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UKRAINIAN PREMIER DENIES PILFERING RUSSIAN GAS. Prime Minister Yuliya Tymoshenko told journalists in Kyiv on 11 July that Kyiv is not siphoning off Russian gas that flows in transit across Ukraine to Europe, Interfax-Ukraine reported. "I would not like to see Ukraine humiliated by statements that do not correspond to reality," Tymoshenko said. She was referring to Russian President Vladimir Putin's comment last week that Russia is ready to cooperate with Ukraine provided that Kyiv does not steal Russian gas (see "RFE/RL Newsline," 11 July 2005). She also stressed that Gazprom's accusations last month that 7.8 billion cubic meters of Russian gas disappeared from Ukraine are not true. According to Tymoshenko, this gas volume remains in Ukrainian storage facilities. JM

UKRAINIAN COURT FREEZES SHARES OF FERROALLOY GIANT. Following a request from the Prosecutor-General's Office, the Kyiv Appellate Court has frozen 50 percent-plus-one-share in the Nikopol Ferroalloy Plant that belong to the Interpipe consortium controlled by Ukrainian oligarch Viktor Pinchuk, Interfax-Ukraine reported on 11 July. The shares were sold at two auctions in 2003 for a total of 410 million hryvnyas ($82 million at the current exchange rate). The Nikopol Ferroalloy Plant reportedly accounts for 11.5 percent of the world market of ferroalloys. Earlier this year the government managed to annul the 2004 privatization of the Kryvorizhstal steel mill, which was partly owned by Pinchuk (see "RFE/RL Newsline," 22 June 2005). JM

On 27 June, the trial of former Moldovan Defense Minister Valeriu Pasat in connection with the sale by his government in 1997 of 21 MiG-29 jet fighters to the United States got under way. The ostensible offense for which Pasat, who served as defense minister from 1997-99, is in the dock is that he defrauded the Moldovan state of $54 million by selling the planes to Washington for a mere $40 million.

The arrest and trial are widely viewed as politically motivated, due to Pasat's association with a previous Moldovan administration and his current connection with Russia's Unified Energy Systems (EES), for which he works as a consultant. The image of a political trial is reinforced by the fact it is being held behind closed doors at the request of the prosecution, purportedly for national security reasons.

Whatever else Pasat may have on to account for, the MiG sale was a good financial deal for Moldova. I oversaw the purchase as Regional Director for Russia, Ukraine, and Eurasia in the office of the U.S. Defense Secretary. I conducted the initial negotiations with Pasat, although I left the Pentagon for a Congressional staff assignment a few weeks before the final purchase.

This acquisition involved confidential matters that I am not at liberty to discuss, but the intention of the U.S. government was to remove the planes from any potential illicit sales on the international arms market and to assist Moldova during a period of extreme economic hardship. The Pentagon saw the transaction as, in part, a type of assistance to Moldova. The amount the United States was willing to pay for the aircraft and associated equipment seemed generous to U.S. officials involved.

The Moldovan side, including Pasat, did not understand the concept of "fair market value," to put it mildly. Officials in Chisinau felt the planes must be worth at least what they had cost the Soviet Union to build, rather than what anyone with real money was currently willing to pay for them. They wanted much more that $40 million, and it took months for them to recognize the limitations of the market.

The aircraft in question had been left in Moldova by the Soviet collapse. Although local mechanics kept the planes in good repair, they were of no practical use to the Moldovan state, which could not even afford fuel for training. The planes had no viable military purpose, as Moldova barely has enough airspace for high-performance fighters to turn around in the sky.

There were no other legitimate buyers for the aircraft, my research at the time revealed. Several other governments operated MiG-29s, but none wanted to add to their inventories; indeed, most were shifting to NATO-standard aircraft. The Moldovan planes lacked a source of spare parts and support/repair systems, making them of little value for a new customer. Russia, the producer of the MiG-29, made clear to potential customers that it would supply parts only for planes purchased from it or with its concurrence. Russia would not encourage the competitive sale of MiGs from sources like Moldova, which might cut into its own export market.

The only other potential customers for the Moldovan planes were the so-called "rogue states." Washington felt it had legitimate concerns about the leakage of Soviet-made weaponry of all types from the arsenals of post-Soviet and former Warsaw Pact states to rogue governments. For Moldova, such an option would have been a disaster because the United States would have terminated its bilateral assistance programs if the MiGs fell into rogue-state hands as required by U.S. law. I have no doubt Washington would also have used its influence in international financial institutions to punish Moldova severely as an object lesson to other countries to discourage this kind of commerce.

The Moldovan government in 1997 was informed of these realities and came, although slowly, to understand the United States was its only serious potential customer, that the offer was a fair one, and that the United States would pay real money immediately in contrast to the vague promises so common in the global arms trade. After several months of negotiations and high-level interventions from the U.S. side, the deal was done. It was a good deal for Moldova.

The sale was a disappointment to many in Chisinau who imagined the aging aircraft to be a goldmine of astronomical worth. In fact, $40 million was more than many people in Washington wanted to pay. I remember having a hard time finding so much money for a country of less-than-primary importance to the United States. The Pentagon proceeded as part of its policy to develop cooperative defense relationships with all the former Warsaw Pact and Soviet states.

I do not know how the $40 million was used. The payment was a simple inter-state financial transfer with no cash or funny business involved. The money went to the Moldovan Finance Ministry.

Anyone with experience of Moldova knows how far short it falls in comparison to Western standards of business practices. Corruption and malfeasance have been rife there throughout its years of independence. However, the sale of 21 aircraft for $40 million was an entirely legitimate transaction. The thinly veiled accusation behind the Pasat trial that the United States in some way defrauded or swindled Moldova in this matter is false.

(E. Wayne Merry is a former U.S. State Department and Pentagon official and current senior associate at the American Foreign Policy Council in Washington.)

'MOSKOVSKIE NOVOSTI' APPOINTS NEW GENERAL DIRECTOR. Sergei Gryzunov has been named the new general director of the weekly "Moskovskie novosti," Russian news agencies reported on 11 July. Gryzunov chaired the State Press Committee in 1994 and for the first half of 1995, during which time he was highly regarded in Moscow's journalistic community. After working for the U.S.-based pharmaceutical company ICN for several years, Gryzunov served as vice president of the Moskovskie novosti publishing house from 2001 to 2003. Speaking to journalists on 11 July, Gryzunov said the executives running "Moskovskie novosti" are discussing candidates to replace Yevgenii Kiselev as editor in chief and hope to make an announcement by 18 July, Ekho Moskvy and reported. (Ukrainian media magnate Vadim Rabinovich, whose Media International Group purchased "Moskovskie novosti" earlier this month, had previously announced plans to appoint a new editor in chief on 11 July.) Gryzunov asserted that the newspaper cannot afford to make "another mistake" and explained that the previous "big mistake" he had in mind was the dismissal of Viktor Loshak as editor in chief in September 2003. Loshak is now editor in chief of the magazine "Ogonek." LB

WILL FORMER RUSSIAN PREMIER BE NAMED AMBASSADOR TO AZERBAIJAN? "Nezavisimaya gazeta," which predicted on 29 March the appointment of former Russian Deputy Prime Minister Ramzan Abdulatipov as Russian ambassador to Tajikistan (see "RFE/RL Newsline," 1 June 2005), reported on 12 July that former Russian Prime Minister Viktor Chernomyrdin will shortly be named Russia's ambassador to Baku. Chernomyrdin has served since May 2001 as Russian ambassador to Ukraine (see "RFE/RL Newsline," 11, 17, and 22 May 2001). LF