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1.  "OVERVIEW OF THE LICENSING REGIME FOR THE

USE OF SUBSOIL IN UKRAINE IN 2007"
In 2007 the GOU continued to carry out hostile policies against
investors and cultivated an unpredictable, contradictory and
arbitrary regime for investment in the energy sector. 2007 was
one of the most depressing years for legitimate foreign investors.

By Dr. Irina Paliashvili, President and Senior Counsel
RULG - Ukrainian Legal Group, P.A. and
Tamara Lukanina, Senior Counsel
Ukrainian Legal Group, LLC
Washington, D.C. and Kyiv, Ukraine
Published by the U.S.-Ukraine Business Council (USUBC)
Washington, D.C. Wednesday, January 9, 2008

 

 

2.  PROVIDING A NUCLEAR FUEL ALTERNATIVE TO UKRAINE

Michael Kirst, Vice President, Central and Eastern European Fuel
Westinghouse Electric Company
Washington, D.C., Stockholm, Sweden

Published by the U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Wednesday, January 9, 2008

3.  U.S.-UKRAINE BUSINESS COUNCIL (USUBC) MEETS WITH

U.S.-Ukraine Business Council (USUBC)

Washington, DC, Monday, January 7, 2008

4. MAXWELL USA LLC JOINS U.S.-UKRAINE BUSINESS COUNCIL
First New USUBC Member for 2008, Member No. 53
U.S.-Ukraine Business Council (USUBC)
Washington, D.C. Tuesday, January 8, 2008 

THE USE OF SUBSOIL IN UKRAINE IN 2007"
In 2007 the GOU continued to carry out hostile policies against
investors and cultivated an unpredictable, contradictory and
arbitrary regime for investment in the energy sector. 2007 was
one of the most depressing years for legitimate foreign investors.

 

By Dr. Irina Paliashvili, President and Senior Counsel
RULG - Ukrainian Legal Group, P.A. and
Tamara Lukanina, Senior Counsel
Ukrainian Legal Group, LLC
Washington, D.C. and Kyiv, Ukraine
Published by the U.S.-Ukraine Business Council (USUBC)
Washington, D.C. Wednesday, January 9, 2008

 

USUBC NOTE: This very important article from USUBC executive

committee member, Dr. Irina Paliashvili, President and Senior Counsel

RULG - Ukrainian Legal Group, P.A., reviews the subsoil licensing

regime in legislation and in practice in 2007.  The full version of the

article is found below and in the attachment.

As we all know the year 2007, apart from the Vanco success of course,
was one of the most depressing years for legitimate foreign investors in
the energy sector, and we all hope that the new Government Of Ukraine
(GOU) will decisively reverse this trend.

However, it is already clear that the problem of regulated gas prices caused
in 2007 by the 2007 Budget Law (spelled out in Decree 31) is here to stay.

The newly adopted Budget Law has exact same provisions (Article 3), and
in order to lift the price control and other restrictions the amendments need
to be made to the Budget Law.

This and other issues of importance to foreign investors are addressed in
the article. The article also describes the loophole in the legislation
(section IV), which would allow the current GOU, if they really want it, to
quickly attract legitimate foreign investors in the subsoil sector.

According to the article, "In 2007 the GOU continued to carry out hostile
policies against investors and cultivated an unpredictable, contradictory
and arbitrary regime for investment in the energy sector.

It remains to be seen whether the new Rada and the new GOU will
introduce serious positive changes in the energy sector and the good
intentions will be implemented in practice."    Morgan Williams
==================================================
OVERVIEW OF THE LICENSING REGIME FOR THE

USE OF SUBSOIL IN UKRAINE IN 2007
In 2007 the GOU continued to carry out hostile policies against
investors and cultivated an unpredictable, contradictory and
arbitrary regime for investment in the energy sector. 2007 was
one of the most depressing years for legitimate foreign investors.

By Dr. Irina Paliashvili, President and Senior Counsel
RULG - Ukrainian Legal Group, P.A. and
Tamara Lukanina, Senior Counsel
Ukrainian Legal Group, LLC
Washington, D.C. and Kyiv, Ukraine
Published by the U.S.-Ukraine Business Council (USUBC)
Washington, D.C. Wednesday, January 9, 2008

Ukraine has two alternative regimes for the use of subsoil: the Licensing
Regime and the production sharing agreements regime (the "PSA Regime").

The article below is devoted exclusively to the Licensing Regime, including
its legislative and practical aspects in 2007 and the prospects for its
development in 2008, with special emphasis on its applicability to foreign
investors in the oil & gas sector.

There are serious and on-going flaws in the legislative basis for the
Licensing Regime, as well as in its practical application.  Despite these
flaws, the Licensing Regime exists and has been used by domestic and
international companies in Ukraine with various degrees of success.

A positive aspect for foreign investors is that Ukraine participates in the
Energy Charter and ICSID, as well as bilateral investment protection and tax
treaties, which considerably strengthen the protection mechanisms available
to them when investing in Ukraine under the Licensing Regime.

I. LEGAL BASIS FOR THE LICENSING REGIME

The Licensing Regime is regulated by subsoil legislation, which includes:
the 1994 Subsoil Code (the "Subsoil Code") and the 2001 Law "On Oil and
Gas" (the "Oil & Gas Law") (we omit the laws regulating other types of
subsoil resources) and is spelled out in various subsequent regulations.

Therefore a standard laws-based legislative basis, albeit outdated and at
times ambiguous and conflicting, does exist for the Licensing Regime
(hereinafter - the "Standard Legislative Basis").

Since 2004, however, the Parliament of Ukraine (the "Rada") has suspended
the Standard Legislative Basis through annually adopted Laws on the State
Budget (the "Budget Laws"), and stipulated an annual ad hoc system for the
Licensing Regime based not on laws, but on regulations adopted annually by
the Government (the Cabinet of Ministers) of Ukraine (the "GOU").

The 2004 suspension initially seemed to be only a temporary, emergency
measure based on just a few lines in the Budget Law, which had no basis in
the subsoil legislation.  However, over the years, this temporary measure
has in practice evolved into a new system of its own.

In sum, the Standard Legislative Basis for the Licensing Regime is being
replaced annually by the ad hoc regulation-based system (the "Regulation-
Based System").

In practice, this replacement happens through a two-step process: (1) the
Standard Legislative Basis is suspended, usually at the end of the year, by
the Budget Law for the next year; and then (2) in the first quarter of said
next year, usually by mid-March, the GOU adopts licensing regulations for
this particular year, which remain in effect only through the end of this
particular year (also resulting in the fact that there is no legal basis at
all for issuing licenses during the gap period running from 1 January of the
year in question until the time when the GOU adopts new regulations,
sometimes not until March or even April).

This ad hoc Regulation-Based System, of course, creates a high degree of
unpredictability and instability and makes the oil & gas sector much more
prone to political influence and dependant on the composition, orientation
and discretion of the GOU of the moment.

Unfortunately, for 2008 we do not see the much-needed return to the Standard
Legislative Basis as likely because the Budget Law for 2008 again provides
for the suspension of the Standard Legislative Basis and renews the flawed
Regulation-Based System.

The Licensing Regime is regulatory rather than contractual because under it,
an investor applies to the State for a permit (license) to use subsoil
("Subsoil Permit.  A Subsoil Permit is issued by a state body authorized to
issue Subsoil Permits (the "Licensing Body").

Over the years, the Licensing Body has changed several times, and the
current Licensing Body is Ukraine's Ministry for Protection of the Natural
Environment (the "Environmental Protection Ministry").

It should be noted that Subsoil Permits are issued separately for
exploration (an "Exploration Subsoil Permit") and for production (a
"Production Subsoil Permit").

Issuance of the Subsoil Permit must be accompanied by an agreement between
the Licensing Body and the subsoil user on the conditions for using subsoil
(a "Licensing Agreement"), which is considered to be an integral part of the
relevant Subsoil Permit.

There is no model Licensing Agreement and, in practice, Licensing Agreements
vary in their contents, depending on which particular Subsoil Permit they
are attached to (for example, the Oil & Gas Law has a list of key terms and
conditions for a Licensing Agreement) and many other factors.

Under the Regulation-Based System, Subsoil Permits are generally sold
through auctions ("Auction Procedure"). In certain special cases, determined
by the GOU, Subsoil Permits are instead granted without holding an auction
("Non-Auction Procedure").

It is important to note that in addition to a Subsoil Permit, which is
obtained for the use of a specific subsoil area pursuant to the subsoil
legislation, there is also a requirement to obtain a license allowing a
company to generally carry out a certain type of activity, such as
exploration or production.  The licensing of types of activity in various
industries is regulated by the Law "On Licensing Certain Types of Economic
Activity".

II. KEY FEATURES OF THE LICENSING REGIME IN 2007
AND TRENDS FOR 2008

We have identified the following notable changes to the Regulation-Based
System for 2007 as compared to 2006, which we categorize as (1) positive;
(2) general; or (3) negative.

(1) POSITIVE TENDENCIES

It appears that in 2007, the following three positive tendencies of high
importance to foreign investors were introduced (although there is no
guarantee that they will continue in 2008):

+        The respective GOU regulations established clearer (but still not
sufficiently clear) provisions with regard to converting an Exploration
Subsoil Permit into a Production Subsoil Permit: if certain conditions are
met, the holder of an Exploration Subsoil Permit has the right to obtain a
Production Subsoil Permit without an auction.

+         This is not an automatic conversion, but it gives the holder of an
Exploration Subsoil Permit a strong legal ground in favor of obtaining a
Production Subsoil Permit uncontested.

+        The possibility of obtaining a single Exploration-Production
Subsoil Permit is more directly implied in the respective GOU regulations.

+        The grounds for reformulating ( transferring) a Subsoil Permit have
been expanded and some new possibilities have opened to investors,
provided certain conditions are met. These possibilities include reissuing
a Subsoil Permit for the benefit of a new joint venture company ("JV") or
for the benefit of a subsidiary or parent company.

+          Under the first possibility, an investor can create a JV with an
existing Subsoil Permit holder, and have a Subsoil Permit transferred to the
new JV.  Under the second possibility, an investor can purchase a 100%-
owned subsidiary of a parent company that holds a Subsoil Permit, after
the Subsoil Permit has been transferred to the subsidiary (or the other way
around).

(2) GENERAL TENDENCIES

+         The list of the cases when an existing Subsoil Permit can be suspended

or cancelled has been significantly revised and expanded (according to
information posted on the Environmental Protection Ministry's website, the
Ministry cancelled 42 Subsoil Permits in the first quarter of 2007. Half of
these were cancelled because the relevant subsoil users had not begun
working on the activities for which the Subsoil Permits were issued).

+         Compared to 2006, the list of the grounds for applying for a Subsoil

Permit under a Non-Auction Procedure has increased from 10 to 13 and some

of the grounds have been restated.

+         The deposit payable at an auction for a Subsoil Permit increased from

5% to 20% of the starting bid for such Subsoil Permit.

+         The auction participation fee in 2007 is no longer refundable to applicants
(a 50% refund was stipulated in 2006).

+         The deadline for filing an auction application has been reduced from 30

to 15 days, and the deadline for making the official auction announcement has
been reduced from 45 to 30 days, both deadlines counting from the date the
auction is held.

          We note that these deadlines are unjustifiably tight, and differ
significantly from the relevant European standards: the EU Directive 94/22
dated 30 May 1994 "On the Conditions for Granting and Using Authorizations
for the Prospects, Exploration and Production of Hydrocarbons" established
deadlines (for the submission of applications and announcement of auctions)
of no less than 90 days in both cases.

(3) NEGATIVE TENDENCIES

Because projects in the oil & gas sector usually require substantial and
long-term investment, the ability of the State to change the rules at any
time and at-will has historically worried investors contemplating projects
under the Licensing Regime.  And in fact, the major problem with the
Licensing Regime is its lack of stability, transparency and certainty.

Historically, issuance of Subsoil Permits under the Licensing Regime in
Ukraine was very politicized, and this has been especially true in the past
several years, and specifically in 2007.

In particular, well-connected companies have received a surprisingly large
share of the Subsoil Permits on offer (including in the oil & gas sector).
In reality, auctions for Subsoil Permits have often been used as a cover,
and only the least attractive and most expensive oil & gas areas were
allowed to be auctioned.  Subsoil Permits for the rest of the areas have
been granted through "exceptions" to the Auction Procedure.

Unsurprisingly, even those few auctions that did take place in 2007 in the
oil & gas sector either did not attract any bidders, failed to sell any
Subsoil Permits, or sold very few Exploration Subsoil Permits, and no
Production Subsoil Permits were offered at all.

The analysis of the Auction Procedure in 2007 shows that it is not
sufficiently transparent and allows for baseless cancellation of an auction
or withdrawal of some Subsoil Permits from the auction.

In addition to the regulatory flaws, the practical implementation of the
Auction Procedure in 2006-2007 was inconsistent, ambiguous, and
deeply flawed.  This resulted in highly publicized scandals, which
caused the President of Ukraine to issue a Decree in the fall of 2007,
suspending all future auctions.

In practice, some well-connected local companies often obtain Exploration
Subsoil Permits, but rather than investing in exploration, proceed
immediately to commercial production (periodically extending the terms of
their Exploration Subsoil Permits), using a loophole in the law that allows
"test" production in the course of exploration.

Therefore, some holders of Exploration Subsoil Permits are actually not
interested in attracting foreign investors or obtaining Production Subsoil
Permits because they are already actively involved in "gray" commercial
production.

Another negative tendency was that in 2007, the GOU declared unlawful the
traditional method by which foreign investors participate in the use of
subsoil, to wit, through joint activity agreements with Ukrainian holders of
Subsoil Permits ("JAAs").  In general, JAAs are possible under Ukrainian
civil legislation, and in particular the Oil & Gas Law recognizes the tie
between JAAs' and oil & gas exploration and production by mentioning it in
various contexts.

At the outset, it should be noted that JAAs do not represent a sufficiently
solid and risk-free legal basis for long-term investment in the oil & gas
sector.  First of all, there are a number of legal concerns in the general
civil law and the tax regime applicable to JAAs.

Second, JAAs specifically in the oil & gas sector, do not allow foreign
investors to acquire any rights to Subsoil Permits held by local partners in
the JAAs.  The law does not permit a JAA to wholly or partially reformulate
(transfer) a Subsoil Permit.

In practice, the Licensing Body usually handwrote on a Subsoil Permit --
previously issued to a JAA's local partner -- that the deposit was being
developed with the assistance of a certain foreign investor on the basis of
a JAA.

However, such handwritten notes had no basis in the law, and did not protect
foreign investors when conflicts arose with the local partner that held the
Subsoil Permit or with State authorities.  Because the Subsoil Permit was
issued in the local partner's name only, the foreign investor's stake in the
Subsoil Permit was indirect and based exclusively on its civil-law agreement
(JAA) with the local partner.

In practice the Licensing Body (in all its various reincarnations, including
the present Environmental Protection Ministry) had always recognized JAAs,
and even encouraged foreign investors to invest in oil & gas projects
specifically through JAAs.

Another Ministry responsible for the oil & gas sector, the Ministry for Fuel
and Energy, seemed to consider JAAs as being almost the only option
available to attract foreign investors into the oil-and-gas sector.
Meanwhile, the GOU was well aware of this practice and, never raising any
objection, silently accepted it.

However, in 2007, the GOU adopted an inconsistent and contradictory
approach towards JAAs.  The Environmental Protection Ministry continued
to recognize and promote JAAs and Mr. Boiko, the Minister for Fuel and
Energy, traveled the world and called for international oil & gas companies
to invest in Ukraine.

Both knew full well that JAAs are realistically the only option actually
being offered to foreign investors.  The GOU, however, took a new course

in 2007 of undermining their legitimacy in the oil & gas sector.

Following the GOU's instructions, the State Tax Administration, Ministry of
Economy, Ministry of Justice, Ministry of Finance and the same Ministry for
Fuel and Energy came to the unanimous -- but unexpected -- conclusion that
the GOU considers the use of JAAs to invest in oil and gas exploration and
production to be unlawful.

Meanwhile, despite the GOU's new position, the Ministry for Fuel and
Energy's press service continues to welcome investment in oil & gas sector,
declaring in "Uriadovy Courier" newspaper dated 12 June 2007 that Ukraine
"is open for such investments" and "can guarantee openness for business,
protection of investments based on rules of law and an independent court
system and the Government's political support . ".

Obviously the GOU's inconsistent, hostile and hypocritical position with
regard to JAAs creates substantial risks for foreign investment in the oil &
gas sector and raises doubts about the GOU's true intentions.

Finally, another major negative setback in 2007 has been the GOU's open
interference in the gas market.  The Budget Law for 2007 and later GOU
Resolution No. 31 dated 16 January 2007 introduced restrictions on the sale
of natural gas extracted in Ukraine.

Companies in which the State owns a majority stake are now required to sell
their natural gas exclusively to NJSC Naftogaz Ukrayiny at a price approved
by the National Commission for Regulation of the Electric Power Industry
(NCRE), i.e. at low prices set by the State.

It is important to note that these restrictions apply not only to gas owned
by companies in which the State owns a majority stake, but also to gas owned
by their privately-owned JAA or JV partners.

For example, if a foreign investor happened to have a JAA or JV with such
a state-controlled company, the share of extracted gas belonging to this
foreign investor would also be subject to these restrictions, and the
foreign investor would be forced to sell its share of gas to NJSC Naftogaz
Ukrayiny at an artificially low, regulated price.

As a result of the above restrictions, 2007 saw gas prices in Ukraine set
not by the free market, but by the State. Predictably, these restrictions
outraged the investment community and resulted in litigation - while the
GOU openly ignored the protests and court decisions.

Ironically, at the same time the Ministry of Fuel and Energy has opined
that, in order to make production profitable, oil and gas companies need to
gradually increase the price they charge for natural gas until it becomes
profitable to produce.  Most unfortunately, the Budget Law for 2008 contains
the same restrictions, so we expect that in 2008, this issue will again wind
up in the courts.

IV. SEPARATE PROCEDURE FOR NON-RESIDENTS

Article 68 of the Subsoil Code stipulates a different procedure for
authorizing foreign legal entities and individuals ("Non-Residents") to use
subsoil: the Separate Procedure for Non-Residents, which is set forth in
more detail in a 1998 GOU Resolution ("Resolution 841") and is tender-based,
with the tender's winner subsequently entering into a contract with the GOU.

The Separate Procedure has not been used in practice, but is treated by the
GOU as being valid, and therefore can theoretically be applied to
non-residents at any time, because it has never been suspended either on the
legislative or on the regulatory levels.

Although the idea of reviving the Separate Procedure for Non-Residents may
seem far-fetched, if in fact the new GOU has the political will to attract
foreign investors, the Separate Procedure could be its best tool for
bypassing the restrictions prescribed by laws without needing to first ask
the Rada to change the laws.

We believe that the Separate Procedure presents foreign investors with an
intriguing opportunity and a sound legal basis for obtaining Subsoil Permits
outside of the current flawed Auction or Non-Auction Procedures, and for
basing relationships with the GOU on a contract protected by stronger
international mechanisms.

V. GOU PLANS FOR THE DEVELOPMENT OF THE
OIL AND GAS SECTOR

In 2007 the GOU and the President of Ukraine have made a number of
declarations about developing the energy sector, improving its legal basis
and attracting foreign investment in this sector, in particular:

(1)   The GOU approved a plan to reform and develop the energy sector,
which includes:

(a) drafting (in 2007 - 2008) a law "On the Basics of Natural Gas Market
Operation" (relevant instructions were given to the Ministry for Fuel and
Energy and Naftogaz);

(b) drafting (in 2007 - 2008) regulations on production sharing with the
purpose of increasing natural gas production; and

(c) bringing natural gas prices to a level that would cover costs and secure
accumulation of capital sufficient to fund further investment in the
infrastructure of fuel and energy companies (expected to take place in
2009 - 2012).

(2)   In a decision dated 15 June 2007, the Ukrainian National Security and
Defense Council ("UNSDC") recommended that the President of Ukraine add
the following provisions to the principal guidelines of the State's Policy
of Ensuring Ukraine's Energy Security, approved by the Ukrainian President's
Edict No. 1863 dated 27 December 2005: "creation of stable, predictable and
transparent conditions for investment in the fuel and energy industry by
improving the legislation without prejudice to international standards".

Also, according to the UNSDC decision, the GOU was instructed to approve
and implement, by the end of 2007, measures to improve the procedure for
attracting investment in the exploration and production of Ukrainian
hydrocarbons, in particular hard-to-extract and depleted reserves.

(3)   By his Decree No. 842 dated 7 September 2007 the President of Ukraine
approved a plan for stabilizing the natural gas market and instructed the
GOU to draft a law whereby investors would be involved in oil and gas
projects through tenders.

Unfortunately, to date, these good intentions have not been implemented. In
practice, in 2007 the GOU continued to carry out hostile policies against
investors and cultivated an unpredictable, contradictory and arbitrary
regime for investment in the energy sector.

It remains to be seen whether the new Rada and the new GOU will introduce
serious positive changes in the energy sector and the good intentions will
be implemented in practice.
-------------------------------------------------------------------------------------------------

[return to index] [U.S.-Ukraine Business Council Monitoring Service]

========================================================
2.  PROVIDING A NUCLEAR FUEL ALTERNATIVE TO UKRAINE

 

Michael Kirst, Vice President, Central and Eastern European Fuel
Westinghouse Electric Company
Washington, D.C., Stockholm, Sweden

Published by the U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Wednesday, January 9, 2008

WASHINGTON/STOCKHOLM - Westinghouse is nearing the completion

of an almost decade long effort to provide a nuclear fuel alternative to

Ukraine to assist in the creation of energy diversity and security for the

country.

It is the expectation that a long-term fuel supply contract will be
completed by the first quarter of 2008 between Westinghouse and Ukrainian
nuclear generator Energoatom.

KEY BENEFITS OF WESTINGHOUSE NUCLEAR FUEL SUPPLY

* As there are no other potential fuel providers in the world for
Ukrainian-type reactors, Westinghouse represents the sole option to ensure
security of supply in cases of poor fuel performance of the existing fuel
provider or unimpeded price demands due to having no competitive threat.

* Westinghouse has designed and manufacturing fuel for 8 different reactor
types throughout the world and have successfully entered as a second
supplier in Germany, Spain, Switzerland, France, Taiwan, South Africa and
Belgium.  Westinghouse has full confidence in its ability to also include
Ukraine on this list.

* Westinghouse fuel performance globally has a substantially better history
than any other manufacturer in the absence of fuel failures (leakers).  In
addition, its fuel design allows for the repair of a failed fuel rod to
permit further energy generation - saving Ukraine millions of dollars it has
lost historically with the current fuel in use which has not allowed repair.

* The Westinghouse fuel also is designed to consume less uranium, allowing
Ukraine to lower its overall costs in energy production, maximize its
domestic uranium reserves and lower the quantity and costs associated with
spent fuel compared to the current fuel provider

* Ukraine is intending to follow the same model as France which also
provided a contract to Westinghouse against its indigenous state-owned fuel
producer to create competition which led to overall price decreases and
performance improvements.  Westinghouse just increased its overall fuel
deliveries by 50 percent (18) reactors due to the success of this
competition.

* Westinghouse pledges to work with Ukraine in developing its own domestic
capabilities in fuel production.  Also, Ukraine may benefit through the
potential supply of Westinghouse's global needs as its nuclear plant designs
represent roughly half the world's operating plants and is considered to
have the next standard design for future needs - the AP1000.

ADDITIONAL WESTINGHOUSE INTERESTS IN UKRAINE

Westinghouse has effectively cooperated, with additional assistance from the
US Government, to provide the most advanced nuclear safety systems

available for Ukraine's fleet.

It now wishes to pursue reactor power uprates and capacity increases of the
existing units and to offer its AP1000 reactor design for new generation.
2008 will be the start of these efforts alongside the completion of the fuel
program.

------------------------------------------------------------------------------------------------
[return to index] [U.S.-Ukraine Business Council Monitoring Service]========================================================
3.  U.S.-UKRAINE BUSINESS COUNCIL (USUBC) MEETS WITH

U.S. AMBASSADOR TO UKRAINE WILLIAM TAYLOR, JR. 

 

U.S.-Ukraine Business Council (USUBC)

Washington, DC, Monday, January 7, 2008

WASHINGTON, DC - On January 3, 2008 the US-Ukraine Business Council

(USUBC) and the Cargill Company hosted a meeting in Washington, DC with

William Taylor, US Ambassador to Ukraine, on current political, economic

and business developments in the country. Over 65 members and guests

attended the meeting.

Ambassador Taylor said that the coming of the new Tymoshenko government

to power is a positive sign for the prospects for further reform. He described

two possible scenarios for the new Cabinet.

According to the optimistic one, the government coalition would be durable and
pursue needed economic reforms. Ambassador Taylor stressed that there is an
active dialogue between the president, prime-minister and speaker in Ukraine.

He described this as a positive trend compared to the recent past.

In the Ambassador's view, the less positive scenario would be the renewal of
past infighting within the governing coalition, with Prime Minister Tymoshenko
and President Yushchenko maneuvering for political advantage with an eye on
the presidential elections. This would again set back reforms.

As long as a clear separation of responsibilities existed between the president
and the premier, said Taylor, the government can succeed in its work.

Among the positive trends in Ukraine, Ambassador Taylor noted the active

work by Ukraine on WTO accession and rapid passage of a budget. He

thought Ukraine would join the WTO soon and that Ukraine would work

to solve the ongoing issue with the Overseas Private Investment Corporation

(OPIC) that has caused OPIC programs to be closed for Ukraine.

He also said that, in contrast to the past, both the new coalition and the
political opposition are focused on economic reforms, fighting corruption,
and improving the investment climate. Amb. Taylor said that these trends

give him hope for the positive changes in these spheres.

 

The Ambassador answered a series of questions from the audience

about business and economic issues such as VAT tax refunds, grain

export controls, intellectual property rights, corporate raidership,

private land ownership, and customs controls.

 

Gene Van Dyke, president of VANCO Energy, Houston, discussed his

companies recent activities in Ukraine in a presentation to the meeting.

VANCO has signed with the government of Ukraine the first contract

for an international company to do deep-water drilling in the Black Sea

off the shore of Ukraine.

Irina Paliashvili, head of the USUBC Legal Affairs Working Group, 

called on the new government deal with legal reform. She noted the

current system is archaic, chaotic, and at times absurd.

Paliashvili called for the new government to act fast in order to improve
business climate in the country by cancelling the most archaic and

damaging legislation. She also called the new government to deal rapidly

with WTO accession.

Paliashvili noted that outstanding issues related to legislative reform have
been neglected for too long by Ukrainian leaders and called the government

of Tymoshenko to face them without further delay. 

 

[return to index] [U.S.-Ukraine Business Council Monitoring Service]========================================================

U.S.-Ukraine Business Council Website: http://www.usubc.org

========================================================
4.  MAXWELL USA LLC JOINS U.S.-UKRAINE BUSINESS COUNCIL
First New USUBC Member for 2008, Member No. 53

 

U.S.-Ukraine Business Council (USUBC)
Washington, D.C. Tuesday, January 8, 2008 

WASHINGTON - The executive committee of the U.S.-Ukraine

Business Council (USUBC) is pleased to announce that MaxWell USA,

LLC, a Washington, D.C.-based medical/pharmaceutical company, has

been approved as the first new member for 2008 and as the 53rd member

of USUBC.
 
USUBC has been meeting with Dr. Peter M. Leitner, President of

MaxWell USA, and with Alex Meerovich, Public Relations Manager,

since early December 2007 about MaxWell's strong interest in being a

member of USUBC.  Dr. Leitner will represent MaxWell USA on

the USUBC board of directors.
 
As a U.S. company with a growing presence in Ukraine, MaxWell USA

is working to meet significant unmet medical needs in the emerging

markets of the former Soviet Union, including through on-site production

of high-tech, high-quality bio- and chemopharmaceuticals targeting

oncological and cardiological diseases.
 
The head office is based in downtown DC, but the bulk of their current
activity is in Ukraine, where MaxWell is building a large, state of the art
pharmaceutical production facility in the town of Boryspil, just outside
Kyiv.
 
Once completed, the Boryspil facility will employ around 500 people
and will produce a range of bio- and chemo-pharmaceuticals in a variety
of formats. Production is slated to begin in 2008.
 
The company president is Dr. Ken Alibek, noted American microbiologist,
biotechnologist, and biodefense expert originally from Kazakhstan.  Dr.
Alibek currently divides his time between MaxWell's corporate head-

quarters in Washington, D.C. and the Boryspil facility.
 
Their plans for Ukraine include much more than manufacturing and
distributing pharmaceuticals.  MaxWell is also establishing a network of
out-patient clinics across Ukraine (the first clinic in Boryspil opened on
August 1, 2007); they just published in Kyiv the first issue of their
popular-medical journal, "Science, Health, Life"; and they plan to open a
specialized cancer and cardiology clinic, a drug development center, a
clinical studies center, and a diagnostic and clinical center, all in close
proximity to the Boryspil plant.
 
In short, MaxWell is creating a novel and comprehensive healthcare
complex in and around Kyiv to realize the corporate motto: "We Help
You Live Longer."
 
The  corporate website is www.max-well.com, available in Ukrainian,
Russian and English.

The membership of the USUBC grew from 22 to 52 in 2007.
MaxWell USA is member 53 and the first new member for 2008.
 
1.  American Continental Group
2.  AES Corporation
3.  ALICO/AIG
4.  Atlantic Group
5.  Archer Daniels Midland Company (ADM)
6.  The Boeing Company
7.  Bracewell & Giuliani LLP
8.  Bunge North America
9.  Charles H. Camp, Attorney
10. Cardinal Resources
11. Cargill
12. Case New Holland (CNH)
13. Chadbourne & Parke LLP
14. Cisco Systems, Inc.
15. The Coca-Cola Company
16. Deere & Company
17. ECdata, Inc.
18. ESSI/TAMSCO
19. The Eurasia Foundation
20. Heller & Rosenblatt
21. Holtec International
22. Horizon Capital Advisors,
      LLC-Emerging Europe Growth Fund
23. International Environmental Trading Group (IETG)
24. International Tax and Investment Center (ITIC)
25. Kennan Institute, Woodrow Wilson
      International Center for Scholars
26. Kraft Foods Ukraina
27. Kyiv-Atlantic Group of Companies
28. Marathon Oil Corporation
29. Marks & Sokolov LLC
30. MaxWell USA LLC
31. Northrop Grumman
32.  Open World Leadership Center,
      U.S. Library of Congress
33. The PBN Company
34. Procter & Gamble (P&G)
35. Russian-Ukrainian Legal Group, PA
36. Salans, international law firm
37. SASI
38. Shell Oil Company
39. SigmaBleyzer Private Equity Investment Group
40. Siguler Guff & Co, LLC
41. Softline Company
42. TD International, LLC
43. The State Export-Import Bank of Ukraine
44. The U.S. Civilian Research & Development Foundation
45. U.S.-Ukraine Foundation (USUF)
46. Ukrainian American Bar Association (UABA)
47. Ukrainian-American Environmental Association (UAEA)
48. Ukrainian Federation of America (UFA)
49. Ukrainian Development Company (UDC)
50. UPS
51. Vanco Energy Company
52. Westinghouse
53. WJ Export-Import Agricultural Group
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