Ukraine's "Orange Revolution" has sparked a great deal of interest in Congress andelsewhere. Some hope that Ukraine may finally embark on a path of comprehensive reforms andEuro-Atlantic integration after nearly 15 years of half-measures and false starts. Others are interestedin the geopolitical implications of a pro-Western Ukraine in the former Soviet region and in relationsbetween Russia and the West. Some analysts detect a new wave of democracy sweeping thepost-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 regimein Kyrgyzstan in March 2005. In 2004, many observers believed that Ukraine was at a key period in its transition that couldshape its geopolitical orientation for years to come, in part due to presidential elections held onOctober 31, November 21, and December 26, 2004. In their view, the elections could move Ukrainecloser to either integration in Euro-Atlantic institutions, real democracy and the rule of law, and agenuine 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 politicalscene had been dominated by President Leonid Kuchma and the oligarchic "clans" (regionally basedgroups of powerful politicians and businessmen) that supported him. The oligarchs chose PrimeMinister Viktor Yanukovych as their candidate to succeed Kuchma as President. The chiefopposition candidate, former Prime Minister Viktor Yushchenko, was a pro-reform, pro-Westernfigure. International observers criticized the election campaign and the first and second rounds ofthe election as not free and fair, citing such factors as government-run media bias in favor ofYanukovych, abuse of absentee ballots, barring of opposition representatives from electoralcommissions, and inaccurate voter lists. Nevertheless, Yushchenko topped the first round of the voteon 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 ElectionCommission proclaimed Yanukovych the winner. Yushchenko's supporters charged that massivefraud 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 toinvalidate the vote. The court invalidated the runoff election on December 3, and set a repeat runoffvote on December 26. Yushchenko won the December 26 re-vote, with 51.99% of the vote toYanukovych's 44.19%. After several court challenges by Yanukovych were rejected, Yushchenkowas inaugurated as President of Ukraine on January 23, 2005. On February 4, 2005, the Ukrainianparliament approved President Yushchenko's appointment of Yulia Tymoshenko as Prime Ministerof Ukraine by a vote of 373-0. Tymoshenko is an energetic, charismatic leader with a sometimescombative political style who campaigned effectively on Yushchenko's behalf. She is a controversialfigure due in part to her alleged involvement in corrupt schemes as a businesswoman and agovernment minister during the Kuchma regime. (1) During the campaign, Yushchenko accused the authorities of trying to poison him. OnSeptember 6, 2004, he fell seriously ill, shortly after attending a dinner with the chief of theUkrainian security services. After his condition worsened, he was rushed to the Rudolfinerhausmedical 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. OnDecember 11, doctors at Rudolfinerhaus, reportedly with the help of American experts, confirmedthat Yushchenko had been poisoned with a massive dose of the toxic substance dioxin. Ukrainianlaw enforcement officials are investigating the poisoning plot, and say they have developedinformation 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 Ukrainiangovernment has not accused the Russian government of complicity in the plot. 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 forfavored businesses. Another key goal is to maintain macroeconomic stability, although this effortmay be challenged by campaign promises to increase social spending. Yushchenko has pledged tofight corruption, a critical problem in Ukraine, including through administration and civil servicereforms. Other priorities include improving the independence and effectiveness of the judiciary; andattracting 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, andthe attempt on Yushchenko's own life. Yushchenko has said that he does not envision wholesale reversal of the sometimes dubiousprivatization deals of the past 15 years (a possible relief to some oligarchs) but that he will revisithighly questionable privatizations that have occurred in recent years, which he has estimated at about20-30 firms. In addition, 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 marketprice of the firm and what they originally paid for it. One privatization, the huge Kryvrizhstal steelworks, 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 investigationand has launched a much broader inquiry that could involve hundreds or even thousands of firms. Western observers have expressed concern that the current uncertainty over privatization andother government policies is having an unsettling effect on Ukraine's investment climate. Effortsto overturn previous privatizations could result in lengthy court battles. In addition, potentiallong-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 oflaw. Some Western observers are also concerned that the government seems focused on boostingtax collection to pay for increased social spending promised during the campaign rather than onreforms that would attract more foreign investment. Indeed, such efforts, undertaken withoutconsultation with investors and in the hands of corrupt bureaucrats, could actually discourageinvestment, they say. Yushchenko's main foreign policy priority is expanding ties with the EU, seeking EUdesignation as a market economy as a first step. After Ukraine receives World Trade Organizationmembership, which Yushchenko wishes to achieve by the end of 2005, Ukraine will seek a free tradezone with the EU, and by 2007 start talks on EU membership, an objective Yushchenko believes canbe achieved within a decade. However, EU officials have tried to downplay the chances forUkrainian membership in the EU, instead calling for practical steps to improve relations within thecontext of the EU's European Neighborhood policy, which could include EU designation as a marketeconomy, assistance for Ukraine's WTO candidacy, a feasibility study for an EU-Ukraine free tradearea, and other forms of assistance. President Yushchenko has said that he favors eventual Ukrainian membership in NATO. TheKuchma regime, at least until the presidential election campaign, when it recanted under allegedRussian pressure, claimed to seek membership in the Alliance, and the United States expressedsupport for Ukraine's aspirations. NATO and Ukraine formed a NATO-Ukraine Commission tofoster cooperation. In 2002, the two sides developed a NATO-Ukraine Action Plan to outline goalsand objectives for political and military reform in Ukraine. However, Ukraine's lack of progress onreforms under Kuchma made such efforts largely ineffective. In April 2005, NATO launched an"Intensified Dialogue" with Ukraine on its membership aspirations and relevant reforms, withouthowever committing the Alliance to any decision on membership. Ukraine's Foreign Minister BorisTarasyuk has said that Ukraine could be ready to join NATO as early as 2008. Other observers aremore skeptical, noting that Ukraine faces serious challenges in reforming its armed forces andsecurity sector, not to mention the broader tasks of political and economic reform. Moreover, somemembers of the government, including those with economic ties to Russia, are skeptical or opposedto NATO membership for Ukraine. President Yushchenko has noted that another obstacle to Ukraine's possible NATOmembership is a lack of public support at present. According to a June 2005 poll by the RazumkovCenter 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 theidea. Ukrainian officials believe an extensive public information effort will be needed to strip awaymisinformation and Soviet-era prejudices toward the Alliance. Some observers have speculated thata stronger push for NATO membership may have to wait until after the March 2006 elections, inorder 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 futuredecision to join NATO would be put to a national referendum first. Despite Russia's strong support for his opponent during the campaign, Yushchenko has saidthat he favors good relations with Russia. In his first foreign visit as President, Yushchenko heldmeetings with Russian President Vladimir Putin in Moscow on January 24. Yushchenko calledRussia a permanent strategic partner of Ukraine, but insisted that he will subordinate participationin the Russian-led Single Economic Space (SES) and the Commonwealth of Independent States tohis goal of Euro-Atlantic integration. Specifically, Ukrainian leaders have said that they mayconsider a free trade zone within the SES, but not a customs union or a currency union. Russian observers have expressed concern about how Ukraine's new European orientationand 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 transportedthrough Russia. Russia is also Ukraine's largest export market, absorbing 18% of Ukraine's exportsin 2003. 78% of Russia's lucrative natural gas exports to Western Europe transit Ukraine. (4) Russia and Ukraine haveestablished a joint consortium to supply Western Europe with gas, but Ukraine is seeking to includewestern European firms as well. Russian businessmen could see advantages in a more favorableclimate for foreign investment in Ukraine. Ukrainian officials have assured Russia that Ukraine'sNATO aspirations would not affect the status of the Russian Black Sea Fleet in Ukraine, which holdsa lease there through 2017. One possible area of controversy between Moscow and Kiev could be policy towardpost-Soviet countries. Moscow may be uneasy about Ukraine's possibly more active role in theGUAM group of countries (an acronym based on the countries forming it: Georgia, Ukraine,Azerbaijan and Moldova). Although having widely varying political and economic conditions, thesecountries have in common a desire to maintain their sovereignty that they sometimes see threatenedby Russia and the Russian-dominated CIS. One particular area in which these countries could work together is diversification of sourcesof 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 oilterminal at the port of Odesa to the town of Brody. The Odesa-Brody pipeline could be used totransport Caspian Sea oil through Georgia, across the Black Sea in tankers to the Odesa-Brodypipeline and into Western Europe, thereby reducing dependence on Russian oil, and reducingRussia's control of regional pipelines. However, due to a decision of the previous government, thepipeline currently runs in "reverse mode," transporting Russian oil to the Odesa terminal and out tothe Mediterranean Sea. The new government faces problems in restoring the pipeline's originallyplanned direction, including a lack of oil supplies to fill the pipeline, and Russian pressure onUkraine and on potential oil suppliers such as Kazakhstan, aimed at thwarting the project. Ukraine's new government supports Moldova's desire to reintegrate its breakawayTransnistria region. In May 2005, Ukraine offered a peace plan for Moldova that called forinternationally 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 andomissions, noting for example that it does not mention the need for a Russian troop withdrawal fromMoldova. Perhaps as importantly, Ukraine has promised to crack down on the lucrative, often illegaltrade 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 asan effort to undermine Moscow's influence in Transnistria. Another potential problem for Russian-Ukrainian relations is the fear expressed by someRussian observers that Ukraine may try to "export" its democratic revolution to other countries inthe region, including Belarus and even Russia itself. Although Ukrainian leaders deny suchintentions, Ukrainian NGOs that played an important role in the Orange Revolution, including theyouth group "Pora" have expressed such goals. Moreover, the very existence of a successfuldemocratic revolution could raise expectations in other CIS countries, particularly if Ukraine'sreforms result in greater prosperity for Ukrainians. The fear of a "color revolution" in Belarus hasled Belarusian dictator Aleksandr Lukashenko to intensify a crackdown on opponents, independentmedia, and NGOs. He has also put in place Soviet-style policies to reduce contacts betweenBelarusians 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 andmove 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'ssupporters have been thrown into disarray by their unexpected defeat, and many of them appear tobe currying favor with the new regime. With the exception of the Communist Party, which hasdeclined in importance since independence, the opposition does not have a set of principles toprovide cohesion. Ukraine is also benefitting from substantial goodwill from the United States andother Western countries, in marked contrast to the former regime, which had isolated itself fromWest by its actions and had become more dependent on Russia. However, Ukraine faces many obstacles as well. Many of its goals, such as rooting outcorruption, may be easy to proclaim but very difficult to achieve. It is possible that some in the newleadership, many of whom served in the old regime, may be tempted to engage in corruption and usethat regime's quasi-authoritarian methods. A related issue is whether those businessmen whosupported the "Orange Revolution" will expect to become the "new oligarchs" of Ukraine, and, ifso, what impact a possible struggle between "old" and "new" oligarchs over Ukraine's economicresources will have on reform efforts. Yushchenko has formed a center-right pro-presidential bloc called People's Union-OurUkraine. People's Union-Our Ukraine is in a loose coalition with other groups, including the YuliaTymoshenko Bloc, the centrist Party of Industrialists and Entrepreneurs (led by First Deputy PrimeMinister Anatoli Kinakh), the centrist People's Party (headed by parliament chairman VolodymyrLytvyn), and the leftist Socialist Party. Reforms have been slowed as much by dissension within thecoalition than effective opposition by the Communists and supporters of oligarchs from easternUkraine. Personal and policy conflicts among coalition partners have led to confusion over thegovernment's policies on many issues, including such fundamental ones as the proper amount ofgovernment control over the economy. Key legislation needed for Ukraine's admission to the World Trade Organization (includinglegislation to fight Ukraine's severe optical media piracy problem) has been voted down by theparliament, 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 Westernobservers have complained that part of the problem is that President Yushchenko has not exercisedconsistent discipline and leadership over the government and parliament to push needed legislationthrough and to ensure coherent government policies. Other observers note that the new governmenthas been in place only a few months, and that these problems could be eased after the March 2006parliamentary elections, when a still-popular Yushchenko may be able to form a more homogenousmajority in parliament. Regional differences in Ukraine may present another problem. Ukrainian officials havesharply 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 asanti-Russian and an extreme nationalist, even as a Nazi, the new government may face a challengein gaining the support of people in eastern and southern Ukraine. In contrast to setbacks on somereform issues, the new government has moved more quickly to replace loyalists of the old regimein public posts, particularly in eastern Ukraine. Moreover, Ukrainian prosecutors have arrestedseveral leading figures of the old regime for various crimes, ranging from extortion to electoral fraudto fomenting separatism. Many of these people are closely associated with the Donetsk region andYanukovych. Reprivatization could also lead to a large-scale redistribution of property fromoligarchs in eastern Ukraine to those supporting Yushchenko. Efforts by Yanukovych and others to characterize these actions as political repression andcreate 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 takenby Razumkov Center for Economic and Political Research and the Kyiv International Institute ofSociology, 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 easternUkraine were 18.9% for Yushchenko and 7.5% for Tymoshenko. This may be because some peoplefrom 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'sopponents 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 assuredpeople in eastern Ukraine that no efforts would be made to force use of the Ukrainian language onpeople 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 Ukrainianparliament in December 2004 as part of a political compromise to end Ukraine's political crisis. Thereforms, which will reduce the powers of the presidency, which will go into effect in September2005 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 havethe power to nominate the prime minister, the foreign minister, and the defense minister, subject tothe approval of parliament. The rest of the government will be nominated by the prime minister andapproved by the parliament. It is possible that these changes could be struck down as a result oflegal challenges. However, if the reforms go into force, they will make the results of the March 2006parliamentary elections even more important. International Obstacles. Ukraine could also faceimportant international obstacles. Perhaps the most important is Russia's policy. It is unclearwhether Russia will genuinely treat Ukraine as an equal, instead of attempting to pressure or punishthe new leadership. Russia could attempt to manipulate Ukraine's heavy dependence on Russianenergy. However, as in the past, Russia's leverage is somewhat limited by Ukraine's control of themain pipelines for Russian energy exports to Western Europe. Some analysts point to several recent incidents that could indicate that Russia may be tryingto 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'scrude oil supplies but also its oil refineries and filling stations, of abusing their market position. Sheimposed price controls and called for greater government control of Ukraine's energy sector. TheRussian firms responded by cutting off gas supplies. President Yushchenko stepped in, sharplycriticized Tymoshenko for her non-market approach to the problem and reached a compromise withthe Russian firms. In another case, the Russian natural gas giant, Gazprom, has called for largeincreases in the price of gas to be supplied to Ukraine in 2006 and has accused Ukraine of a massivetheft of Russian gas. Sharply increased energy prices could have a negative impact on Ukraine'seconomy. The Ukrainian government has responded to the problem by trying to diversify itssupplies 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 inthe past tried to play upon regional differences in Ukraine, most recently during the presidentialelections, without success. Ukraine's reform efforts might be hampered if Western countries do notprovide timely and effective assistance, which could come in the form of political support, economicaid, lower trade barriers, and support for WTO membership. One indicator of success will be if Ukraine experiences a substantial increase in foreigninvestment. This would indicate that investors are happier with Ukraine's progress in such areas ofperennial concern as fighting corruption, reducing red tape, and enforcing the rule of law. Perhapsa more important indicator from the point of view of the majority of Ukraine's population would bean increase in living standards and a decrease in poverty. In recent years, Ukraine has experiencedhigh levels of economic growth, but the benefits of that growth have not reached all sectors of thepopulation. International observers may closely monitor the March 2006 parliamentary electioncampaign for signs of media access for opposition candidates, improved election laws andadministration, and other signs of free and fair elections. In the longer term, Ukraine's foreign policy success may be measured by whether it receivesa signal from the EU that it can be considered a candidate for eventual EU membership, and a similarsignal from NATO, perhaps in the form of a Membership Action Plan. However, it should be notedthat 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 orderto preserve regional stability and economic ties with Russia. In addition, possible membership forUkraine poses difficult problems of its own for the EU, which is struggling to incorporate tenrecently admitted members, as well as possible future new members in Turkey and the Balkans. Onthe other hand, many of the EU's new members in central Europe, especially Poland and the Balticstates, are looking to counterbalance Russia and stabilize their eastern borders. They continue topush strongly for one day incorporating Ukraine, and possibly other post-Soviet countries, into theEU. If Ukraine becomes discouraged about the prospects for joining the EU, due to the EU's currentdifficulties, it is possible Kiev could push more strongly for NATO membership in a bid to showtangible gains in its Euro-Atlantic integration efforts. U.S. officials supported the "Orange Revolution" in Ukraine, warning the former regime ofnegative consequences if it engaged in fraud, sharply criticizing fraud in the November 21 runoffvote, and hailing Yushchenko's ultimate victory. The United States also provided assistance toUkrainian non-governmental organizations that monitored the election and conducted exit polls todetect fraud. (5) In a showof support for the new leadership, President Bush and other NATO leaders met PresidentYushchenko at a NATO summit on February 22, 2005. President Yushchenko visited the UnitedStates 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 standingovations. The two leaders signed a joint statement that hailed Ukraine's democratic revolution and saidthe two countries would work to spread freedom in the region, as well as throughout Europe andbeyond, including in Belarus and Cuba. It restates the long-standing U.S. policy goal of ademocratic, 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 WTOin 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 sideswill establish an "energy dialogue" to help Ukraine achieve greater energy independence. Thestatement 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, theUnited States pledges to help Kiev fight AIDS/HIV, a serious problem in Ukraine, and to providean additional $45 million to the Chernobyl Shelter Fund, which collects funds to repair the protectiveshelter over the reactor destroyed in the 1986 nuclear accident. Current U.S. aid levels for Ukraine are relatively modest. According to the FY2006 budgetsubmitted 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 soughtan additional $60 million to aid reform in Ukraine in an Iraq/Afghanistan FY2005 supplementalappropriations request. U.S. aid is focused on anti-corruption and rule of law efforts, media andNGO development, and election monitoring and other democracy-building programs. The UnitedStates also seeks to increase exchange programs between the two countries. As noted in the April 2005 Bush-Yushchenko joint statement, the United States will beinterested in seeing how the new government tackles such issues as weapons proliferation andhuman trafficking. During the Kuchma era, several arms trafficking scandals damaged Ukraine'sinternational reputation. In September 2002, the Administration announced that it had authenticateda conversation taped in Kuchma's office in July 2000, in which Kuchma gave approval for the saleof four Kolchuga early warning radar systems to Iraq, a sale banned by a U.N. Security Council armsembargo. 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 smallarms and man-portable surface-to-air missiles. The 2005 State Department Trafficking in Persons report says that Ukraine is a sourcecountry for women and girls trafficked for purposes of sexual exploitation. The report designatesUkraine as a "Tier 2" country, which means that it does not comply with minimum standards for theelimination of trafficking, but is making "significant efforts" to do so. The report says Ukraine hasincreased the number of prosecutions and convictions of traffickers, but that shortcomings exist inseveral areas, including government corruption. The report notes that the new government aims toimprove Ukraine's performance on this issue. The report recommends that Ukraine "create a specialwitness protection program for trafficking victims, expand the legal definition of trafficking toconform with international requirements, ensure the appropriation of consistent resources for theanti-trafficking unit, and conduct sensitivity training to reduce victim blaming and breaches of victimconfidentiality." 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, wouldnot cause the United States to overlook Ukraine's democratic shortcomings during the presidentialelections. However, some observers were concerned that the leaders of the former regime werehoping that the United States would downplay election irregularities if Ukraine continued its troopdeployment in Iraq. During the campaign, Yushchenko pledged to quickly withdraw the troops ifelected, while Yanukovych supported the deployment, but raised the possibility that a continueddeployment could be conditioned on such factors as the granting of more reconstruction contractsin Iraq to Ukrainian firms. After taking office, President Yushchenko confirmed that he would pull Ukraine's troops outof Iraq after consultation with other Iraq coalition members and the Iraqi government. On March11, 2005, over 130 Ukrainian troops were withdrawn from Iraq. A further 550 left Iraq in May, andthe remaining troops will be withdrawn by the end of the year. The Administration has downplayedthe 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. Buthe also has said that he's going to cooperate with the coalition in terms of further withdrawals, andI appreciate that." (6) 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 exampleby helping it obtain loans from international financial institutions for its reform plans. Ukraine'strade with the United States could be enhanced if the Department of Commerce determined Ukraineto be a market economy in the near future. (7) Some experts have said that Ukraine should receive funding underthe Millennium Challenge Account when it qualifies for such assistance. Finally, some observershave suggested that leading Western countries should hold an aid donor conference this year in orderto seek aid pledges and coordinate assistance efforts. In addition, U.S. assistance tailored toYushchenko's near-term agenda, and similar support from the EU, could be important toconsolidating the gains of democratic forces in Ukraine in the run-up to the March 2006parliamentary elections. Another potential issue is how or whether to deal with perceptions among some observersin 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 abeacon of democracy and reform and have appeared cautious about offering public criticism, perhapsbecause 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 usefulto help nudge the reforms forward. A third issue is whether the United States should strongly signal support for Ukraine's NATOaspirations. If the United States decided to make such a move, it would likely also have to cope withMoscow's strident opposition, as well as tension with several European NATO allies more eager toaccommodate Moscow on the issue. At present, Administration officials are approaching the issueof NATO membership for Ukraine with some caution. They have called on Ukraine to focus onimplementing its current Action Plan with NATO. During an April 4 press conference withYushchenko, President Bush said, "I'm a supporter of Ukraine becoming a member of NATO. Ithink it's important." But he cautioned that Ukraine's NATO membership "is not a given," notingthat Ukraine has to make reforms before it can join the Alliance. (8) There is also the issue of the impact of Ukraine's political crisis on the bilateral relationshipbetween the United States and Russia. Some Russian observers have viewed the "OrangeRevolution" as an American-engineered humiliation of and threat to Russia, as well as a part of ageopolitical offensive against Russian interests in the region. Administration officials have tried toavoid confrontation with Moscow on the issue, saying that the United States is only interested inpromoting democracy in the region and throughout the world. However, such assurances may beof little comfort to Russian elites, who may fear greater democracy could undermine their power athome and abroad, and to the Russian public, much of which views Ukraine as inseparable fromRussia. (9) During the Ukranian presidential election campaign and during the ensuing electoral crisis,the 108th Congress approved legislation calling for free and fair elections in Ukraine and urged theAdministration to warn Ukraine of possible negative consequences for Ukraine's leaders and forU.S.-Ukraine ties in the case of electoral fraud. On July 22, 2004, the Senate passed S. Con. Res.106by unanimous consent. The resolution noted the violations against OSCE standards for free and fairelections that took place during the Ukrainian election campaign. The resolution pledged Congress'ssupport for Ukraine's establishment of democracy, free markets, and a place in the Westerncommunity 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 "stronglyencourage" the President to fully employ U.S. government resources to ensure a free and fair electionand to stress to the Ukrainian government that the conduct of the elections would be "a central factorin determining the future relationship between the two countries." On November 18, 2004, justbefore the second round of the election, the Senate passed S.Res. 473 by unanimousconsent. As in the case of H.Con.Res. 415 , it warned Ukrainian leaders againstconducting a fraudulent election. However, it went further than H.Con.Res. 415 in thatit "strongly encourages" the Administration to impose sanctions against persons encouraging orparticipating in fraud. Senator Richard Lugar, chairman of the Senate Foreign Relations Committee, monitored theNovember 21, 2004 runoff at the request of President Bush. He said after the vote that "it is nowapparent that there was a concerted and forceful program of election day fraud and abuse enactedwith the leadership or cooperation of the authorities." Senator Lugar said that he had carried a letterfrom President Bush to President Kuchma that warned that a "tarnished election" will cause theUnited States to "review" its relations with Ukraine. Senator Lugar stressed that Kuchma "has theresponsibility and the opportunity for producing even at this point an outcome which is fair andresponsible." (10) The 109th Congress passed resolutions after President Yushchenko was inaugurated. OnJanuary 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 congratulatingUkraine for its commitment to democracy and its resolution of its political crisis in a peacefulmanner; congratulating Yushchenko on his victory; applauding the candidates, the EU and otherEuropean organizations and the U.S. Government for helping to find that peaceful solution; andpledging U.S. help for Ukraine's efforts to develop democracy, a free market economy, and integrateinto the international community of democracies. If the "Orange Revolution" continues to show progress, Congress could consider furtherlegislation on Ukraine, including ending the application of the Jackson-Vanik amendment toUkraine. The Jackson-Vanik amendment bars permanent normal trade relations (PNTR) status forcountries with non-market economies that do not permit freedom of emigration. The amendmentwas originally intended to pressure the Soviet Union to permit Jewish emigration. The success oflegislation on granting permanent NTR status may depend on issues not directly related to theprovisions of Jackson-Vanik, such as the assessment of Ukraine's efforts in fighting anti-Semitismand returning communal property to Jewish groups. Ukraine currently enjoys NTR status, subjectto annual determinations by the President that it permits free emigration. PNTR and U.S. supportfor WTO membership for Ukraine may also be held up by intellectual property rights concerns, highUkrainian agricultural tariffs, and other trade disputes. Several bills have been introduced that would authorize the President to grant Ukraine PNTRstatus. 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-Vanikwould 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 byRepresentative 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 againstimport surges from Ukraine and that Congress may express its view that a U.S.-Ukrainian bilateralagreement on conditions of Ukraine's accession to the WTO "does not adequately advance theinterests 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 Ukraine to $33.7 million. In its report( H.Rept. 109-16 ), the House Appropriations Committee "lauds the democratic initiative of theUkrainian people and intends this funding to be used for projects that will quickly show support forthe Yushchenko government, as well as for costs associated with supporting the upcomingparliamentary elections." The report did not address why the Committee had decided to reduce thePresident's request for Ukraine, but the Committee criticized the request in general for containingitems that did not constitute true emergencies, which therefore should be handled in the regularappropriations process. However, the Senate restored the $60 million in its version of the bill. Theconference version of the bill, signed by President Bush on May 11, 2005 ( P.L. 109-13 ), alsocontained $60 million for Ukraine. On June 28, the House passed H.R. 3057 , the FY2006 foreign aid appropriationsbill. The bill provides no earmark for Ukraine and provides $477 million for the former Sovietcountries as a whole. This amount is $5 million below the President's request and $78.5 millionbelow the FY2005 aid amount. The report accompanying the bill says the Committee "stronglysupports" President Yushchenko's reform efforts. Another bill, H.Res. 44 , calls for astaff exchange program between the House of Representatives and the Ukrainian parliament.

Summary: In January 2005, Viktor Yushchenko became Ukraine's new President, after massivedemonstrations 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 sparkeda great deal of interest in Congress and elsewhere. Some hope that Ukraine may finally embark ona path of comprehensive reforms and Euro-Atlantic integration after nearly 15 years of half-measuresand false starts. Others are interested in the geopolitical implications of a pro-Western Ukraine inthe former Soviet region and in relations between Russia and the West. Some analysts detect a newwave of democracy sweeping the post-Soviet region. Yushchenko has said that his key domestic priorities include reducing the size of theunofficial, "shadow" economy, maintaining macroeconomic stability, and fighting corruption, amajor problem in Ukraine. Other critical priorities include improving the independence andeffectiveness of the judiciary and attracting foreign investment. Yushchenko has vowed to prosecutethose guilty of crimes, including fraud during the election, the 2000 murder of Ukrainian journalistGeorgi Gongadze, and an attempt on Yushchenko's life during the campaign, which has left himdisfigured. In foreign policy, Ukraine seeks closer ties with the European Union, NATO, and theUnited States, with the goal of eventual NATO and EU membership. Yushchenko has said that heviews Russia as a "strategic partner" of Ukraine, but that integration with the West will supercedeRussian-led integration efforts. The Bush Administration has hailed the "Orange Revolution" as a part of a wave ofdemocratization sweeping the region and the world, and has proposed a modest increase in U.S. aidto Ukraine. Experts believe that prompt U.S. and international assistance may be needed to help thenew government to boost public support before crucial March 2006 parliamentary elections. TheUnited States has also expressed hopes that the United States and Ukraine will work together moreeffectively on such issues as weapons proliferation and trafficking in persons. The Administrationhas downplayed Yushchenko's decision to honor a campaign pledge to pull Ukraine's troops out ofIraq 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 theAdministration to warn the previous regime of possible negative consequences for Ukraine's leadersand for U.S.-Ukraine ties in the case of electoral fraud. The 109th Congress will consider aid fundingfor Ukraine, and may take up extending permanent Normal Trade Relations to Ukraine, terminatingthe application of the Jackson-Vanik amendment to Ukraine, which bars permanent NTR status forcountries with non-market economies that do not permit freedom of emigration. This report will notbe updated. For background on the Orange Revolution, see CRS Report RL32691(pdf) , Ukraine'sPolitical Crisis and U.S. Policy Issues , by [author name scrubbed].