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END NOTE: RUSSIA GIVES UKRAINE A HELPING HAND IN ITS ELECTIONS
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RUSSIA GIVES UKRAINE A HELPING HAND IN ITS ELECTIONS

Preparations for the Ukrainian parliamentary elections on 31 March are being keenly followed not only in the West but also in Moscow. Russia is keen to capitalize upon its success over the past two years in reorientating Ukraine's multivector foreign policy eastward. The main threat to the consolidation of this eastward orientation and Russia's increasing influence in Ukraine is Viktor Yushchenko and his Our Ukraine bloc.

In Ukraine, as in other postcommunist states, support for the pursuit of reform, reviving national identity, and an orientation toward "Europe" are closely tied together. The West is seeking to support this package of policies by encouraging reform and free elections, as exemplified by U.S. training of 25,000 local election commissions and $200,000 in support for the regional media in Ukraine. In contrast, Russia's primary concern is to reassert its influence within Ukraine, regardless of who is in power in that country (as in Belarus).

During the last two years, Russophile oligarch clans and their media outlets in Ukraine have increasingly given credence to a "Brzezinski plan" conspiracy that was first aired by Russian sources close to President Vladimir Putin. The "Brzezinski plan" is supposedly an elaborate plan concocted by a group of U.S. policymakers to overthrow President Kuchma and replace him with Yushchenko in a "bloodless revolution." An analogy is drawn with the overthrow of Slobodan Milosovic in Serbia in October 2000. Yushchenko's alleged allies in this plot are the two wings of the radical anti-Kuchma opposition, Yuliya Tymoshenko, his former deputy prime minister, and Socialist leader Oleksandr Moroz.

The "Brzezinski plan" was allegedly behind the "Kuchmagate" scandal that broke in November 2000, when incriminating tapes illicitly made in Kuchma's office were released, leading to Ukraine's largest opposition demonstrations. The "Brzezinski plan" therefore played a classic disinformation role in seeking to deflect attention from possible Russian involvement in the scandal (in cahoots with a Ukrainian oligarch group) by laying blame on the West. After Kuchma survived calls for his ouster in 2000-2001, the conspiracy was quietly forgotten, but it was again revived in November of last year by "Kievskiye Vedomosti," a newspaper owned by the Social Democratic Party (United) (SDPU-O).

Controversial Kremlin strategist and Putin imagemakers Gleb Pavlovskii and Merat Gelman, who are joint owners of the Fund for Effective Politics (FEP), have given the maximum publicity to the "Brzezinski plan" conspiracy. The FEP is seeking to continue other shadowy PR activities in the Ukrainian elections together with the SDPUO. Its main target is, unsurprisingly, Yushchenko, who is the archenemy of SDPU-O leader Medvedchuk.

In a recent survey of attitudes to foreign policy by political parties undertaken by the Analytical Centers of Ukraine Network (http://www.intellect.org.ua), only the SDPU-O, apart from the Communists, supported Ukraine's membership of the Russia-Belarus Union. The SDPU-O also recently raised the question of changing the 1989 Law On Languages by adding Russian as a second "official language." This Russophile populism did not prevent the SDPU-O from including the "nationalist" and pro-NATO former President Leonid Kravchuk among its top five candidates for the elections.

The SDPU-O is also the main backer of the extreme nationalist, anti-Western, and pro-Kuchma Rukh for Unity (NRU-ye) splinter group led by Bohdan Boyko, which was suspiciously created only three days before the Kuchmagate scandal began. The NRU-ye and the Progressive Socialists play the role of "radical opposition" parties on the left and right controlled by the executive, in a similar manner to Vladimir Zhirinovsky's Liberal Democratic Party of Russia. The NRU-ye controls the Ternopil-based "Tryzub" paramilitaries led by Colonel Yevhen Fil who orchestrated the violence at the March 9, 2001 demonstration in order to discredit the anti-Kuchma opposition.

The SDPU-o has also duplicated some of the shadowy PR activities that the FEP earlier successfully used in Russia. This includes attempting to blacken Yushchenko's character, which unlike that of the majority of other politicians, remains beyond repute. The FEP has an agreement with the SDPU-O to provide "campaign advice," and 10 of its associates are working on this campaign. This has included creating a fake Yushchenko website (http://www.yuschenko.com), an action that the FEP also undertook in the 1999 Russian parliamentary elections against Moscow Mayor Yurii Luzhkov and then-Foreign Minister Yevgenii Primakov.

The FEP and its SDPU-O allies were very probably behind Ukraine's second taping scandal, that of Yushchenko and Kyiv Mayor Oleksandr Omelchenko in early January 2002. As Serhiy Sobolev, deputy head of the Reform and Order pro-Yushchenko party said, this latest scandal "is a fresh pointer to those who organized the tape scandal" in Kuchma's office. This is apparently because of the similarity in advanced technology used in both cases. Sobolev had in mind the suspicion -- first voiced by "RFE/RL Newsline" in December -- that the SDPU-O (with Russia) was behind the taping of Kuchma's office.

The latest tape was released by the newly organized civic group "For Trustworthiness in Politics," which is closely linked to the SDPU-O and the NRU-ye. It aimed to discredit Yushchenko by creating the impression that he conspired with Omelchenko to remove Medvedchuk as deputy speaker. The latest taping was condemned by the majority of political parties and Omelchenko has taken the matter to court. Omelchenko, whose son is a member of the Yushchenko bloc and is himself a strong opponent of the SDPU-O, also accused Pavlovskii and the FEP of underhand practice by "humiliating Ukrainian national dignity."

The Ukrainian elections are the scene of a fierce geopolitical competition over the future direction of Ukraine, and yet the choices open to Ukraine are only twofold. Either it can continue to muddle along and "rejoin Europe together with Russia," the preferred option of Kuchma and the oligarchs, which postpones integrating into Europe indefinitely and ties Ukraine's fate to Russia's. Or it can revitalize its reform and nation-building policies and integrate into Europe regardless of Russia, the option promoted by Yushchenko and his allies.

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UKRAINIAN PARTIES, BLOCS LIST PARLIAMENTARY ELECTION CANDIDATES. The Ukrainian National Assembly approved a list of 86 candidates on 21 January who will seek parliamentary mandates in the countrywide multiseat constituency, Interfax reported. The previous day, election lists were approved by the Unity bloc of Kyiv Mayor Oleksandr Omelchenko, the Popular Movement of Ukraine bloc led by Bohdan Boyko and Heorhiy Filipchuk, and the Greens Party headed by Vitaliy Kononov. Last week, lists of candidates for the 31 March parliamentary ballot were approved by eight other blocs and parties (see "RFE/RL Poland, Belarus, and Ukraine Report," 22 January 2002). JM

UKRAINIAN OPPOSITION LEADER VOWS TO BREAK 'INFORMATION BLOCKADE.' Yuliya Tymoshenko, the leader of the antipresidential Forum of National Salvation and the election bloc bearing her name, told journalists on 21 January that she is going "to break the information blockade around the opposition" by meeting voters in regions, Interfax reported. "The authorities do everything to prevent our bloc from electioneering, the only [way out is to hold] meetings with voters," she said. She added that printing houses in Kyiv have recently refused to print the "Vechirni Visti" and "Slovo Batkivshchyny" newspapers, which are backed by the National Salvation Forum. Tymoshenko made a written pledge last year not to leave Kyiv in connection with a corruption case conducted against her. In December, Tymoshenko filed a lawsuit questioning the legality of the procedure that stripped her of her parliamentary immunity. A Kyiv court has accepted her lawsuit and ruled that law enforcement bodies may not take any actions against her that would violate a deputy's immunity. According to Tymoshenko, the ruling also means that the Prosecutor-General's Office had no right to demand from her a written pledge to stay in Kyiv. JM

UKRAINE WANTS STATUS LAW BENEFITS TO FALL INTO LINE WITH 'ROMANIAN MODEL.' Ukrainian officials have proposed that seasonal job opportunities in Hungary extended to all Romanian citizens be offered to all Ukrainian citizens as well, "Nepszabadsag" reported on 19 January. Citing reliable sources in Kyiv, the newspaper wrote that Ukrainian members of the Ukrainian-Hungarian intergovernmental joint committee made the proposal at the committee's last session. A compromise was reportedly agreed upon, under which Ukraine will request that all SubCarpathian inhabitants, rather than just ethnic Hungarians, be entitled to the job opportunities made available under Hungary's Status Law. Ukraine's Sub-Carpathian region has a population of 1.3 million, of whom some 160,000 are ethnic Hungarians. MSZ

RUSSIA GIVES UKRAINE A HELPING HAND IN ITS ELECTIONS

RADIO FREE EUROPE/RADIO LIBERTY, PRAGUE, CZECH REPUBLIC

RFE/RL Poland, Belarus, and Ukraine Report Vol. 4, No. 3, 22 January 2002

A Survey of Developments in Poland, Belarus, and Ukraine by the Regional Specialists of RFE/RL's Newsline Team

RUSSIAN PRESIDENT IN POLAND. Russian President Vladimir Putin was in Poland on 16-17 January on the first visit there by a Russian head of state in the past eight years. Polish President Aleksander Kwasniewski said on the eve of Putin's trip that he hoped for a "breakthrough" in Polish-Russian relations, but most Polish commentators concur in the opinion that the visit, albeit important and useful, did not result in any significant changes.

Putin started his visit with a face-to-face meeting with Kwasniewski. Prior to the meeting, however, in the attendance of reporters, Putin gave Kwasniewski copies of documents from Russian archives concerning General Wladyslaw Sikorski, Poland's prime minister in 1939-43 who signed an accord with Stalin on reestablishing Polish-Soviet relations.

"The difficult stage [in Polish-Russian relations] in the 1990s is behind us," Kwasniewski told a news conference following his meeting with Putin. Meanwhile, at the same news conference Putin said: "We see the visit as a groundbreaking event in the relations between our countries.... Over the past few years it has been our desire to reach a qualitatively new level in our relations." Putin added that he and Kwasniewski discussed bilateral economic ties, EU expansion, cultural cooperation, the problem of Kaliningrad Oblast, and combating international terrorism. Putin said Poland's entry into the EU "should not have a negative effect on Russian-Polish relations or create any barriers for our citizens."

Answering a question from a Polish journalist about calls for compensation to surviving Poles deported to Siberia after the NaziSoviet partition of Poland in 1939, Putin ruled out financial compensation similar to that being paid out by Germany to Third Reich slave laborers. But he added: "We do not want to close our eyes to the negative sides of the Stalinist regime. As is well-known, in Russia there is a law on the rehabilitation of individuals who were wronged during political repressions. I feel that the opportunities for the implementation of this act may also be used by Polish citizens who were wronged in those days."

On 17 January, Putin and Kwasniewski went to Poznan, where they attended a Polish-Russian economic forum and visited an international trade fair. Putin assured the economic forum that Russia will do everything possible to cut Poland's $3 billion trade deficit with Russia, which is largely the result of Polish dependence on Russian natural gas.

Putin met earlier the same day with Prime Minister Leszek Miller in Warsaw. Miller told Putin that Warsaw wants to verify earlier gas-supply agreements with Russia in order to reduce supply volumes. The sides agreed that representatives of Gazprom and the Polish Oil and Gas Company will meet in mid-February to discuss the issue. Both sides are also expected to decide in February on the construction of a link between the Polish section of the Yamal-Europe gas pipeline and Slovakia to enable Russian gas supplies to Western Europe to bypass Ukraine, "Rzeczpospolita" reported on 18 January. ITAR-TASS quoted Polish Deputy Premier Marek Belka as saying two days earlier that Warsaw "fully backs" Moscow's idea of building a gas pipeline to circumvent Ukraine. Belka was in the United States and unavailable for comment, while Economy Minister Jacek Piechota said the Polish government has not made any decision on this issue. It appears, however, that Warsaw -- which during the term of the previous Solidarity-led government vowed not to trade its "strategic partnership" with Ukraine for better relations with Russia -- has now taken a more pragmatic stand and will eventually agree to the gas pipeline bypass demanded by Moscow.

Before leaving for Russia on 17 January, Putin said that any possible apologies by the Russians and the Poles for wrongdoings of the past will not improve the relations between the two countries. Putin was apparently referring to the expectation voiced by some Polish media that during his visit the Russian president would apologize to the Poles for the Katyn massacre. Putin said making apologies for the past could give rise to "a balance sheet of who apologized how many times." And he added: "I think it would be more objective to note that we see the problems of our history and that we shall draw conclusions from this. We have great respect for the Polish people, we see all the problems of our past, and of course we shall draw conclusions for the future."

A similar view was expressed more clearly by Russian Foreign Minister Igor Ivanov a day earlier, who answered a question from a Polish journalist as to why the schedule of Putin's visit included neither wreath-laying at the 1944 Warsaw Uprising Monument nor an address to the Sejm as had been proposed by the Polish side. "One can deal with gestures but one can also seriously deal with real politics. We want to deal with serious work, with changing our mutual relations and the approach to international problems," PAP quoted Ivanov as saying. However, Putin made two unscheduled "gestures" that were approvingly noted by the Polish media. On 16 January, he laid flowers at the memorial to Poland's Home Army in Warsaw, while on 17 January in Poznan he unexpectedly halted before the monument to the victims of anticommunist protests in 1956 and paid his respects.

UKRAINE

OUR UKRAINE APPROVES ELECTION LIST. A congress of former Premier Viktor Yushchenko's election bloc Our Ukraine approved its election list on 16 January, Ukrainian media reported. The first five on the list are: Yushchenko; lawmaker Oleksandr Stoyan, the head of the Trade Union Federation of Ukraine; lawmaker Hennadiy Udovenko, the leader of the Popular Rukh of Ukraine; lawmaker Yuriy Kostenko, the leader of the Ukrainian Popular Rukh; and lawmaker Viktor Pynzenyk, the leader of the Reforms and Order Party.

Additional names on the list are: lawmaker Liliya Hryhorovich, the head of the Union of Ukrainian Women; lawmaker Oleksandr Slobodyan; Ivan Zayets, the deputy head of the Ukrainian Popular Rukh; former Foreign Minister Borys Tarasyuk; former Deputy Prime Minister Mykola Zhulynskyy; Slava Stetsko, the head of the Congress of Ukrainian Nationalists; Les Tanyuk, the deputy head of the Popular Rukh of Ukraine; Our Ukraine political coordinator Roman Bezsmertnyy; Vyacheslav Koval from the Popular Rukh of Ukraine; Serhiy Sobolev from the Reforms and Order Party.

The congress also approved a list of Our Ukraine candidates running in single-seat constituencies. This list included Taras Chornovil, a son of charismatic Rukh leader Vyacheslav Chornovil, as well as lawmakers Roman Zvarych and Oleksandr Zhyr.

"Ukrainian politics lacks decency. We are for honesty in politics, for honesty in matters connected with the governing of the state," Yushchenko said during the congress while adding, "we should do everything to restore the people's trust in the authorities."

Yushchenko also told the congress that Our Ukraine pledges "to free the country from everything that hampers its development," and said his bloc seeks to change Ukraine's "ruthless, bureaucratic, and corrupt" executive power system. Asked by journalists about possible allies in the future parliament, Yushchenko named the Unity bloc led by Kyiv Mayor Oleksandr Omelchenko and the pro-presidential For a United Ukraine led by Volodymyr Lytvyn.

BEAUTY PLANS TO TOUR UKRAINE. The fiercely antipresidential Yuliya Tymoshenko Bloc on 18 January approved its election list, the "Ukrayinska pravda" website reported. Former Deputy Premier Yuliya Tymoshenko and Sobor Party leader Anatoliy Matviyenko top the list. The third name on the list is Hryhoriy Omelchenko, which "Ukrayinska pravda" referred to as a "sensational" development. Lawmaker Omelchenko, who is known for his relentless fight against corruption in Ukraine, has in the past written a slew of letters to ProsecutorGeneral Mykhaylo Potebenko and President Leonid Kuchma asking them to instigate criminal proceedings against Tymoshenko and former Premier Pavlo Lazarenko.

The Yuliya Tymoshenko Bloc election list also includes lawmaker Vasyl Onopenko, famous Soviet dissident Levko Lukyanenko, lawmaker and former Ukrainian Ambassador to the U.S. Oleh Bilorus, and Oleksandr Turchynov, Tymoshenko's comrade from the Fatherland Party.

Some Ukrainian independent media deliberately refer to the Yuliya Tymoshenko Bloc by using its specially adapted Ukrainian acronym BYuTy, which sounds similar to the English word "beauty." This interlingual play on words, of course, underscores the fact that the bloc is led by the politician who is famous not only for her moral fortitude but also for her attractiveness and sex appeal.

Tymoshenko told the 19 January "Dzerkalo tyzhnya" that this week she begins election trips across Ukraine. Asked by the weekly how she can travel after she gave a written pledge to the ProsecutorGeneral' s Office not to leave Kyiv, Tymoshenko said that she has recently filed a lawsuit questioning the legality of the procedure that stripped her of her parliamentary immunity. A court has accepted her lawsuit and this, according to Tymoshenko, means that she will retain her parliamentary immunity until the court's final verdict. This also means, Tymoshenko argued, that the Prosecutor-General's Office had no right to demand from her a written pledge that she will not leave Kyiv.

Last week, Tymoshenko publicly invited the leader of the Social Democrat Party (United) (SDPU-O), Viktor Medvedchuk, to participate in a televised debate with her, STB Television reported. Tymoshenko pointed out that Medvedchuk has been recently portrayed as a real man in his television commercials. "If you are a man, come and join me in a televised duel," Tymoshenko challenged. She added that the debate could be broadcast on the private Inter Television. Medvedchuk reacted almost immediately with an open letter saying that he does not accept the ideology of the Tymoshenko-led bloc, which is against President Kuchma. Medvedchuk added that he would like to speak on television to communists and representatives of the Our Ukraine and For a United Ukraine election blocs.

UKRAINIAN SOCIAL DEMOCRATS (UNITED) APPROVE ELECTION LIST... At a congress on 15 January, the SDPU-O approved its election list and manifesto, Interfax reported. The top five on the list are SDPU-O leader Medvedchuk; Tamara Proshkuratova, a teacher from Cherkasy Oblast; SDPU-O deputy head Oleksandr Zinchenko; Volodymyr Ryabika, the head of the National Committee of Youth Organizations; and Leonid Kravchuk, the first president of independent Ukraine. Medvedchuk told the congress that an SDPU-O caucus in the future parliament will seek to create a centrist majority, including with the For a United Ukraine bloc, the Green Party, the Democratic Union, and the Yabluko Party.

DEMOCRATIC PARTY-DEMOCRATIC UNION BLOC APPROVES ELECTION LIST. The Democratic Party-Democratic Union election bloc approved its election lists on 19 January. The top five are: Democratic Union leader Volodymyr Horbulin, Democratic Party leader Bohdan Shyba, Ukrainian Cossacks leader Ivan Bilas, television news moderator Vyacheslav Pikhovshek, and businessman Volodymyr Severnyuk. The founder of the Democratic Union, Oleksandr Volkov, will seek a parliamentary mandate in a single-seat constituency.

PEASANT PARTY OF UKRAINE APPROVES ELECTION LIST. The Peasant Party of Ukraine approved its election list on 17 January. The first five on the list are: Peasant Party leader Serhiy Dovhan, Illya Tsaberyabyy, Ivan Dotsenko, Andriy Sklarenko, and Anatoliy Drobotov. The party canceled its earlier resolution to cooperate with the Communist Party of Ukraine in the election campaign.

TEAM OF THE WINTER-CROP GENERATION APPROVES ELECTION LIST. The election bloc under the fancy name of the Team of the Winter-Crop Generation (Komanda ozymoho pokolinnya) approved its election list on 17 January. The fop five on the list are: Valeriy Khoroshkovskyy, Inna Bohoslovska, Mykola Veresen, Valeriy Voshchevskyy, and Ostap Protsyk. The "winter-croppers" declare in their manifesto that they are going into politics "with Ukraine in their hearts" in order to "provide inspiration through their own example as to how to conduct honest politics."

NEW GENERATION OF UKRAINE APPROVES ELECTION LIST. The New Generation of Ukraine party approved its election list on 16 January, Interfax reported. The first five on the list are: New Generation of Ukraine leader Yuriy Mroshnychenko, Vyacheslav Kredisov, Olena Romina, Oleh Hliy, and Volodymyr Barabash. The party, which was established in 1999, claims to have 3,500 members.

SOCIALISTS CRITICIZE RYABETS FOR STANCE ON MELNYCHENKO. The Socialist Party has said it disagrees with the statement of Central Election Commission head Mykhaylo Ryabets to the effect that former presidential bodyguard Mykola Melnychenko, who has been residing in the United States for more than a year, cannot be registered as a candidate running on the Socialist Party election list, Interfax reported on 17 January. Ryabets said on 15 January that the election law stipulates that only those Ukrainian citizens who have been living in Ukraine for the past five years may be elected to the Ukrainian parliament. The Socialists retorted that, according to the same law, residence in Ukraine means also "staying outside Ukraine's borders in accordance with Ukraine's appropriate international agreements." The Socialists believe that Melnychenko's U.S. visa is a document envisioned by such "appropriate international agreements." The Socialist Party said Ryabets' stance on Melnychenko is "preconceived."

"RFE/RL Poland, Belarus, and Ukraine Report" is prepared by Jan Maksymiuk on the basis of a variety of sources including reporting by "RFE/RL Newsline" and RFE/RL's broadcast services. It is distributed every Tuesday.

UKRAINE PRIVATIZATION RAISES $400 MILLION (8 January) Ukraine's government announced that privatization revenues totaled 2.124 billion gryvnias ($400 million) last year, just over one-third of its initial target. Sales in the energy and telecommunication sectors failed. The State Property Fund expected to raise 5.9 billion gryvnias in 2001, but the program suffered a blow when President Leonid Kuchma ordered a freeze in the energy sector sell-off. The International Monetary Fund (IMF) and the World Bank are urging the government to step up its privatization efforts to turn inefficient and unprofitable companies around and help support the nation's economic recovery. The State Property Fund will focus on selling Uktelekom and 12 electricity distributing companies. The government expects to raise 5.8 billion gryvnias in 2002, Reuters reported. The previous government, headed by reformer Viktor Yushchenko, had started privatizing the energy sector and sold six utilities to U.S. group AES Corp and Slovak energy company Vychodoslovenske Energeticke. But Yushchenko was forced to step down last year during a political crisis. Analysts have cast doubt on the government's privatization plans, saying it will have to delay major sales until the second half of the year due to a parliamentary election in March. (JMR)

UKRAINE AIMS TO RESOLVE VAT OBJECTION (9 January) Ukraine's government has announced measures to resolve its dispute with the International Monetary Fund (IMF) over the estimated 6 billion gryvnias ($1.1 billion) of value-added tax (VAT) refunds owed to exporters. Mykola Azarov, head of the state tax administration, told Reuters the government plans to partly repay the debt with gas and electricity supplies in a bid to defuse a dispute that is blocking the resumption of IMF lending. Newly appointed Finance Minister Igor Yushko said a working group would be formed this week to prepare the ground for changes to the laws on the payment and refunding of VAT. The IMF has postponed the release of a $375 million installment this month, citing the VAT problem. Some economists say the VAT debt has not been properly accounted for in Kyiv's budget and could inflate its deficit target for 2002 to far beyond the current target of 1.7 percent. (JMR)

UKRAINE'S INDUSTRIAL OUTPUT RISES (9 January) Ukrainian Deputy Prime Minister Vasyl Rohovyy told journalists that Ukraine's industrial output grew by 14.2 percent in 2001, year-onyear, UNIAN reported. This is the highest growth rate since Ukraine declared independence in 1991. In 2000, Ukraine posted industrial growth of 12.4 percent. The State Statistics Committee reported that Ukrainian farmers harvested 39.7 million tons of grain last year, significantly surpassing the 2000 harvest of 24.8 million tons, "RFE/RL Newsline" reported. (JMR)

ROBERT CHRISTIAN: LAUNCHES NEW CAUCASUS AIRLINE "The Georgian Business Week" reported on 13 January that a new regional airline, called Silk Route Airways, has begun operations in Georgia. The general manager of the new airline, Giorgi Lashkhi, said the airline was registered in September 2000 with 60 percent of shares in the hands of the Georgian company Samgori-94 and 40 percent held by its American partners. The prime mover of this new venture was Robert Christian. He is the owner of Pacific Island Aviation (PIA), a regional airlines based in Saipan, an island servicing Japan and a number of Pacific islands including the American island of Guam. PIA is registered in the Mariana Islands (near Japan) and was founded 15 years ago by Christian. PIA is a registered American international airline. American multibillion-dollar defense and aerospace company Lockheed Martin provided the project's financing. Samgori is also active in cigarette distribution and meat importing, among other things (see "RFE/RL Business Watch," 15 January 2002).

The story of Silk Route Airways and how Robert (Bob) Christian found his way to Georgia from an island off the coast of Japan is illustrative of today's' global business realities. In January 1999, Christian was invited to Georgia by William Schierlberl, the legal counsel of Houston-based Transoceanic Shipping Company. Transoceanic, a company providing support services to Western oil companies operating in the Caspian, was attempting to facilitate the oil companies' need for regional transportation between Azerbaijan and Georgia. Energy development and pipeline-construction projects were creating increased and timely transportation requirements that were not being met. Roads are in a terrible condition and dangerous. Rail links take too long. Today, with no regular flights available between Azerbaijan and Georgia, especially the Black Sea ports of Poti and Batumi, the ability of companies to do business efficiently in the region is complicated. Transoceanic Shipping immediately comprehended the need to fly between the capitals and the ports located on the Caspian and on the Black Sea. A regional airline quickly became a requirement; but how to manage, run, and fund it became the real challenge.

William Schierlberl, of New York City, had heard of Christian and his regional airlines from Japanese business contacts. A Japanese business acquaintance of Schierberl's had described Christian as a professional pilot and manager who could make unconventional projects work in unusual places. Schierlberl contacted Christian and invited him to Georgia. After the Georgia trip, Schierlberl realized that Christian was the man for the job. Christian, a helicopter pilot and a veteran of the Vietnam War, had worked internationally and had experience managing a multi-ethnic workforce. As an American expatriate living in Saipan with a successful regional airline, Christian appeared to be looking for a new challenge. Christian's Saipan-based airline, PIA, was virtually functioning on autopilot, according to a Japanese source familiar with Christian and his company. The assessment proved correct, and it didn't take long for Christian to realize that Georgia had a need and some powerful supporters. In Christian's first meeting with U.S. Embassy officials, the reaction was "over the top" for the prospects of a regional airline in the region. Christian, a decisive man, quickly assessed the opportunity. Risk aside, the need for an air service was clearly there. This offered the new challenge he was looking for. But of all the places in the world to set up a new airline, why did Bob Christian choose Georgia? His background helps answer the question.

Christian left the U.S. military in 1977 and moved from his home in Seattle to Hawaii. In 1978, he became involved in the airline business as chief pilot and director of flight operations for a local commuter airline on the island of Maui. Since then, Christian has functioned as a CEO, taught at Embry Riddle Aeronautical University, and worked as chief pilot for various airlines in the Hawaiian Islands. In 1985, Christian took Maui Airlines to the island of Guam in the Pacific and established a regional air carrier.

In 1988, a Japanese business group invited Christian to establish a new U.S. flagship (FAA: 14CFR121) international airline. The purpose was to blend Japanese interests with the local economy, and the project would become the model for Christian's later decision to establish an American-backed airline in the Caucasus. That airline became Pacific Island Aviation (PIA). PIA's success came quickly. In 1993, PIA entered a code-sharing agreement with Continental Airlines, allowing for joint sales and transfers. A similar code-sharing arrangement was entered into with Northwest Airlines in 1995, providing service to Guam. The airline continues to offer extensive services to the Marianas and Japan.

Christian's trip to Georgia convinced him that oil interests could be blended into the Georgian economy. If Christian could find the financing, he could provide regional airline services that could meet Western standards in the region and still provide the local population with discounted travel rates by filling excess capacity. He quickly decided on the plane: a fast, fuel-efficient, modern turbo-propeller plane -- the Brazilian-made Embraer-120. The airplane is equipped with Colin avionics and Pratt Whitney engines, all from the U.S., and can carry 30 passengers. It travels at 650 kilometers an hour and has a modern cockpit with full autopilot. He believed the aircraft was the perfect fit for a new regional airline in the South Caucasus.

In September 2000, after many trips and meetings with Georgian officials, Silk Route Airways was established. The Georgian partner was the company that proudly described itself as the country's largest taxpayer, Samgori-94. Staff was hired in the fall of 2000, and plans were implemented to establish a managerial and administrative team. Personnel were sent to Saipan to be trained at PIA and see first-hand the standards and methods of an international airline. Training was undertaken for pilots, maintenance crews, and accountants, including flight-simulator training in France. But the real challenges would come as negotiations over the financing bogged down and dragged on with a number of potential investors and banks.

Christian eventually negotiated a successful loan agreement with Lockheed Martin, which was committed to carrying out a pledge made to President Eduard Shevardnadze to facilitate the creation of a regional airline in Georgia. Through the efforts of both parties and the cooperation of the Georgian Transportation Ministry, the hard work paid off with the arrival of the first plane in Georgia -- leased from the KLM Exel fleet in the Netherlands on 28 December 2001. The next plane is scheduled to arrive in late January. Flights are set to begin in mid-February, with daily routes to Baku, Azerbaijan, and three flights a week to Batumi, Georgia and Yerevan, Armenia.

Already, the implications of the new airline are being felt. Solomon Pavliashvili, minister for state property management, announced at a government session on 9 January the need for privatizing Georgian Airlines because of the losses incurred by the state carrier. In his opinion, the situation can only be improved by the rapid sale of the company to a private investor. And he is not the only one calling for the sale of the state airline. The World Bank also insists on privatizing Georgian Airlines. In the meantime, Georgian Airlines representatives have announced its intention to cooperate with Silk Route Airways. One source indicated that Georgian Airlines intends to code-share seats on the Silk Route Embraer-120 for regional flights currently flown by Georgian Airlines' YAK 40 aircraft. This will dramatically reduce fuel costs and substitute a newer aircraft on flights to Turkey, Russia, and perhaps Ukraine. Already, speculation has started that Christian will take over Georgian Airlines.

Christian says he enjoys the people of Georgia for their expansive ways of living life. He knows, however, that while this can be appealing from a lifestyle perspective, it does not immediately translate into a successful business formula. Christian once described Georgian conditions as somewhere between Sicily and Japan. He hopes that Georgia can become an important regional hub for airlines and that his airline can help make that happen by ferrying passengers within the region. By providing services at Western standards, he believes the market can rapidly develop. "Georgians recognize they need this type and level of service," said Christian. "I have developed an excellent working relationship with the government and am confident of success." Christian readily admits that there are many problems to be faced and that "no one size fits all," but as long as both parties maintain "mutual respect" he says he can work things out and introduce Western standards and procedures with the new airline. Diplomats and foreign business are keeping their fingers crossed in hopes that the airline succeeds. One businessman remarked, "Silk Route Airways might take '[You] can't get there from here' out of my vocabulary."

Bob Christian is a newcomer to the business world in Georgia. Only time will tell whether his experience will be different from that of entrepreneur-importer Fady Asly (see "RFE/RL Business Watch," 15 January 2002). Since those men know each other, they no doubt will share their experiences and compare various approaches to conducting business in Georgia. Clearly the import business is different from that of running an airline. Moreover, the sectors attract different kinds of competitors: The import business and retail sales have traditionally attracted criminal interests, particularly in the developing world. Operating small planes in a regional environment need not represent a direct threat to large air carriers involved in the "long-haul" business. By coordinating their route schedules, such airlines can even help keep each other prosperous.

However, reports of financial troubles at the Georgian national air carrier could complicate Christian's plans for his regional airline feeder service. Any collapse of these national flagships could bring Christian into conflict with other forces that do not want foreign involvement to complicate their business. On the other hand, the Georgian government will no doubt want a Georgian airline flying internationally to Europe. Managing these conflicting business models may place this new airline in a difficult early position, but only time will tell. (PMJ)