Publication: Monitor Volume: 4 Issue: 224

Officials of the United States and Ukraine have signed a program of economic cooperation which enshrines a new concept in bilateral relations and has no precedent in post-communist countries. Known as the “Kharkiv Initiative,” the program seeks to attract U.S. capital and know-how to this heavily industrialized region in order to assist its transition to the market economy. The U.S. State Department’s Coordinator for Aid to the Newly Independent States William Taylor, U.S. Ambassador to Ukraine Steven Pifer, Kharkiv Region Administration head Oleg Dyomin and the Minister of the Cabinet of Ministers Anatoly Tolstoukhov signed the program, capping a visit to Kharkiv by a U.S. government and business delegation.

Originally outlined during U.S. Secretary of State Madeleine Albright’s visit last May, the idea was to reward Ukraine for renouncing a lucrative participation alongside Russia in equipping Iran’s nuclear power plant at Bushehr. Kharkiv’s turbine-maker Turboatom and other Kharkiv plants lost nearly US$100 million of anticipated revenue earlier this year when the Ukrainian government quashed the deal at Washington’s request. Kyiv’s political decision did much to advance U.S.-Ukrainian relations.

The Kharkiv Initiative has since expanded well beyond its original purpose. The program just signed envisages incentives to U.S. capital investment in the processing industries, technological research for commercial profit, medium-size and small business, the service sector, as well as technical assistance to privatization programs, marketing strategies and infrastructure development planning. The parties intend the Kharkiv Initiative to become a potential model for developing economic cooperation between U.S. business and Ukrainian regions (UNIAN, December 2; Eastern Economist Daily (Kyiv), December 3).

The initiative also has an implicit political dimension which may be more important to President Leonid Kuchma than to the American side. The populous, russified and left-leaning industrial centers of Kharkiv Region are crucial to the outcome of any national election. At the same time, the city of Kharkiv is a political cradle and an economic base of the pro-presidential People’s Democratic Party (NDP), with a core of ethnic Russian officials and industrial managers who support Kuchma against the left. Dyomin and Tolstoukhov are ethnic Russians and NDP stalwarts, as is Kharkiv’s former mayor, Yevgeny Kushnaryov, who has just resigned as head of presidential administration in order to focus on the electoral campaign (see Lazarenko story at the head of this section). Should Kuchma run for reelection as he intends, the NDP-Kharkiv connection is pivotal to the strategy of cutting into leftist strength in russified industrial centers.–VS

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