and the IMF, there is no sign that Mr. Yushchenko is ready to change his position ahead of a presidential ballot in January. With the IMF saying it is ready to help Ukraine only if consensus is reached, its release of the scheduled $3.8 billion installment seems increasingly unlikely.

At Tuesday's meeting, attended by Oleksandr Shalpak, deputy head of the presidential administration, and officials from the central bank, Deputy Prime Minister Hryhoriy Nemyria called on the president to "cast aside populism" and work toward an agreement to secure the scheduled installment from the
IMF. An agreement, he said, is "in the national interest."

Observers said Mr. Yushchenko's position shows he is determined to cripple his former ally and now bitter rival Ms. Tymoshenko in the run-up to the ballot.

Opposition leader Viktor Yanukovych, whose party was the main supporter of the bill raising social spending, is the frontrunner in the presidential race, polling at 28%, according to an October poll by the Razumkov Center in Kiev. Ms. Tymoshenko is his nearest rival, with 20%, with Mr. Yushchenko trailing far behind, with 5%.

Without the scheduled $3.8 billion installment, Ukraine will struggle to cover a widening budget deficit.

"It's clear Ukraine can survive to the end of the second round of elections in March, but it would be a serious problem for Ms. Tymoshenko," said Peter Vanhecke, head of Renaissance Capital in Ukraine. "The budget gap would have to be covered by reducing expenditures, which would be unpopular, or getting the central bank to print money, which is unlikely as it's controlled by Mr. Yushchenko."

Gas payments to Russia also could come under pressure, Mr. Nemyria said in televised comments Monday night. He added that Ukraine will continue to pay for Russian gas by converting IMF special drawing rights -- not linked to the standby loan package of $16.4 billion agreed last fall -- into dollars, as it did for the October bill.

Ukraine has said it has enough gas in storage to ensure transit of Russian gas to the European Union through winter.

LINK: http://online.wsj.com/article/SB125789318495942361.html
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4. UKRAINE PM SEES DIFFICULTIES WITHOUT IMF TRANCHE

Reuters, Kiev, Ukraine, Wed, Nov 11, 2009

KIEV - Immediate economic prospects for Ukraine will be "extremely difficult" without a fourth $3.8 billion tranche of funds from the International Monetary Fund, Ukraine's prime minister said on Wednesday.

"We consider that continuing Ukraine's cooperation with the IMF is necessary," Prime Minister Yulia Tymoshenko told a gathering of ambassador from the Group of Eight nations.

"Following the road to the end of the presidential campaign, to the stabilisation of the political situation in Ukraine and overcoming the financial-economic crisis without the fourth tranche of IMF funds will be extremely difficult," she said.

She was referring to the fourth tranche of a $16.4 billion standby programme which the IMF has suspended after parliament passed a bill raising the minimum wage.

IMF Chief Dominique Strauss-Kahn said last week that the fund was unlikely to continue cooperation with Ukraine until after the Jan. 17 election for president. (Reporting by Natalya Zinets; writing by Richard Balmforth; Editing by Andy Bruce)
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5. UKRAINE CONTINUES DEVELOPMENT OF SECURITIES
REGULATIONS: NEW RULES FOR ISSUERS AND INVESTORS

Ukraine Law Alert, Squire Sanders, Kyiv, Ukraine, Tues, Nov 10, 2009

KYIV - On 11 June 2009 Ukraine’s parliament adopted the Law of Ukraine "On Amendment of the Law of Ukraine ‘On Securities and Stock Market’ With Respect to Some Rules Applicable to Issuers and Investors" (the Securities Amendment), which went into effect on 30 October 2009.

The Securities Amendment was adopted mainly to bring the "On Securities and Stock Market" law in compliance with the Joint Stock Company Law (2008). In addition, the Securities Amendment introduces important rules applicable to issuers and investors in Ukraine’s securities market.

The Securities Amendment (i) limits the number of potential investors who may be solicited during private placements of joint stock company (JSC) shares, (ii) introduces grounds for termination of a shares subscription and (iii) establishes a requirement to convert shares into either paper or electronic form by 30 October 2010.

1. Maximum Number of Potential Investors During Private Placements
The Securities Amendment limits the number of potential investors who may be directly solicited to buy shares during private placement of a private JSC to 100 persons, who must be determined in advance. In addition to 100 new persons, all existing shareholders may be solicited during the private placement of a public JSC’s shares.

2. Termination of Shares Subscription; Consequences and Penalties
The Securities Amendment introduces the following grounds for termination of a shares subscription:

[1] The Ukraine Securities and Stock Market State Commission (SSMSC) invalidates the issuance of shares;

[2] The JSC does not approve the results of the shares placement within 60 days after its completion; or

[3] Shareholders do not amend the JSC’s statutes to reflect the increase of the JSC’s charter capital. Ukraine law does not establish any deadline for when a company must amend its statutes. Therefore, termination of a shares subscription on this ground is not likely until the deadline is established by law or the SSMSC.

The Securities Amendment further provides that, no later than six months after any of these events occur, the JSC must return to shares subscribers the money, property or proprietary rights they paid as a subscription fee. In turn, subscribers must return to the JSC any share certificates they received.

If the JSC or subscriber breaches these obligations, they will be subject to a penalty equal to double the discount rate of the National Bank of Ukraine (currently, 10.25 percent per annum). However, this penalty provision is quite general and the procedure for its application needs to be further clarified by the SSMSC.

3. Electronic Shares
The Securities Amendment requires all JSCs with both paper and electronic shares to convert them to one form by 30 October 2010. In addition, the Securities Amendment restates the Joint Stock Company Law provision that, starting from 29 October 2010 (i.e., one day earlier than the previous deadline), all shares must be only electronic.

From a practical point of view, the almost simultaneous deadlines mean that before 29 October 2010 all shares must be converted into electronic format. Conversion from electronic to paper format would be unreasonable (unless there were a strong need to do this) because by 29 October 2010 all shares would have to be converted back to electronic.

Conversion of shares from paper to electronic format is quite complex and protracted, taking approximately two to three months. To meet the 29 October 2010 deadline, a JSC should start the share conversion process no later than June 2010.

Due to the SSMSC’s exacting approach, all documents required for conversion should be carefully drafted and all deadlines should be met. Otherwise, the SSMSC may delay conversion of shares and a JSC may be subject to administrative penalties for violation of the securities regulations.

To convert shares from paper into electronic format, the following steps must be taken:

[1] The General Shareholders Meeting decides to convert shares from paper to electronic.

[2] No later than 10 days after the conversion decision date, the JSC publishes an announcement about the decision in one of the SSMSC’s official publications and informs all shareholders who own shares subject to conversion.

[3] The JSC applies to the SSMSC and, no later than 30 days after the conversion decision date, changes the certificate of registration of paper shares to a certificate of registration of electronic shares.

[4] The JSC determines the date when the shareholder register will be terminated.

[5] No later than 10 days before the shareholder register termination date, the JSC concludes (i) an agreement with a licensed depositary for servicing the issuance of electronic shares and (ii) an agreement with a licensed custodian for opening securities accounts for owners of shares subject to conversion.

[6] On the shareholder register termination date, the shareholder register is transferred to the custodian.

[7] The JSC prepares a global certificate of shares subject to conversion and deposits it with the depositary, which then generates the electronic shares.

[8] After the electronic shares are generated, the JSC instructs the depositary to transfer the shares to accounts of the JSC and the custodian and instructs the custodian to credit shares to the shareholders’ securities accounts.

If you have questions about the Securities Amendment, please contact your principal Squire Sanders lawyer or one of the lawyers listed in this Alert.

Founded in 1890, Squire, Sanders & Dempsey L.L.P. has lawyers in 32 offices and 15 countries around the world. With one of the strongest integrated global platforms and our longstanding one-firm philosophy, Squire Sanders provides seamless legal counsel worldwide.

Contacts: Peter Z. Teluk; +380.44.220.1414; Dmytro Sakharuk +380.44.220.1407; Volodymyr Smelik +380.44.220.1413; Squire, Sanders & Dempsey L.L.P., Leonardo Business Center, 19-21 Bohdan Khmelnytsky St., 16th Floor, Kyiv 01030, Ukraine

NOTE: Squire, Sanders & Dempsey is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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6. RECENT EVENTS ON OIL PRODUCTS MARKET AND OIL REFINING INDUSTRY OF UKRAINE, INTERVIEW WITH LEONID KOSYANCHUK

Interview with Leonid Kosyanchuk, Former director of Department for Oil, Gas
and Oil Refining Industry of the Ministry of Fuel and Energy of Ukraine
By Oksana Liven, “EnergoBusiness” magazine, Kyiv, Ukraine 04 Oct 2009

KYIV - Former director of Department for Oil, Gas and Oil Refining Industry of the Ministry of Fuel and Energy of Ukraine and expert on the fuel and energy sector Leonid KOSYANCHUK commented on the recent events on the oil products market and the oil refining industry of Ukraine in his interview to “EnergoBusiness”.

[Oksana Liven] Leonid Vasilyovich, is current retail pricing for oil products properly justified? Have recommendations of expert and analytical group of the Ministry of Fuel and Energy been taken into account?

[Leonid Kosyanchuk] We claim to have market relations in place. Therefore, each market participant independently sets prices for oil products considering conditions, consumer demand and desired profitability of its business. As for recommendations of the expert and analytical group, the bulletin published by its secretariat is only a guideline and reflects reasonable price levels for the current decade.

Meanwhile, the level of retail prices depends directly on the world prices for oil and oil products, as well as on hryvnia’s exchange rate of against US dollar. Changes in pricing take place with a certain delay depending on the stock availability.

[Oksana Liven] What challenges are importers of oil products facing?

[Leonid Kosyanchuk] In fact, the challenges are numerous, but the key ones are instability of the national currency, corrupted auction sales of Ukrainian oil and as a result development of unfair competition, i.e. price dumping.

[Oksana Liven] Recently, the wholesale market has faced the shortage of the diesel fuel. What was the reason for it? What can be the impact of the increase of the excise tax for diesel fuel starting on November 1?

[Leonid Kosyanchuk] The shortage, among other things, was a result of the abovementioned problems. The increase of the excise tax for diesel fuel will be ultimately paid for by consumers. In the meantime, the level of the supply will not change due to the mentioned increase, if that’s what you mean.

[Oksana Liven] There is an opinion that soon Privat Group will try to take over the control of Odessa Oil Refinery, while the conflict between UkrTransNafta and LUKOIL is only the beginning of this process …

[Leonid Kosyanchuk] This is an obvious conclusion, taking into account Privat’s general aggressive approach on the market. However, this is hardly the case: LUKOIL is not another UkrTransNafta or UTN-Vostok. Rather, it looks like a ‘developing attack’ before a major assault on the market. They’ve made a trial move and wait for a response from the LUKOIL, the authorities and the public.

The authorities have demonstrated their position by showing reluctance to meet the president of LUKOIL Vagit Alekperov concerning this issue. In the meantime, the public shut up like an oyster, and LUKOIL agreed to suffer additional expenses in favor of Privat’s business. Quod erat demonstrandum. As Mikhail Zhvanetskiy would put it, ‘come to the table, everything’s boiled up’.

[Oksana Liven] So, what can be expected from Privat Group strengthening its position in the oil market?

[Leonid Kosyanchuk] Nothing good neither for consumers, nor for traders. And not for Ukraine, in the first place, as foreign investors are also reading our news…

[Oksana Liven] How would you comment on the conflict between CJSC UkrTatNafta and LLC UTN-Vostok?

[Leonid Kosyanchuk] I’d quote Krylov’s fable: ‘You’re guilty of the mere fact that I’m hungry.’

[Oksana Liven] What’s your opinion about the beginning of supplies of Azerbaijani oil to Ukraine and SOKAR’s declaration of intent to buy one of Ukrainian oil refineries?

[Leonid Kosyanchuk] Azerbaijani oil is an individual business project of a certain business group regardless of the loud words about diversification they use to cover it up. Moreover, ‘it is neither a method nor a result’. What I mean is that in order to meet a private business goal, much to my regret, they have used oil transportation facilities of UkrTransNafta, thus those of the state, which [UkrTransNafta’s facilities] a bit earlier (maybe particularly for this purpose?!) had been privatized by Privat in way of a ‘Trojan horse’.

As for SOKAR statement, I’d only be glad if it would buy any western refinery or what is left from Kherson refinery. Maybe they’d find money for their reconstruction and upgrade. In that case there would be working places, assignments to the budget and high-quality oil products.

However, it seems too good to be true, for as of the end of October 2009 none ‘Azerbaijani national’ have been seen close Kherson oil refinery. In the meantime, 378 specialists at the plant were laid-off. As a result, the staff of the plant will be cut to only 200 people, while 2,250 specialists were working there in1999-2000.

[Oksana Liven] What are the chances of diversification of oil supplies to Ukraine?

[Leonid Kosyanchuk] First of all, we have to understand whether there’s an actual need for diversification of oil supplies to Ukraine. And who needs this diversification. Of course, diversification of energy resources in general is essential key component of primarily Ukraine’s energy security and that of European Union in general. But these issues must be addressed at the level of the Ministry of Fuel and Energy and the State, instead of waiting for an Israeli citizen permanently residing at the Lake of Geneva to settle these problems down at his own cost.

Then, what oil supplies are we talking about? Is it about Russian oil to oil refineries belonging to Russian, transnational and openly private companies?
‘People in trouble are left to themselves’, isn’t it? What governmental assistance and what diversification, say, TNK-ВР and LUKOIL need? For them it would be enough to get VAT refunds on time and don’t face additional artificial barriers.

Doubtlessly, if the pipeline to Odessa refinery is closed for the mere purpose of pleasing Privat Group, then it’s high time for us all to engage in diversification. Of course, if we want to buy high-quality products of domestic production at fuel stations instead of components of motor fuels produced at western refineries of Privat Group.

[Oksana Liven] So what is there to diversify?

We mustn’t reverse oil transportation flows to please a certain company, even if they are getting along very well with the Prime-Minister, but we should rather take care of developing Ukraine’s transit capacities, preferably at the expense of the European Union. And we shouldn’t worry too much about oil supplies to the refineries, which have not been the state property for a long time now.

[Oksana Liven] How would you comment on the fact that for nine months of 2009 UkrTatNafta more than doubled its net loss, while the supply and refining volumes remained the same as the last year?

[Leonid Kosyanchuk] Well, I personally don’t like the wording ‘growth of net loss’. It is unnatural. Managing efforts of any enterprise must be aimed at ensuring its breakeven operation at least. And professional skills of any manager are assessed by the net profit growth rather than reduction of a net loss.

I have no doubts in the highest professional level of management at both UkrTatNafta and its related structures of Privat Group. They wouldn’t keep anyone of insufficient qualification. As long as it’s the case, then UkrTatNafta’s net loss for the given period can be increased only by shifting the profit from the half state-owned refinery to private companies, such as Platinum Industries Ltd. and the like that are somewhere in between the refinery and auctions for Ukrainian oil.

By the way, considering that this year the price of Ukrainian oil for Privat structures was more than ‘exclusive (four times less than the average world prices), with such favorable price conditions combined management of the group had to ‘do their best’ to double either the net loss of UkrTatNafta or the net profit of Privat Group – either wording is correct.

The only thing that is wrong is the fact that the government owning 43% of CJSC “UkrTatNafta” doesn’t have any questions to Privat Group considering such ‘indicators’. Indeed, if Kremenchug oil refinery had not been operating since the beginning of the year, the resulting loss would be way less tangible.
[Oksana Liven] What’s the role of mini oil refineries in supply of the oil products market?

[Leonid Kosyanchuk] The same role that homebrewed alcohol plays in population’s drinking addiction. Add stable sale of stolen hydrocarbon and subtract from household budgets for renovation of motor vehicles that used such end products.

In fact, mini refinery is a quite primitive facility of initial processing of raw hydrocarbons. The difference between the products of such facilities and commercial grade fuel is similar to the one between a high school student and a PhD.

And what are the prospects of the firms that are hardly producing components of motor fuels of questionable quality and trying to sell these semi-made products to retail chains as a standard motor fuel?

Mini refineries have a right to exist only as an auxiliary production of components for secondary processing by actual refineries. In the meantime, the access of their products to smaller wholesale and retail market chains must be blocked.

[Oksana Liven] What changes must be made in the regulatory framework to balance the market?

[Leonid Kosyanchuk] In fact, there is no need in any special ‘balancing’. My experience shows that the less the government interferes with the market, the better and more reliably it operates. The most that is needed is to watch that all market participants, without any exception, follow the law and ‘rules of the game’. And ‘violators of convention’ must be mercilessly punished for unfair competition, eve in spite of their close relations to the power elite.

[Oksana Liven] Despite that local oil refineries operate at the low of its capacities, the possibility of construction of a new refinery is being lively discussed…

[Leonid Kosyanchuk] Well, why should you be surprised? According to Ukrainian ‘tradition’, the ‘kickback’ [illegal return of a part of the payment from a winning bidder to the initiator of the tender (auction), as a result of the prior secret mutual agreement between individuals from the first and the latter entities] of the construction budget is known to exceed 20%.

In such a case, what can be more exciting than ‘encashment’ of such kickback? How many puppet political parties can be kept for this money at Verkhovna Rada, not to mention other possibilities? It’s just breathtaking! Given such circumstances, why wouldn’t they fight for ‘diversification’ and ‘energy independence’ of the country...

[Oksana Liven] What problems do you see on the retail market segment and what are the possible solutions?

[Leonid Kosyanchuk] I would classify these problems into two groups for convenience: those that do not depend on traders, and those, which solution depends solely on the will and the wish of the market participants. With the first group we can refer to the same problems that the importers are facing. The key problems belonging to the second group are as follows:

       [a] Price dumping as demonstration of unfair competition and lack of equal possibilities;
       [b] No state strategy of development of regional oil products logistics infrastructures, including problems with allocating land plots under construction of fuel stations in a number of regions;
       [c] Lack of generally accepted industry-related ‘rules of the game’, including loyalty and discounting systems;
       [d] Imperfection of noncash sale system, lack of common framework and use of tedious, unprofitable and outdated methods (like fuel tickets);
       [e] Lack of unified requirements to fuel retail sites, which leads to appearance of uncivilized, archaic, block-fashioned fuel stations, and even to the sale of fuel directly from tankers;
       [f] Lack of legislative grounds for utilization of poor quality oil products found at the fuel stations;
       [g] Tedious and excessively detailed reporting upon numerous requests by the Antimonopoly Committee of Ukraine, especially for companies with a branched network of fuel stations in many regions.

The format of this interview does not envisage detailed analysis of each of these issues. I’d only say that the way to efficient solution of the majority of them lies through creation of an industry association by retail traders. In this issue the retail market of oil products lags behind other sectors of economy.

In fact, in the current circumstances the solution of certain problems of the industry is, without exaggeration, dangerous for the initiator’s business. While the association doesn’t own any property and a written explanation is worst it can ‘forfeit’ with. This is what business owners in a number of industries have already tried and appreciated.

NOTE: The original article was in Russian. Translation was by a private translation service.
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7. GLOBAL CARBON MARKETS STRUGGLING TO EMERGE
FROM COMMUNISM'S RUBBLE
Perhaps the greatest legacy of the excess credits will be the additional negotiating clout they will give Russia and Ukraine in the climate talks in Copenhagen.

By Paul Voosen, Greenwire, The New York Times, NY, NY, Mon, Nov 9, 2009

NEW YORK - A surplus of U.N. carbon emission credits piling up across Central and Eastern Europe is threatening to destabilize nascent carbon markets across the world and dampen efforts to curb global warming, market experts and politicians say.

Already this year, sales of emission credits from countries like the Czech Republic, Latvia and most notably Ukraine have caused the price of a ton of carbon in Europe's cap-and-trade system to plunge by more than a euro, a significant drop, said Kevin James, the vice president of carbon finance at Climate Change Capital.

To date, some 147 million tons of the credits -- known in U.N. legalese as assigned amount units and in policy circles as "hot air" -- have been sold worldwide under the Kyoto Protocol, according to a recent analysis by Point Carbon. Ukraine alone is estimated to be in negotiations to sell an additional 450 million tons to Japanese firms, said Andreas Türk, a Kyoto consultant at Joanneum Research in Austria.

"It's a hot potato that no one wants to touch," said Peter Zapfel, an official at the environment directorate of the European Commission, the European Union's executive arm.

Credits are building up largely thanks to the economic malaise that afflicted Central and Eastern Europe in the 1990s. The rapid decline and deindustrialization of post-communist countries means they won't come close to using the amount of emission credits granted to them by the United Nations' previous round of climate talks last decade.

STOCKPILE HELD MOSTLY BY RUSSIA AND UKRAINE
Because of the gap between prediction and reality, these countries are expected to have a stockpile of 6.5 billion tons of CO2 credits by 2013, mostly held by Russia and Ukraine. For comparison, the United States emitted a total of some 6 billion tons of carbon dioxide in 2007.

While reputation concerns and several prescient decisions have kept the carbon market from collapsing -- notably, the partial decoupling of Europe's cap-and-trade system from Kyoto credits -- the looming conflict over the excess emissions is a prime example of how flawed policies, bad data and optimistic growth projections can undermine government-created trading.

Worries about the "hot air" credits have simmered for years in international circles, with regulators worrying that their purchase could theoretically allow countries to meet CO2 commitments without any emission cuts being made in the buying or selling nation. Japan, which is not close to meeting its CO2 commitments, has so far been the largest buyer of the credits.

Many of the post-communist E.U. countries, such as the Czech Republic, which has sold 68.5 million credits, have taken pains to show that these funds will go into energy efficiency programs, constructing elaborate "green investment schemes" to mollify Western critics.

"We know that the Czech Republic and Latvia have done a good job," Türk said. They have brought in international observers and are transparent in how the money is handled, he said.

But other deals have remained elusive in how the funds will ultimately be used -- for example, several of Slovakia's environment ministers have been consecutively fired over a scandalous deal the country made to sell its credits through Switzerland and Denmark to an unknown Japanese buyer.

And most deals with corruption-ridden Ukraine are suspect, Türk said. "Austria would never buy from Ukraine," he said.

As a show of their concern, European heads of state called late last month for world leaders to pay close attention to how these excess credits will be accounted for during the U.N. climate talks in Copenhagen, Denmark.

"This issue must be addressed ... so that the handling of the AAU surplus does not affect the environmental integrity of a Copenhagen agreement," they said.

LEGACY OF 'WALL FALL' PROFITS
When the Berlin Wall fell, 20 years ago today, and the crowds pushed through -- first in a trickle and then a flood -- few could then imagine that one of the most lasting, if abstract, legacies of the popular revolt against communist governments across Europe would be a marked decline in CO2 emissions.

But it was. Exposure to market economies exposed the rabid inefficiencies in state-owned industries across the East, resulting in massive efficiency upgrades, widespread plant closures or the stripping of newly privatized companies for illegal profit.

A look at countries' individual greenhouse gas emissions makes this strikingly clear. Over the past two decades, while countries like Spain, Portugal and Ireland saw emissions rise, Poland's output dropped 30 percent; Bulgaria's plummeted 43.3 percent; Ukraine's, 52.9 percent; and Latvia's, 54.7 percent.

"These were just the low-hanging fruit," said Joachim Schleich, a climate economist at Germany's Fraunhofer Institute for Systems and Innovation Research. In those days, he said, "climate change was not on the top of their minds. That was not an issue in the early '90s."

Yet when countries gathered last decade to craft what would become the Kyoto Protocol, 1990 was chosen as the baseline for emissions reduction -- just prior to the collapse of a huge portion of the world's economy. While negotiators were aware of this decline, they failed to account for its depth and severity, said Thomas Legge, a climate and energy expert at the German Marshall Fund.

"There was also a sense that you didn't want to constrain those particular economies," Legge said. There was a concern to "keep countries that really had no interest in environmental issues at the time, you wanted to keep them in the game."

It is a little understood fact that the European Union is currently meeting its ambitious CO2 commitments largely because of the reconstruction of Central and Eastern Europe, Schleich said. "The E.U. is on track, but that's mainly because of the contribution of the new member states," he said.

A recent report by the Sandbag Climate Campaign, a British advocacy group, seeks to make this inheritance clear. The European targets "may appear ambitious but this is largely due to the accounting rules the E.U. has chosen to adopt in describing its ambitions," it says.

West European emissions have dropped 4.3 percent compared to 1990, a figure that more than doubles when emissions from post-communist states are factored in, the report says. And much of this drop can be attributed to the gasification of the United Kingdom and, even more so, the fall of the Berlin Wall.

Thanks to its reunification, Germany includes one of the world's most ambitious renewable subsidies and the remains of a decayed post-communist state. Reflecting this, Germany took on aggressive targets during the Kyoto negotiations, pledging to reduce its emissions 21 percent from 1990 levels by 2012.

Even with these targets, many complained about the potential for "wall fall" CO2 cuts from the former East Germany. And sure enough, three years after Kyoto was signed in 1997, Germany already sat at a 17 percent reduction, half of which was due to the East's decline, Schleich said.

It should not be ignored that Germany was also a leader in adopting renewable energy subsidies like feed-in tariffs, which guarantee higher electricity rates for wind and solar power, Legge said.

The wall-fall profits have "certainly helped them," Legge said. "But it's sometimes mischaracterized as the only reason."

POWER OF REPUTATION
Currently, the only thing keeping Europe's carbon market afloat is reputation. No European country wants to be seen as buying "hot air" that does little to reduce emissions, experts say.

"Buying 'hot air' from Russia or Ukraine is not something that would go down well politically, especially if you're trying to position yourself as the No. 1 region fighting climate change," Schleich said. Without such concerns, the market would immediately crash, Legge added.

"My prediction is a lot of the hot air credits will go unused," he said. "If there was really an open market for them, the price would drop to zero."

For the most part, the Kyoto credits are only purchased by countries. After much discussion, the European Union opted to use its own internal credits for its cap-and-trade system. This decision is the subject of much relief today, as otherwise, European companies would be able to buy "hot air" credits to cover their emissions -- a regulatory nightmare.

The underlying problem with the credits is that while they were intended as a trading mechanism, they have instead become an accounting system, the European Union's Zapfel said. European companies trade in E.U. credits, and then, at the end of the year, the countries pass Kyoto credits around to reflect these sales, he said.

Countries have used the credits for ulterior motives, as well, Türk said. Austria has bought modest credits from the Czech Republic and Latvia partially because it wants to sell Austrian technology, he said. Similarly, countries "may buy Russian AAUs just to get their foot in the door," he said.

In the face of increasing international pressure, Japan has slowed its purchases of the credits. But as part of a voluntary program to cap CO2 emissions, Japanese companies have purchased $1 billion worth of Kyoto CO2 credits over the past fiscal year. While most of these have gone toward funding clean energy in China or similar projects, some have also been "hot air" credits.

The opportunity to buy credits from Ukraine won't last, Türk added. "It's becoming increasingly difficult for Japanese companies to buy hot air," he said, thanks largely to government pressure.

Perhaps the greatest legacy of the excess credits will be the additional negotiating clout they will give Russia and Ukraine in the climate talks in Copenhagen. Russia will seek to bank its credits, sparing painful cuts to its economy, which is practically indentured to fossil fuels.

"I can understand Russia's position would require some kind of compensation to go along" with cuts in Copenhagen, Schleich said.

LINK: http://www.nytimes.com/gwire/2009/11/09/09greenwire-carbon-markets-struggling-to-emerge-from-commun-7546.html?pagewanted=all
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8. FIONA HILL NAMED DIRECTOR OF THE CENTER ON THE UNITED
STATES AND EUROPE (CUSE) AT THE BROOKINGS INSTITUTION
Steven Pifer to be Brookings Senior Fellow with focus on arms control and non-proliferation.

Brookings, Washington, DC, Wed, October 28, 2009

WASHINGTON, D.C. - Fiona Hill, an expert on Russia and Eurasia, will return to the Brookings Institution as a senior fellow and director of the Center on the United States and Europe (CUSE), Brookings President Strobe Talbott announced today. Steven Pifer, the acting director of CUSE, has been named a Brookings senior fellow.

Hill, who will rejoin Brookings on November 1, has been on leave from Brookings since June 2006 while serving as national intelligence officer for Russia and Eurasia at the National Intelligence Council. She is a frequent commentator on Russian and Eurasian affairs and has researched and published extensively on Russia; the states of the former Soviet Union; ethno-political conflicts in Eurasia; and energy and strategic issues.

Steven Pifer, who has been a visiting fellow since April 2008, will focus on arms control and non-proliferation.

“Fiona is a gifted scholar and analyst with keen insight on the evolving political landscape across Europe and Eurasia,” said Talbott. “Her command of the issues—from energy security to terrorism to the problems of strengthening democracies in the former states of the Soviet Union—makes her ideally suited to direct the Center on the United States and Europe.”

“At a time of such enormous global challenges, I plan to develop the center’s place as a premier forum for research, dialogue, debate and collaboration with our allies in Europe and Eurasia,” said Hill.

Prior to joining Brookings, Hill was director of strategic planning at the Eurasia Foundation in Washington, D.C. From 1994 to 1999, she was associate director of the Strengthening Democratic Institutions Project at Harvard University’s John F. Kennedy School of Government; and, from 1991 to 1994, she was director of Harvard’s project on ethnic conflict in the former Soviet Union, coordinator of Harvard’s trilateral study on Japanese-Russian-U.S. relations and a research associate at the Kennedy School of Government.

A Frank Knox fellow at Harvard University, Hill holds an M.A. in Russian and modern history from St. Andrews University in Scotland; an A.M. in Soviet studies; and a Ph.D. in history from Harvard University. Hill’s book with Brookings Senior Fellow Clifford Gaddy, The Siberian Curse. How Communist Planners Left Russia Out in the Cold, was published by Brookings Press in December 2003.

Before coming to Brookings as a visiting fellow, Steven Pifer served as U.S. ambassador to Ukraine. His twenty-five year career as a Foreign Service officer centered on Europe, the former Soviet Union and arms control. In addition to Kyiv, he had postings in London, Moscow, Geneva and Warsaw as well as on the National Security Council. Pifer holds a B.A. in economics from Stanford University.

LINK: http://www.brookings.edu/media/NewsReleases/2009/ 1028_hill_cuse.aspx

NOTE: Ambassador Steven Pifer serves as a Senior Advisor to the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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9. DAMON WILSON APPOINTED NEW ATLANTIC COUNCIL VICE PRESIDENT
International Security Program Director Provides Critical Leadership

Atlantic Council of the United States, Wash, D.C, Sept 17, 2009

WASHINGTON, D.C. - Frederick Kempe, President and CEO of the Atlantic Council of the United States, today appointed former National Security Council official Damon Wilson to the position of Vice President. He will add this overall management responsibility to his current position as Director of the International Security Program.

Mr. Wilson assumes the new role after serving as Special Assistant to the President and Senior Director for European Affairs at the White House and departing the State Department in March, following 11 years of government service.

Senator Chuck Hagel, Chairman of the Board of the Atlantic Council, said, “With Damon’s appointment as Vice President, the Council further strengthens its management team during an exciting period of growth. He combines a rich intellectual understanding of the challenges facing the Atlantic Community and practical knowledge about how to get things done.”

Mr. Kempe said, “Damon has already made a significant contribution to the Council, bolstering both the quality and profile of the Council’s work. His extensive government experience – from the White House and Foggy Bottom to NATO Headquarters and Baghdad – will enhance the strategic thinking and future activities of the Atlantic Council at a crucial historic moment.”

Mr. Wilson’s appointment also expands Atlantic Council management capability during a year in which it has significantly expanded its activities with new programs focusing on global business and economics, Eurasian energy, South Asia and Africa.

Under Mr. Wilson’s leadership, the Atlantic Council has expanded its work on NATO with a particular emphasis on Afghanistan and a new Strategic Concept. His program has helped shape debate and impact policy on issues ranging from France’s return to NATO, Germany’s elections and NATO enlargement to missile defense, cyber security, intelligence-sharing, maritime security and transatlantic defense industrial cooperation.

Mr. Wilson has played a key role in helping to launch the Council’s new Africa Center, while strengthening relationships with key European partners. He has developed innovative transition seminars for NATO’s new leadership, organized strategy sessions for senior U.S. military commanders and inaugurated high-profile speaker series in Washington and New York.

Prior to his service as Special Assistant to the President and Senior Director for European Affairs at the National Security Council, Mr. Wilson served as Chief of Staff at the U.S. Embassy in Baghdad, Iraq; Director for Central, Eastern and Northern European Affairs at the NSC; and Deputy Director of the Private Office of the NATO Secretary General, during which he advised Lord Robertson on Afghanistan and NATO’s historic post-Cold War enlargement and transformation to face modern threats.

The Atlantic Council aims to renew the Atlantic community for 21st-century global challenges through constructive U.S.-European leadership and engagement in world affairs. A coordinated response from the Atlantic community is essential to addressing today’s most pressing issues: economic instability, climate change, energy security, failed states, a rising Asia, a resurgent Russia.

Led by Senator Chuck Hagel, Chairman, and Frederick Kempe, President and CEO, the Atlantic Council embodies a network of policy, academic and business leaders who foster transatlantic ties through non-partisan and cross-national discussions and studies.

LINK: http://www.acus.org/press/damon-wilson-new-atlantic-council-vice-president
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10. DAVID J. KRAMER JOINS GERMAN MARSHALL FUND OF
THE UNITED STATES AS SENIOR TRANSATLANTIC FELLOW
Former Assistant Secretary of State will study Russia, Wider Europe

German Marshall Fund, Washington, D.C., April 27, 2009

WASHINGTON - Former U.S. Assistant Secretary of State for Democracy, Human Rights, and Labor David J. Kramer joins the German Marshall Fund of the United States (GMF) on May 4 as a Senior Transatlantic Fellow working on issues related to Russia and Wider Europe.

Kramer joins GMF after more than eight years at the State Department in various capacities, most recently as Assistant Secretary of State for Democracy, Human Rights, and Labor. Before that, he was Deputy Assistant Secretary of State for European and Eurasian Affairs, responsible for Russia, Ukraine, Moldova, and Belarus affairs, as well as regional nonproliferation issues.

He also served in the Office of Policy Planning and as Senior Advisor to the Under Secretary of State for Global Affairs. He also was Executive Director of the U.S. Advisory Commission on Public Diplomacy in Washington.

"David's wealth of experience in the State Department will contribute to GMF's growing expertise on transatlantic approaches to Russia and Wider Europe," said GMF President Craig Kennedy. "It's an area of rising transatlantic importance, and we are pleased to have David on board in service of our mission, our network, and our organization."

Before joining government, Kramer was a Senior Fellow at the Project for the New American Century, Associate Director of the Russian and Eurasian Program at the Carnegie Endowment for International Peace, and Assistant Director of Russian and Eurasian Studies at the Center for Strategic and International Studies, all in Washington.

Kramer has also been a lecturer in Russian Studies at Clark University in Worcester, Massachusetts, and a teaching fellow at Harvard University. A native of Massachusetts, he received his M.A. in Soviet studies from Harvard University and his B.A. in Soviet Studies and Political Science from Tufts University.

The German Marshall Fund of the United States is a nonpartisan American public policy and grantmaking institution dedicated to promoting greater cooperation and understanding between North America and Europe. GMF does this by supporting individuals and institutions working on transatlantic issues, by convening leaders to discuss the most pressing transatlantic themes, and by examining ways in which transatlantic cooperation can address a variety of global policy challenges.

In addition, GMF supports a number of initiatives to strengthen democracies. Founded in 1972 through a gift from Germany on the 25th anniversary of the Marshall Plan as a permanent memorial to Marshall Plan assistance, GMF maintains a strong presence on both sides of the Atlantic. In addition to its headquarters in Washington, DC, GMF has seven offices in Europe: Berlin, Bratislava, Paris, Brussels, Belgrade, Ankara, and Bucharest.

LINK: http://www.gmfus.org/press/article.cfm?id=171&parent_type=R
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U.S.-Ukraine Business Council (USUBC): http://www.usubc.org
Promoting U.S.-Ukraine business relations & investment since 1995.
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11. UNITED STATES INSTITUTE OF PEACE TAPS FORMER DIPLOMAT
WILLIAM B. TAYLOR JR. TO HEAD UP POST-CONFLICT PEACE
AND STABILITY OPERATIONS CENTER IN WASHINGTON, D.C.
United States Institute of Peace (USIP), Wash, D.C., Mon, Sep 14, 2009

WASHINGTON, D.C. - The United States Institute of Peace has named William B. Taylor, Jr. to be vice president of the Center for Post-Conflict Peace and Stability effective October 1, 2009.

Ambassador Taylor served as U.S. Ambassador to Ukraine from 2006 to June 2009. In his new capacity at USIP, Taylor will lead the Institute's efforts in societies emerging from conflict, including overseeing Institute operations in Afghanistan and Iraq.

"We are very fortunate that Bill Taylor is joining the Institute" said Richard H. Solomon, president of the U.S. Institute of Peace. "Ambassador Taylor brings a wealth of experience in many conflict zones around the world."

Until February 2006 he was the U.S. government's representative to the Quartet's effort to facilitate the Israeli disengagement from Gaza and parts of the West Bank, led by Special Envoy James Wolfensohn in Jerusalem. The Quartet special envoy was responsible for the economic aspects of this disengagement.

Prior to this assignment, Ambassador Taylor served in Baghdad as director of the Iraq Reconstruction Management Office (2004-2005), in Kabul as coordinator of U.S. government and international assistance to Afghanistan (2002-2003) and in Washington with the rank of ambassador as coordinator of U.S. government assistance to the former Soviet Union and Eastern Europe (1992-2002).

He previously served in Brussels as deputy defense adviser at the U.S. Mission to NATO, in Washington on the staff of Senator Bill Bradley, at the National Defense University and in the U.S. Department of Energy.

As an infantry officer in the U.S. Army, he served in Vietnam and Germany. He graduated from the U.S. Military Academy at West Point and Harvard University's Kennedy School of Government.

USUBC FOOTNOTE: The U.S.-Ukraine Business Council (USUBC) and its over 100 members sincerely congratulates Ambassador William B. Taylor, Jr. on his appointment as Vice President of the Center for Post-Conflict Peace and Stability at the U.S. Institute of Peace in Washington, D.C. USUBC wishes him the very best in his new, important position. Ambassador Taylor served the people of the United States with distinction as U.S. Ambassador to Ukraine the past three years.

Ambassador Taylor was always very supportive of all the efforts to build a thriving private enterprise, market driven economic system in Ukraine, of the several hundred U.S. businesses who invested and are creating jobs and income in Ukraine, and of all the work to build a strong, democratic, independent, prosperous Ukraine. USUBC and its members are proud to have had the opportunity to work with and support Ambassador Taylor in this important work.
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LINK: http://www.usip.org/newsroom/news/united-states-institute-peace-taps-former-diplomat-head-post-conflict-peace-and-stabil
LINK: http://www.usip.org/specialists/william-b-taylor
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