When Ukraine’s Finance Minister Natalia Jaresko spoke at the event focused on dealing with Ukraine’s critical financial and economic challenges, hosted by the Brookings Institution in Washington on March 17, she outlined the priorities of the Ukrainian government for economic reforms. These include anti-corruption campaign, bringing business out of the shadow and other measures to broaden the tax base. Ms. Jaresko talked about the need to create an environment for investment inflow, and hryvnia devaluation, Ukraine’s human capital and benefits of the Association Agreement and FTA as elements that could make Ukraine a competitive manufacturing platform into the EU. The Ukrainian Week spoke to Steven Pifer, Director of Arms Control and Non-Proliferation Initiative at Brookings, ex-Ambassador of the US to Ukraine, and moderator of the event, about trust for the Ukrainian government in the United States and Barak Obama’s Ukraine and Russia policy.
U.W.: How is the progress in reforms in Ukraine seen from the United States?
When Minister Jaresko was here, she gave an excellent speech that outlined the challenges facing Ukraine, primarily the military and economic ones. She also described the main vectors for Ukraine’s reform, including reform of the financial and energy sectors, anti-corruption steps, and moves to create the conditions in which Ukraine could draw investment. Ms. Jaresko made clear that Ukraine does not want to live on international credit forever – it needs to get its economy growing and begin drawing both domestic and foreign investors. That was very well received. Now, people will be watching how that reform program is implemented.
U.W.: Based on that discussion with Ms. Jaresko, do you have an impression that the Ukrainian leadership is united in the determination to actually conduct structural rather than superficial reforms?
According to Minister Jaresko, the program that she presented has strong support of the Cabinet of Ministers. I asked her a question about the prospects of implementation, and she said “Watch!”
She said that there will be real actions for the international community, markets and potential investors to see. That should make clear that Ukraine understands that it really needs to get on the reform track right now.
U.W.: Is there trust for the Ukrainian leadership in the United States now, especially compared to the time when the current government entered into office?
There is a lot of support in the US Government and Congress for Ukraine. I think that, given the recent history of Ukraine, there are questions as to whether this government can implement what is seen as a very difficult reform program. A lot has to be done, and it’s not going to be easy. But I think there is certain willingness here to take Ms. Jaresko and the government at their word and see how the implementation proceeds.
U.W.: What effect do you expect discussions on Ukraine hosted by influential American think tanks to have on policymakers? Or are they more of an awareness raising effort to keep the US public informed about processes in Ukraine?
Ms. Jaresnko had a lot of time for private discussions with the US government and the Congress. The event at Brookings offered an opportunity for her to lay out in a public venue, and draw the attention of the press and the community that follows Ukraine, to the things that I believe she has been saying privately about Ukraine’s reform priorities, and about what Ukraine hopes to achieve.
In terms of programs that we do here, giving the opportunity to foreign senior officials to speak on serious questions – and Ukraine is certainly very much in focus now (the economic and financial questions are considered of equal importance to the military challenge in the East) – is important.
U.W.: Is the US Administration committed to consistently supporting Ukraine until it reaches stability and security? Some argue that it is not, therefore it should not provide Ukraine with arms, thus engaging deeper in the current conflict.
I think that the Obama Administration – and this is very similar to the George W. Bush and Clinton administrations – wants to see Ukraine as a stable, democratic, market economy on its path to Europe. That has been an American goal for Ukraine for the past twenty years, shared by both Republicans and Democrats.
Some people suggest that the current Administration have other goals concerning Ukraine. But given the foreign policy challenges that the Obama Administration faces elsewhere, they may have made the decision to let Chancellor Merkel take the lead in the West’s diplomacy on Russia. Frankly, that was a smart decision. Chancellor Merkel has better channels of communication with Mr. Putin than our President does. Also, there is very close communication between Washington and Berlin on the Ukraine policy. I don’t see very big differences between the two.
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U.W.: Couldn’t this be a mistake given the fact that Germany was among the most fervent opponents of Ukraine’s NATO membership in 2008, right after Russia’s aggression on Georgia?
Part of Washington’s approach reflects realities on the ground in Kyiv. In 2010, when Viktor Yanukovych became president, he basically put to rest any idea of deepening Ukraine’s relationship with NATO, but opted for strengthening links with the EU. The Obama Administration considered that a logical way for Ukraine to broaden its ties with Europe. Since the US is not part of the EU, it was not at the forefront of that policy. Over the past year, however, we have seen the US become more actively engaged as the Russia-Ukraine crisis became deeper.
When we speak of letting Germany take lead in terms of conversation with Russia, there is an interesting fact, and a good one: Chancellor Merkel went to Kyiv first before heading to Moscow in early February. She is not talking to Russia over Ukraine’s head. She has been very strong on the principle that countries should not use force to change borders, and on the idea that sanctions should not be eased until Russia fully implements Minsk Agreements. And the unity of the EU on the sanctions compared to a year ago is thanks to Chancellor Merkel. She was prepared to take a leadership role in the crisis.
There still are tactical differences between her and the US. I think it still makes sense for the US to consider providing defensive arms to Ukraine. President Obama has put this on hold until he sees what happens to the Minsk-2 Agreement. Should the ceasefire collapse because of the separatists’ or Russian actions, there is going to be quite a bit of pressure on the White House to begin providing arms to Ukraine. If the Russians are responsible for the breakdown of Minsk-2, I’m not sure the Germans will oppose the provision of arms to Ukraine by the US.
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U.W.: How much interest do you think there is in the US, especially its investors, for Ukraine as a potential economy, a regional economic player?
There is interest. Potentially, Ukraine has some very interesting investment opportunities in the agricultural and energy sectors, as well as some hi-tech industries.
However, there are a number of things that are holding investors back. One is, of course, the conflict with Russia. Ukraine can address that by making clear that the conflict is taking place just in the East, while the rest of the country has a fairly normal climate.
The second thing is to create an investment climate that will draw investors. The Ukrainian government can achieve that. It includes a simplified tax system that investors can understand, a court system that will resolve disputes in an impartial manner, and regulatory structures that stop inflicting time costs for getting licenses and similar things. The Ukrainian government knows what it needs to do.
BIO
Steven Pifer was the United States Ambassador to Ukraine from 1998-2000. He is now Senior Advisor with the Washington-based Brookings Institution focusing on arm controls in Ukraine and Russia. He served at the State Department for over 25 years and the US embassies in London, Moscow, Geneva and Warsaw. In 1996-1997, Mr. Pifer was special assistant to the president and National Security Council senior director for Russia, Ukraine, and Eurasia
Interviewed by Anna Korbut
