Interfax-Ukraine, Kyiv, Ukraine, Thursday, September 28, 2006
[via AUR]

KYIV - The European Bank for Reconstruction and Development (EBRD) correlates the level of Ukraine's investment attractiveness with the  authorities' attitude to Mittal Steel as a large investor.

EBRD Country Director Kamen Zahariev gave the bank's position at a meeting of the top management of OJSC Mittal Steel Kryviy Rih (formerly Kryvorizhstal steel mill) in Dnipropetrovsk region with diplomats and representatives of international organizations in Ukraine, Mittal Steel Kryviy Rih reported in a press release on Thursday.

Zahariev said that the Ukrainian authorities' attitude to such a large investor as Mittal Steel would in many respects determine relations of foreign investors to Ukraine.

Zahariev said that in 2006 the EBRD provided Mittal Steel Kryviy Rih with a large loan - the largest over the Bank's work in Ukraine - $200 million.

"We're working with the Mittal Steel company for many years in various countries in Europe and Asia and treat this company as a reliable and effective partner," the press service quotes Zahariev as saying.

According to the press release, after the investor acquired the steel mill, investments in modernization of fixed capital have topped $85 million, the output of marketable rolled stock and sales have grown by 14% and 23% respectively since the beginning of 2006.

by Kommersant Special Correspondent Nataliya Gevorkyan
Gazeta.ru, 2 May 2006
[translation posted on Johnson's Russia List, 3 May 2006, hat tip Ukraine List]

I would like to congratulate my colleagues from with a simple investigation, as they put it, into the owners of the Ukrainian half of Rosukrenergo, but this "investigation" has as much to do with journalism as Mr. Mamontov's "investigation" of the "philosopher's stone".

This sad story (where journalism is concerned, of course) will be rich in quotations, so please forgive me in advance. First take one straight from : "Before recalling shortly, whom journalists have taken to be owners of Rosukrenergo, let us rejoice for US lawyers: they clearly have long since resolved their own country's domestic problems (it was enough to punish the terrorist called Mussawi) and now they have the time and the desire to poke their noses into other people's business. However, what do they think is their own business... "Clearly the investigation is unpleasant for Moscow", the writes. "It is aiming to make use of the current chairmanship of the G8 for propaganda about energy security, and will strengthen Europe's fears over the attempts by Gazprom to purchase energy assets there. The prospects for unpleasantness even against the background of the G8, of course, are enough to get on Moscow's nerves. The US will not miss such an opportunity".

We will stay with the intonation and turns of phrase with which the self-respecting journalists attempted not to sin even during the time of the Cold War. Why, exactly, should a Russian newspaper be so offended by an American newspaper's investigation of Ukrainian property? It would appear that if there is something to get twitchy about, it is Ukraine and not the owner of the newspaper, who is as transparent as crystal. And why did US professionals draw the attention of the author's "personal investigation" rather than his own professionalism? If it were not for those bloody Yanks, who poke their nose everywhere, the author of the 'investigation" would not have taken an interest in the answer to a question, which is arousing the interest of half the world, namely who is hiding behind 50 percent of a company with billions in turnover, which is the partner of Gazprom, the owners of the newspaper? It was when the Americans got involved "in somebody else's business" that the author suddenly found the matter interesting. And what do you think, it has turned out to be as simple as spitting for the newspaper owned by Gazprom, which at the same time owns the other 50 percent of Rosukrenergo, to find a couple of documents on the Internet or elsewhere, to show the names of the owners of this mysterious Ukrainian half of the company.

The Americans did not manage to name anything, take note, not a single name. But the real authors of the newspaper's "investigation" understood what could be found out and named, especially given that the "cover" for the second half of the company (Reiffeisen Investment) had promised to reveal the names of the owners in the very near future. This was the catalyst, and through its newspaper Gazprom took the high ground and named a couple of names. It has two aims for doing this. One was named with the directness worthy of one of the world's largest companies, and I quote: "Alas, Moscow had nothing to do with it, and the investigators' work was not so difficult after all. has carried out its own investigation to show that 50 percent of Rosukrenergo belongs to Gazprom (which everyone knew about anyway). The person behind the Ukrainian half of the company is not the "citizen of many countries, Semen Mogilevich, who is being sought by Interpol, and certainly not Leonid Kuchma, as the Orange revolutionaries have hinted".

All clear? Gazprom does not do business with criminals and the overturned leaders of foreign countries. There is no need to tie us in with those. There is no need to tie Gazprom in. We are clean and fluffy exactly by half, but the Ukrainian half, oh dear, oh dear, now that is the second aim of the investigation's authors: "Two surnames are mentioned in the audit report on the company's financial activities between July 22 2004 and December 31 2005: D. Firtash (who owns 90 percent of the shares) and I. Fursin (who owns the other 10 percent). It is these two citizens who are not the most well known people among the broad Ukrainian reading public, who are the beneficiaries of the company. There are no grounds to disbelieve this evidence. The audit was carried out by PriceWaterhouseCoopers, and its report is what we have cited. It remains only to guess, why the truth has been kept under wraps for so long. We will recall that back on Maydan demands were raised to make public the whole list of the owners of Rosukrenergo. But when Yushchenko and Tymoshenko came to power these demands were silenced immediately, from which we might suppose that Messrs. Firtash and Fursin suited the Orange revolutionaries completely".

It is also clear that first of all, two sort of dubious personages own the Ukrainian half of the company, and secondly, they are Ukrainian citizens, as the publication asserts, although Yushchenko has said that there are no Ukrainians in the company. Thirdly, for some reason they suit the Orange revolutionaries. Is the hint clear? If you do not get it, they will explain briefly how these gentlemen, who suit the Orange revolutionaries are connected with that same Mogilevich, and how (I hope that you have already guessed) they are linked with the intimate entourage of the Orange president, Yushchenko. In addition the figures illustrating this proximity, are given with reference to the Ukrainian press. An independent conclusion from all this is that Yushchenko had personal motives for hiding the real co-owners of the company on the Ukrainian side.

Now you will recall the meeting back in February between President Putin and Spanish journalists. They asked him about the real owners of Rosukrenergo. The answer (and I quote from the newspaper) was this: "This is a joint Russian-Ukrainian enterprise, in which the Russian partner owns 50 percent. This partner is Gazprom. Like you, I do not know who owns the other 50 percent".

--- Viktor Yushchenko says that there is not a single Ukrainian in the company.

--- (Putin) So go ask Viktor Yushchenko. Gazprom owns fifty percent of the company and the Ukrainian side owns the other fifty percent. What I said to Viktor Yushchenko is this: 'Please, we would welcome it if your 50 percent were to be sent directly to Naftogaz Ukrainy', but we did not do this. The Ukrainian side did. Like you, I do not know to whom they transferred this fifty percent via Raiffeisenbank. Gazprom does not know either. Believe me, I am telling you the 100-percent truth! This is the Ukrainian part! Ask them about it... They proposed to us that Rosukrenergo supply natural gas to Ukraine instead of Gazprom. We have agreed with this".

What do you think, why did Vladimir Putin send the journalists off to Yushchenko so insistently? He simply sent the hapless Spaniards packing: "Take yourselves off to Hohol-land (Ukraine)". This he did because in one of his files he had what journalists had to find out sooner or later, namely compromising material. Part of this material has appeared now in the Gazprom publication. I think that 's irritation at the American investigation could be explained by two things. Firstly, all compromising material has its day, especially if it is a serious political-financial instrument. I suppose that Gazprom has been forced to leak information ahead of time because of the Americans and thus the effectiveness of the use of this instrument turned out to be not so great. However, we will wait and see. There is another possible reason: Gazprom has no interest in the West's digging seriously into this story because it could turn out by accident that not everything is so wonderful, clean and transparent on the Russian side as is imagined. I recall that everything to do with the Russian half of Rosukrenergo was limited to the phrase: "Everything about us is understood. Our country has Gazprom". Of course, the journalists did not touch upon this half and the documents referring to Russia's fifty percent on the Internet did not drop into their hands. The shots were fired at the other half, which looks, on the basis of the "investigation", somehow unpleasant and even unsightly. It remains only to explain why white and fluffy Gazprom is having a partnership relationship with these unwholesome guys. If, of course, they are really the ones. In general it looks somehow rotten. Gazprom is Gazprom, whatever you say, but these Firtash and Fursin are something else.

The same official report from PriceWaterhouseCoopers, to which refers, was posted by someone on the Internet with premeditation. The report is dated to March of this year. However, the company's audit, as has been mentioned above, was made for the period between July 2004 and December 2005. It referred to the whole company, not just the Ukrainian half. The report states: "the company is owned jointly by two Austrian companies, namely Arosgaz Holding AG, and Centrosgaz Holding AG. The one real de facto owner of Arosgaz Holding AG is the stock company Gazprom and the real de facto owners of Centrosgaz Holding AG are Messrs. D. Firtash (90 percent) and I. Fursin (10 percent)".

This is an account of a joint company, if I understand correctly. All the figures and data in this report are about a joint company, that is a 100-percent entity, not the 50 percent Ukrainian part. Sorry, I mean, Austrian. That is, in 2004 and 2005 Gazprom already knew perfectly well, who its partners were. Even before Yushchenko cam to power, if we take the 2004 months.

I suppose that the professionals have been investing for a long time in the game called Rosukrenergo. Remember what Putin said: Ukraine proposed that we make use of Rosukrenergo. Now add to these words "investigation", "by " with a hint at Yushchenko's link with the owners of Ukraine's 50 percent. Understood? Wily Yushchenko himself suggested the proposal that was not the most advantageous for Ukraine with a specific intermediary because these were his guys (see above).

Who said that Ukraine put forward Rosukrenergo? Putin, of course. Try finding a single piece of evidence, apart from his words, that this was really so. Aha, there is no other evidence. And according to the rules of the said game, it could not be otherwise. Otherwise would mean if Moscow had selected namely this intermediary and insisted upon it, then all the balance of the compromising material would collapse, don't you think?

asked the deputy head of the Gazprom management, Aleksandr Medvedyev who it was that put Rosukrenergo forward. Then he was seized unexpectedly by signs of amnesia: "The proposal to make use of Rosukrenergo in order to avoid conflict was made during negotiations. The negotiating process is a complex matter and I cannot even recall who specifically made this proposal". Then the Ukrainian premier, Yuriy Yekhanurov, remembered. Immediately after the hundred-percent truthful answers from Vladimir Putin to the Spanish journalists he announced that the government of Ukraine was prepared to substitute the company, "taking into account the statement from the Russian side concerning definite remarks referring to the, the Rosukrenergo company".

Now let us rewind the film further back to the beginning of this January. The French publication,, famous in Russia for having been the first to report that Russian individuals were buying up Nogi debts, also issues a bulletin called. quote: "But what is even more troubling is that on January 3, Rosukrenergo sent two bank transfers through the Raiffeisen Zentralbank in Vienna. The first of these - uncovered by Ukraine Intelligence, (a facsimile of the transactions can be seen on our web site) - is for $53 million paid to the order of the Petrogaz company in Dubai, in the United Arab Emirates. The second, for $12.3 million was to the order of the Refin Commercial Company, registered in Portland, Oregon, which has an account in Hansabank in Estonia. Who owns these two companies? The legal representative for Petrogas is Ramses Kok, and Nestor Shalai is the representative for Refin. But according to informed banking sources close to the Ukrainian security services, Petrogaz is linked to Petr Yushchenko, the president's brother, and Refin is a part of the galaxy of Gazprom's off-shore interests. Why did Rosukrenergo make those transfers, hours before being handed the monopoly on gas supplies to Ukraine? We may well ask the question".

So, as the publication asserts, the day before the contract between Russiaand Ukraine was signed, that is, on January 3, Rosukrenergo made tow bank transfers via Raiffeisenbank: $53 million to Dubai (recipient - the Petrogaz Company), and $12.3 million to Estonia (recipient - the Refin Company). According to data from the publication's news sources, Petrogaz is linked with the brother of the Ukrainian president, Petr Yushchenko, while Refin figures among the off-shore interests of Gazprom. We can only guess why Rosukrenergo made these transfers only a fews hours in total before it became a gas monopoly company in Ukraine.

This remark was made in January before Putin's meeting with the Spanish journalists. When during the meeting the Russian president began insistently to send the journalists off to Yushchenko and swear blind that neither he nor Gazprom knew who the Ukrainian beneficiaries were, I remembered this French remark. Well, of course, I thought, the compromising material has most likely already be drafted and is waiting for its time to come. I do not know, how the French journalist got hold of the information and the documents. There are several ways it could have happened, including via a leak. The editor-in-chief of is a very professional journalist, whom I know very well, so he, as you have noticed, was interested in the other side too, namely Gazprom. In addition to what was mentioned above in the note, there is something pro-Russian in the negotiation: "It is reckoned that certain Gazprom top managers are shareholders in Arosgaz, including Aleksandr Medvedyev and Aleksandr Ryazanov in addition to Semen Mogilevich, who was offered 15 percent, which he decisively refused, however".

Is this not why Aleksandr Medvedyev could not in any way remember, that it was he who proposed Rosukrenergo? In general, such forgetfulness when the tracks of a very large agreement that has only just been signed are fresh, as a rule is not typical of top managers of top companies. Indeed, there is a quotation in this note from the French publication, which allows us once more to doubt that the Russian president was telling the journalists the truth and nothing but the truth. Prime Minister Yekhanurov, as the publication writes, said during a television interview on January 12 this year that Russia had not left Ukraine any choice and had in the final run foisted Rosukrenergo upon it.

When all is said and done, this is a murky story. But it is murky as a whole, not just in its Ukrainian half, as the "investigative journalism" has tried to portray it.

I have a feeling that the current authorities are involved in business in the way they learned in the KGB's higher school. They make contracts in the same way as they force people to collaborate. First you have to frighten the client witless, then you get him a girl or boy, depending on his passions, next you take this down on film, then you scare him again and force him to since the agreement to collaborate. Then you remind him about this piece of paper so that he will not chicken out. If need be, you can use this piece of paper to help you "bump him off". The Kremlin has just not forgiven Yushchenko for the personal shame it he caused during the elections two years ago. Nor will it forgive him. All that has been mentioned above does not mean that President Yushchenko is an angel. There are two real sides to this story, and in the best scenario neither side is an angel, while in the worst, one side has made a giant frame up for the other.

by Vladimir Berezhnoy
Izvestia, 27 April 2006
[translated by Pavel Pushkin for What The Papers Say, via the Ukraine List]

The Wall Street Journal reported the other day, citing informed sources in Europe and the United States, that the US Justice Department has started investigating the operations of RosUkrEnergo. The company supplies gas from Russia and Central Asia to Ukraine, as well as to Slovakia, Hungary, Poland and Estonia. Americans grew curious about the composition of owners of the company considering its structure non-transparent.

Investigators from the US Justice Department even met with holders of the Ukrainian half of shares of Raiffeisen Investment AG and evidently tried to find out who was the real owner of
RosUkrEnergo from the Ukrainian side. Austrians met with investigators but did not say if they disclosed terrible secrets of the gas company to them. This does credit to them but also lets journalists feel free in guessing on pages of newspapers who is the real owner of RosUkrEnergo.

Before saying briefly whom journalists have presumed to be the owners we can be glad for the sake of American lawyers. They have evidently solved domestic problems of their own country a long time already, that is why they have time and wish to interfere into business that is not theirs. In any case, it depends on what is considered your business. The Wall Street Journal says, "The investigation will evidently be unpleasant for Moscow that is trying to use its current chairmanship in G8 for propaganda of energy security and will strengthen the apprehensions of Europe about the attempts of Gazprom to buy energy assets there." Naturally, a prospect of troubles against the background of G8 summit is worth making Moscow nervous. Americans will not miss such chance.

Alas, Moscow turned out to be not involved and work of investigators not so difficult. Conducting our own investigation, we found that a 50% stake in RosUkrEnergo belonged to Gazprom, which was already known to everyone. We have also learned that behind the Ukrainian half of RosUkrEnergo there was not "citizen of many countries Semen Mogilevich, wanted by Interpol" and not even Leonid Kuchma contrary to the hints of the "orange" ones. It was sufficient to do an online search to discover that RosUkrEnergo AG was registered in the commercial register of the Swiss canton Zug on July 22 of 2004. Shareholders of the company are Gazprom and Raiffeisen Investment AG on the parity basis. The declared goals of activity are trade in commodities in the energy sector.

It was also not difficult to obtain copies of documents that were incidentally not classified and were already issued to the interested companies who wanted to know how transparent was the structure of owners of RosUkrEnergo. Two names were mentioned in the report of auditors about financial operations of the company between July 22 of 2004 and December 31 of 2005. This is D. Firtash (owning 90% of shares) and I. Fursin (10%). These two Ukrainian citizens, not very well known to the public, are beneficiaries of the company. There are no grounds to doubt this information, since the audit was done by PricewaterhouseCoopers and its report has been quoted.

It is possible only to guess why the truth has not surfaced for such a long time. Demands to disclose the entire list of owners of RosUkrEnergo were made during the demonstrations in Independence Square. However, when Yushchenko and Timoshenko ascended to power these demands were immediately hushed down. From this circumstance it is possible to presume that the "orange" ones are quite content with Firtash and Fursin, as well as the "white-blue" ones who have not initiated any investigations too. Now Timoshenko calls on termination of the gas agreement between Ukraine and Russia and already demands a new investigation. It's uncertain whether Timoshenko is the person whom the US Justice
Department is helping so actively. Another point is clear. RosUkrEnergo has fulfilled all obligations to gas recipients in Europe. Gas has been sold, transit is being done and there is no way back. From this point of view Europe has nothing to worry about, moreover so against the background of preparation for the summit of G8 the topic of which is energy security.

As to the questions related to transparency, ownership structure and so on, it is necessary to address them to authorities in Kiev. They evidently know everything that should be known about Firtash and Fursin, because they have entrusted to these people an important business of "international trade in commodities in the energy sector."

Reuters, 26 April 2006
[via the Ukraine List]

MOSCOW-Two influential Ukrainian businessmen were named Wednesday as the owners of a one-half stake in RosUkrEnergo, a mysterious company that controls Ukraine's gas imports.

Citing audit documents, the newspaper Izvestia said Dmitry Firtash - who has in the past played a role in importing gas from Turkmenistan to Ukraine and owns a Kiev basketball club - and Ivan Fursin, a banker, were the beneficial owners of the 50-percent stake.

Raiffeisen Zentralbank in Austria confirmed the names, saying it was holding the stake on their behalf.

In an e-mailed statement, the bank said Centragas Holding, a company based in Vienna, "is a joint owner of RosUkrEnergo." Firtash owns 90 percent of Centragas and Fursin holds the other 10 percent, the statement said.

Raiffeisen said in the past that it held the stake as trustee but declined to disclose the names of the owners.

Firtash, who reportedly spends most of his time in Hungary, could not be reached immediately for comment. Fursin also was not reached.

RosUkrEnergo bounced into the public eye when it was named as the go-between in a deal to resolve a gas pricing dispute between Russia and Ukraine which interrupted supplies to Europe over the New Year.

Russia's state-controlled monopoly Gazprom owns the other 50 percent of Swiss-registered RosUkrEnergo.

The U.S. Justice Department's organized crime section reportedly opened a probe into RosUkrEnergo, with diplomatic and financial sources saying that Raiffeisen had cooperated by providing information on the company.

Izvestia, which is owned by Gazprom, published extracts from an audit report by PricewaterhouseCoopers that named the two men as owners of Centragas.

Ukraine's energy minister, Ivan Plachkov, was quoted by Interfax- Ukraine news agency as saying that Kiev may review the January gas deal because of the revelation.

RosUkrEnergo's sales in 2005 were around $3.5 billion and it made profits of $500 million from the sale of about 40 billion cubic metres of gas, Raiffeisen has said. That makes it one of Europe's largest gas marketers.

The disclosures come as concern grew that Ukraine, which is the transit route for 80 percent of Russia's gas exports to Europe, was tolerating opaque gas deals, even after the "Orange Revolution" of 2004, that jeopardize regional energy security.

Ukraine's state energy company, Naftogaz, is struggling to pay for gas imports following the January gas deal, under which the import price Ukraine must pay nearly doubled to $95 per 1,000 cubic meters.

Naftogaz has been unable to pass on the gas price increase to consumers and, according to local media reports, ran up losses of at least $500 million in the first quarter of 2006.

Firtash also figures prominently in a recent report by Global Witness, a non- governmental organization that campaigns against corruption involving natural resources, on the structures through which Turkmen gas has been sold to Ukraine.

Global Witness warned that Europe's energy security was threatened by the opaque nature of gas supply deals in the former Soviet states.

by Dominique Arel (Chair of Ukrainian Studies, U of Ottawa)
Roundtable on Ukrainian Elections
CREES, University of Toronto, 11 April 2006
[via the Ukraine List]

The March parliamentary elections in Ukraine could not match the Orange Revolution in excitement, suspense, and bewilderment. Yet they could prove quite significant for the development of Ukraine as an open society, and thereby as a permanent political threat to its immediate neighbors, Russia and Belarus.

These elections are significant for three reasons:

The first  is that they may induce the Orange political class, and many of us, to come out of denial regarding Eastern Ukraine.

The second is that they may force leading politicians to be in permanent coalition building mode, not just in the next weeks or months, but an ongoing basis. While this runs the danger of producing political paralysis, post-war (or current) Italian-style, it could, on the other hand, establish strong foundations for political pluralism.

The third is that the heretofore highly ambiguous constitutional reform could actually amount to more sturdy arrangements, not through some rushed document adopted at the eleventh hour, but rather owing to the very unpleasant reality that all major political players are regionally based and that each needs to be included in decision-making for Ukrainian policies to acquire legitimacy and substance.

**

First, the denial. At one basic level, the March 2006 vote is a carbon copy of December 2004 election. Yanukovych obtained 44 percent of the vote in the 2004 repeat voting. If the vote for the Party of Regions and satellite parties (Communists and Vitrenko) is correlated with the vote for the Orange parties (Tymoshenko, Our Ukraine, Socialists) and satellites (PORA and Kostenko), then the proportion of the vote obtained by the anti-Orange blocs is virtually identical (44 to 46 percent) to what it was sixteen months ago.

And the vote is as regionally polarized as it was during Orange. Again, if the anti-Orange and Orange blocs are counted together, we get landslide anti-Orange votes everywhere in Eastern and Southern Ukraine, and landslide Orange votes everywhere in Central and Western Ukraine. A landslide occurs when the proportion is at least 60-40%. This is the relative proportion that the anti-Orange vote obtained in Kherson, while its range everywhere else in the East and South was between 69% and 92%. In the Center and West, the Orange vote never fell below a proportion of 66% (Poltava and Zhytomyr), and generally landed within a 75%-97% range. Remarkably, not in not a single oblast or territory of Ukraine was the race between the anti-Orange and Orange blocs competitive.

Even within the Orange family, there wasn't much competition between the Tymoshenko Bloc and Our Ukraine. In only six of twenty-seven oblasts and territories were the two blocs close (five in Western Ukraine, the other being Crimea where most of the Orange electorate is comprised of Crimean Tatars). Tymoshenko soundly outpaced Yushchenko in proportions ranging from 2/1 to 4/1 in twenty-one oblasts, including Eastern and Southern Ukraine, but one must bear in mind that the overall Orange vote was rather small.

My reading of these results is twofold. First, Eastern Ukraine is not going away. The 2004 anti-Orange polarized vote was attributed to falsifications (which was certainly the case in the second round, but not in the third) and to a censored media (definitely the case in the second round, far less so in the third). The March 2006 election was conducted under conditions deemed fair and free by local and international monitoring bodies, the regime did not capture the broadcast media, and yet the results are identical. Eastern Ukraine still massively rejects the Orange parties, in the same proportion that it rejected Yushchenko in 2004. Maybe it is time for us to stop explaining the Eastern Ukraine vote as that of an electorate with an undeveloped national consciousness, who does not vote according to its true interests, and is manipulated by their unsavory elites and, of course, by Mother Russia. There is something deeper at work.

The second point is that the Party of Regions is not the only regional party in Ukraine. In fact, all parties are regional parties: Tymoshenko and the Socialists in Central Ukraine, Our Ukraine in Western Ukraine. Even the four parties which had a chance to make it to parliament, but did not in the end, crossed the threshold in specific regions: Lytvyn in the Center, Vitrenko in the East and South, PORA in Galicia, Kostenko/Pliushch in Galicia/Volyn. The Russian press presents the regionalization of Ukrainian politics as a source of instability. I think, on the contrary, that it is a strength. But a strength that can be capitalized upon only if the reality of regionalism is recognized.

***

The second reason why these elections are significant is because they introduce coalition-building in what could become a permanent feature of Ukrainian politics. Previously, the executive branch was concocting parliamentary majorities by buying off deputies who had run as so-called independents in first-past-the-post districts. The result was a Cabinet which was mostly unaccountable to the will of the electorate (mostly, but not entirely, as the Orange Revolution revealed).

Under the new electoral system, none of the deputies were elected to parliament as independent. Moreover, the new constitutional rules prohibit them from changing camps. What must happen, therefore, is a formal coalition of existing blocs. Mathematically, there are three possibilities: a coalition of the three Orange blocs, a coalition of Our Ukraine and the Party of Regions, or a coalition of Our Ukraine and Tymoshenko. Politically, none of the coalition scenarios involving the Party of Regions are possible, since a significant portion of both the Yushchenko and Tymoshenko blocs regard the Party of Regions as profoundly illegitimate, and any formal alliance with Yanukovych would incur a politically unsustainable rebellion with the Orange ranks. In the end, we will have what everybody expects, that is to say, an Orange coalition. Formally.

In practice, however, Ukrainian political culture will not be conducive to party discipline in parliamentary votes. Deputies may be prohibited from changing sides, but they will not be prohibited from defecting on particular votes. There is a parallel with American practice, where Senators and Congressmen constantly defect on important votes. This is what I mean by permanent coalition building. Each major vote will require ad hoc majority building. And since the Tymoshenko, Yushchenko and Moroz blocs will have constant squabbles over specific policies, the Party of Regions will have to be involved in the quest for parliamentary majorities. After all, how could it be different? The Party of Regions has made the demonstration that it speaks for a great majority of Ukrainian citizens living in Ukraine's geographical half. A state cannot be built on the basis of excluding half of its territory from crucial decision-making. However disreputable and unsavory many of the Rehiony characters might be, the Orange leaders will have sit down with them on an ongoing basis to hatch out the kind of compromises necessary for the political development of Ukraine. The Orange folks do not trust Rehiony, and, as we all know, the Our Ukraine folks don't trust Tymoshenko either, but it is precisely because they all have the structural incentives to work together, willy nilly, that Ukraine has a chance to truly consolidate itself as an open and internally competitive system.

The challenge is to find a way to de facto integrate the Party of Regions without formally integrating it in the Cabinet, since the latter would be politically explosive. There is virtually no one from Eastern Ukraine in the Tymoshenko Bloc's and Nasha Ukraina's slate of deputies, ensuring that the future Cabinet will continue to seriously underrepresent the East. This is an unhealthy situation for any state with strong regional cleavages. The new Orange cabinet will have to devise creative ways to allow an Eastern voice to be heard. Arrogance and contempt towards Eastern elites, which has generally characterized the first Orange administration, would not be a strategy bearing long-term fruits, from the point of view of democratic consolidation.

The Party of Regions has its own representational problem. Not in the sense that it does not legitimately reflect the concerns of the Eastern electorate. We can't have it both ways. We can't praise, on the one hand, the process of open elections as the true achievement of the Orange Revolution, while, on the other hand, delegitimizing the Party of Regions as a motley crue of rascals who should be in jail rather than in parliament. While, say, Piskun, Kovalov or Azarov will never win our vote for statesmen of the year, the fact is that they belong to a party that won a plurality in an open contest. If the Orange parties systematically finished way behind the Party of Regions throughout the East and South, it was not due, on the whole, to fear, intimidation or fabrication. At one level, the Party of Regions does represent the East. (We know that the electoral base of the Tymoshenko and Our Ukraine blocs will not accept that, but we, as disinterested analysts of the Ukrainian scene, should accept it as the corollary of an open contest). But the Party of Regions is a Donetsk political machine and, if we are to believe Kerstin Zimmer's analysis of its electorate slate, all its leaders and the bulk of its deputies come from the Donbas. The East and South, outside of Donbas, voted massively for a party that is essentially a Donbas party, rather than an all-inclusive East and South party, or so it appears. While the Party of Regions will struggle to have its voice heard nationally, the non-Donbas regions will struggle to have theirs heard within the Party of Regions. In other words, it will be very interesting to observe whether Regions will evolve from a political vehicle serving the interests of a local clan to a substantively regional party. Under the Orange Revolution-imposed rules of open politics, shall we add.

***

The third major consequence of the election is constitutional reform. We are familiar with the facts. A constitutional compromise, ostensibly shifting more powers to the parliament and prime minister, was passed in December 2004, as a condition for amending the electoral law and paving the way for Yushchenko's victory. Yushchenko does not seem to support the reform anymore, and his Ministry of Justice is on the record for calling the reform unconstitutional. Tymoshenko passionately opposed the reform, back then, and now, well, she is not about to repeat her experience of a prime minister whose powers are constantly encroached upon by the presidential branch. Politicians in the national-democratic camp have constantly changed their minds in the last ten years on whether Ukraine should adopt a more presidential or more parliamentary system. The reality, however, is that under the kind of open political system that the Orange Revolution has brought about, a mostly presidential system is no longer possible. A democratic Ukraine magnifies regional differences, not just along an Orange/anti-Orange axis, but within the Orange movement, and the imperative of regional inclusion and representation will make highly unlikely that a constitutional majority favoring a more centralized presidential rule could ever emerge, as one camp would always mistrust that another camp misuses its presidential authority in case of an election victory.

In short term politics, Yushchenko, humiliated by Tymoshenko in the last elections, does not have the political capital to resist constitutional reform. (In any case, the knock on him is that he did not even have the inclination to use the vast presidential powers that he inherited in January 2005). Tymoshenko, bent on reclaiming her seat as prime minister, does not want a presidential Security Council chief breathing down her neck. Yanukovych, obviously, wants more power to the one political arena where he has influence: parliament. As for Moroz, whom most analysts assess as a man of integrity, he will not yield on constitutional reform. And no Orange coalition is mathematically possible without Moroz. Three years down the road, if Tymoshenko were to win the Presidency, you can bet that the Nasha Ukraina folks would prefer to have her impetuous style checked by a powerful parliament. The experience of Central European states, since the end of Communism, has demonstrated without a doubt that a semi-presidential system of government, where parliament is endowed with more power than the president, is the best garantor, by far, of substantive democratization. Ukraine has a good chance of developing such a model of government, not because of superior political flair by its elites, but due to the strength of its regional rivalries.

The larger question is whether this "forced pluralism", or the "pluralism by default" that Lucan Way insightfully wrote about, will plant the seeds of a new political culture in Ukraine, one based on the respect for the rule of law. That respect is still in very scarce supply in post-Orange Ukraine. One thing is certain. If a new set of constitutional arrangements does evolve between parliament, the Prime Minister and the presidential office, it will evolve from conventions, not from any strict observance of the letter of the law. The conventions themselves will arise from the institutional necessity of finding compromises. A respect for these conventions, or new political "rules of the game," could over time mutate into a respect for the law and for a court system endowed with the task of ruling over jurisdictional disputes. But this is a long and risky path. The temptation by Ukrainian administrations, whether of an anti-Orange and, yes, of an Orange orientation, to subvert the court to serve their partisan goals, will always loom large. Paradoxically, the mistrust that Ukrainian political leaders have towards each other could set the foundations for a mutually-agreed apolitical adjudicating system standing above political interest. Mistrust in rivals could beget trust in institutions.

This may not happen and Ukraine could drown into political paralysis. Yet none of what I discussed could be conceivable without a a system built on openness and political contest. And that is the greatest achievement of the Orange Revolution.

[The roundtable, organized by the Petro Jacyk Program for the Study of Ukraine, University of Toronto, featured Dominique Arel, Adrian Karatnycky (Founder and President, The Orange Circle), Inna Pidluska (Foundation Europe XXI, Kyiv), and Daniel Bilak (UNDP Advisor to the Government of Ukraine).]