Ukraine's Orange Revolution and U.S. Policy

CRS Report for Congress
Ukraine’s Orange Revolution
and U.S. Policy
Updated July 1, 2005
Steven Woehrel
Specialist in European Affairs
Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

Ukraine’s Orange Revolution and U.S. Policy
In January 2005, Viktor Yushchenko became Ukraine’s new President, after
massive demonstrations helped to overturn the former regime’s electoral fraud, in
what has been dubbed the “Orange Revolution,” after Yushchenko’s campaign color.
The “Orange Revolution” has sparked a great deal of interest in Congress and
elsewhere. Some hope that Ukraine may finally embark on a path of comprehensive
reforms and Euro-Atlantic integration after nearly 15 years of half-measures and false
starts. Others are interested in the geopolitical implications of a pro-Western Ukraine
in the former Soviet region and in relations between Russia and the West. Some
analysts detect a new wave of democracy sweeping the post-Soviet region.
Yushchenko has said that his key domestic priorities include reducing the size
of the unofficial, “shadow” economy, maintaining macroeconomic stability, and
fighting corruption, a major problem in Ukraine. Other critical priorities include
improving the independence and effectiveness of the judiciary and attracting foreign
investment. Yushchenko has vowed to prosecute those guilty of crimes, including
fraud during the election, the 2000 murder of Ukrainian journalist Georgi Gongadze,
and an attempt on Yushchenko’s life during the campaign, which has left him
disfigured. In foreign policy, Ukraine seeks closer ties with the European Union,
NATO, and the United States, with the goal of eventual NATO and EU membership.
Yushchenko has said that he views Russia as a “strategic partner” of Ukraine, but that
integration with the West will supercede Russian-led integration efforts.
The Bush Administration has hailed the “Orange Revolution” as a part of a
wave of democratization sweeping the region and the world, and has proposed a
modest increase in U.S. aid to Ukraine. Experts believe that prompt U.S. and
international assistance may be needed to help the new government to boost public
support before crucial March 2006 parliamentary elections. The United States has
also expressed hopes that the United States and Ukraine will work together more
effectively on such issues as weapons proliferation and trafficking in persons. The
Administration has downplayed Yushchenko’s decision to honor a campaign pledge
to pull Ukraine’s troops out of Iraq by the end of this year. President Yushchenko
visited the United States on April 4-7.
During the Ukranian presidential election campaign and during the ensuing
electoral crisis, Congress approved legislation calling for free and fair elections in
Ukraine and urged the Administration to warn the previous regime of possible
negative consequences for Ukraine’s leaders and for U.S.-Ukraine ties in the case ofth
electoral fraud. The 109 Congress will consider aid funding for Ukraine, and may
take up extending permanent Normal Trade Relations to Ukraine, terminating the
application of the Jackson-Vanik amendment to Ukraine, which bars permanent NTR
status for countries with non-market economies that do not permit freedom of
emigration. This report will not be updated. For background on the Orange
Revolution, see CRS Report RL32691, Ukraine’s Political Crisis and U.S. Policy
Issues, by Steven Woehrel.

In troduction ......................................................1
Ukraine’s Priorities................................................2
Foreign Policy................................................3
Prospects ........................................................6
Potential Obstacles.............................................6
International Obstacles......................................7
Indicators of Success...........................................8
U.S. Policy.......................................................9
Iraq ........................................................10
Policy Issues.................................................11
Congressional Response...........................................12
Current Issues................................................13

Ukraine’s Orange Revolution
and U.S. Policy
Ukraine’s “Orange Revolution” has sparked a great deal of interest in Congress
and elsewhere. Some hope that Ukraine may finally embark on a path of
comprehensive reforms and Euro-Atlantic integration after nearly 15 years of half-
measures and false starts. Others are interested in the geopolitical implications of a
pro-Western Ukraine in the former Soviet region and in relations between Russia and
the West. Some analysts detect a new wave of democracy sweeping the post-Soviet
region, from the “Rose Revolution” in Georgia in November 2003-January 2004, to
the “Orange Revolution” in November 2004-January 2005, and possibly to the
overthrow of the regime in Kyrgyzstan in March 2005.
In 2004, many observers believed that Ukraine was at a key period in its
transition that could shape its geopolitical orientation for years to come, in part due
to presidential elections held on October 31, November 21, and December 26, 2004.
In their view, the elections could move Ukraine closer to either integration in Euro-
Atlantic institutions, real democracy and the rule of law, and a genuine free market
economy; or they could move Ukraine toward a Russian sphere of influence, with
“managed democracy” and an oligarchic economy. For the past decade, Ukraine’s
political scene had been dominated by President Leonid Kuchma and the oligarchic
“clans” (regionally based groups of powerful politicians and businessmen) that
supported him. The oligarchs chose Prime Minister Viktor Yanukovych as their
candidate to succeed Kuchma as President. The chief opposition candidate, former
Prime Minister Viktor Yushchenko, was a pro-reform, pro-Western figure.
International observers criticized the election campaign and the first and second
rounds of the election as not free and fair, citing such factors as government-run
media bias in favor of Yanukovych, abuse of absentee ballots, barring of opposition
representatives from electoral commissions, and inaccurate voter lists. Nevertheless,
Yushchenko topped the first round of the vote on October 31 by a razor-thin margin
over Yanukovych. Other candidates finished far behind.
After the November 21 runoff between the two top candidates, Ukraine’s
Central Election Commission proclaimed Yanukovych the winner. Yushchenko’s
supporters charged that massive fraud had been committed. Hundreds of thousands
of Ukrainians demonstrated against the fraud, in what came to be known as the
“Orange Revolution,” after Yushchenko’s chosen campaign color. They blockaded
government offices in Kiev and appealed to the Ukrainian Supreme Court to
invalidate the vote. The court invalidated the runoff election on December 3, and set
a repeat runoff vote on December 26. Yushchenko won the December 26 re-vote,

with 51.99% of the vote to Yanukovych’s 44.19%. After several court challenges by
Yanukovych were rejected, Yushchenko was inaugurated as President of Ukraine on
January 23, 2005. On February 4, 2005, the Ukrainian parliament approved President
Yushchenko’s appointment of Yulia Tymoshenko as Prime Minister of Ukraine by
a vote of 373-0. Tymoshenko is an energetic, charismatic leader with a sometimes
combative political style who campaigned effectively on Yushchenko’s behalf. She
is a controversial figure due in part to her alleged involvement in corrupt schemes as
a businesswoman and a government minister during the Kuchma regime.1
During the campaign, Yushchenko accused the authorities of trying to poison
him. On September 6, 2004, he fell seriously ill, shortly after attending a dinner with
the chief of the Ukrainian security services. After his condition worsened, he was
rushed to the Rudolfinerhaus medical clinic in Austria. Doctors were unable to
determine the cause of the illness at the time. Yushchenko soon resumed
campaigning, but his face was, and remains, severely pockmarked. On December 11,
doctors at Rudolfinerhaus, reportedly with the help of American experts, confirmed
that Yushchenko had been poisoned with a massive dose of the toxic substance
dioxin. Ukrainian law enforcement officials are investigating the poisoning plot, and
say they have developed information on who was behind the plot and who carried it
out, but have not disclosed details. Ukrainian officials have hinted that the poison
may have come from Russia, although the Ukrainian government has not accused the
Russian government of complicity in the plot.
Ukraine’s Priorities
President Yushchenko has set an ambitious set of domestic priorities for the new
government. Yushchenko has said that his key domestic priorities include reducing
the size of the unofficial, “shadow” economy, especially by reducing taxes and
eliminating loopholes and exemptions for favored businesses. Another key goal is
to maintain macroeconomic stability, although this effort may be challenged by
campaign promises to increase social spending. Yushchenko has pledged to fight
corruption, a critical problem in Ukraine, including through administration and civil
service reforms. Other priorities include improving the independence and
effectiveness of the judiciary; and attracting foreign investment.2 Yushchenko has
vowed to prosecute those guilty of crimes, including fraud during the election, the
2000 murder of Ukrainian journalist Georgi Gongadze, and the attempt on
Yushchenko’s own life.
Yushchenko has said that he does not envision wholesale reversal of the
sometimes dubious privatization deals of the past 15 years (a possible relief to some
oligarchs) but that he will revisit highly questionable privatizations that have
occurred in recent years, which he has estimated at about 20-30 firms. In addition,

1 For more background on the Ukrainian presidential election, see CRS Report RL32691,
Ukraine’s Political Crisis and U.S. Policy Issues, by Steven Woehrel.
2 Text of President Yushchenko’s speech to the World Economic Forum, Ukrainian TV
Kanal 5, as carried by the BBC Monitoring Service, January 28, 2005.

he has raised the possibility that current owners could keep the companies, if they
paid the government an additional amount to make up the difference between the fair
market price of the firm and what they originally paid for it. One privatization, the
huge Kryvrizhstal steel works, has already been overturned. According to press
reports, international steel companies, including U.S. Steel and Russian firms, may
be interested in bidding on the firm if it is re-privatized. However, Prime Minister
Tymoshenko has resisted limiting the number of deals under investigation and has
launched a much broader inquiry that could involve hundreds or even thousands of
Western observers have expressed concern that the current uncertainty over
privatization and other government policies is having an unsettling effect on
Ukraine’s investment climate. Efforts to overturn previous privatizations could result
in lengthy court battles. In addition, potential long-term investors could fear that
their property could be expropriated if politically-determined “rules of the game” are
changed once again in the future, instead of firmly establishing the rule of law. Some
Western observers are also concerned that the government seems focused on boosting
tax collection to pay for increased social spending promised during the campaign
rather than on reforms that would attract more foreign investment. Indeed, such
efforts, undertaken without consultation with investors and in the hands of corrupt
bureaucrats, could actually discourage investment, they say.
Foreign Policy
Yushchenko’s main foreign policy priority is expanding ties with the EU,
seeking EU designation as a market economy as a first step. After Ukraine receives
World Trade Organization membership, which Yushchenko wishes to achieve by the
end of 2005, Ukraine will seek a free trade zone with the EU, and by 2007 start talks
on EU membership, an objective Yushchenko believes can be achieved within a
decade. However, EU officials have tried to downplay the chances for Ukrainian
membership in the EU, instead calling for practical steps to improve relations within
the context of the EU’s European Neighborhood policy, which could include EU
designation as a market economy, assistance for Ukraine’s WTO candidacy, a
feasibility study for an EU-Ukraine free trade area, and other forms of assistance.
President Yushchenko has said that he favors eventual Ukrainian membership
in NATO. The Kuchma regime, at least until the presidential election campaign,
when it recanted under alleged Russian pressure, claimed to seek membership in the
Alliance, and the United States expressed support for Ukraine’s aspirations. NATO
and Ukraine formed a NATO-Ukraine Commission to foster cooperation. In 2002,
the two sides developed a NATO-Ukraine Action Plan to outline goals and objectives
for political and military reform in Ukraine. However, Ukraine’s lack of progress on
reforms under Kuchma made such efforts largely ineffective. In April 2005, NATO
launched an “Intensified Dialogue” with Ukraine on its membership aspirations and
relevant reforms, without however committing the Alliance to any decision on
membership. Ukraine’s Foreign Minister Boris Tarasyuk has said that Ukraine could
be ready to join NATO as early as 2008. Other observers are more skeptical, noting
that Ukraine faces serious challenges in reforming its armed forces and security
sector, not to mention the broader tasks of political and economic reform. Moreover,

some members of the government, including those with economic ties to Russia, are
skeptical or opposed to NATO membership for Ukraine.
President Yushchenko has noted that another obstacle to Ukraine’s possible
NATO membership is a lack of public support at present. According to a June 2005
poll by the Razumkov Center for Economic and Political Research and the Kyiv
International Institute of Sociology, 56.7% of those polls were opposed to NATO
membership for Ukraine, while only 22.4% supported the idea. Ukrainian officials
believe an extensive public information effort will be needed to strip away
misinformation and Soviet-era prejudices toward the Alliance. Some observers have
speculated that a stronger push for NATO membership may have to wait until after
the March 2006 elections, in order to avoid giving the government’s opponents a
campaign issue, particularly in eastern Ukraine, where pro-Russian sentiments are
strong.3 Yushchenko has tried to allay public concerns by saying any future decision
to join NATO would be put to a national referendum first.
Despite Russia’s strong support for his opponent during the campaign,
Yushchenko has said that he favors good relations with Russia. In his first foreign
visit as President, Yushchenko held meetings with Russian President Vladimir Putin
in Moscow on January 24. Yushchenko called Russia a permanent strategic partner
of Ukraine, but insisted that he will subordinate participation in the Russian-led
Single Economic Space (SES) and the Commonwealth of Independent States to his
goal of Euro-Atlantic integration. Specifically, Ukrainian leaders have said that they
may consider a free trade zone within the SES, but not a customs union or a currency
Russian observers have expressed concern about how Ukraine’s new European
orientation and reprivatization plans will affect bilateral economic ties. About 90%
of Ukraine’s oil and 80% of its natural gas supplies come from Russia, and a
substantial portion of the rest is transported through Russia. Russia is also Ukraine’s
largest export market, absorbing 18% of Ukraine’s exports in 2003. 78% of Russia’s
lucrative natural gas exports to Western Europe transit Ukraine.4 Russia and Ukraine
have established a joint consortium to supply Western Europe with gas, but Ukraine
is seeking to include western European firms as well. Russian businessmen could
see advantages in a more favorable climate for foreign investment in Ukraine.
Ukrainian officials have assured Russia that Ukraine’s NATO aspirations would not
affect the status of the Russian Black Sea Fleet in Ukraine, which holds a lease there
through 2017.
One possible area of controversy between Moscow and Kiev could be policy
toward post-Soviet countries. Moscow may be uneasy about Ukraine’s possibly
more active role in the GUAM group of countries (an acronym based on the countries
forming it: Georgia, Ukraine, Azerbaijan and Moldova). Although having widely
varying political and economic conditions, these countries have in common a desire

3 Discussions with Ukrainian experts, February 2005.
4 “EIA Country Analysis Brief: Ukraine,” January 2005, Department of Energy website,
[ ht t p: / / www.ei e me u/ cabs/ ukr ai ml ] .

to maintain their sovereignty that they sometimes see threatened by Russia and the
Russian-dominated CIS.
One particular area in which these countries could work together is
diversification of sources of energy and the pipelines needed to transport that energy.
Ukraine is currently studying how to move forward with a plan to extend into Poland
an oil pipeline that currently runs from an oil terminal at the port of Odesa to the
town of Brody. The Odesa-Brody pipeline could be used to transport Caspian Sea
oil through Georgia, across the Black Sea in tankers to the Odesa-Brody pipeline and
into Western Europe, thereby reducing dependence on Russian oil, and reducing
Russia’s control of regional pipelines. However, due to a decision of the previous
government, the pipeline currently runs in “reverse mode,” transporting Russian oil
to the Odesa terminal and out to the Mediterranean Sea. The new government faces
problems in restoring the pipeline’s originally planned direction, including a lack of
oil supplies to fill the pipeline, and Russian pressure on Ukraine and on potential oil
suppliers such as Kazakhstan, aimed at thwarting the project.
Ukraine’s new government supports Moldova’s desire to reintegrate its
breakaway Transnistria region. In May 2005, Ukraine offered a peace plan for
Moldova that called for internationally monitored elections in Transnistria and for
Transnistria’s autonomy within Moldova. Moldova welcomed Kiev’s initiative in
principle but reacted cautiously to some of its details and omissions, noting for
example that it does not mention the need for a Russian troop withdrawal from
Moldova. Perhaps as importantly, Ukraine has promised to crack down on the
lucrative, often illegal trade between Ukraine and Transnistria. This could put heavy
pressure on the Transnistria leadership, perhaps making a negotiated settlement more
likely. Russia would likely view Ukraine’s stance as an effort to undermine
Moscow’s influence in Transnistria.
Another potential problem for Russian-Ukrainian relations is the fear expressed
by some Russian observers that Ukraine may try to “export” its democratic revolution
to other countries in the region, including Belarus and even Russia itself. Although
Ukrainian leaders deny such intentions, Ukrainian NGOs that played an important
role in the Orange Revolution, including the youth group “Pora” have expressed such
goals. Moreover, the very existence of a successful democratic revolution could raise
expectations in other CIS countries, particularly if Ukraine’s reforms result in greater
prosperity for Ukrainians. The fear of a “color revolution” in Belarus has led
Belarusian dictator Aleksandr Lukashenko to intensify a crackdown on opponents,
independent media, and NGOs. He has also put in place Soviet-style policies to
reduce contacts between Belarusians and foreigners who could “contaminate” them
with democratic ideas.

Ukraine’s new leaders have several things in their favor in their efforts to reform
Ukraine and move it closer to the West. Ukraine’s new leadership has many
competent figures, is fairly young, and highly motivated. Yushchenko enjoys strong
public support at present. The former regime’s supporters have been thrown into
disarray by their unexpected defeat, and many of them appear to be currying favor
with the new regime. With the exception of the Communist Party, which has
declined in importance since independence, the opposition does not have a set of
principles to provide cohesion. Ukraine is also benefitting from substantial goodwill
from the United States and other Western countries, in marked contrast to the former
regime, which had isolated itself from West by its actions and had become more
dependent on Russia.
Potential Obstacles
However, Ukraine faces many obstacles as well. Many of its goals, such as
rooting out corruption, may be easy to proclaim but very difficult to achieve. It is
possible that some in the new leadership, many of whom served in the old regime,
may be tempted to engage in corruption and use that regime’s quasi-authoritarian
methods. A related issue is whether those businessmen who supported the “Orange
Revolution” will expect to become the “new oligarchs” of Ukraine, and, if so, what
impact a possible struggle between “old” and “new” oligarchs over Ukraine’s
economic resources will have on reform efforts.
Yushchenko has formed a center-right pro-presidential bloc called People’s
Union-Our Ukraine. People’s Union-Our Ukraine is in a loose coalition with other
groups, including the Yulia Tymoshenko Bloc, the centrist Party of Industrialists and
Entrepreneurs (led by First Deputy Prime Minister Anatoli Kinakh), the centrist
People’s Party (headed by parliament chairman Volodymyr Lytvyn), and the leftist
Socialist Party. Reforms have been slowed as much by dissension within the
coalition than effective opposition by the Communists and supporters of oligarchs
from eastern Ukraine. Personal and policy conflicts among coalition partners have
led to confusion over the government’s policies on many issues, including such
fundamental ones as the proper amount of government control over the economy.
Key legislation needed for Ukraine’s admission to the World Trade
Organization (including legislation to fight Ukraine’s severe optical media piracy
problem) has been voted down by the parliament, including by some members of
Yushchenko’s own People’s Union-Our Ukraine group, putting Yushchenko’s goal
of joining the WTO in 2005 in jeopardy. Some Ukrainian and Western observers
have complained that part of the problem is that President Yushchenko has not
exercised consistent discipline and leadership over the government and parliament
to push needed legislation through and to ensure coherent government policies.
Other observers note that the new government has been in place only a few months,
and that these problems could be eased after the March 2006 parliamentary elections,
when a still-popular Yushchenko may be able to form a more homogenous majority
in parliament.

Regional differences in Ukraine may present another problem. Ukrainian
officials have sharply warned leaders in eastern Ukraine that any talk of separatism
would be severely punished. Yushchenko’s electoral support was overwhelmingly
concentrated in western and central Ukraine. Due in part to the previous regime’s
propaganda that attempted to portray Yushchenko as anti-Russian and an extreme
nationalist, even as a Nazi, the new government may face a challenge in gaining the
support of people in eastern and southern Ukraine. In contrast to setbacks on some
reform issues, the new government has moved more quickly to replace loyalists of
the old regime in public posts, particularly in eastern Ukraine. Moreover, Ukrainian
prosecutors have arrested several leading figures of the old regime for various crimes,
ranging from extortion to electoral fraud to fomenting separatism. Many of these
people are closely associated with the Donetsk region and Yanukovych.
Reprivatization could also lead to a large-scale redistribution of property from
oligarchs in eastern Ukraine to those supporting Yushchenko.
Efforts by Yanukovych and others to characterize these actions as political
repression and create massive public support for themselves in eastern Ukraine have
so far failed. Nevertheless, the government remains more popular in western Ukraine
than in the east. In a June 2005 poll taken by Razumkov Center for Economic and
Political Research and the Kyiv International Institute of Sociology, in western
Ukraine, 54.9% strongly supported Yushchenko’s actions as president (55.4% felt the
same way about Prime Minister Tymoshenko), while the corresponding figures in
eastern Ukraine were 18.9% for Yushchenko and 7.5% for Tymoshenko. This may
be because some people from eastern and southern Ukraine may fear a transfer of
economic resources from their regions, which they view as more productive, to
poorer regions in western Ukraine. Also, Yushchenko’s opponents could play on
fears that the new government will pressure people in eastern Ukraine, which is
overwhelmingly Russian-speaking, to speak Ukrainian. Ukrainian officials have
assured people in eastern Ukraine that no efforts would be made to force use of the
Ukrainian language on people in their region, for example by shutting down Russian-
language schools and media.
There is also the possible impact of the constitutional changes approved by the
Ukrainian parliament in December 2004 as part of a political compromise to end
Ukraine’s political crisis. The reforms, which will reduce the powers of the
presidency, which will go into effect in September 2005 if a new law on local
government is passed and in January 2006 if it is not. Under the reform, the Cabinet
of Ministers will be the supreme executive body in Ukraine. The President will have
the power to nominate the prime minister, the foreign minister, and the defense
minister, subject to the approval of parliament. The rest of the government will be
nominated by the prime minister and approved by the parliament. It is possible that
these changes could be struck down as a result of legal challenges. However, if the
reforms go into force, they will make the results of the March 2006 parliamentary
elections even more important.
International Obstacles. Ukraine could also face important international
obstacles. Perhaps the most important is Russia’s policy. It is unclear whether Russia
will genuinely treat Ukraine as an equal, instead of attempting to pressure or punish
the new leadership. Russia could attempt to manipulate Ukraine’s heavy dependence
on Russian energy. However, as in the past, Russia’s leverage is somewhat limited

by Ukraine’s control of the main pipelines for Russian energy exports to Western
Some analysts point to several recent incidents that could indicate that Russia
may be trying to pressure Kiev by playing the energy card. In April 2005, gasoline
prices rose sharply in Ukraine. Prime Minister Tymoshenko accused Russian energy
firms, which control not only most of Ukraine’s crude oil supplies but also its oil
refineries and filling stations, of abusing their market position. She imposed price
controls and called for greater government control of Ukraine’s energy sector. The
Russian firms responded by cutting off gas supplies. President Yushchenko stepped
in, sharply criticized Tymoshenko for her non-market approach to the problem and
reached a compromise with the Russian firms. In another case, the Russian natural
gas giant, Gazprom, has called for large increases in the price of gas to be supplied
to Ukraine in 2006 and has accused Ukraine of a massive theft of Russian gas.
Sharply increased energy prices could have a negative impact on Ukraine’s economy.
The Ukrainian government has responded to the problem by trying to diversify its
supplies of oil and natural gas through negotiating deals with Turkmenistan,
Kazakhstan and Iran, among other countries.
Another way Russia could attempt to “punish” Kiev could be to bolster “pro-
Russian” opposition forces in eastern and southern Ukraine. However, it should be
noted that Russia has in the past tried to play upon regional differences in Ukraine,
most recently during the presidential elections, without success. Ukraine’s reform
efforts might be hampered if Western countries do not provide timely and effective
assistance, which could come in the form of political support, economic aid, lower
trade barriers, and support for WTO membership.
Indicators of Success
One indicator of success will be if Ukraine experiences a substantial increase
in foreign investment. This would indicate that investors are happier with Ukraine’s
progress in such areas of perennial concern as fighting corruption, reducing red tape,
and enforcing the rule of law. Perhaps a more important indicator from the point of
view of the majority of Ukraine’s population would be an increase in living standards
and a decrease in poverty. In recent years, Ukraine has experienced high levels of
economic growth, but the benefits of that growth have not reached all sectors of the
population. International observers may closely monitor the March 2006
parliamentary election campaign for signs of media access for opposition candidates,
improved election laws and administration, and other signs of free and fair elections.
In the longer term, Ukraine’s foreign policy success may be measured by
whether it receives a signal from the EU that it can be considered a candidate for
eventual EU membership, and a similar signal from NATO, perhaps in the form of
a Membership Action Plan. However, it should be noted that success in these areas
depends as much or more on such issues as intra-EU politics, trans-Atlantic ties, and
perceptions of Russia’s future, as on Ukraine’s own efforts. France, Germany, and
other EU countries stress the importance of maintaining good relations with Moscow,
in order to preserve regional stability and economic ties with Russia. In addition,
possible membership for Ukraine poses difficult problems of its own for the EU,
which is struggling to incorporate ten recently admitted members, as well as possible

future new members in Turkey and the Balkans. On the other hand, many of the
EU’s new members in central Europe, especially Poland and the Baltic states, are
looking to counterbalance Russia and stabilize their eastern borders. They continue
to push strongly for one day incorporating Ukraine, and possibly other post-Soviet
countries, into the EU. If Ukraine becomes discouraged about the prospects for
joining the EU, due to the EU’s current difficulties, it is possible Kiev could push
more strongly for NATO membership in a bid to show tangible gains in its Euro-
Atlantic integration efforts.
U.S. Policy
U.S. officials supported the “Orange Revolution” in Ukraine, warning the
former regime of negative consequences if it engaged in fraud, sharply criticizing
fraud in the November 21 runoff vote, and hailing Yushchenko’s ultimate victory.
The United States also provided assistance to Ukrainian non-governmental
organizations that monitored the election and conducted exit polls to detect fraud.5
In a show of support for the new leadership, President Bush and other NATO leaders
met President Yushchenko at a NATO summit on February 22, 2005. President
Yushchenko visited the United States from April 4-7, and had meetings with
President Bush and Secretary of State Rice. Yushchenko’s address to a joint session
of Congress on April 6 was interrupted by several standing ovations.
The two leaders signed a joint statement that hailed Ukraine’s democratic
revolution and said the two countries would work to spread freedom in the region,
as well as throughout Europe and beyond, including in Belarus and Cuba. It restates
the long-standing U.S. policy goal of a democratic, secure Ukraine integrated in
European and Euro-Atlantic institutions. In the statement, the United States pledged
its assistance to help Ukraine make the necessary reforms to join the WTO in 2005
and its support for Ukraine’s NATO aspirations. The Administration also called for
“immediately” ending the application of the Jackson-Vanik amendment to Ukraine.
The two sides will establish an “energy dialogue” to help Ukraine achieve greater
energy independence. The statement underlines the cooperation of the two sides to
fight terrorism and weapons proliferation, especially in ballistic missiles, an area in
which Ukraine is a world leader. In the statement, the United States pledges to help
Kiev fight AIDS/HIV, a serious problem in Ukraine, and to provide an additional $45
million to the Chernobyl Shelter Fund, which collects funds to repair the protective
shelter over the reactor destroyed in the 1986 nuclear accident.
Current U.S. aid levels for Ukraine are relatively modest. According to the
FY2006 budget submitted by the President, Ukraine will receive an estimated $93.5
million in U.S. aid in FY2005. The Administration proposed $115.9 million in aid
for Ukraine in FY2006. The President sought an additional $60 million to aid reform
in Ukraine in an Iraq/Afghanistan FY2005 supplemental appropriations request. U.S.
aid is focused on anti-corruption and rule of law efforts, media and NGO

5 For background, CRS Report RL32691, Ukraine’s Political Crisis and U.S. Policy Issues,
by Steven Woehrel.

development, and election monitoring and other democracy-building programs. The
United States also seeks to increase exchange programs between the two countries.
As noted in the April 2005 Bush-Yushchenko joint statement, the United States
will be interested in seeing how the new government tackles such issues as weapons
proliferation and human trafficking. During the Kuchma era, several arms trafficking
scandals damaged Ukraine’s international reputation. In September 2002, the
Administration announced that it had authenticated a conversation taped in Kuchma’s
office in July 2000, in which Kuchma gave approval for the sale of four Kolchuga
early warning radar systems to Iraq, a sale banned by a U.N. Security Council arms
embargo. The Yushchenko government has recently opened investigations into other
arms sales, including the sale of 18 nuclear-capable long-range cruise missiles to Iran
and China in 1999-2000. The United States is leading a NATO effort to help
Ukraine destroy its vast stocks of obsolete small arms and man-portable surface-to-
air missiles.
The 2005 State Department Trafficking in Persons report says that Ukraine is
a source country for women and girls trafficked for purposes of sexual exploitation.
The report designates Ukraine as a “Tier 2” country, which means that it does not
comply with minimum standards for the elimination of trafficking, but is making
“significant efforts” to do so. The report says Ukraine has increased the number of
prosecutions and convictions of traffickers, but that shortcomings exist in several
areas, including government corruption. The report notes that the new government
aims to improve Ukraine’s performance on this issue. The report recommends that
Ukraine “create a special witness protection program for trafficking victims, expand
the legal definition of trafficking to conform with international requirements, ensure
the appropriation of consistent resources for the anti-trafficking unit, and conduct
sensitivity training to reduce victim blaming and breaches of victim confidentiality.”
A key issue for U.S. policymakers is the withdrawal of Ukrainian troops from
Iraq. U.S. officials said during 2004 that Ukraine’s contribution of over 1,600 troops,
while appreciated, would not cause the United States to overlook Ukraine’s
democratic shortcomings during the presidential elections. However, some observers
were concerned that the leaders of the former regime were hoping that the United
States would downplay election irregularities if Ukraine continued its troop
deployment in Iraq. During the campaign, Yushchenko pledged to quickly withdraw
the troops if elected, while Yanukovych supported the deployment, but raised the
possibility that a continued deployment could be conditioned on such factors as the
granting of more reconstruction contracts in Iraq to Ukrainian firms.
After taking office, President Yushchenko confirmed that he would pull
Ukraine’s troops out of Iraq after consultation with other Iraq coalition members and
the Iraqi government. On March 11, 2005, over 130 Ukrainian troops were
withdrawn from Iraq. A further 550 left Iraq in May, and the remaining troops will
be withdrawn by the end of the year. The Administration has downplayed the
significance of the Ukrainian withdrawal. After an April 4 meeting with President
Yushchenko, President Bush said that Yushchenko was “fulfilling a campaign

pledge. I fully understand that. But he also has said that he’s going to cooperate with
the coalition in terms of further withdrawals, and I appreciate that.”6
Policy Issues
One important issue for U.S. policy will be whether to take additional steps to
help Ukraine. Many analysts say that the United States could provide additional
support to Ukraine, for example by helping it obtain loans from international
financial institutions for its reform plans. Ukraine’s trade with the United States
could be enhanced if the Department of Commerce determined Ukraine to be a
market economy in the near future.7 Some experts have said that Ukraine should
receive funding under the Millennium Challenge Account when it qualifies for such
assistance. Finally, some observers have suggested that leading Western countries
should hold an aid donor conference this year in order to seek aid pledges and
coordinate assistance efforts. In addition, U.S. assistance tailored to Yushchenko’s
near-term agenda, and similar support from the EU, could be important to
consolidating the gains of democratic forces in Ukraine in the run-up to the March

2006 parliamentary elections.

Another potential issue is how or whether to deal with perceptions among some
observers in the United States and elsewhere that the reform process in Ukraine is in
a state of drift, particularly on economic reform. U.S. officials have praised the
Yushchenko government as a beacon of democracy and reform and have appeared
cautious about offering public criticism, perhaps because the government is only a
few months old and perhaps for fear of undermining it. However, some observers
argue that a more frank approach, expressed by high-level officials, could be useful
to help nudge the reforms forward.
A third issue is whether the United States should strongly signal support for
Ukraine’s NATO aspirations. If the United States decided to make such a move, it
would likely also have to cope with Moscow’s strident opposition, as well as tension
with several European NATO allies more eager to accommodate Moscow on the
issue. At present, Administration officials are approaching the issue of NATO
membership for Ukraine with some caution. They have called on Ukraine to focus
on implementing its current Action Plan with NATO. During an April 4 press
conference with Yushchenko, President Bush said, “I’m a supporter of Ukraine
becoming a member of NATO. I think it’s important.” But he cautioned that
Ukraine’s NATO membership “is not a given,” noting that Ukraine has to make
reforms before it can join the Alliance.8

6 Federal Document Clearing House transcript of President’ Bush’s press conference with
President Yushchenko, April 4, 2005.
7 One possible stumbling block is Ukraine’s record on intellectual property rights. In 2001,
the United States withdrew Ukraine’s benefits under the Generalized System of Preference,
due to rampant optical media piracy. Although the U.S. Trade Representative has reported
that Ukraine’s record has improved on this issue, extremely high levels of piracy continued
in 2004, according to the USTR.
8 Transcript of President Bush’s press conference with President Yushchenko, April 4, 2005,

There is also the issue of the impact of Ukraine’s political crisis on the bilateral
relationship between the United States and Russia. Some Russian observers have
viewed the “Orange Revolution” as an American-engineered humiliation of and
threat to Russia, as well as a part of a geopolitical offensive against Russian interests
in the region. Administration officials have tried to avoid confrontation with
Moscow on the issue, saying that the United States is only interested in promoting
democracy in the region and throughout the world. However, such assurances may
be of little comfort to Russian elites, who may fear greater democracy could
undermine their power at home and abroad, and to the Russian public, much of which
views Ukraine as inseparable from Russia.9
Congressional Response
During the Ukranian presidential election campaign and during the ensuingth
electoral crisis, the 108 Congress approved legislation calling for free and fair
elections in Ukraine and urged the Administration to warn Ukraine of possible
negative consequences for Ukraine’s leaders and for U.S.-Ukraine ties in the case of
electoral fraud. On July 22, 2004, the Senate passed S. Con. Res.106 by unanimous
consent. The resolution noted the violations against OSCE standards for free and fair
elections that took place during the Ukrainian election campaign. The resolution
pledged Congress’s support for Ukraine’s establishment of democracy, free markets,
and a place in the Western community of democracies. H.Con.Res. 415 was passed
by the House on October 4. It was identical to S.Con.Res. 106, except that it added
two clauses that “strongly encourage” the President to fully employ U.S. government
resources to ensure a free and fair election and to stress to the Ukrainian government
that the conduct of the elections would be “a central factor in determining the future
relationship between the two countries.” On November 18, 2004, just before the
second round of the election, the Senate passed S.Res. 473 by unanimous consent.
As in the case of H.Con.Res. 415, it warned Ukrainian leaders against conducting a
fraudulent election. However, it went further than H.Con.Res. 415 in that it “strongly
encourages” the Administration to impose sanctions against persons encouraging or
participating in fraud.
Senator Richard Lugar, chairman of the Senate Foreign Relations Committee,
monitored the November 21, 2004 runoff at the request of President Bush. He said
after the vote that “it is now apparent that there was a concerted and forceful program
of election day fraud and abuse enacted with the leadership or cooperation of the
authorities.” Senator Lugar said that he had carried a letter from President Bush to
President Kuchma that warned that a “tarnished election” will cause the United States
to “review” its relations with Ukraine. Senator Lugar stressed that Kuchma “has the

8 (...continued)
from the White House website, [].
9 Jamestown Foundation, Eurasia Daily Monitor, Vol. 1, Issue 145, December 13, 2004.

responsibility and the opportunity for producing even at this point an outcome which
is fair and responsible.”10
The 109th Congress passed resolutions after President Yushchenko was
inaugurated. On January 25, 2005, the House passed H.Con.Res. 16, and the Senate
passed S.Con.Res. 7 on the 26th. The identical resolutions include clauses
congratulating Ukraine for its commitment to democracy and its resolution of its
political crisis in a peaceful manner; congratulating Yushchenko on his victory;
applauding the candidates, the EU and other European organizations and the U.S.
Government for helping to find that peaceful solution; and pledging U.S. help for
Ukraine’s efforts to develop democracy, a free market economy, and integrate into
the international community of democracies.
Current Issues
If the “Orange Revolution” continues to show progress, Congress could consider
further legislation on Ukraine, including ending the application of the Jackson-Vanik
amendment to Ukraine. The Jackson-Vanik amendment bars permanent normal trade
relations (PNTR) status for countries with non-market economies that do not permit
freedom of emigration. The amendment was originally intended to pressure the
Soviet Union to permit Jewish emigration. The success of legislation on granting
permanent NTR status may depend on issues not directly related to the provisions of
Jackson-Vanik, such as the assessment of Ukraine’s efforts in fighting anti-Semitism
and returning communal property to Jewish groups. Ukraine currently enjoys NTR
status, subject to annual determinations by the President that it permits free
emigration. PNTR and U.S. support for WTO membership for Ukraine may also be
held up by intellectual property rights concerns, high Ukrainian agricultural tariffs,
and other trade disputes.
Several bills have been introduced that would authorize the President to grant
Ukraine PNTR status. Three bills — H.R. 1053, offered by Representative Gerlach;
H.R. 885, introduced by Representative Hyde; and S. 410 (identical to H.R. 885),
offered by Senator McCain — would authorize the President to determine that
Jackson-Vanik would no longer apply to Ukraine and to grant permanent normal
trade relations status to Ukraine. S. 46, sponsored by Senator Levin, and H.R. 1170,
sponsored by Representative Levin, would also terminate Jackson-Vanik for Ukraine
but add other provisions. These include affirming that the United States retains to
right to impose safeguard measures against import surges from Ukraine and that
Congress may express its view that a U.S.-Ukrainian bilateral agreement on
conditions of Ukraine’s accession to the WTO “does not adequately advance the
interests of the United States.”11
Congress also faces the issue of U.S. aid to the new government in Ukraine. On
March 16, the House approved H.R. 1268, the Iraq/Afghanistan supplemental
appropriations bill. The bill reduced the Administration’s $60 million request for

10 Text of statement from Sen. Lugar’s website, [].
11 See CRS Report RS22114, Permanent Normal Trade Relations (PNTR) Status for Ukraine
and U.S.-Ukrainian Economic Ties, by William Cooper.

Ukraine to $33.7 million. In its report (H.Rept. 109-16), the House Appropriations
Committee “lauds the democratic initiative of the Ukrainian people and intends this
funding to be used for projects that will quickly show support for the Yushchenko
government, as well as for costs associated with supporting the upcoming
parliamentary elections.” The report did not address why the Committee had decided
to reduce the President’s request for Ukraine, but the Committee criticized the
request in general for containing items that did not constitute true emergencies, which
therefore should be handled in the regular appropriations process. However, the
Senate restored the $60 million in its version of the bill. The conference version of
the bill, signed by President Bush on May 11, 2005 (P.L. 109-13), also contained $60
million for Ukraine.
On June 28, the House passed H.R. 3057, the FY2006 foreign aid appropriations
bill. The bill provides no earmark for Ukraine and provides $477 million for the
former Soviet countries as a whole. This amount is $5 million below the President’s
request and $78.5 million below the FY2005 aid amount. The report accompanying
the bill says the Committee “strongly supports” President Yushchenko’s reform
efforts. Another bill, H.Res. 44, calls for a staff exchange program between the
House of Representatives and the Ukrainian parliament.