[Senate Hearing 112-471]
[From the U.S. Government Printing Office]
S. Hrg. 112-471
UKRAINE AT A CROSSROADS: WHAT'S AT STAKE FOR THE U.S. AND EUROPE?
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HEARING
BEFORE THE
SUBCOMMITTEE ON EUROPEAN AFFAIRS
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
FEBRUARY 1, 2012
__________
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COMMITTEE ON FOREIGN RELATIONS
JOHN F. KERRY, Massachusetts, Chairman
BARBARA BOXER, California RICHARD G. LUGAR, Indiana
ROBERT MENENDEZ, New Jersey BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland JAMES E. RISCH, Idaho
ROBERT P. CASEY, Jr., Pennsylvania MARCO RUBIO, Florida
JIM WEBB, Virginia JAMES M. INHOFE, Oklahoma
JEANNE SHAHEEN, New Hampshire JIM DeMINT, South Carolina
CHRISTOPHER A. COONS, Delaware JOHNNY ISAKSON, Georgia
RICHARD J. DURBIN, Illinois JOHN BARRASSO, Wyoming
TOM UDALL, New Mexico MIKE LEE, Utah
William C. Danvers, Staff Director
Kenneth A. Myers, Jr., Republican Staff Director
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SUBCOMMITTEE ON EUROPEAN AFFAIRS
JEANNE SHAHEEN, New Hampshire, Chairman
BENJAMIN L. CARDIN, Maryland JOHN BARRASSO, Wyoming
ROBERT P. CASEY, Jr., Pennsylvania JAMES E. RISCH, Idaho
JIM WEBB, Virginia BOB CORKER, Tennessee
RICHARD J. DURBIN, Illinois JIM DeMINT, South Carolina
(ii)
C O N T E N T S
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Page
Barrasso, Hon. John, U.S. from Wyoming, opening statement........ 3
Tymoshenko Carr, Eugenia, Kiev, Ukraine.......................... 34
Prepared statement........................................... 38
Chow, Edward C., senior fellow, Energy and National Security
Program, Center for Strategic and International Studies,
Washington, DC................................................. 18
Prepared statement........................................... 21
Piper, Hon. Steven, senior fellow, Foreign Policy, Center on
United States and Europe, Brookings Institution, Washington, DC 4
Prepared statement........................................... 6
Shaheen, Hon. Jeanne, U.S. Senator from New Hampshire, opening
statement...................................................... 1
Wilson, Damon M., executive vice president, Atlantic Council,
Washington, DC................................................. 12
Prepared statement........................................... 15
Additional Material Submitted for the Record
Johns Hopkins Center for Transatlantic Relations Report ``Towards
an Open Ukraine: Policy Recommendations''...................... 44
Letter from Ambassador Alexander Motsyk, Embassy of Ukraine,
Washington, DC................................................. 53
(iii)
UKRAINE AT A CROSSROADS: WHAT'S AT STAKE FOR THE U.S. AND EUROPE?
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WEDNESDAY, FEBRUARY 1, 2012
U.S. Senate,
Subcommittee on European Affairs,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:35 p.m., in
room SD-419, Dirksen Senate Office Building, Hon. Jeanne
Shaheen (chairman of the subcommittee) presiding.
Present: Senators Shaheen, Menendez, Barrasso, and Risch.
OPENING STATEMENT OF HON. JEANNE SHAHEEN,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Shaheen. Good afternoon, everyone. Thank you for
joining us.
The Senate Foreign Relations Subcommittee on Europe meets
today to examine the current situation in Ukraine and to
evaluate what is at stake for the United States and our
transatlantic allies.
I want to thank the witnesses who are here to help us sort
through these difficult issues. We look forward to your
testimony today.
I am pleased to be joined by the subcommittee's ranking
member, Senator John Barrasso from Wyoming.
As one of the largest and most strategically located
countries in Europe, Ukraine literally and figuratively lies at
the crossroads between Europe and Russia. Its importance as an
energy transit state and as a force in the vital Black Sea
region has made the country a unique and critical player in
Euro-Atlantic economic, energy, and security considerations. In
addition, the country's ongoing transition from a Soviet
Republic to a market-based democratic system makes Ukraine an
important test case for reform in this part of the world.
Obviously the people of Ukraine will have the final say on
the future of their country; however, we are here today because
the path Ukraine ultimately chooses is important to the United
States and our European allies. As a result, the United States
and Europe must play a more aggressive role in encouraging
Ukraine to continue down the path to reform.
Last year marked the 20th anniversary of Ukraine's
independence from the Soviet Union, and over the course of the
last two decades, we have seen some important progress in
Ukraine.
On the security front, Ukraine made a courageous decision
to voluntarily give up its nuclear arsenal in 1996, and today
it continues to lead in nonproliferation efforts around the
globe, committing to eliminate all of its highly enriched
uranium by the spring of 2012. In addition, the United States
relationship with Ukraine has evolved positively since 1991,
culminating in a strategic partnership initiated in 2008. We
have seen progress on political reforms and democratization in
some areas, including open elections and free media.
Unfortunately, despite some movement forward, Ukraine is
severely lagging on a number of its own initiatives, and it
continues to slip backward on its democratic and economic
reform agenda.
It has been 2 years since Viktor Yanukovych returned to
power following the 2010 Presidential campaign in Ukraine.
Elected in what was considered by outside observers to be a
relatively free and fair election, Yanukovych had the
legitimacy and mandate to continue moving Ukraine toward a
modern, independent, and market-oriented future. However,
Ukraine under Mr. Yanukovych has seen a significant slide on
critical issues, including democratic reform, media
independence, election standards, rule of law, and economic
issues.
According to the Wall Street Journal, Ukraine ranks 163rd
out of 179 countries in terms of economic freedom. That puts
them dead last in Europe behind Belarus and Russia. Last year's
annual Freedom House Report found that Ukraine suffered the
steepest decline in democracy of any major nation in the last 2
years. That report cited antidemocratic tactics, politicized
courts, a media crackdown, and the illegitimate use of force in
the country.
Perhaps of most concern for the international community is
the case of former Prime Minister Yulia Tymoshenko. Her
continued imprisonment on dubious, politically motivated
charges is unacceptable and antithetical to a free and open
system. The decision to move her to a prison outside of Kiev
and her continued lack of appropriate medical care adds to our
concerns.
Her case shows the pervasive lack of rule of law, a
corrupted judicial process, and selective persecution of
political opposition leaders. Politically motivated trials and
further abuses will isolate Ukraine, undermine its independence
from Russia, make it difficult to attract outside investment,
and will further hurt the country's struggling economy. We have
already seen a major free trade agreement with the European
Union held up over the Tymoshenko case.
So let us be clear, or let me be clear at least. It will be
difficult, if not impossible, for Ukraine to deepen relations
with the West while Ms. Tymoshenko remains behind bars. She
should be released.
Today the people of Ukraine and its leadership face a
critical choice about its future path. We all share an interest
in an open, independent, and successful Ukraine that is
accountable to its people, and we all have a responsibility to
help the country reach that important goal. I look forward to
hearing from our witnesses today and to learn their ideas and
suggestions for accomplishing this important objective.
I am going to turn it over to Senator Barrasso before I
introduce our witnesses.
OPENING STATEMENT OF HON. JOHN BARRASSO,
U.S. SENATOR FROM WYOMING
Senator Barrasso. Thank you very much, Madam Chairman, and
I want to thank you for holding this hearing today.
I would like to also welcome all of our witnesses. We
appreciate you appearing here today before this subcommittee to
evaluate the current political and economic environment in
Ukraine.
It is important for Congress to carefully examine what is
happening in Ukraine and understand the implications that it
has on our strategic policy objectives. Ukraine is a large
nation both in its size and in its population. It is located in
a geographically important area between Russia and the
countries in the European Union.
In August of last year, Ukraine celebrated its 20th
anniversary of independence. The United States has worked
closely with Ukraine over the years on a variety of important
issues. Our Nation wants to see Ukraine become an example for
the region, as a strong, thriving, and democratic nation.
During the last 20 years, there has been a lot of progress
taking place in Ukraine. However, recent events have raised
serious concerns about the future of democracy and the rule of
law in Ukraine. I am concerned about the conviction of the
former Prime Minister. The Government of Ukraine has been
engaging in what many people view as selective prosecution
against opposition party figures. I believe that politically
motivated prosecutions significantly undercut the values of
democracy. The United States believes it is the fundamental
importance of democracy. Our Nation has also been a strong
advocate for rule of law and an independent judiciary.
I hope the Government of Ukraine takes action to prevent
the backsliding and the erosion of democracy currently taking
place in Ukraine. With parliamentary elections occurring in
October, the international community is going to be carefully
watching to assess the country's true commitment to a fair,
open, and transparent election process. The actions and
policies of the Government of Ukraine have a significant impact
on the relationship between our two countries. Ukraine needs to
support the values of democracy. The government should work on
tackling corruption and providing conditions for a flourishing
market economy. I also hope Ukraine continues to pursue
meaningful steps toward European integration.
I look forward to hearing the testimony of our witnesses on
these important issues.
And with that, thank you very much again, Madam Chairman.
Senator Shaheen. Thank you, Senator Barrasso.
We have two panels this afternoon. On our first panel, we
have Ambassador Steven Pifer who is currently a senior fellow
for Foreign Policy at the Brookings Center on the United States
and Europe and a former U.S. Ambassador to the Ukraine. Thank
you for being here.
Next we have Damon Wilson, who is the executive vice
president of the Atlantic Council and a senior advisor to the
U.S.-Ukraine Business Council. Welcome.
And we have Edward Chow, a senior fellow of Energy and
National Security at the Center for Strategic and International
Studies.
We are delighted to have all of you here. And let me just
recognize the final witness who will be on the second panel
today. I want to take this opportunity to recognize Ms. Eugenia
Tymoshenko, and I will reserve your introduction for the second
panel. Thank you.
And I believe we also have the Ukrainian Ambassador here,
though I am not sure where he is. Thank you. Welcome.
So, Ambassador Pifer, if you would like to begin.
STATEMENT OF HON. STEVEN PIFER, SENIOR FELLOW, FOREIGN POLICY,
CENTER ON UNITED STATES AND EUROPE, BROOKINGS INSTITUTION,
WASHINGTON, DC
Ambassador Pifer. Thank you. Madam Chairwoman, Senator
Barrasso, thank you for the opportunity to appear today to talk
about developments in Ukraine and the implications for U.S.
policy and U.S. policy goals in Europe.
With your permission, I will submit a written statement for
the record.
The 2 years since Viktor Yanukovych became President of
Ukraine have meant significant changes for the country's
foreign and domestic policies. President Yanukovych made the
first foreign policy priority repairing what he regarded as
Ukraine's badly frayed relationship with Russia. He quickly
agreed to extend
the presence of the Black Sea fleet in Crimea in return for a
reduction in the price that Ukraine paid Russia for natural
gas. He ended a number of other policies pursued by his
predecessor Viktor Yushchenko that had angered Moscow.
At the same time, the Yanukovych government indicated that
Ukraine would seek a balance between its relationship with the
West, particularly the European Union, and that with Russia.
This seemed a sensible course for Ukraine in its current
circumstances. Kiev began serious work to complete an
association agreement and free trade arrangement with the
European Union.
Regrettably, however, the first 2 years of the Yanukovych
Presidency have also seen a significant regression in
democratic practices in Ukraine. This includes inappropriate
activities by the Security Service of Ukraine, a questionable
constitutional change by the constitutional court that
increased the power of the Presidency, flawed nationwide local
elections, and the arrest and trial of opposition figures,
including former Prime Minister Tymoshenko, on what appear to
be politically motivated charges. This democratic regression is
unfortunate for the Ukrainian people and for their ability to
enjoy a full and open democracy. It also hinders President
Yanukovych's professed goal of achieving a balanced foreign
policy as it has resulted in a cooling of Ukraine's relations
with the European Union and the United States. EU officials
have indicated, for example, that signature and ratification of
an EU-Ukraine association agreement, which is now complete,
depends on Ms. Tymoshenko's situation. This undermines
Ukraine's relations with the West, and it will leave Kiev in a
weaker position vis-a-vis Russia.
This raises the question of what Washington should do. It
remains in the United States interest that Ukraine develop as
a stable, independent, democratic state with a market economy,
increasingly integrated into Europe and institutions such as
the European Union. That kind of Ukraine promotes the United
States objective of a wider, more stable, and secure Europe.
Democratic regression within Ukraine, however, takes Ukraine in
the wrong direction.
The United States and Europe cannot ignore this. The U.S.
Government's priority with Ukraine now should be to encourage
the Ukrainian Government to make the right choices regarding
the country's democratic development. This means releasing Ms.
Tymoshenko and allowing her to return to normal political life.
It also means that the Ukrainian Government should end its
manipulation of the judicial system against other members of
the opposition. It should rein in agencies such as the Security
Service of Ukraine, and it should work with a broad political
spectrum to ensure that the upcoming parliamentary elections
this autumn are free, fair, and competitive.
To promote this objective, the U.S. Government should,
first of all, continue to underscore to Kiev U.S. concern about
democratic regression and continue to remind the Ukrainian
leadership that its internal political policies have a negative
impact on its relationships with the United States and the
West. U.S. officials should reiterate these points at every
opportunity, including when Senate and congressional
delegations visit Ukraine.
Second, the United States should keep the door open for a
more positive relationship with Ukraine should Kiev heed the
message on democracy. A Ukraine that returns to the democratic
path should be fully welcome in the European and transatlantic
communities.
Third, the U.S. Government should coordinate closely with
the European Union so as to maximize the impact of Western
policy on decisions by Mr. Yanukovych and the Ukrainian
leadership. It is especially useful for Washington to
coordinate with the European Union now as the European Union
may be better placed to influence thinking in Kiev.
What do these policies mean in practice? As one example,
Mr. Yanukovych would dearly appreciate an invitation to the
White House or an opportunity to host President Obama in
Ukraine. The U.S. Government and European Union should continue
what appears to be a de facto policy of minimizing high-level
meetings with Mr. Yanukovych. U.S. officials should make clear
to their Ukrainian counterparts that as long as Kiev imprisons
opposition leaders and regresses on democracy, no meetings at
the highest level will be possible.
This approach does not mean freezing ties across the board.
Normal diplomatic interaction should continue at most levels.
The U.S. Government should carefully consider the assistance
funding priorities it has. United States programs should aim to
sustain civil society in Ukraine, which has made dramatic gains
over the past 20 years. In this context, exchange programs that
bring Ukrainians to the United States and Europe can play a
major role.
It may be time for the United States and the European Union
to consult as to whether it is appropriate to consider lists of
Ukrainians who would be denied visas to visit the United States
and EU member states. Even the threat of this could have a
powerful effect on Mr. Yanukovych and the elite around him.
Some Ukrainian officials likely will warn that this kind of
approach by the United States and the European Union will cause
Ukraine's leadership to turn toward Russia. Western officials
should not be taken in by this. If Ukraine truly wants to join
Europe, then its leadership must accept the democratic values
that prevail in Europe. If the leadership is not prepared to
accept such values, then how can Europe and the West integrate
Ukraine?
Moreover, Kiev does not wish to fall too closely into
Moscow's orbit. President Yanukovych does not want to
compromise Ukraine's sovereignty. He wants to be the leader of
a fully independent state. The Ukrainian elite and public
likewise overwhelmingly support an independent and sovereign
Ukraine.
Madam Chairwoman, the overall goal of U.S. and EU policy
now should be to crystallize in Mr. Yanukovych's mind the
following choice. He can have a more authoritarian political
system, more difficult relations with the West and a greatly
weakened position when he deals with Moscow, or he can return
to a more democratic approach and have a stronger relationship
with the West and a balanced foreign policy. In the end, I
believe Mr. Yanukovych has reasons to opt for the latter
course. The West should face him with that choice as clearly as
possible.
Thank you for your attention.
[The prepared statement of Ambassador Pifer follows:
Prepared Statement of Steven Pifer
introduction
Madam Chairwoman, Senator Barrasso, distinguished members of the
committee, thank you for the opportunity to appear today to testify on
developments in Ukraine and the implications for U.S. policy and U.S.
policy goals in Europe.
When Victor Yanukovych became President of Ukraine in February
2010, his first foreign policy priority was to repair what he regarded
to be Ukraine's badly frayed relationship with Russia. At the same
time, his government indicated that Ukraine would seek a balance
between its relationship with the West--particularly the European
Union--and that with Russia. This seemed a sensible course for Ukraine
in its current circumstances.
Regrettably, the first 2 years of President Yanukovych's tenure in
office have seen a significant regression in democratic practices
within Ukraine. That is unfortunate for the Ukrainian people, and it is
blocking the strengthening of Ukraine's relations with the European
Union and the United States. EU officials have made clear, for example,
that the signature of an EU association agreement with Ukraine depends
on Kyiv taking certain steps, such as releasing former Prime Minister
Tymoshenko from prison.
Mr. Yanukovych's domestic policies are seriously undermining his
ability to balance Ukraine's relationships between the West and Russia.
That will complicate Ukrainian foreign policy, leaving it less
connected to Europe and in a weaker position to deal with Russia on
issues where Ukrainian and Russian interests do not coincide.
It remains in the U.S. interest that Ukraine develop as a stable,
independent, democratic, market-oriented state increasingly integrated
into Europe and institutions such as the European Union. That kind of
Ukraine promotes the U.S. objective of a wider, more stable and secure
Europe. Democratic regression within Ukraine, however, impedes that
country's ability to draw closer to the West.
The U.S. Government should continue to underscore to Kyiv U.S.
concerns about democratic backsliding and remind the Ukrainian
leadership that its internal political policies have a significant
impact on its relationships with the United States and Europe; keep the
door open for a more positive relationship with Ukraine should Kyiv
heed the message on democracy; and coordinate closely with the European
Union to maximize the impact of Western policy on decisions by Mr.
Yanukovych and the Ukrainian leadership.
While engaging Ukraine at most diplomatic levels, the United States
and European Union should continue what appears to be a de facto policy
of minimizing high-level contact with Mr. Yanukovych until he alters
his internal political policies. The West should seek to crystallize in
Mr. Yanukovych's mind the choice between a more authoritarian political
system and a strong relationship with the West, and make clear that he
cannot have both.
ukraine's foreign policy--a history of balance
Developing an independent foreign policy has posed one of the key
challenges for Kyiv since the collapse of the Soviet Union in 1991.
Ukrainian Presidents have generally sought a balance in their foreign
policy relationships between the West and Russia. Europe and the West
are attractive to many Ukrainians. Ukraine ought to be able to develop
stronger relations with the European and trans-Atlantic communities
without rupturing relations with Russia, which are also important to
many in Ukraine.
Given the large space that Russia occupies on Ukraine's border, the
long, complex history between the two countries, cultural links between
Ukrainians and Russians, and economic ties that have continued since
the end of the Soviet era, it is natural that Ukraine seek a stable
relationship with Russia. At the same time, Russia is not the easiest
of neighbors. Ukrainian Presidents thus have sought to develop
relationships with the United States, Europe and institutions such as
NATO and the European Union. Ukraine's leaders have been motivated in
part by a desire to gain greater freedom of maneuver vis-a-vis Russia.
For example, Ukraine's first President, Leonid Kravchuk, moved
immediately after Ukraine regained independence to build strong
relationships with the West. When he could not reach agreement with
Moscow on the terms for the elimination of the strategic nuclear
weapons on Ukrainian territory, he involved the United States. The
resulting trilateral process successfully brokered a deal in early
1994.
President Leonid Kuchma, who took office in July 1994, established
a strategic partnership with the United States, concluded a partnership
and cooperation agreement with the European Union, and agreed to a
distinctive partnership with NATO. As Ukraine's relations with the West
strengthened, Moscow softened its approach toward Kyiv. In May 1997,
Ukraine and Russia resolved the longstanding issue of basing rights for
the Russian Black Sea Fleet in Crimea on terms acceptable to Kyiv, and
signed a bilateral treaty that incorporated a clear and unambiguous
recognition of Ukraine's sovereignty and territorial integrity--
something Ukrainian officials had sought since 1991.
President Victor Yushchenko assumed office in 2005 following the
Orange Revolution. While seeking stable relations with Moscow, he made
no secret of his desire to integrate Ukraine fully into institutions
such as the European Union and NATO. Kyiv opened negotiation of an
association agreement with the European Union and asked for a NATO
membership action plan. Other Yushchenko policies--including expanded
use of the Ukrainian language, seeking to have the Holodomor recognized
as genocide, and support for Georgian President Saakashvili--plus
disputes over gas purchase contracts further angered Moscow. Relations
between the two countries hit a low point in 2009. But the President
failed to build elite or public support for his course; many Ukrainians
grew concerned over the downturn in relations with Russia.
mr. yanukovych's foreign policy
Victor Yanukovych became Ukraine's fourth President in February
2010. He believed that ``normalizing'' relations with Russia should be
his first foreign policy priority.
President Yanukovych met with Russian President Medvedev in Kharkiv
less than 2 months after taking office. At the meeting, the Ukrainians
agreed to extend the Black Sea Fleet's basing lease for an additional
25 years. In return, Russia's Gazprom agreed to reduce the price that
it charged Ukraine for natural gas by $100 per thousand cubic meters
for the remainder of the multiyear gas contract signed in 2009. Mr.
Yanukovych and other Ukrainian officials praised the arrangement for
significantly reducing Ukraine's energy costs, though independent
energy experts question whether Kyiv might not have negotiated a better
deal, perhaps without having to extend the Black Sea Fleet's lease. The
government rammed the agreement through the Rada (Parliament) within
just a few days of signature and with no substantial parliamentary
discussion, despite opposition by the Rada's foreign affairs, European
integration and national security committees.
At the same time, Kyiv dropped other policies that had generated
Russian complaints: It downgraded the program to promote use of the
Ukrainian language, ended the campaign to get the Holodomor recognized
as genocide, and toned down relations with Georgia. While expressing
interest in maintaining cooperative relations with NATO, the Yanukovych
government made clear that it sought neither membership nor a
membership action plan. With these policies, Kyiv swept the bilateral
agenda with Moscow clear of most issues that the Russians had
considered problematic.
Even before the Kharkiv meeting, however, Ukrainian officials
indicated that, while their first foreign policy priority was repairing
the relationship with Russia, Kyiv planned to do so in the context of
an overall policy that pursued balance between Ukraine's relationship
with the West and that with Russia. Senior Ukrainian officials made
clear that Ukraine remained very interested in concluding an
association agreement, which would include a deep and comprehensive
free trade arrangement (FTA), and a visa facilitation agreement with
the European Union as the vehicles to strengthen Ukraine's integration
into Europe.
Ukrainian officials also indicated that they wanted a robust
relationship with the United States. By all accounts, President
Yanukovych was delighted with the opportunity that he had for a
bilateral meeting with President Obama on the margins of the April 2010
nuclear security summit in Washington.
One could see Kyiv's outreach to the West and effort to strike a
balanced foreign policy in several developments in May and June 2010.
The Rada voted overwhelmingly to approve the annual plan for military
exercises on Ukrainian territory, most of which involved NATO forces.
Ukrainian officials ruled out the possibility of joining a customs
union with Russia, Belarus, and Kazakhstan, as that would be
incompatible with an FTA with the European Union. Kyiv declined to join
the Russian-led Collective Security Treaty Organization, which Moscow
billed as a Eurasian counterpart to NATO.
Western diplomats in 2010 also reported that the Ukrainian
Government was doing its homework to prepare an association agreement
and FTA with the European Union in a more serious manner than had been
the case during the Yushchenko Presidency. A number of Western
diplomats expressed the view that President Yanukovych wanted to be
seen as the one who ``brought Ukraine into Europe.''
Other reports suggested that senior Ukrainian officials were
becoming unhappy with Russia's policies. For example, Ukrainian
officials questioned why Moscow continued to pursue the South Stream
gas pipeline, which would run along the Black Sea bottom and circumvent
Ukraine, when the Ukrainian gas transit system had considerable excess
capacity. As the Russians had no new gas to flow into South Stream, the
pipeline, if constructed, would only divert gas from pipelines through
Ukraine.
Kyiv's frustrations grew in 2011 as senior Ukrainian officials
asserted that the price for Russian gas--even with the Kharkiv discount
of $100 per thousand cubic meters--was too high and ``unfair.'' Gazprom
showed no sign of budging. Ukrainian complaints increased at the end of
the year, and Kyiv informed Gazprom that it would import only 27
billion cubic meters of gas in 2012. Gazprom officials responded that
Ukraine had a ``take or pay'' contract and was obligated to take--or in
any case pay for--41.6 billion cubic meters. These issues are currently
unresolved. Press reports in December suggested that the Ukrainians
were considering plans that would give Gazprom significant control of
the Ukrainian gas pipeline system. Gazprom has long coveted Ukraine's
gas transit infrastructure, but there likely would be significant
resistance in Kyiv to ceding control.
democratic regression
Mr. Yanukovych was elected President in 2010 as the result of a
process that domestic and international observers found to be free,
fair, and competitive. Ms. Tymoshenko, who lost in the runoff round by
about 3 percent of the vote, briefly challenged the result but offered
no compelling evidence of major fraud. Western governments quickly
recognized the result, which was Ukraine's fifth consecutive nationwide
election following the Orange Revolution to win plaudits from election
observers.
Unfortunately, questions soon arose about the Yanukovych
government's commitment to democratic principles and practices. Over
the course of 2010 and 2011, concern grew about the government's
authoritarian tendencies. Some of the most troubling examples:
Widespread reports began to emerge in spring 2010 of
inappropriate activities by the Security Service of Ukraine
(SBU), including approaching university officials for
information and reporting on students who had taken part in
antigovernment protests. SBU officers also reportedly
approached nongovernmental organizations to seek information on
their activities.
On September 30, 2010, the Constitutional Court of Ukraine
invalidated the changes to the Constitution approved by the
Rada in December 2004, after the replacement of four judges who
opposed the decision by four new judges who supported it. The
result was to revert to the Constitution that had been in
effect prior to the Orange Revolution, which gave the President
significantly stronger powers and weakened the authority of the
Rada. The European Commission for Democracy through Law (Venice
Commission) issued a report the following December which raised
numerous questions about the Constitutional Court's action. The
report noted ``it is clear that a change of the political
system of a country based on a ruling of a constitutional court
does not enjoy the legitimacy which only the regular
constitutional procedure for constitutional amendment and
preceding open and inclusive public debate can bring.''
Ukraine held nationwide local elections in October 2010.
Observers found significant flaws, and both the European Union
and U.S. Government expressed concern. The Congress of Local
and Regional Authorities of the Council of Europe observer
group issued a report in March 2011 noting concern over ``a
newly adopted local election law which created politically
unbalanced electoral commissions, discretionary registration of
candidates and overly complicated voting and counting
procedures.'' The report concluded with the assessment that
``overall, the local elections of 31 October 2010 in Ukraine
met neither the standards that it wished to see, nor the
standards set by the Presidential elections [in Ukraine] in
January and February 2010.'' The conduct of these elections
raises concern about the Rada elections to be held in autumn
2012.
Attracting the most attention, former officials who served
in the Cabinet under Ms. Tymoshenko have been arrested on
charges that appear, to most observers, to be politically
motivated. Among those arrested have been former Interior
Minister Lutsenko, former First Deputy Justice Minister
Korniychuk, former Acting Minister of Defense Ivashchenko,
former First Deputy Chairman of Naftogaz Ukrainy Didenko,
former Head of the State Customs Service of Ukraine Makarenko
and former Economy Minister Danylyshyn (Mr. Danylyshyn sought
and received political asylum in the Czech Republic). Then
there is the case of Ms. Tymoshenko herself. She was charged in
December 2010 with abuse of state power stemming from her
conclusion of the 2009 gas purchase contract with Russia. Her
trial began in June 2011, and she was jailed in August for
disrupting courtroom proceedings. In October, she was convicted
and sentenced to 7 years in prison--a verdict immediately
condemned by the United States, European Union, most major EU
member states and Russia. The Parliamentary Assembly of the
Council of Europe, in a report issued in January, criticized
the charges against former government officials as amounting to
``post facto criminalization of normal political
decisionmaking.'' Although Ukrainian officials maintain that
these arrests were legitimate and do not represent selective
prosecutions, no comparable members of the current government
have been arrested or charged, despite the general view that
corruption has increased significantly under Mr. Yanukovych.
In 2006 Freedom House rated Ukraine as the first post-Soviet state
other than a Baltic nation to achieve a ``free'' ranking. In January
2011, given the democratic problems within Ukraine, it became the first
post-Soviet state to lose the ``free'' ranking when it was found to be
only ``partly free.'' Freedom House reaffirmed that ranking last month.
democratic regression and ukraine's relations with the west
The authoritarian tendencies within Ukraine have affected Kyiv's
relations with the West. European and U.S. officials have long
expressed concern about democratic regression, including warning senior
Ukrainian officials as early as January 2011 not to carry forward the
charges against Ms. Tymoshenko, whose case has come to epitomize the
problem of selective application of the law within Ukraine.
Following her jailing in August, some deputies in EU member-state
Parliaments stated that they would oppose ratification of the
association agreement and FTA with Ukraine unless Ms. Tymoshenko was
released. This is no surprise. The European Union has long regarded
commitment to democratic principles as an important element of the
association agreement process. In September 2011, Swedish Foreign
Minister Bildt, EU Commissioner for Enlargement Fuele and European
Parliament member Brok had a lengthy meeting with President Yanukovych
and warned him of the damage that the Tymoshenko case was doing to EU-
Ukrainian relations.
The Rada passed up an opportunity to end the case in October when
it examined the Criminal Code. Despite suggestions that it might annul
the article on which the charge against Ms. Tymoshenko was based, it
did not. Days later, the court convicted her. The European Union
responded by postponing a planned Yanukovych visit to Brussels.
EU officials continued to state that Ms. Tymoshenko should be
released and allowed to return to normal political life. In November
meetings with President Yanukovych, Lithuanian President Grybauskaite,
and Polish President Komorowski reiterated warnings that Ms.
Tymoshenko's imprisonment would damage EU-Ukraine relations and prevent
signature of the (now completed) association agreement and FTA at the
planned December EU-Ukraine summit in Kyiv.
Although a number of European countries reportedly favored
canceling the summit, EU President Van Rompuy and EU Commission Head
Barrosso went to Kyiv and held a short meeting with President
Yanukovych. They signed no agreements and made clear that signature
would depend on Ms. Tymoshenko's situation.
Thus, at the beginning of 2012, EU-Ukraine relations are at a
standstill. It is not clear what will happen with the association
agreement and FTA, which were to provide the basis for a new stage in
the relationship between Brussels and Kyiv.
U.S.-Ukrainian relations are at a quiet point. Washington has few
major issues on its bilateral agenda with Kyiv, reflecting the fact
that many of the problems that troubled the relationship earlier have
been resolved. More broadly, given everything else on the foreign
policy agenda, Ukraine barely registers on the radar. Ukrainian
officials have over the past 18 months actively sought to arrange
meetings for President Yanukovych with President Obama or Vice
President Biden, but without success. The lack of enthusiasm to meet
with Mr. Yanukovych undoubtedly reflects the U.S. Government's critical
attitude toward the democratic developments that have taken place the
past 2 years in Ukraine.
the risk to kyiv
Democratic regression most destructively sets back the ability of
the Ukrainian people to have a free, fair, robust and competitive
political system. It also has a destructive impact on Mr. Yanukovych's
professed foreign policy.
Democratic backsliding puts at risk Ukraine's relations with the
West, in particular with the European Union. As the EU President has
indicated, the European Union does not intend to proceed with signature
of the association agreement and FTA until political circumstances
within Ukraine change. Even were it prepared to do so, the association
agreement and FTA must be approved by all 27 EU member states, and a
number of deputies in EU member-state parliaments have already stated
that they would oppose ratification so long as Ms. Tymoshenko remains
in jail.
Moreover, given the current difficulties within the European Union,
such as the eurozone crisis, a number of member states believe that the
EU's attention should be focused internally and that the European Union
should slow the pace of its engagement with neighboring states,
particularly those which say they aspire to become EU members. For
those EU member states, democratic regression within Ukraine offers a
handy reason to justify slowing down the pace of EU relations with
Kyiv. Even Kyiv's traditional advocates within the European Union--such
as Poland, Lithuania, and Sweden--appear to be flagging in their
support for Ukraine.
Mr. Yanukovych's internal policies not only pose a major impediment
to his goal of drawing closer to the European Union, they also endanger
his goal of having a balance between Ukraine's relations with the West
and with Russia. Although Kyiv sought to repair its relations with
Moscow in 2010, the two countries' interests simply diverge on some
issues. Take natural gas: a lower price for Ukraine means less revenue
for Gazprom. Likewise, construction and operation of the South Stream
pipeline would reduce the flow of gas through Ukrainian pipelines.
Russian Prime Minister and presumptive President Putin has called for
creation of a Eurasian Union to serve as a counterpart to the European
Union. It is not exactly clear what the Eurasian Union might be in
practice--and few other post-Soviet states have expressed enthusiasm
for the idea--but it is almost certain that one of Mr. Putin's goals is
to increase Russian influence in the post-Soviet space.
With weaker relations with the West, Kyiv will find that is has
less room for maneuver in its dealings with Moscow. Tough negotiations
will likely become even more difficult. Mr. Yanukovych only has to look
north to Belarus and what happened to President Lukashenko once he had
burned his bridges with the European Union and the United States
following the December 2010 crackdown on opposition leaders and
demonstrators. Facing a dire economic situation and with no hope for
help from the West, Mr. Lukashenko struck a deal with Moscow that
secured a lower price for gas and a loan from Russia--at the price of
surrendering control of the Belarusian gas pipeline system to Gazprom.
It is not clear why Mr. Yanukovych is putting himself and Ukraine
in this position. He has regularly expressed a desire for closer
relations with the European Union and a balanced foreign policy. He may
be allowing personal hostility toward Ms. Tymoshenko and a desire to
sideline her politically to dominate his decisions. Ironically, over
the past year, the government's actions against Ms. Tymoshenko have
focused public attention on her, and her poll ratings and those of her
party have increased significantly.
Mr. Yanukovych may also calculate that the European Union and the
United States will overlook his democratic regression and accept
Ukraine without his having to adjust his domestic policies, believing
that the West does not want to see Ukraine drift closer to Moscow's
orbit. That would reflect a fair measure of wishful thinking and
overestimate the geopolitical importance that the West currently
attaches to Ukraine.
u.s. interests and u.s. policy
Since the early 1990s, the United States has supported Ukraine's
development as a stable, independent, democratic state, with a robust
market economy and growing links to the European and trans-Atlantic
communities. Such a Ukraine is in the U.S. interest as it would
contribute to the goal of a wider, more stable and secure Europe. It
could be--and has been--an important partner in addressing critical
questions such as proliferation challenges. The nuclear question, which
dominated U.S.-Ukrainian relations in the early 1990s, has been
resolved as the nuclear weapons systems that were in Ukraine have been
eliminated and Kyiv has agreed to transfer its small stock of highly
enriched uranium.
Over the past two decades, the United States has provided several
billion dollars in assistance to Ukraine to promote democratization,
economic reform and the elimination of the strategic nuclear systems
and infrastructure that Kyiv inherited following the end of the Soviet
Union. The United States has led in shaping a strong partnership
between NATO and Ukraine and has encouraged the European Union to
deepen its relations with Ukraine.
The U.S. interest has not changed. However, the circumstances
within Ukraine have, and the Ukrainian Government is moving in the
wrong direction. On democracy, it is walking back the gains that the
Ukrainian people have made over the past 20 years, particularly in the
period of 2005-2009. The West cannot and should not ignore that.
The U.S. Government's priority with regard to Ukraine now should be
to encourage the Ukrainian Government to make the right choices
regarding the country's democratic development. This means releasing
Ms. Tymoshenko and allowing her to return to normal political life. But
it does not end with Ms. Tymoshenko. The Ukrainian Government needs to
end its manipulation of the judicial system for political purposes
against other members of the opposition. It should rein in agencies
such as the Security Service of Ukraine. And it should work with the
broad political spectrum to ensure that the upcoming autumn Rada
elections are free, fair, and competitive.
To promote this objective, the U.S. Government should, first of
all, continue to underscore to Kyiv U.S. concerns about democratic
regression and continue to remind the Ukrainian leadership that its
internal political policies have a negative impact on its relationships
with the United States and the West. Ambassador John Tefft and the U.S.
Embassy in Kyiv are working hard to convey this message. Washington
should reiterate it as often as possible, including when Senate and
congressional delegations visit Ukraine.
Second, the United States should keep the door open for a more
positive relationship with Ukraine should Kyiv heed the message on
democracy. A Ukraine that returns to the democratic path should be
fully welcome in the European and trans-Atlantic communities.
Third, the United States should coordinate closely with the
European Union so as to maximize the impact of Western policy on
decisions by Mr. Yanukovych and the Ukrainian leadership. The joint
letter sent to President Yanukovych last September by Secretary of
State Clinton and EU High Representative for Foreign Affairs and
Security Policy Ashton provides just such an example of coordination
between Washington and Brussels. It is especially useful for Washington
to coordinate with the European Union now, as the European Union may be
better placed to influence thinking in Kyiv.
What do these policies mean in practice? As one example, the
Ukrainian leadership greatly desires high-level contact with
Washington, which gives it a degree of political legitimacy. Mr.
Yanukovych would dearly appreciate an invitation to the White House or
the chance to host President Obama in Kyiv. The U.S. Government should
continue what appears to be a de facto policy of minimizing high-level
meetings with Mr. Yanukovych. U.S. officials should inform Ukrainian
officials that, as long as Kyiv imprisons opposition leaders and
regresses on democracy, no meetings at the highest level will be
possible.
As a second example, Ukraine's credit line with the International
Monetary Fund is currently suspended, because Kyiv has failed to meet
the conditions of the IMF loan. In the past, the U.S. Government has on
occasion weighed in with the IMF to support a more lenient approach
with Ukraine. Given the democratic regression in Ukraine, now would not
be the time for Washington to take such an approach with the IMF.
This approach does not mean freezing ties across the board. Normal
diplomatic interaction should continue at most levels. The target
should be the most senior leadership in Kyiv, those who are responsible
for Ukraine's democratic regression.
As for assistance programs, the U.S. Government should carefully
consider its priorities, especially as budget resources for Ukraine
will be limited. U.S. assistance should aim to sustain civil society in
Ukraine, which has made dramatic gains over the past 20 years. In this
context, exchange programs that bring Ukrainians to the United States
and Europe can play a major role. The U.S. Government should also
continue assistance programs to promote energy security, so that
Ukraine can become less dependent on imported energy.
It may be time for U.S. and EU officials to consult as to whether
it is appropriate to consider lists of Ukrainian individuals who would
be denied visas to visit the United States and EU member states. Even
the threat of this could send a forceful message to Kyiv and have a
powerful effect on President Yanukovych and the elite around him.
This is not a call for the type of isolation that the West has
applied to Belarus. Ukraine has not yet regressed to that point. But
the United States and European Union should seek effective ways to
disabuse Mr. Yanukovych of the notion that he can pursue a more
authoritarian course at home without repercussions for Kyiv's relations
with the West.
crystallizing a choice
Some Ukrainian officials likely will warn that this kind of
approach by the United States and European Union will cause Ukraine's
leadership to turn toward Russia. Western officials should not be taken
in by this. If Ukraine truly wants to join Europe, then its leadership
must accept the democratic values that prevail in Europe. If the
leadership is not prepared to adopt such values, then how can Europe
and the West integrate Ukraine?
Moreover, Kyiv does not wish to fall too closely into Moscow's
orbit. Mr. Yanukovych does not want to compromise Ukrainian
sovereignty; he wants to be the leader of a fully independent state.
The Ukrainian elite and public likewise overwhelmingly support an
independent and sovereign Ukrainian state. For the Ukrainian
oligarchs--who control so much of the Ukrainian economy--the Russian
model holds little appeal.
The overall goal of U.S. and European Union policy thus should be
to crystallize in Mr. Yanukovych's mind the following choice. He can
have a more authoritarian political system, more difficult relations
with the West, and a greatly weakened hand in dealing with Russia, or
he can return to a more democratic approach and have a stronger
relationship with the West and a balanced foreign policy. In the end,
Mr. Yanukovych has reasons to opt for the latter course. The West
should face him with the choice as clearly as possible.
Senator Shaheen. Thank you very much.
Mr. Wilson.
STATEMENT OF DAMON M. WILSON, EXECUTIVE VICE PRESIDENT,
ATLANTIC COUNCIL, WASHINGTON, DC
Mr. Wilson. Madam Chairman, Ranking Member, I am honored to
speak before your committee on the situation in Ukraine.
Ukrainian democrats and their supporters share a vision of
an independent, sovereign Ukraine with strong democratic
institutions, rule of law, and a prosperous free market,
embedded in Europe, a partner of the United States, and at
peace with Russia.
Yet, 20 years after independence, Ukraine's young
democracy, its cultural identity, and weak institutions face
political manipulation and its fragile economy is subject to
massive distortions from widespread, top-down corruption. In
short, Ukraine's sovereignty is not guaranteed, its democracy
is not inevitable, and its market is not free.
Today Ukraine teeters between Eurasian malaise and an
ambivalent Europe. Indeed, Ukraine's future is in play.
Decisions taken now and in the coming year by President
Yanukovych and his government, the Ukrainian political
opposition, civil society, media, youth, as well as the United
States and the European Union, will determine whether Ukraine
evolves into a European democracy or descends into a post-
Soviet authoritarian kleptocracy.
Indeed, Ukraine is at a crossroads. And there is much at
stake for transatlantic interests.
President Viktor Yanukovych and the Ukrainian Government
are pursuing contradictory policies: they seek to integrate
Ukraine into Europe while emasculating their domestic
opposition. In their first 2 years in office, they have made
progress on both, eliminating his key challenger from politics
and negotiating a landmark deal with the European Union. Yet,
ultimately, they must choose.
The choice is not between Russia and the West. In many
respects, this is a false choice. The choice is whether Ukraine
sees its future in the European mainstream or relegated to the
borderlands. The outcome rests on whether Yanukovych and his
government decide their political preservation is more
important than anchoring Ukraine to the institutions of Europe.
Ukraine's difficult situation today is a result of the
failure of political leadership in the wake of the Orange
Revolution. Orange leaders, while allowing political pluralism
to thrive, disappointed the Ukrainian people by failing to
govern effectively. Their infighting opened the door to
Yanukovych's rehabilitation and election in 2010 as President
in free and fair elections.
When President Yanukovych came to power, he began to
centralize authority. His advisors offer a compelling
explanation. After years of political chaos and economic
mismanagement, Ukraine's new leaders consolidated power in
order to be able to govern more effectively and to implement
long-needed reforms. And in many cases, the government has
pursued difficult economic reforms necessitated by the global
financial crisis including, for example, raising the retirement
age.
At the same time, under Yanukovych, Ukraine has been a
responsible international actor, advancing practical
negotiations with the European Union, agreeing with the United
States to eliminate highly enriched uranium, and managing more
normal relations with Russia.
However, President Yanukovych's first 2 years in office
provide a sufficient record to sound the alarm on the state of
democracy. We have witnessed selective prosecutions of
opposition figures, a more restrictive media environment,
disturbing involvement of the security service in domestic
politics, seriously flawed local elections in October 2010,
pressure on civil society, an erosion of free speech,
consolidation of executive influence over the judiciary,
manipulation of the electoral code in advance of parliamentary
elections this fall, and continued rampant corruption. In
essence, the ruling Party of Regions has centralized authority,
governing all of Ukraine much as it governed its stronghold
oblasts like Donetsk, weakening Ukrainian society's checks and
balances.
The vision of a democratic European Ukraine, however, is
not lost.
As we look forward, Ukraine faces three key tests: its
handling of political prosecutions, the October elections, and
its energy security.
Despite protests to the contrary, Ukrainian authorities
have pursued selective prosecutions against political
opponents, most notably former Prime Minister Yulia Tymoshenko.
She is not an isolated incident but is illustrative of a
disturbing pattern that is corrosive to democracy. If those in
power believe that the price of losing an election is prison,
they are unlikely to ever relinquish power. Through its own
actions, the Party of Regions has set this dangerous dynamic in
play. After months of various officials telling many in the
West that the President would find a way within the law to end
the prosecution of Tymoshenko, she has been sentenced to 7
years in prison and is now facing a set of new charges.
Ukraine's leaders seem to have calculated that the threat she
poses politically outweighs the cost of international
opprobrium.
American and European officials have spoken out forcefully
regarding her case, and the EU has delayed signing an
association agreement over the issue. Both the United States
and European partners should keep this issue at the top of
their agenda with Ukraine, not allowing the passing of time to
diminish the Ukrainians' calculations of the costs of their
actions. Washington and Brussels should also consider taking
additional measures to raise those costs.
Second, the most critical test is whether Ukraine is able
to conduct free and fair parliamentary elections in October. I
have serious concerns already about the Ukrainian authorities'
actions to tilt the scales in their favor through changes to
the electoral code and influence over the judiciary.
Nonetheless, these elections are in play. Recent polling
indicates that while the opposition remains weak, the ruling
Party of Regions has lost tremendous support throughout
Ukraine, including in its political base in the east. Given
there is a genuine possibility for competitive elections,
authorities may be tempted to take extraordinary measures
beyond administrative means to maintain their majority in
Parliament.
Therefore, now is precisely the time to shine a spotlight
on Ukraine. The U.S. and EU members need to work together
closely to help ensure a level playing field through support
for measures that can counteract fraud. This includes helping
independent civil society to observe elections, monitor media,
conduct exit polls and parallel vote counts.
Furthermore, the European Union can make clear that
ratification of any deep and comprehensive free trade agreement
depends not only on the issue of political prosecutions, but
also the conduct of these elections.
As we judge Ukraine's performance on these tests, United
States and European objectives should be clear.
First, in the near term, transatlantic policies should aim
to check democratic backsliding and help Ukrainians demand a
free and fair election this fall. As a first step, this
requires that the sham trials against Tymoshenko end and that
she be released.
Second, we should continue to promote Ukraine's genuine
European integration by fostering societal level contacts while
government-to-government negotiations stall.
Third, we should continue to help Ukraine increasingly
integrate its market into the global economy, reorienting its
economy away from Soviet-era patterns of trade.
And finally, the United States and our transatlantic
partners should continue to support Ukraine's sovereignty and
independence.
Holding Ukraine to account on democracy will not send
Ukraine into Russia's arms. Whether it is Ukrainians in the
west of the country whose reference is Poland rather than
Russia, Ukrainian oligarchs who fear economic domination by
their Russian counterparts, or Ukraine's political elites who
have grown accustomed to managing their own nation, Ukrainians
will play the lead role in preserving their sovereignty.
So as Members of Congress, you have much on your plate. It
is important to remember that Ukraine's success or failure as a
free market democracy will reverberate far beyond its borders.
Ukraine can help anchor a region plagued by uncertainty, moving
the region closer to European norms, advancing the vision of a
Europe whole and free, or alternatively, it will set back
reform in the broader region and undermine the goal of
completing Europe.
Madam Chairman, Ukraine is indeed at a crossroads. Its
democracy is in play. Its place in Europe is in play. And its
reliability as a partner of the United States is in play.
Western policy can sharpen the choices facing Ukrainian leaders
today.
Thank you, Madam Chairman and Ranking Member. I look
forward to your questions.
[The prepared statement of Mr. Wilson follows:]
Prepared Statement of Damon M. Wilson
Madam Chairman, ranking member, members of the committee, I am
honored to speak before your committee on the situation in Ukraine.
Ukrainian democrats and their supporters share a vision of an
independent, sovereign Ukraine with strong democratic institutions,
rule of law, and a prosperous free market, embedded in Europe, a
partner of the United States, and at peace with Russia.
Yet 20 years after independence, Ukraine's young democracy,
cultural identity, and weak institutions face political manipulation
and its fragile economy is subject to massive distortions from
widespread, top-down corruption. In short, Ukraine's sovereignty is not
guaranteed, its democracy is not inevitable, and its market is not
free.
Today, Ukraine teeters between Eurasian malaise and an ambivalent
Europe. Indeed, Ukraine's future is in play. Decisions taken now and in
the coming year by President Yanukovych and his government, the
Ukrainian political opposition, civil society, media, and youth--as
well as the United States and European Union--will determine whether
Ukraine evolves into a European democracy or descends into a post-
Soviet authoritarian kleptocracy.
Indeed, Ukraine is at a crossroads. And there is much at stake for
transatlantic interests.
President Viktor Yanukovych and the Ukrainian Government are
pursuing contradictory policies: They seek to integrate Ukraine into
Europe, while emasculating their domestic opposition. In their first 2
years in office, they have made progress on both, eliminating his key
challenger from politics and negotiating a landmark deal with the
European Union. Yet ultimately, they must choose.
The choice is not between Russia and the West. In many respects,
this is a false choice. The choice is whether Ukraine sees its future
in the European mainstream or relegated to the borderlands. The outcome
rests on whether Yanukovych and his government decide their political
preservation is more important than anchoring Ukraine to the
institutions of Europe.
Ukraine's difficult situation today is a direct result of the
failure of political leadership in the wake of the Orange Revolution.
Orange leaders, while allowing political pluralism to thrive,
disappointed the Ukrainian people by failing to govern effectively.
Their infighting opened the door to Yanukovych's rehabilitation and
election in 2010 as President in free and fair elections, Ukraine's
fourth set of free elections in a row at the time.
When President Yanukovych came to power, he began to centralize
authority. His advisors offer a compelling explanation: After years of
political chaos and economic mismanagement, Ukraine's new leaders
consolidated power in order to be able to govern more effectively and
to implement long-needed reforms. And in many cases, the government has
pursued difficult economic reforms necessitated by the global financial
crisis, including for example raising the retirement age.
At the same time, under Yanukovych, Ukraine has been a responsible
international actor, advancing practical negotiations with the European
Union, agreeing with the United States to eliminate highly enriched
uranium, and managing more normal relations with Russia.
However, President Yanukovych's first 2 years in office provide a
sufficient record to sound the alarm on the state of democracy. We have
witnessed selective prosecutions of opposition figures, a more
restrictive media environment, disturbing involvement of the security
service (SBU) in domestic politics, seriously flawed local elections in
October 2010, pressure on civil society, an erosion of speech,
consolidation of executive influence over the judiciary, manipulation
of the electoral code in advance of parliamentary elections this fall,
and continued rampant corruption. In essence, the ruling Party of
Regions has centralized authority, governing all of Ukraine much as it
governed its stronghold oblasts like Donetsk, while weakening Ukrainian
society's checks and balances.
The vision of a democratic, European Ukraine is not lost however.
Ukraine's political and cultural diversity is a bulwark against any one
force dominating the political landscape. As we look forward, Ukraine
faces three key tests: Its handling of political prosecutions, the
October parliamentary elections, and its energy security.
First, despite protests to the contrary, Ukrainian authorities have
pursued selective prosecutions against political opponents, most
notably former Prime Minister Yuliya Tymoshenko. She is not an isolated
incident, but is illustrative of a disturbing pattern that is corrosive
to democracy. If those in power believe that the price of losing an
election is prison, they are unlikely to ever relinquish power. Through
its own actions, the Party of Regions has set this dangerous dynamic in
play. After months of various officials telling many in the West that
the President would find a way within the law to end the prosecution of
Tymoshenko, she has been sentenced to 7 years in prison and is now
facing a set of new charges. Ukraine's leaders seem to have calculated
that threat she poses politically outweighs the cost of the
international opprobrium.
American and European officials have spoken out forcefully
regarding her case, and the European Union has delayed signing an
association agreement over this issue. Both the United States and its
European partners should keep this issue at the top of their agenda
with Ukraine, not allowing the passing of time to diminish the
Ukrainians' calculations of the costs of their actions. Washington and
Brussels should also consider additional measures to raise those costs.
Second, the most critical test is whether Ukraine is able to
conduct free and fair parliamentary elections in October. I already
have serious concerns about Ukrainian authorities' actions to tilt the
scales in their favor through changes to the electoral code and
influence over the judiciary. After free and fair parliamentary
elections in 2006 and 2007, there was no compelling need to revise the
electoral code in advance of these elections. The ruling party's
singular focus to do so raises concerns about those in power changing
the rules of the game to their advantage.
Nonetheless, these elections are in play. Recent polling indicates
that, while the opposition remains weak, the ruling Party of Regions
has lost tremendous support throughout Ukraine, including in its
political base in the east. Given there is a genuine possibility for
competitive elections, authorities may be tempted to take extraordinary
measures beyond administrative means to maintain their majority in
Parliament.
Therefore, now is precisely the time to shine a spotlight on
Ukraine. The United States and European Union members need to work
together closely to help ensure a level playing field through support
for measures that can counteract fraud. This includes helping
independent civil society to observe elections, monitor media, and
conduct exit polls and parallel vote counts.
Furthermore, the European Union can make clear that ratification of
any Deep and Comprehensive Free Trade Agreement depends not only on the
issue of political prosecutions, but also on the conduct of these
elections. Similarly, the United States should make clear that the
conduct of these elections will determine the possibilities in our
bilateral relationship.
Ukraine has been a valued partner given its commitment to hand over
all of its highly enriched uranium as part of President Obama's nuclear
security initiative. The risk, however, is that the Ukrainians will
perceive they can cooperate on this strategic priority, and in return
earn a pass on democracy issues. Washington needs to continue to send
clear, consistent messages to Kyiv about the costs of poor elections in
October.
A third key test for Ukraine is how it handles its dismal record on
energy security. The energy sector in Ukraine is opaque and corrupt.
More importantly, the government's management of energy is corrosive to
Ukraine's democracy and sovereignty. The scale of corruption in the
energy sector threatens to undermine Ukraine's democracy, as it
provides an incentive for those in power to perpetuate their rule both
for personal enrichment and to avoid prosecution once out of power.
Corruption in the energy sector is also a national security threat as
it allows unscrupulous interests to manipulate Ukrainian officials and
policy. The best way to strengthen Ukraine's sovereignty, and to
mitigate Ukraine's dependency on Russia for natural gas, would be to
pursue an aggressive energy efficiency program and to liberalize its
antiquated energy sector inviting in investors and promoting
transparency.
As we judge Ukraine's performance on these three tests, U.S. and
European objectives should be clear.
First, in the near term, transatlantic policy should aim to check
democratic backsliding and help Ukrainians demand a free and fair
election this fall. As a first step, this requires that the sham trials
against Yuliya Tymoshenko end and that she be released.
Second, we should continue to promote Ukraine's genuine European
integration by fostering societal level contacts while government-to-
government negotiations stall. While some European nations seek to
tether Ukraine to the European Union, many would prefer that Ukraine
have no future home in Europe. U.S. policy should state that a
democratic Ukraine that pursues reforms can earn its place in Europe's
institutions.
Third, we should continue to help Ukraine increasingly integrate
its markets into the global economy, reorienting its economy away from
Soviet era patterns of trade. As Ukraine's economic interests
increasingly value their credibility in Western markets, these forces
will support rule of law at home and some will value Ukraine's
democratic credentials abroad.
Finally, the United States and our transatlantic partners should
continue to support Ukraine's sovereignty and independence. As Vladimir
Putin plans his return to the Russian Presidency, we are likely to hear
more ideas along the lines of his proposal for a Eurasian Union. While
cooperative, constructive relations between Ukraine and Russia are
healthy, Russian efforts to exert a sphere of influence, if unchecked,
will lead to greater demands and ultimately greater instability over
time. Our engagement with Ukraine through good times and bad will
bolster Kyiv's ability to determine its own future.
Holding Ukraine to account on democracy, however, will not send
Ukraine into Russia's arms. Whether it is Ukrainians in the west of the
country whose reference is Poland rather than Russia, Ukrainian
oligarchs who fear economic domination by their Russian counterparts,
or Ukraine's political elites who have grown accustomed to managing
their own nation, Ukrainians will play the lead role in preserving
their sovereignty.
As Members of Congress, you have much on your plate. The United
States interests are global. So why should U.S. policymakers concern
themselves with Ukraine. I would offer three reasons.
First, as a nation with almost as many people as Spain and as much
land as France, and with shared borders with the European Union, NATO,
and Russia, Ukraine is a major actor and of significant importance to
Euro-Atlantic security and prosperity. Much of the history of conflict
in Europe is about insecurity in the land between Germany and Russia;
as long as Ukraine's future remains uncertain, there is a risk of
instability.
Second, Ukraine's success or failure as a free market democracy
will reverber-
ate far beyond its borders. Ukraine can help anchor a region plagued by
uncertainty, moving the region closer to European norms, and advancing
the vision of a Europe whole, free, and at peace. Alternatively, its
failure will set back reform in the broader region and undermine the
goal of ``completing Europe.''
Third, change in Ukraine may be among the best hopes for change in
Russia. Most analysts think about how developments in Russia will
impact Ukraine. I tend to believe that developments in Ukraine can
influence Russia. First, failure in Ukraine would validate Vladimir
Putin's narrative to the Russian people that experimentation with
democracy in the former Soviet Union leads to political chaos and
economic instability; ``democracy is dangerous.'' However, Ukraine's
success as a market-oriented European democracy would challenge those
assumptions. For so many in Russia who have been taught to think of
Ukrainians as their backward cousins, progress in Ukraine would
underscore the viability of progress in Russia.
Madam Chairman, Ukraine is indeed at a crossroads. Its democracy is
in play. Its place in Europe is in play. And its reliability as a
partner of the United States is in play. Western policy can help
sharpen the choices facing Ukrainian leaders.
A President Yanukovych who ceases political prosecutions and
releases Tymoshenko, presides over fair parliamentary elections,
combats corruption, achieves a ratified association agreement with the
European Union, and advances a top U.S. nonproliferation objective has
the opportunity to remake his image in the world and in his own nation.
The choice is his.
Thank you Madam Chairman, ranking member, and members of the
committee. I look forward to answering your questions.
Senator Shaheen. Thank you very much.
Mr. Chow.
STATEMENT OF EDWARD C. CHOW, SENIOR FELLOW, ENERGY AND NATIONAL
SECURITY PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL
STUDIES, WASHINGTON, DC
Mr. Chow. Madam Chair, it is my distinct honor to testify
before your subcommittee. Unlike my fellow panelists who served
with distinction at the Department of State and White House, I
come to you as a simple oil and gas analyst and practitioner in
the international petroleum industry for more than 30 years. In
the past dozen years, I have observed the Ukrainian energy
sector, sometimes up close, and written on the subject. I had
the occasion to advise four separate Cabinets of Ministers of
Ukraine on energy, including those led by then-Prime Ministers
Yanukovych and Tymoshenko. It is this experience and knowledge
that informed me for today's testimony.
I would start off by saying, with all due respect to the
title of this hearing, that as far as energy is concerned,
Ukraine, a country which seems perpetually at crossroads, is no
longer in that position. It may have been at crossroads in 2005
right after the Orange Revolution when there was a tremendous
opportunity to shed its Soviet legacy and incomplete economic
transition and to embark on the path of energy reform that
could have greatly enhanced its domestic energy condition and
improved energy security for both itself and Europe. However,
infighting among the Orange political forces, including over
energy rents, and secondarily insufficient attention and
engagement by the West extinguished these hopes.
Since then, Ukraine has been on a dangerous path toward
energy insecurity which has accelerated in the last 2 years.
All the pity as Ukraine has enormous potential as an energy
producer, efficient consumer, and key transit partner for
Russia/Central Asia and Europe.
Until the discovery and development of major West Siberian
gas fields in the 1970s, Ukraine was an exporter of gas to the
Soviet Republic of Russia. Ukrainian gas production peaked at
69 billion cubic meters in 1975, more than its current annual
consumption. Today Ukraine's domestic gas production has
stagnated below 20 billion cubic meters and it is two-thirds
dependent on gas imports from Russia.
I have not met a single Ukrainian or Western geologist who
does not believe that Ukraine has the geologic prospects to
greatly increase its domestic oil and gas production. If proper
policies and investment conditions were in place, domestic gas
production can easily increase by 50 percent in a few short
years. Together with energy efficiency improvements, Ukraine
can be more than 50 percent self-sufficient in gas. Currently
Ukraine is the third-largest gas consumer in continental
Europe. It consumes two-thirds as much gas as Germany does,
while its GDP is less than 5 percent of Germany's.
Ukraine's oil and gas sector is operated in a totally
dysfunctional manner. This, as they say in this part of the
world, is not an accident. Various state energy assets have
been hijacked by rent seekers for their private gain.
Regulation and pricing are left deliberately murky in order to
benefit private interests. This is not a particular indictment
of the current Government of Ukraine. In fact, these conditions
of Ukraine's incomplete transition from its Soviet command
economy have remained through the terms of four different
Presidents and many more Prime Ministers and Cabinets of
Ministers in the 20 years of independence. Franchises on
control of energy assets may shift, but the business model
never changed.
In fact, if you were to design an energy system that is
optimized for corruption, it might look very much like
Ukraine's. You would start with a wholly state-owned monopoly
that is not accountable to anyone except the head of the
country who appoints the management of this company. It would
operate nontransparently without being held accountable by
shareholders or capital markets since its chronic indebtedness
is periodically repaid by the state treasury.
Domestic production would be priced artificially low,
ostensibly for social welfare reasons, leading to a gray market
in gas supply that is allocated by privileged access rather
than by price. Low prices suppress domestic production and
energy efficiency improvement, thereby requiring import of
large volumes of gas which coincidentally is controlled by the
same state monopoly or its chosen middleman company. The opaque
middleman is frequently paid handsomely in kind rather than in
cash, which allows him to re-export the gas or to resell to
high-value domestic customers, leaving the state company with
the import debt and social obligations.
Ukraine has also eroded its significant advantages as a
major oil and gas transit country between Russia/Central Asia
and European markets by virtue of its geographic location and
Soviet legacy pipeline infrastructure. Ukraine inherited Soviet
gas transit pipelines, which had a nameplate capacity of 175
billion cubic meters per year, as well as abundant and ideally
located gas storage.
Yet, today Russian gas transit amounts to less than 100
billion cubic meters from a post-Soviet average of 120 billion
cubic meters, and Russia is busy building and planning
pipelines that bypass Ukraine, namely Nord Stream and
especially South Stream. If Russia proceeds next year with
South Stream at 63 billion cubic meters, then by 2016 it would
have bypassed pipeline capacity that completely replaces
current gas transit through Ukraine, which represented about 80
percent of the gas Russia sells to Europe or 20 percent of
European gas demand.
This developed because Ukraine has proven itself as an
unreliable transit partner for both Russia and Europe.
Successive Ukrainian governments have tried to use its transit
leverage to extract below-market gas prices from Russia. This
persisted even though conditions that facilitated the barter of
cheap gas for transit, namely low-price Central Asian gas,
disappeared about 5 years ago. Even when gas prices were low,
Naftogaz is chronically indebted to Gazprom, leading to
contract disputes, regular brinksmanship, and occasional gas
cutoffs.
The gas crisis of January 2006 and 2009 seriously affected
gas supply for Europe at the height of winter and underscored
that Ukraine is a transit liability. Frequently Europe acts as
if it is an innocent victim of pipeline disputes between Russia
and Ukraine. EU blindly embraces every deal the two come up
with no matter how fatally flawed the terms are or, therefore,
how ephemeral their compliance is.
The root causes of Ukraine's energy insecurity are well
known, as are their remedies. They are well documented in the
Energy Policy Review of Ukraine conducted by the International
Energy Agency and published in 2006. Repeated attempts have
been made by international institutions, including the
International Monetary Fund, World Bank, European Union, and
U.S. Government to persuade and support Ukrainian authorities
to enact serious energy sector reforms. They have been met
generally by lip service even as fundamental conditions
continue to deteriorate in the country.
The recommendations basically come down to modernizing the
business practice of this large and nontransparent sector of
the Ukrainian economy which has served as an exclusive
playground for Ukrainian leaders for the past 20 years. This
means the end of rent-seeking that leaks billions of dollars
per year, transparent and fair rules of the game for investors
that do not favor politically connected interests, and above
all, energy pricing reform.
Instead of fundamental reform and the immediate benefits
that can be achieved, this Ukrainian Government would rather
talk about fanciful projects that are 5 years or further away
in the future, such as shale gas or other unconventional gas
production, liquefied natural gas imports, and offshore
exploration, none of which can possibly succeed without energy
reform.
At best, this is a misplacement of policy priorities. At
worst, it is a deliberate misdirection in order to change the
topic and to divert attention away from current and future
mischief in the energy sector.
For the moment, Russia and Ukraine are supposedly at an
impasse in their gas price negotiations, after the disastrous
decision President Yanukovych and his government made on gas
agreement with Russia in Kharkiv in April 2010. Ironically, the
Kharkiv agreement essentially confirmed and locked his new
government into the terms of the agreement made by then-Prime
Minister Yulia Tymoshenko and Prime Minister Vladimir Putin in
January 2009, the unfairness for which she is currently accused
and jailed.
The most likely scenario is an agreement will be reached
soon between Russia and Ukraine on gas that cedes partial
control and/or ownership of Ukraine's international gas transit
system to Gazprom in exchange for another so-called discount on
gas pricing.
Despite such an agreement, Russia will likely continue to
progress the South Stream pipeline as important for its own
interests or at least hold it in reserve. Russia may expect to
gain full control of the gas transit system over time, as
Ukraine continues to mismanage its energy sector and pile on
gas debt to Russia.
The result of this scenario is that Ukraine becomes an
energy appendage of Russia's. What is the geopolitical
significance for the United States and Europe of this possible
outcome I will leave to others more expert on such subjects on
this panel.
I would offer one small recommendation. If the United
States and our European allies care about Ukraine's energy
vulnerability and its negative impact on the region, then they
must address the policy remedies not only to Ukrainian leaders
but also publicly to Ukrainian society. Ukraine has a vibrant
civil society, an educated public, and relatively free press
for post-Soviet space. Speaking privately to political leaders
about urgently needed energy reform has proven ineffective in
the past and may even enable their bad behavior. It is time we
invest in a direct dialogue with the Ukrainian people if we
believe we have a stake in the energy health of this important
country.
Thank you.
[The prepared statement of Mr. Chow follows:]
Prepared Statement Edward C. Chow
Madam Chair, it is my distinct honor to testify before your
subcommittee. Unlike my fellow panelist, who served with distinction at
the Department of State and White House, I come to you as a simple oil
and gas analyst and practitioner in the international petroleum
industry for more than 30 years. In the past dozen years, I have
observed the Ukrainian energy sector, sometimes up close, and written
on the subject. I had the occasion to advise four separate cabinets of
ministers of Ukraine on energy, including those led by then-Prime
Ministers Yanukovych and Tymochenko. It is this experience and
knowledge that informed me for today's testimony.
I would start off by saying, with all due respect, that as far as
energy is concerned Ukraine--a country which seems perpetually at
crossroads--is no longer in that position. It may have been at
crossroads in 2005, right after the Orange Revolution, when there was a
tremendous opportunity to shed its Soviet legacy and incomplete
economic transition; and to embark on a path of energy reform that
could have greatly enhanced its domestic energy condition and improved
energy security for both itself and Europe. However, infighting among
the Orange political forces, including over energy rents, and
secondarily insufficient attention and engagement by the West
extinguished these hopes.
Since then, Ukraine has been on a dangerous path toward energy
insecurity, which has accelerated in the last 2 years. All the pity as
Ukraine has enormous potential as an energy producer, efficient
consumer, and key transit partner for Russia/Central Asia and Europe.
Until the discovery and development of major West Siberian gas
fields in the 1970s, Ukraine was an exporter of gas to the Soviet
Republic of Russia. Ukrainian gas production peaked at 69 billion cubic
meters (bcm) in 1975, more than its current annual consumption. Today
Ukraine's domestic gas production has stagnated below 20 bcm and it is
two-thirds dependent on gas imports from Russia. Reliance on imports
has diminished only because of the dismal performance of the overall
Ukrainian economy, not because of efficiency improvements or increased
domestic production.
I have not met a single Ukrainian or Western geologist who does not
believe that Ukraine has the geologic prospects to greatly increase its
domestic oil and gas production. If proper policies and investment
conditions were in place, domestic gas production can easily increase
by 50 percent in a few short years. Together with energy efficiency
improvements, Ukraine can be more than 50 percent self-sufficient in
gas. Currently Ukraine is the third-largest gas consumer in continental
Europe (outside of Russia). It consumes two-thirds as much gas as
Germany does, while its GDP is less than 5 percent of Germany's.
Ukraine's oil and gas sector is operated in a totally dysfunctional
manner. This, as they say in this part of the world, is not an
accident. Various state energy assets have been hijacked by rent
seekers for their private gain. Regulation and pricing are left
deliberately murky in order to benefit private interests. This is not a
particular indictment of the current Government of Ukraine. In fact
these conditions of Ukraine's incomplete transition from its Soviet
command economy have remained through the terms of four different
Presidents and many more Prime Ministers and Cabinets of Ministers in
the 20 years of independence. Franchises on control of energy assets
may shift, but the business model never changed.
In fact, if you were to design an energy system that is optimized
for corruption, it might look very much like Ukraine's. You would start
with a wholly state-owned monopoly that is not accountable to anyone
except the head of the country who appoints the management of this
company. It would operate nontransparently without being held
accountable by shareholders (who might demand legal rights as owners)
or capital markets since its chronic indebtedness is periodically
repaid by the state treasury.
Domestic production would be priced artificially low, ostensibly
for social welfare reasons, leading to a grey market in gas supply that
is allocated by privileged access rather than by price. Low prices
suppress domestic production and energy efficiency improvement, thereby
requiring import of large volumes of gas which coincidentally is
controlled by the same state monopoly or its chosen middleman company.
The opaque middleman is frequently paid handsomely in-kind, rather than
in cash, which allows him to reexport the gas or to resell to high-
value domestic customers, leaving the state company with the import
debt and social obligations.
Ukraine has also eroded its significant advantages as a major oil
and gas transit country between Russia/Central Asia and European
markets by virtue of its geographic location and Soviet legacy pipeline
infrastructure. Ukraine inherited Soviet gas transit pipelines, which
had a nameplate capacity of 175 bcm per year, as well as abundant and
ideally located gas storage capacity. In addition, Ukraine's oil
transit pipelines have a capacity of more than 1 million barrels per
day, linking Russian and Central Asian oil production with landlocked
markets in Central Europe.
Yet today Russian gas transit amounts to less than 100 bcm from a
post-Soviet average of 120 bcm and Russia is busy building and planning
pipelines that bypass Ukraine, namely Nord Stream and especially South
Stream. When the second line of Nord Stream is completed by the end of
this year, it will bring capacity to 55 bcm per year. If Russia
proceeds next year with South Stream at 63 bcm, by 2016, it would have
bypass pipeline capacity that completely replaces current gas transit
through Ukraine, which represented about 80 percent of the gas Russia
sells to Europe or 20 percent of European gas demand.
This developed because Ukraine has proven itself as an unreliable
transit partner for both Russia and Europe. Successive Ukrainian
governments have tried to use its transit leverage to extract below-
market gas prices from Russia. This persisted even though conditions
that facilitated the barter of cheap gas for transit, namely low-priced
Central Asian gas available to Russia, disappeared about 5 years ago.
Even when gas prices were low, Naftogaz (the Ukrainian state company)
is chronically indebted to Gazprom, leading to contract disputes,
regular brinksmanship, and occasional gas cutoffs. Instead of
maintaining and enhancing the reliability of the Ukrainian pipeline
system with the transit revenue it earned in order to attract higher
volumes, Ukraine raised serious doubts in the minds of energy producers
and consumers.
The gas crisis of January 2006 and 2009 seriously affected gas
supply for Europe at the height of winter and underscored that Ukraine
is a transit liability. Consequently, even the EU-sponsored Nabucco
pipeline proposal is as much a diversification away from the risks of
transit through Ukraine as a diversification from over-dependence on
Russian gas supply. More frequently, Europe acts as if it is an
innocent victim of pipeline disputes between Russia and Ukraine. EU
blindly embraces every deal the two come up with, no matter how fatally
flawed the terms are or how ephemeral their compliance, as proved to be
the case in both 2006 and 2009.
The root causes of Ukraine's energy insecurity are well known, as
are their remedies. They were well documented in an ``Energy Policy
Review of Ukraine'' conducted by the International Energy Agency and
published in 2006. Repeated attempts have been made by international
institutions, including the International Monetary Fund, World Bank,
European Union, and U.S. Government to persuade and support Ukrainian
authorities to enact serious energy sector reforms.
These have been met generally by lip service, even as fundamental
conditions continue to deteriorate in the country. It amused me to read
that 2 weeks ago there was a conference in Kyiv on ``Natural Gas and
Ukraine's Energy Future'' conducted by a well-known international
energy consulting firm and attended by senior Ukrainian officials. I
dare say that most Ukrainian energy experts could have written the
policy recommendations by themselves without any foreign help--they
have heard them so many times.
These recommendations basically come down to modernizing the
business practices of this large and nontransparent sector of the
Ukrainian economy, which has served as an exclusive playground for
Ukrainian leaders for the past 20 years. This means the end of rent-
seeking that leaks billions of dollars per year; transparent and fair
rules of the game for investors that do not favor politically connected
interests; and above all energy pricing reform. Assuming the right
business conditions, Ukraine possesses sufficient conventional and
renewable energy potential, and scientific and engineering skills to
both increase its domestic energy production and to significantly
improve its energy efficiency.
Foreign investment can also help in this regard. However, to date,
foreign investors have not been met with fair access to geologic data,
open and transparent tender process, or internationally standard
business terms. What small foreign operators who have ventured into oil
and gas production and achieved minor success in Ukraine have been met
with corporate raids, absence of rule of law, capricious regulations,
and other hostile conditions.
Instead of fundamental reform and the immediate benefits that can
be achieved, this UkrainianGgovernment and its predecessors would
rather talk about fanciful projects that are 5 years or further away in
the future, such as shale gas or other unconventional gas production,
liquefied natural gas imports, and offshore exploration--none of which
can possibly succeed without energy reform.
At best, this is a misplacement of policy priorities. At worst, it
is deliberate misdirection in order to change the topic and to divert
attention away from current and future mischief in the energy sector.
For the moment, Russia and Ukraine are supposedly at an impasse in
their gas price negotiations, after the disastrous decision President
Yanukovych and his government made on gas agreement with Russia in
Kharkiv in April 2010, soon after his ascendency to the Presidency.
Ironically the Kharkiv agreement essentially confirmed and locked his
new government into the terms of the agreement made by then-Prime
Minister Yulia Tymoshenko and Prime Minister Vladimir Putin in January
2009, the unfairness of which she is currently accused and jailed.
The most likely scenario is an agreement will be reached soon
between Russia and Ukraine on gas, perhaps before Russia's Presidential
election in March, that cedes partial control and/or ownership of
Ukraine's international gas transit system to Gazprom in exchange for
another so-called discount on gas pricing. Concessions on penetration
into Ukraine's domestic gas market may also be made to Gazprom or its
chosen middleman company.
Despite such an agreement, Russia will likely continue to progress
the South Stream pipeline as important for its own interests or at
least hold it in reserve. Russia may expect to gain full control of the
gas transit system over time--as Ukraine continues to mismanage its
energy sector and pile on gas debt to Russia--similar to what it has
already accomplished in Belarus.
The result of this scenario is that Ukraine becomes an energy
appendage of Russia's. What is the geopolitical significance for the
U.S. and Europe of this possible outcome I leave to others more expert
on such subjects on this panel and to subsequent questioning by the
committee, as I prefer to stay within my competence in energy.
I would offer one recommendation: If the United States and our
European allies care about Ukraine's energy vulnerability and its
negative impact on the region, then it must address the policy remedies
not only to Ukrainian leaders, but also publicly to Ukrainian society.
Ukraine has a vibrant civil society, an educated public, and relatively
free press for post-Soviet space. Speaking privately to political
leaders about urgently needed energy reform has proven ineffective in
the past and may even enable their bad behavior. It is time we invest
in a direct dialogue with the Ukrainian people if we believe we have a
stake in the energy health of this important country.
Senator Shaheen. Thank you very much, Mr. Chow. I do not
think anybody would describe you as a simple energy analyst.
I want to go back to this question of the imprisonment of
former Prime Minister Tymoshenko. I mentioned it in my opening
statement. Ambassador Pifer, you mentioned it and Mr. Wilson
mentioned it as well.
I also want to point out that the subcommittee did engage
the Ukrainian Embassy here in Washington. As I mentioned, the
Ambassador is here, and they submitted a letter to me relative
to some of the issues that face the United States-Ukrainian
relationship. I appreciate their thoughts, and I want to ask
the panelists about one of the points raised in the letter from
the Embassy.
The letter suggests that political issues should be
separated from legal issues and that attempts to link the
Tymoshenko case to Ukraine's European aspirations are
artificial. And I would like to ask both Ambassador Pifer and
Mr. Wilson if you think it is possible to separate the two or
how continued integration into the EU is going to be viewed as
long as former Prime Minister Tymoshenko remains in prison. And
I will ask you if you would begin, Ambassador.
Ambassador Pifer. Thank you. I think that is an excellent
question.
It first gets to the point--and I think you may hear a
little bit more on the second panel about the specifics of the
charge, but it is a charge of abuse of power for her conclusion
in January 2009 of a contract with Russia for a gas sale. And
the view of most outside observers is this was a political
decision. You cannot and you should not be criminalizing those
types of political decisions. And it opens up sort of a
Pandora's box, as Mr. Chow said, questions about the Kharkiv
agreement. Could somebody then look back and say, well, does
that agreement open up the same types of questions? And I think
it is this.
But it is also not just the case of Ms. Tymoshenko. She is
one of probably a dozen former senior members of the government
under President Yushchenko and Prime Minister Tymoshenko who
have also been arrested and charged on similar charges that do
not appear to be well based.
So I think this is the basis of the concern, both as
expressed by the European Union and the U.S. Government, that
the judicial system in Ukraine is being manipulated for
political means in a way that we really haven't seen happen
before in Ukraine's 20 years of independence. And I think as
long as that continues, that will be and should be a
significant barrier to Ukraine's effort to draw closer to
Europe because ultimately if you want to be a full member of
Europe and a member of the transatlantic community, you have to
accept democratic values, and what we are seeing with regard to
Ms. Tymoshenko and other former opposition or other former
government leaders is not consistent with those values.
Senator Shaheen. Thank you.
Mr. Wilson, do you want to add to that?
Mr. Wilson. Madam Chair, I would endorse what Ambassador
Pifer just said, and add to that, that I think the argument of
the need to disentangle the political from the legal is frankly
disingenuous. What we are seeing right now is the distortion of
the legal for political purposes, and I think that is pretty
clear to everyone who has paid attention to this particular
case, but also as Ambassador Pifer says, this case is
sensational and it is a human rights issue, but it is also
illustrative of a broader pattern that raises genuine, deep
concerns.
The second part of this, I think, in response to the
comments that you conveyed, it represents on the Ukrainian side
a fundamental misunderstanding of what it means to draw closer
to the European Union to join Europe. At the end of the day,
accession talks to the EU--yes, there is a long process. In
these association agreements, there are lots of technical
negotiations. There is a technical aspect to it. But that is
not the purpose.
At the end of the day, this is about moving closer to a
community of shared values, shared norms based on democracy,
human rights, rule of law, and democracy. And if the Ukrainian
Government does not understand the connection between the
values issues and the technical issues they are negotiating in
an agreement, then there is a fundamental misunderstanding of
what it means to become part of Europe.
Senator Shaheen. That is my followup. Do you think the
people around Yanukovych understand that, that really you
cannot separate the two?
Mr. Wilson. From their actions, it does not imply that that
is the case. My sense, from watching the situation, is that
there is some merit, political merit, on the part of the
President to be seen as having made more progress in the
negotiations with the European Union than his predecessors. And
in the technical sense, Ukraine has advanced in those
negotiations. But it is not clear to me--I think that that
fuels a domestic purpose of being seen of checking the box,
making progress with Europe, but not a fundamental
understanding or commitment to what is behind that and what it
represents. And I think what we are seeing play out over the
Tymoshenko trial is at the end of the day an unwillingness to
make that connection and to take the tough choices that are
required to actually give meaning to many of these technical
agreements.
Senator Shaheen. And can you both comment on what kind of
an impact both the imprisonment of Tymoshenko and other former
officials has on the interest in international investment and
business investment in the country?
Ambassador.
Ambassador Pifer. I think, again, to the extent that this
raises questions about the Government of Ukraine's readiness to
observe the rule of law, it raises questions in the minds of
Western companies and American companies that are looking to
invest and do business in Ukraine. And I know from my own 3
years there back at the end of the 1990s, Ukraine at that
time--and I think it is a bit better, but it is still not an
easy environment. You have complex tax regulations, very
difficult customs rules, often applied in an arbitrary manner.
Unfortunately, the court system in Ukraine is to the point
where I think very few Western companies have any confidence
that if they went to court, they would actually have the chance
of a fair outcome. And again, what we see with the manipulation
of the judicial system now against political opponents, it only
feeds into that disaccreditation of the judicial system in
Ukraine. So this, I think, has a bigger impact. It is not just
about the rule of law with regard to democracy, but it does
raise questions in the minds of investing companies that are
looking at Ukraine about whether that is the right place to go,
particularly when they have lots of other opportunities around
the world.
Senator Shaheen. And, Mr. Chow, you talked about the many
challenges facing the energy sector in Ukraine. Is this
something that as companies who are interested in the energy
sector in the Ukraine look at a potential future there? Do you
think this is something that deters them as well?
Mr. Chow. It certainly is a factor. I mean, oil companies
follow geology first. But then you look at the investment
conditions under which you might have to operate. So, for
example, if you were to invest and hopefully be successful in
producing gas in Ukraine, what access would you have to
customers? What access would you have to pipelines? Would you
be held for ransom along the way? What gas price might you be
able to get in the domestic market, never mind the right to
export it? All these are undetermined, deliberately murky, and
unpredictable. So even if the geology is good, you are likely
to discount your bid on the basis that the investment
conditions are risky.
So does that mean that no oil company would come knocking
on Ukraine's door? Every time Ukraine has a new government, oil
companies come knocking on the door, and inevitably they have
been disappointed in the past.
You will see there is a bid round coming up, I think, to be
announced on February 22, very soon. There are some oil company
interests in it, and I have spoken to some of them. But how do
you assign a value to an opportunity when the fundamental
investing conditions are so shaky?
Senator Shaheen. Thank you.
My time is up. Senator Barrasso.
Senator Barrasso. Thank you very much, Madam Chairman.
Both to Mr. Wilson and Mr. Chow. At the opening of the
Nuclear Security Summit in Washington 2 years ago, about April
2010, there was an agreement reached where Ukraine would
eliminate its entire stock of highly enriched uranium by March
2012. So it is coming up in the next month. With the summit
quickly approaching, could you tell us what kind of progress
Ukraine has made regarding the disposal of all of its highly
enriched uranium and where we are with that and how you see
things coming in terms of this March deadline?
Mr. Wilson. This was very much a significant outcome of
that Nuclear Security Summit and a major commitment on
Ukraine's part to fully eliminate highly enriched uranium, a
major nonproliferation objective for our country.
There has been significant progress in implementing the
agreement. There were some delays, but many of the interim
markers have been met and I think they remain on track in
theory to try to meet a March deadline.
However, the concern I have related to that is the
perception in Ukraine that action and movement on an issue that
is a nonproliferation objective for the United States has the
potential to buy them a free pass on some of these democracy
and human rights issues. So the challenge for U.S. policy in
managing the highly enriched uranium issue is to underscore our
intent or commitment to try to follow through on the agreements
the Ukrainian Government has made, but that does not remove
Ukraine from expectations in meeting rule-of-law issues at
home.
Senator Barrasso. Mr. Chow and then Ambassador Pifer.
Mr. Chow. I do not have a whole lot to add. I stipulated
that I am a simple oil and gas guy and not really competent on
fissile materials.
I would add, though, that the rest of Ukraine's energy
sector, whether you are talking nuclear power, powerplants,
fuel supply to those powerplants, as well as the oil industry,
are burdened with the same shadowy business practices that I
highlighted on gas. So there is reason to seek the most
transparent regime possible to make sure that the pledges made
by Ukrainian authorities are actually met.
Senator Barrasso. Mr. Ambassador, anything else to add on
that?
Ambassador Pifer. I would just add briefly. I think
Ukraine, in fact, does have every incentive to meet that
agreement because as part of the arrangement, U.S. Government
assistance, provided mainly by the Department of Energy, is
helping Ukraine convert its reactors so that they can operate
on low-enriched uranium in a more modern way. So there is
actually an advantage to Ukraine in completing that deal.
Senator Barrasso. I want to move to the IMF. In July 2010,
$15.5 billion stand-by loan approved by the IMF for Ukraine.
The latest tranche of the loan is suspended. IMF is requesting
Ukraine make some changes. Specifically they have requested
that Ukraine address its domestic gas price. Can you explain
any of the major concerns that are happening there and the
impact this is having on Ukraine, and with the parliamentary
elections coming up in the fall, do you see the political will
needed to make the changes that the IMF may request? Mr.
Wilson, I do not know if you want to start.
Mr. Wilson. I would say two things in response to that.
One, I do not see the political will in addressing sort of
this core issue of the domestic gas price. That is what Mr.
Chow has talked about, one of the core issues that has a whole
ream of ramifications for corruption, sovereignty, security
issues. I am very skeptical that the Ukrainian Government will
be in a position to move on the domestic gas price issue.
At the same time, I think some of their efforts to respond
to the financial crisis previously worked on the IMF side of
this have reinforced their political instincts because they
have taken some difficult decisions that have not been popular
in the public. You can point to a substantial drop of political
support in the east because of raising the retirement age, for
example. So in some respects, I think some of their efforts on
the economic front have reinforced their inclination to take
measures on the political front because they feel vulnerable
and exposed headed into parliamentary elections.
Senator Barrasso. Anyone want to add anything to that?
Mr. Chow. I was a critic of the Fund--that is, IMF--in 2009
when I thought that they were being too lenient to the then-
Tymoshenko government. If the Orange forces needed tough love
at that time, my position is that this government needed strict
compliance before any money is given to them. We have already
seen the first tranche delivered by the IMF. The second tranche
continues to be delayed for the reasons that Mr. Wilson gave,
as well as the upcoming parliamentary elections in October. I
am highly skeptical that any positive move would be made soon.
Ambassador Pifer. I would agree with my two colleagues,
because one of the primary conditions for the next tranche of
the IMF loan is a raise in domestic gas prices which would hit
a broad portion of the electorate. I do not see this government
as prepared to do it in the runup to a parliamentary election.
Senator Barrasso. Then I want to move to integration with
the European Union and the accessment agreement with Ukraine is
stalled. So I am curious about long-term prospects for the
integration of Ukraine into the European Union and kind of the
requirements and reforms that should the European Union require
of the Ukraine. If you have any assessment of how you think the
people of Ukraine feel about joining the European Union. Is it
something they want, something they are concerned about? Mr.
Wilson, if you want to start.
Mr. Wilson. Sure. I think despite the tenor of the
testimony that you have heard today, I am very supportive of
the long-term prospects of Ukraine's integration into Europe,
and I think ultimately the vast majority of the Ukrainian
population wants to see their future as part of the European
mainstream. That is what gives me confidence at the end of the
day there is an element of a check to the tendency that we have
been seeing, but that has been put completely at risk right
now.
So I think part of the challenge--what has played out in
the wake of the Orange Revolution, what has played out with
this government is an increasing sense of apathy among the
Ukrainian population, apathy within civil society, which I
think is a dangerous precursor to an ability to allow the
government to take steps without some of those checks and
balances. So I think key in this is United States policy
beginning to be clear, including with those that are skeptical
in Europe, that as Ukraine takes the right steps, as Ukraine
restores its democracy and strengthens its free market, that
really the doors in Europe should be open.
Senator Barrasso. Mr. Ambassador.
Ambassador Pifer. I would just add two observations.
First, to agree with what Mr. Wilson said, polls over the
last several years have consistently showed 55 to 65 percent of
the Ukrainian population supports the idea of joining Europe,
and primarily it is because of the attraction of the economic
standard of living there.
The second point on this points up why the democratic
backsliding in Ukraine comes at a very bad time because within
Europe now, I think, you have a lot of questions about how far
it should expand. And with the eurozone crisis and the internal
problems, there really is this tendency to look inward. And so
the democratic backsliding that you have seen in Ukraine over
the last 2 years is being taken by those countries who want to
say we really cannot think much beyond our borders and to push
Ukraine off. So it is not playing out at a good time.
I would guess that had Poland, which held the Presidency of
the European Union during the last part of 2011--had Poland not
held that Presidency, I think there would have been a very good
chance that the European Union would not have gone forward with
a summit meeting with the Ukrainians last December. That is
because the Poles have been one of the countries that have been
strongly advocating for Ukraine, but I suspect even they may be
getting a bit frustrated.
Senator Barrasso. Thank you. Thank you, Madam Chairman.
Senator Shaheen. Thank you.
Senator Risch.
Senator Risch. Thank you, Madam Chairman.
Mr. Chow, can you tell me what percent of the electricity
is generated in the Ukraine from nuclear energy? Do you know
that number off the top of your head?
Mr. Chow. I do not know that number off the top----
Senator Risch. Is it significant?
Mr. Chow. It is very significant. Fifty percent. I was
going to say 40. So 40-50 percent. So it is a very significant
part of electricity.
Senator Risch. And what about the remainder of it? Is it
coal, gas, combination? What is the remainder of it or do you
know?
Mr. Chow. Power generation by energy source in Ukraine is
approximately as follows: 48 percent nuclear, 34 percent coal,
11 percent gas, and 7 percent hydroelectricity.
Senator Risch. The other question I would have for any one
of you--I suppose, Mr. Ambassador, it is probably more in your
line. The dismantling of the old Soviet Union missile system in
the Ukraine. Is that completed now?
Ambassador Pifer. Senator, in 1996, the last of the nuclear
warheads that were in Ukraine----
Senator Risch. I knew the warheads were gone, but what
about the remainder of the system?
Ambassador Pifer. All of the ICBM silos have been
dismantled. All of the bombers have been dismantled. Probably
the one piece that is still being worked on is the SS-24
missiles have been separated into stages, but they are still
working out the way to remove the fuel from those missiles. But
it has been a very, I think, cooperative effort between the
United States and Ukraine.
Senator Risch. The reason I ask is, there is an Idaho
company, I believe, that is involved in that. Thank you very
much. I appreciate that.
Thank you, Madam Chairman.
Senator Shaheen. Thank you, Senator Risch.
Ambassador Pifer, in December you wrote a very interesting
article in the Ukrainian Weekly which argued that Mr.
Yanukovych's pursuit of a more authoritarian agenda at home
would cause disbalance in Ukraine's foreign policy. I am not
quoting you exactly, but you point out that actually his
current tactics may weaken his ability to negotiate with Moscow
rather than improve that ability. I wonder if you could
elaborate on this.
Ambassador Pifer. I think when you look at Russia, Russia
has a fairly strong set of goals it wants to achieve vis-a-vis
Ukraine. It wants to keep Ukraine geopolitically in its orbit.
It does not want to see Ukraine draw closer to NATO or the
European Union. It wants to have control, including ownership,
if possible, of the energy transit system through Ukraine. It
wants to have Ukraine open for Russian business. And I think as
we have seen over the last couple of years, even when relations
between Russia and Ukraine improved after the beginning of
2010, the Russians remained very hard-nosed negotiators. As
early as the summer of 2010, one was hearing that Ukrainiane
officials, including in Bankova, where the Presidential
administration is housed, were becoming very frustrated that
the Russians continually push for more, push for more.
So my own estimate is that to the extent that Mr.
Yanukovych's policies on democracy mean a weaker relationship
with the West, he is going to find himself in a more lonely and
more difficult position dealing with the Russians, and I think
the Russians will use that to their advantage. That is, quite
frankly, the hope that I have because I think Mr. Yanukovych
can appreciate that. And my hope is--I am not as optimistic as
I was maybe 5 months ago, but my hope remains that seeing that
difficult position without the balance, that that will lead him
to conclude that he has to adjust his course on democracy to
return to the balance, which would be good both in terms of
Ukraine's relationship with Europe but also strengthen his
position vis-a-vis Moscow.
Senator Shaheen. And, Mr. Wilson, do you share Ambassador
Pifer's view that Yanukovych understands this and will respond
to it, or do you think that is part of his political
calculation?
Mr. Wilson. Sort of two points.
One, first on the Russia side of this, I think there is
another objective that is in play from Moscow's part. Vladimir
Putin needs the experiment of democracy, needs the experiment
of the Orange Revolution and its aftermath to fail and to be
seen as failing to reinforce the narrative to the Russian
people that experimentation with democracy in the post-Soviet
space is dangerous, leads to economic uncertainty, chaos.
If Ukraine were to succeed, with its democratic
experiment--the Russians have been taught to think of
Ukrainians as their backward cousins. If that were to succeed
inside Ukraine, it really challenges the narrative. We used to
think that changes in Moscow would reverberate throughout the
former Soviet space. I think today that successful change in
Ukraine has a strong likelihood of impacting Russia. And so I
think that is another factor in play as the Russians think
about how all this plays out.
At the same time, I think President Yanukovych is very
leery of being drawn too close into Moscow's orbit and has
tried to pursue sort of equidistance. I think he understands it
is not in his interests to be completely under the arms of a
returning President Putin. Speaking to many of Yanukovych's
advisors, Prime Minister Tymoshenko when she was Prime
Minister, having Russian leaders speak to them with street
language Russian as a condescending sense conveys to them
almost that they are a lower class, has inculcated across the
Ukrainian political elite, whether from the Orange camp or
others, a sense of pride in actually being able to be
responsible for their own nation and not wanting to be subject
to Russia.
So I think that there are complicated calculations.
President Yanukovych's No. 1 priority is to have cheap gas from
Russia to maintain his own political support in Ukraine, but it
gets quite complicated beyond that because they understand that
there are real liabilities to that dependence.
Senator Shaheen. And do the current protests in Russia
affect those calculations at all, do you think?
Mr. Wilson. I think they very much impact Vladimir Putin's
calculations and reinforce the sense that success of a free
market democracy in a post-Soviet country, particularly
Ukraine, is a
direct threat and challenge to the narrative and the structure
that I think has been set up in Russia.
Senator Shaheen. And how do Ukrainians view what is going
on in Russia? Either you or Ambassador Pifer.
Ambassador Pifer. Probably with interest, but I think it is
somewhat colored by the fact that for a lot of Ukrainians now,
there is a certain degree, unfortunately, of cynicism about the
Orange Revolution, and that was, unfortunately, in the
aftermath of the Orange Revolution in 2005, President
Yushchenko--and I think some of the blame also lies with Prime
Minister Tymoshenko--is they had an opportunity there and they
failed to take advantage of that opportunity, the result of
which is, I think, 5 years later people then basically voted
for Mr. Yanukovych who had, of course, been the one thrown out
by the Orange Revolution. So my suspicion is that there is
still a desire to be closer to Europe and have a more
democratic society, but unfortunately, it has been colored by
an experience that they see as really not having delivered.
Senator Shaheen. Mr. Chow talked about the importance of
engaging the Ukrainian public if there were any real reforms
going to be done to the energy sector. How possible do you
think that is to really engage the public?
Mr. Chow. I think it is wide open honestly. I think Ukraine
is still, in spite of its problems today, a relatively open
society. There are organizations with people that we can speak
directly to. The United States Government has invested 20 years
of building up civil society organizations in Ukraine. People,
as Ambassador Pifer alluded to, are very disappointed and
disillusioned with this generation of political leaders, and
they have good reason to be. But that does not mean that we
should give up on Ukrainians and give up on talking
particularly to younger generations of Ukrainians about the
possibility of change and improvement in their country.
Senator Shaheen. Thank you.
Senator Barrasso.
Senator Barrasso. Thank you, Madam Chairman.
This is a followup, and they may feel that they have
completely answered this. Due to the geographic location, the
cultural history, the aspirations for the future of the people
of Ukraine--I believe people will continue to search for the
right balance in terms of its foreign policies. Is there a way
for Ukraine to successfully balance its relationship with the
West as well as Russia? You all alluded to that in the last
answer. I do not know if there is something else you would like
to add.
Ambassador Pifer. I do not think it should be, nor does it
have to be, for Ukraine an either/or choice. Ukraine should be
able, on the one hand, to have a stable, constructive
relationship with Russia, which I think most Ukrainians want.
They do not want to have difficult relations with the Russians.
And Ukraine also can have, I think, a strong and growing
relationship with Europe and the transatlantic community. So it
can do both. What is holding it back now though, is the
decisions that President Yanukovych is making regarding
democracy within his country, and that is preventing the
development of the relationship with particularly the European
Union that might be possible.
Mr. Wilson. I would just add that part of the challenge
here is Russia's approach is a very clear perspective on
privileged interests, fear of influence. And in that context,
balance does not work.
If you look at Poland, the Baltic States, by their being
able to join NATO and join the European Union, once they were
safely embedded in the institutions of the transatlantic
community, they actually had the stability, the confidence to
be able to manage more cooperative, constructive relationships
with Russia. Without that, the Russians were not willing to
respect certain limits, respect certain sovereignty.
And I think that is the challenge that Ukraine will face.
When will Russian leaders be prepared to honestly treat and
think of Ukraine as a sovereign, independent nation? And it
does not just work to be equidistance or to balance. It
requires, I think, a greater Ukrainian integration into a
broader community of shared values, interests, and norms to be
able to help check some of those Russian tendencies and provide
the Ukrainians the confidence and the capability to be able to
manage a healthy relationship with Russia. But right now, I see
it very difficult for the Russians opening the door being
willing to have that kind of healthy relationship.
Senator Shaheen. Senator Risch, any other questions?
Senator Risch. No other questions.
Senator Shaheen. I just have one final question. Mr.
Wilson, you pointed out that one of the tests upcoming will be
the parliamentary elections this year. And I wonder if you all
could--both you and the Ambassador and Mr. Chow, if you have
any views as well--what concerns you have about seeing those
elections go forward in a way that ensures that they are free
and fair and what can the United States and Europe do to help
make that happen. So, Mr. Wilson, do you want to go first?
Mr. Wilson. Madam Chair, I do believe this is a critical
issue on our policy agenda right now. President Yanukovych was
elected in free and fair elections that represented the fourth
in a series of free and fair elections in Ukraine. That is very
significant in the post-Soviet space. The first election that
happened under his watch, the local elections in 2010, were
seriously flawed. There was a real regression in terms of the
conduct of elections. This will be the first parliamentary
elections under his Presidency, and I think, first of all, I
already have very serious concerns because, despite two
successful, free and fair parliamentary elections already, the
ruling party with singular focus decided to pursue a change in
the electoral code, one that when most analysts look at this
mixed system which increases the number of majoritarian seats,
it has a tendency to benefit the ruling incumbent party. So,
one, I am already quite concerned and skeptical as to why
Ukraine needed to go through yet another electoral code. It is
as if the party in power continues to change the rules of the
game to support itself each electoral cycle. There needs to be
continuity and stability in electoral code in Ukraine.
Second, I think by trying to keep Tymoshenko in prison is
trying to hamstring the opposition in this effort.
And third, I think part of the key issue right now--part of
the United States--its support with Europe that was so valuable
in the runup to the Orange Revolution was our support to
Ukrainian civil society organizations that could do election
monitoring, that could conduct exit polls, that could manage
parallel vote counts, that were part of the fabric to do media
monitoring. I think right now we are not as far along as I
would like to see us. I think USAID should already be
committing its grants, already be pushing this money out to
help support Ukrainian civil society organizations, as well as
IRI, NDI, other American actors, to set the right table for the
elections this fall. The default option is that these are going
to be dirty, they are going to be tough, and they are likely to
be tilted. But I do think Ukrainian actors have been involved
in checking these practices in the past, and I think United
States and European policy needs to be doing what it can today
to maximize their capability to check that in the fall.
Senator Shaheen. Ambassador.
Ambassador Pifer. Two points which really build on what Mr.
Wilson said.
First of all, there needs to be--and I think the United
States and European Union are already providing this message,
but there needs to be just a continuous message hammered home
on Kiev of the importance of democracy within Ukraine for
Ukraine's relationship with the West. We must leave no doubt in
the minds of Mr. Yanukovych and the Ukrainian leadership that
if these elections are bad elections, there will be significant
consequences for the relationship that they hope to build with
Europe and the United States.
And then I would also agree with Mr. Wilson, what we have
seen in Ukraine is actually a very heartening development in
terms of civil society organizations. Already 10 years ago, the
Ukrainians had organizations that were very well set up to
monitor elections. So, for example, in preparation for their
2002 parliamentary elections--and I was still in the
Government. I had a chance to visit Kiev. I mean, they had one
group that was monitoring electronic media, one group
monitoring print media, one group that was organizing exit
polls. So there are organizations on the ground in Ukraine that
know how to do this, and they are going to be a lot smarter
than American or European observers in catching fraud. So we
ought to be directing assistance to them so that they can do
the job that we know they can do.
Senator Shaheen. Thank you. Yes, I was actually in Armenia
for the parliamentary elections in 2003, and there were a
number of Ukrainian observers there and they were very
sophisticated.
Mr. Chow, did you want to add anything to that?
Mr. Chow. I will allow myself to venture beyond my
competence.
[Laughter.]
I have observed, as a private citizen, a couple of
elections in this part of the world before. And I will just
say, to underscore what my colleagues have already mentioned,
that the messaging from us, the West, to the authorities and to
the Ukrainian people need to be starting now and not on
election night. Elections are not only rigged on election
night, as you well know. Lots of conditions, rules of the game
are already being implemented now. By the time we object the
day after the election, it will be too late to have an impact.
So if we want to have an effect, then we ought to be saying
something sooner rather than later.
Senator Shaheen. Thank you very much. I think we all share
that.
As we are closing this panel, I want to just make clear for
the record that the letter that I referenced earlier from the
Embassy will be submitted for the record on this hearing.
And I also have another report that I will be submitting
called ``Open Ukraine.'' I had the opportunity in December to
host an event for the Johns Hopkins Center for Transatlantic
Relations called ``Open Ukraine'' that produced a policy report
outlining some important recommendations for both the United
States and Europe. And so I want to make sure that that report
is also submitted for the record.
Senator Shaheen. So thank you all very much for joining us.
We very much appreciate your views. And I will, at this point,
close this first panel and ask Ms. Tymoshenko if she would join
us at the table.
On our second panel, we have a special guest from the
Ukraine, Ms. Eugenia Tymoshenko. Ms. Tymoshenko is a graduate
of the London School of Economics, a businesswoman and
restaurateur. She has previously worked for the International
Development Fund and is the Honorary President of the Festival
of Arts for Orphans and Disadvantaged Children in Ukraine.
Today she is here on behalf of her mother, former Prime
Minister Yulia Tymoshenko. Eugenia has been devoting her time
to fighting for the release of her mother from prison. We are
very pleased to have you here today. We look forward to your
testimony.
And I would just point out that I understand you have an
important appointment shortly. And so we will try not to keep
you too long. Thank you very much for being here.
STATEMENT OF EUGENIA TYMOSHENKO CARR,
KIEV, UKRAINE
Ms. Tymoshenko Carr. Thank you, Senator Shaheen and
distinguished members of the committee, ladies and gentlemen.
Thank you for granting me, a citizen of Ukraine, the privilege
of coming here to speak to the Senate today and, through you,
to the citizens of America. It is such an honor for me to be
here in this hallowed place, but I know that you are truly
honoring my country, my mother, and other political prisoners
by inviting me here to discuss this issue in this moment of
grave danger for Ukrainians' liberty, even for our independence
as a nation.
Thank you for being able at last to speak of injustice in
these cases of political repression and to be heard and to find
the solution.
I am very glad to see that you are from New Hampshire,
Senator Shaheen. My mother has always admired your State motto:
``Live Free or Die.''
I want to discuss what is happening in Ukraine today and
given the daily threats of what is left of our democracy. I was
able to witness the court proceedings and the show trial that
happened in Ukraine during the repression where actors such as
judges and prosecutors were acting as puppets of the President
with no regard to the rule of law. I continue to witness this
cynical miscarriage of justice every day following my mother's
case and being able to see her in prison.
I want to begin with the sad and amazing words taken from
the Internet petition to free my mother filed by Bishop Paul
Peter Jesep where he quoted the French thinker Montesquieu, and
it says: ``There is no greater tyranny than that which is
perpetrated under the shield of law and in the name of
justice.''
My mother has been illegally imprisoned, maltreated, and
humiliated for 6 months by the regime which is trying to break
her. Despite the immense psychological pressure and constant,
unbearable pain, she did not break. Her spirits are high. I can
say that emphatically, but her health is failing. When I see
her, I must lift her from her bed. She can barely walk. Yet,
she still works and not only to fight all the legal mud that is
being thrown at her, but to unify all of Ukraine's democratic
forces to challenge President Yanukovych and the repressive
clan that rules with him.
My mother went into politics and took up the great task to
free her country of injustice, absence of rule of law, and
corruption left from Soviet past so that we young Ukrainians
would not need to devote our lives to do the same. One of the
major failures was and now remains corruption. She chose to go
against the system, refused to be part of corrupt schemes, and
ended up facing the system alone, letting it destroy her
business, putting her, her family, and friends behind bars on
falsified charges.
That happened 10 years ago when my mother was Vice Prime
Minister for Energy, and when she managed to remove corruption
in the energy sector and restored financial functioning in this
sector that is still intact. When the country's leadership
resisted her reform efforts and imprisoned her for the first
time, she was freed and organized massive protest movements.
These protests later grew into the Orange Revolution where she
became an icon for democratic victory in Ukraine.
While Prime Minister, even though she had limited control
but big responsibilities, she fought for major reforms and
country's well-being. Despite her transparent efforts, she was
many times betrayed for her refusal to compromise country's
well-being for her own. After 2009 gas negotiations with
Russia, when she had removed the corrupt gas trading middleman,
RosUkrEnergo, she brought the transparency back into the gas
trade, but became enemy No. 1 to those who were trying to
monopolize the energy market and who are in power now.
What we are witnessing in Ukraine is such a twisting of the
rule of law that it is not possible to distinguish illegality
from legality. It is hard to see the line between the law and
abuse of law.
My mother is imprisoned under an old Soviet-era criminal
code of 1960 that criminalizes political decisions. It is
important to know that there was no accusation or evidence
introduced in the court that my mother had personally gained
from negotiating the gas deals that ended the European gas
crisis back in January 2009.
Politically motivated charges, of which my mother was found
innocent by Supreme Court 6 years ago, have also been reopened
with no legal basis. The statute of limitations is also
ignored. They have been reopened for only one reason, to try to
destroy her reputation in the EU and USA and to put more
psychological pressure by prosecuting my father, my
grandfather, her colleagues, and friends.
Her cell in Kachanivska prison outside of Kharkiv, far from
her family and friends, is not a dungeon, as you may be
relieved to know. But the Yanukovych regime does not need to
use medieval surroundings to get medieval results. Instead,
they are using the modern techniques of sleep deprivation and
intimidation to try to break her. This includes 24 hours lit
room and 24-hour video surveillance. Lately they have
introduced a close-up surveillance camera so that they can see
what she is writing to me, to her husband, to her supporters
around the world.
They say it is done for her protection, but I doubt it.
When she fell unconscious for 2 hours due to a sudden,
mysterious loss of blood pressure, no help came, as her
cellmate tried to revive her for 20 minutes. They waited for a
doctor to come, and when the doctor arrived, they did not even
call an ambulance. She could have died that night. But we only
found out about this incident 3 days later from her and her
cellmate. Later, they say they would lose the video archive. It
is clear why she stopped trusting the ministry doctors and why
she refuses to see them and to make their false diagnosis.
Many other outrageous breaches of her rights, the rule of
law I can mention, like illegal second arrest delivered by the
court that took place in her cell and lasted for 12 hours when
she was bed-ridden and in pain. It is illegal in Ukraine to
have a court hearing in the cell and, more than that, to arrest
the person for the second time. There was also impossibility
for her defense to build up the strategy and to defend her in
the proper way.
We are told that they plan to move her now to a new cell
with other seven people, make her to wear uniform, and work
despite her illegal sentence and constant pain.
I have no doubts that the verdict against my mother was
sought and approved by President Yanukovych. She is, according
to recent polls, his main political opponent and more popular
than him.
But I do not want you to think that this is only about my
mother. It is not. Others are being repressed and unjustly
imprisoned.
Her former colleague, Minister of Interior Yuri Lutsenko,
has been imprisoned for over a year on charges that would be
laughable if they were not so tragic. He is charged with hiring
a driver past the retirement age and of spending $2,000 over
budget to mark Ukraine's national police day. I do not know
American political practice very well, but I cannot imagine a
former Cabinet Minister be jailed for over a year without a
trial on such charges.
And there are others. The son-in-law of Supreme Court
chairman was arrested on the day his wife gave birth in order
to intimidate that Justice into resigning. Former Acting
Minister of Defense, Valery Ivashchenko, has been imprisoned
for almost 2 years with his health severely deteriorating. They
are all repressed and humiliated because of their political
views. They courageously stood up to the regime and the
injustice and fear it is sowing.
The situation with political prisoners is just the tip of
an iceberg, and the situation is direct evidence of a much
graver problem, political crisis that the regime is creating by
continuous abuse of criminal justice system. Politically
motivated prosecutions of former government officials, civil
society activists, and prosecutions of human rights defenders
ignore the rule of law. The bottom line is that no law
enforcement agency dares to make a move to prosecute the
political opposition without the instruction of the President.
I believe that the current situation, as described in the
recent European Parliament and the Parliament Assembly of the
Council of Europe resolutions, require urgent action.
Numerous legal infringements of the European Convention of
Human Rights were listed and explained in three reports of the
Danish Helsinki Committee, which was commissioned by the EU,
and found the truth behind the political so-called criminal
cases.
Yanukovych spent millions of U.S. dollars hiring American
audit companies and hoping that he can find traces of her
corruption. Hundreds of her ex-coworkers were summoned for
questioning. They were looking hard but never found and will
never find.
The current government's activities are not only ruining
the image of Ukraine and Ukraine as a united nation, but also
the profitable sectors of the economy that become paralyzed and
eventually abandoned when the rule of law is ignored.
Successful people prefer to leave Ukraine and our population is
declining.
Indeed, not even our constitution has survived Yanukovych's
contempt for law. To grab more power for himself, he simply
junked it. His first breach of the constitution was signing a
shameful Kharkov agreement with Russia which was nothing but a
concession of Ukraine's national interests.
I know that Ukraine must seem like a faraway place and that
our problems must also seem distant from the concerns of
Americans at this difficult time for America. But just as no
man is an island unto himself, no democracy is an island. When
one nation is allowed to be hijacked, all democracies are
threatened.
I am here today to answer your questions, Senator Shaheen,
but also to plead that America do all that it can to preserve
democracy in my country. My mother's plight has united many
great, strong nations and amazing people, true heroes of our
time to support political prisoners in Ukraine and fight for
their release. It is paramount for Ukraine to have free and
fair elections this fall, but it would be impossible without
major opposition leaders.
I know my mother strongly believes in democratic future of
Ukraine and has consistently fought for it and continues to do
so despite the risk for her life. Yanukovych wants her to write
a letter publicly asking forgiveness and admitting her sins for
him to pardon her. This will never happen as she never
committed a crime, even according to the old criminal code. She
will never let Ukraine fall back into the Soviet past. She is
strong enough to do it and to win the elections if she is
allowed to run. She has already succeeded in bringing
fractioned opposition into one unified front.
The enemies of democracy and freedom should not be welcome
in a democratic society unless they correct their mistakes. I
ask you to consider all possible ways to influence and to
explain to them the consequences of their actions. But most of
all, I ask you to speak out loudly and clearly so that the
people of my country do not feel abandoned and lose hope.
I want to thank you again and thank present administration,
Secretary Clinton and President Obama for the support, but also
mention that I really appreciate the statement made, according
to the Associated Press, by the head of the security, by the
head of the intelligence, Mr. Clapper, who said that democracy
in Ukraine is under siege, and the charges against my mother
and other political prisoners are politically motivated. And I
just wanted to add that he is right in his statement.
Thank you very much for your attention.
[The prepared statement of Ms. Tymoshenko Carr follows:]
Prepared Statement of Eugenia Tymoshenko Carr
Thank you, Senator Shaheen. Thank you for granting me, a citizen of
Ukraine, the privilege of coming here to speak to the Senate and
through you, to the people of the United States. It is such an honor
for me to be in this hallowed place, but I know that you are truly
honoring my country and my mother by inviting me here to discuss with
you this moment of grave danger for Ukraine's liberty, and our
independence as a nation.
I am very glad to see that you are from New Hampshire, Senator
Shaheen. My mother has always admired your State motto: ``Live Free or
Die.''
I hardly know where to begin in discussing what is happening in
Ukraine, given the daily threats to what is left of our democracy.
Perhaps I ought to begin with the sad and amazing words taken from the
Internet petition to free my mother, filed by Bishop Paul Peter Jesep,
where he quoted the French thinker Montesquieu, and it says, ``There is
no greater tyranny, than that which is perpetrated under the shield of
law and in the name of justice.''
My mother has been illegally imprisoned, maltreated, and humiliated
for 6 months by the regime which is trying to break her. This didn't
break her. Her spirits are high, I can say that emphatically, but her
health is failing. When I see her I must lift her from her bed; she can
barely walk. Yet she still works, and not only to fight all the legal
mud that is being thrown at her, but to unify all of Ukraine's
democratic forces to challenge President Viktor Yanukovych and the
repressive clan that rules with him.
My mother went into politics and put on her small shoulders the
great task to free her country of injustice, absence of rule of law,
and corruption left from Soviet past, so that we, young Ukrainians,
would not need to devote our lives to do the same. She, unlike many
young entrepreneurs in newly independent Ukraine, managed to build a
big, successful corporation that helped restore the lost production and
trade ties between ex-Soviet states. By doing that she uncovered most
major failures of the old system. One of the major failures was and now
remains--corruption. She chose to go against the system, refused to be
part of corrupt schemes and, ended up facing the system alone, letting
it destroy her business, putting her, her family, and friends behind
bars and again on falsified charges.
Ten years ago, when my mother was Vice Prime Minister for the
Energy Sector, she managed to remove corruption in oil, electricity,
and gas trading and restored financial functioning in this sector. When
the country's leadership resisted her reform efforts she organized
massive protest movements. These protests later grew into the Orange
revolution, which she helped to lead and supported a person for
President she believed would lead the country into democratic victory.
While Prime Minister, even though she had limited control but big
responsibilities, she fought for major reforms and country's well-
being. After she had removed the gas trading monopolist, RosUkrEnergo,
she became enemy number one, to those who were trying to monopolize the
energy market and who are in power now. She ended up illegally
imprisoned, convicted, and tortured for not playing by the rules of
their game, not complying with their orders that were detrimental to
Ukraine.
Her cell in Kachanivska prison outside of Kharkiv, far from her
family and friends, is not a dungeon you may be relieved to know. But
the Yanukovych regime does not need to use medieval surroundings to get
medieval results. Instead, they are using the modern techniques of
sleep deprivation and intimidation to try and break her. They won't
succeed. They are able to deny her a restful night's sleep because her
cell is kept lit and she is filmed and watched 24 hours a day. Lately,
they have introduced a closeup surveillance camera so that they can see
what she is writing to me, to her husband, to her supporters and to the
world.
They say it is done for her protection but I doubt it. When she
fell unconscious in her cell due to a sudden mysterious loss of blood
pressure, no help came, as her cellmate waited for 20 long minutes for
a doctor to come in, who didn't even call an ambulance. She could've
died that night. We found out about the incident 3 days later from her
and her cellmate. Later, they would ``lose'' the video archive and
would make her cellmate rewrite her witness statement.
You will not be surprised to learn that since her incarceration and
the constant pressure the regime has placed on her, my mother has
developed serious health problems, which have gone untreated. The
regime will say that this is my mother's own choice. But can anyone
seriously expect her to trust her physical well-being to a regime that
directs doctors to falsify their diagnoses. Her only request is to be
examined by her own doctors, or independent doctors from abroad. That
does not seem unreasonable. People who keep her behind bars say: ``Of
course, yes, yes,'' then nothing happens. But no one should be
surprised by that. As European leaders have learned all too well over
the past year, Yanukovych can't be trusted to keep his word.
The intimidation that my mother is enduring comes from the fact
that the regime and its prosecutorial henchmen keep piling criminal
charge upon criminal charge, so that my mother and her small team of
lawyers are simply overwhelmed. Against all legal norms, she is
interrogated in her cell, sometimes for 12 or more hours consecutively.
She is given inadequate time to review the documents that will be used
against her in the next court hearing. It was clear at the first trial
and at the appeal court that my mother was convicted before the
evidence was heard. She was even denied a closing statement and
evidence that would have proven her innocence was not admitted. Over
100 other motions made by the defence team were denied.
I have no doubts that the verdict against my mother was sought and
approved by President Yanukovych. She is, according to recent polls,
his main political opponent and more popular than him.
But I don't want you to think that this is only about my mother. It
is not. Others are being repressed and unjustly imprisoned.
Her former colleague, Minister of Interior Yuri Lutsenko, has been
imprisoned for over a year on charges that would be laughable if they
were not so tragic. He is charged with hiring a driver past the
retirement age and of spending $2,000 over budget to mark Ukraine's
national police day. I don't know American political practice very
well, but I can't imagine a former cabinet minister be jailed for over
a year without trial on such charges.
And there are others. The son-in-law of a Supreme Court Chairman
was arrested on the day his wife gave birth, in order to intimidate
that justice into resigning. Former Acting Minister of Defence Valery
Ivashchenko has been imprisoned for almost 2 years, with his health
severely deteriorating. They are all repressed and humiliated because
of their political views. They courageously stood up to the regime and
the injustice and fear it is sowing.
Unfortunately Ukraine turns into an authoritarian regime with
leaders of the opposition sitting in jail.
What we are witnessing in Ukraine is the continuous abuse of the
criminal justice system. Politically motivated prosecutions of former
government officials, civil society activists and prosecutions of human
rights defenders ignore the rule of law. I believe that the current
situation, as described in the recent European Parliament and
Parliamentary Assembly of the Council of Europe resolutions, requires
urgent action.
To say that prosecution of the opposition is just a problem of the
outdated legislation is to miss the obvious. It's really not so much
the law at fault but how it is enforced. Ukrainian authorities
cynically blame the law while everyone knows that the prosecution
system and the judiciary is under the complete control of the governing
party via the so-called High Council of Justice, which is controlled by
President Yanukovych. No law enforcement agency dares to make a move to
prosecute the political opposition without instruction from the
President.
Numerous legal infringements of the European Convention of Human
Rights were listed and explained in three reports of the Danish
Helsinki Committee, which was commissioned by the EU, to find the truth
in the political, so-called ``criminal'' cases. This shows a systematic
prosecution of the opposition or people close to it. And my mother is
the main target.
What we are witnessing in Ukraine is such a twisting of the rule of
law that it is impossible to distinguish illegality from legality, hard
to see the line between law and abuse of law. My mother is imprisoned
under an old Soviet Era Criminal code of 1960, that criminalizes
political decisions. Even as out-dated as they are, they have been
applied illegally in her case. It is important to know that there was
no accusation or evidence introduced in the court that my mother
personally gained from negotiating the gas deals and ending the
European gas crisis in January 2009. Two letters filed by acting
Minister of Justice, Mr. Lavrynovich, and ex-Prosecutor General, Mr.
Medvedko, state the same. The state gas trading company ``Naftogas''
has recently issued a statement, that calculation of losses that my
mother is charged with, was done under severe pressure from the General
Prosecutor's Office.
Politically motivated charges of which my mother was found innocent
a decade ago have also been reopened, with no legal basis. Past Supreme
Court rulings are being ignored. The statute of limitations is also
ignored, as some of the charges now being brought against my mother for
her business activities stem from 15 and 16 years ago. They have been
reopened for only one reason, to destroy her reputation in the EU and
the USA.
These new cases can take care of a few other problems for
Yanukovych's government. She will stay in jail despite the European
Court of Human Rights' decision, if it is in her favour. They put more
psychological pressure on her by prosecuting and charging her husband,
her father-in-law, and ex-colleagues.
Yanukovych and his team are trying to do everything possible to
charge my mother with corruption. They hope the smallest hint of
corruption will confuse Western politicians and make them turn their
back on Ukraine and on her. And that's what Yanukovych's administration
is trying to achieve. They spent millions of U.S. dollars hiring
American audit companies in hoping they can find traces of her
corruption. Hundreds of her ex-coworkers were summoned for questioning.
They were looking hard, but never found anything and they never will.
The current government's activities are not only ruining the image
of Ukraine, and Ukraine as a united nation, but also the profitable
sectors of the economy, that become paralyzed and eventually abandoned,
when the rule of law is ignored. Successful people prefer to leave
Ukraine and our population is declining.
Indeed, not even our Constitution has survived Yanukovych's
contempt for law. To grab more power for himself, he simply junked it.
His first breach of the Constitution, was signing a shameful Kharkov
agreement with Russia which was nothing but a concession of Ukraine's
national interests. The lease of Sevastopol naval base to Russia was
supposed to give Ukraine a major discount on Russian natural gas, but
at the end of the day Yanukovych got a price $100 higher than my mother
did in 2009. By this standard, he and not my mother should be in prison
if the law was applied equally.
I know that Ukraine must seem like a faraway place, and that our
problems must also seem distant from the concerns of Americans at this
difficult time for America. But just as no man is an island unto
himself, no democracy is an island. When one nation's is allowed to be
hijacked, all democracies are threatened. Ukraine exists in a fragile
neighbourhood, where war broke out just a few years ago across the
Black Sea in Georgia.
I am here today to answer your questions, Senator Shaheen, but also
to plead that America do all that it can to preserve democracy in my
country. My mother's plight has united many great, strong nations and
amazing people, true heroes of our time who are trying to get her and
other political prisoners out of jail. We are hoping for your support.
It is paramount for Ukraine to have free and fair elections this fall,
but it would be impossible without major opposition leaders.
I know my mother will not let Ukraine fall back into the Soviet
past. She is strong enough to do it and to win the elections if she is
allowed to run. She has already succeeded in bringing fractioned
opposition into one united front.
The enemies of democracy and freedom should not be welcome in a
democratic society unless they correct their mistakes. I ask you to
consider all possible ways to influence them and to explain to them the
consequences of their actions. But most of all, I ask you to speak out,
loudly and clearly, so that the people of my country do not feel
abandoned and lose hope.
Senator Shaheen. Thank you very much for being here and for
your eloquent testimony. You point out, as the previous panel
did, that this is about more than just the case of your mother,
as difficult as that is personally, but it is also about
selective persecutions and rule of law and really moving the
democratic process backward in Ukraine, unfortunately, rather
than keeping it moving forward.
Can you talk a little bit about how the public in Ukraine
has reacted to your mother's imprisonment?
Ms. Tymoshenko Carr. Well, of course, during the beginning
of the court, there were many people coming, joining us and the
family and the team outside the court. And we could see many
supporters even throwing themselves under the prison van when
my mother was taken, when she was arrested on the 5th of
August. But the amount of the military forces and police forces
accumulated there brutally stopped any kind of protests by the
court and actually the protests after that were maybe not so
numerous but were definitely less in number than the military
and the police.
A lot of statements and appeals to free her were made by
the local elite, by the actors, intelligentsia, by the leaders
of our civil society. I mean the support was and still remains
unprecedented. I mean, the support is growing and she has
become more popular now than Yanukovych and his party.
Senator Shaheen. You talked about the statement of National
Security Director Clapper and I talked a little bit about the
letter from Secretary Clinton to your mother. Are there other
actions that the United States can take to demonstrate our
support for your mother's release and how has your mother
responded to some of those statements?
Ms. Tymoshenko Carr. Well, I think she only holds on
because of the support of the democratic world now, and now we
see that the pressure is building because the repressions are
becoming worse in Ukraine. And of course, we are here to ask
you to keep up this pressure because, as we see with other
cases around the world of political prisoners, this helps. And
the more we make sure that the regime and the people who are
persecuting their opposition in Ukraine should know that they
are under watch and their course of action should be changed.
We could also ask about restrictive measures to those in
particular who are creating this political repression and
cynically continuing to do so despite signals from the
democratic world. Of course, it is my mother's and Mr.
Lutsenko's and other prisoners' concern that Ukrainian nation
does not suffer from such actions.
Senator Shaheen. Thank you.
I understand that your father was recently granted
political asylum in the Czech Republic, I understood because
there were some concerns that he might also be arrested. Are
you hearing that about others who have been part of the
opposition, and are you afraid for your own safety?
Ms. Tymoshenko Carr. Well, thank you for this question.
The old cases that have been reopened against my mother
actually have been reopened also against the members of my
family and against her ex-colleagues and friends, and there is
a tremendous pressure that these people will be put and were
put under prosecution. And my grandfather, who is a victim of
stroke--he can't even move--he has been put under investigation
now with no legal basis as well.
At least the people who are under prosecution now--and
every day we found more and more. They are mostly members of
the opposition like the ex-governor of Kharkov, Mr. Avakov, who
has been recently now also put under investigation. Her house
has been searched by people in masks without any legal basis.
And he had to flee the country. This, I am afraid, will
continue.
Senator Shaheen. Thank you very much.
Senator Menendez.
Senator Menendez. Thank you, Madam Chair. Thank you for
holding this hearing. I think it is incredibly important. It
seems to me that the Ukraine is at a crossroads. It is
backsliding on human rights. Corruption is on the rise. The
energy sector has great potential, but it seems to be largely a
mess right now. And I think its political leaders have to
decide where it wants to hitch its wagon in the future: to the
West or to Russia.
It is of real concern to me, as someone who cares very much
about democracy and human rights on this committee, that while
the Orange Revolution was a success, its leaders, obviously,
have not followed the spirit of that revolution at the end of
the day. Freedom of the press is restricted. The 2010 local
elections were largely a sham, and we have the present set of
circumstances that we are talking about.
So I really appreciate the chair's leadership in calling
this hearing.
Ms. Tymoshenko, I appreciate your coming before the
committee. I personally believe your mother is a pioneering and
incredibly strong woman who is an example for all people who
care so much about their country that they are willing to
endure extraordinary hardship and not just lay down the face of
oppression. And I think having you in this panel at this
hearing is an extraordinary way to inform the American people
about your mother.
I am wondering what else you think my Senate colleagues,
who might pay some attention here, can do to make sure that
more people learn about her situation and keep the pressure on
the Ukrainian authorities to seek her freedom?
Ms. Tymoshenko Carr. Thank you, Senator.
Well, I wanted to mention the resolution that was recently
passed in the Parliamentary Assembly of the Council of Europe,
and it states very strong points on ways out of this political
crisis and names a few solutions which is humanitarian release,
but actually unfortunately now it became not as much as a
political but humanitarian problem for the people illegally put
behind bars because of their health and maltreatment. But also
it is calling President Yanukovych to use all constitutional
means to solve the situation and to release the political
prisoners. So we wanted to urge you to act upon this resolution
and to join in the efforts with EU to follow this up and put
the pressure more according to the points to the Government of
Ukraine.
Senator Menendez. Well, I appreciate that. I am concerned
by the trajectory in the Ukraine, as the human rights situation
worsens it is starting to remind me of the shameful conditions
of the Soviet era in which the yokes were broken from. I know
your mother worked very hard to throw off the tyranny of the
Soviet past, and to see her and other opposition leaders in
jail is a reminder that no one is safe in today's Ukraine. And
so I hope, Madam Chairman, that for our bilateral relationship
the State Department is focused on changing the course of
events.
I am also very concerned about the growing economic
relationship between the Ukraine and Russia, not in the context
of a relationship that any two countries might have in a
bilateral way, but especially as it relates to energy
cooperation. That it is ultimately perverting the views of what
the Ukrainian society and democracy should be about.
I know you are here primarily to focus on your mother's
freedom, which I fully understand. I am wondering whether you
have a view as to how we convince President Yanukovych to look
at Ukraine's path in the future and economic prosperity, not to
a return to Soviet-style centralized government, but to release
the power and the dignity of the Ukrainian people as well as
their ingenuity and intellectual ability to make for a better
Ukraine.
Ms. Tymoshenko Carr. Thank you.
I wanted to stress again that this case is not just about
my mother. My mother is just an example of such repressions
that happen. As you said, if it is happening, it can happen to
leaders of opposition, the people who are popular now and enjoy
majority support in the country, then what can happen to a
simple citizen of Ukraine? And this is the crisis that touches
everyone, all the Ukrainian citizens, and actually the
surrounding countries that Ukraine is really the remaining
democracy and had a very strong chance to restore the democracy
if the elections in autumn will happen and will be fair and
free. And that could only happen if the opposition leaders are
present there.
So when the Parliament or Assembly of the Council of Europe
demanded for President Yanukovych to use all constitutional
means to free political prisoners, it also urged him to amnesty
these political prisoners and let them take the rightful parts
in the parliamentary elections so that people of Ukraine can
vote and choose and judge rather than the manipulated courts.
So I think the actions of Yanukovych and his team are now
isolating Ukraine, and their playing off the interests against
Europe and Russia just led us to more isolation. And I think
that in order to save democracy, the only way is to urge and
pressure our government and Yanukovych to change his course
even maybe by applying certain restriction measures to their
luxuries and wealth that they allow themselves, unfortunately,
at the moment.
Also Transparency International recently made a statement
of the massive corruption going on in preparation to Euro 2012,
and there are many examples, unfortunately, of such corruption.
Senator Menendez. Thank you.
Thank you, Madam Chair.
Senator Shaheen. Thank you very much, Senator Menendez.
And thank you, Ms. Tymoshenko, for being here.
Ms. Tymoshenko Carr. Thank you very much. It is an honor.
Senator Shaheen. We will continue to follow what goes on in
the Ukraine very closely.
I appreciate all of the witnesses' testimony today.
The record will be open until close of business on Friday.
At this time, I would like to close the hearing.
[Whereupon, at 4:14 p.m., the hearing was adjourned.]
----------
Material Submitted for the Record
Johns Hopkins Center for Transatlantic Relations Report ``Towards an
Open Ukraine: Policy Recommendations''
Ukraine is one of the biggest, but also the second poorest country
in Europe after Moldova. Given its territorial size, its geographic
position, its almost 50 million population and its role as the main
transit state for Russian oil and gas exports to central and western
Europe, Ukraine has been a critical strategic factor for Euro-Atlantic
and Eurasian security in the two decades of its independence. Today, it
stands at a critical crossroads between developing a more open society
increasingly integrated into the European space of democracy,
prosperity and market-based economics grounded in respect for human
rights and the rule of law, or an increasingly autocratic system, mired
in the economic stagnation and political instability that is
historically characteristic of Europe's borderlands. The choice is
straightforward: Ukraine can either join the European mainstream or
remain in a gray zone of insecurity between Europe and Russia.
The following recommendations outline how Ukraine could move away
from immobility in the gray zone of domestic and international politics
in which it finds itself, break its reform logjam and become an Open
Ukraine--a democracy accountable to its people with a socially
responsible market economy, governed by an administration that respects
the rule of law, fights corruption and that can effectively implement
needed reforms, and that is increasingly integrated into the European
mainstream. These proposals are intended to expand the horizons of
Ukrainian elites and opinion leaders and equip them with concrete
reasons to move from short-term ``momentocracy'' to a more powerful
vision that could guide their country. They also suggest ways Ukraine's
neighbors can make the costs and benefits of Ukraine's choices clear.
political reforms and democratization
Ukraine's fundamental problem has been government dysfunction with
leaders changing the constitution and election laws to deny power to
the opposition or maximize power for themselves after elections. For
Ukraine to have more effective governance, it must tackle seven
interrelated challenges: switching from a presidential to a
parliamentary political system, which is better suited for encouraging
democratization; parliamentary and legislative reform; administrative
reform; strengthening the rule of law; judicial reform; eradicating
systemic corruption; and strengthening civil society and independent
media.
Switch to a Parliamentary System. The scholarly and policy
debate has been extensive whether presidentialism or
parliamentrism is best suited for countries in transition. Of
the 27 post-Communist states, those with successful democracies
in Central-Eastern Europe have adopted parliamentary systems
while authoritarian regimes in Eurasia are primarily bult on
Presidential systems. Parliamentary systems have therefore been
successful in promoting democracy and European integration than
presidential systems. Over two decades Ukraine has had a
presidential system for a decade (1996-2005) and again since
2010 when the Constitutional Court ruled under pressure from
the executive that constitutional reforms adopted in December
2004 and going into effect after the March 2006 elections were
``unconstitutional'' (the same Court had refused to consider
the same question under President Viktor Yushchenko).
Presidentialism in Ukraine has stifled democratic developments,
encouraged authoritarianism, promoted censorship of the media
and became a nexus of corruption and illegality. Unelected
regional governors, which duplicate elected local councils and
mayors, have traditionally been at the center of election
fraud, patronage and corruption. Abuses of presidentialism are
clearly evident under President Viktor Yanukovych who has
sought to maximize power at the expense of Parliament, the
Cabinet, regions and local councils.
Parliamentary and Legislative Reform. A strong and
independent legislature is vital for jump-starting the reform
process in Ukraine, yet the Ukrainian parliament turned into a
rubber-stamp body with minimal political authority. Open
Ukraine requires legislation, drafted in a transparent manner
and be open to public deliberation, that would ensure a level
playing field for competing political parties and their fair
representation in the Parliament. The mixed system, adopted in
November 2011 ignoring recommendations by the Council of
Europe's Venice Commission, prevents this by skewing election
results in favor of the Party of Regions. Provisions for full
disclosure of candidates' funding sources and for challenging
election results are essential for a democracy. The law should
limit the ability of electoral commissions to interfere with
the electoral process. The parliament's role in choosing
candidates for Cabinet positions must be revived. It must also
have strong oversight powers over the executive. Internal rules
for coalition formation should prioritize party factions over
individual deputies; the majority coalition should be formed
based solely on parties elected to the parliament and not, as
has been the tradition until now, of new parties and factions
created after elections within the life of parliaments. There
should also be a strict enforcement of the rules requiring
deputies to vote individually (that is, a halt to the
widespread practice of absentee voting) and disclose their
personal incomes. The legislative process should be streamlined
to improve the quality of legislation, possibly with the
assistance of a Council of Foreign Advisers as was the case in
the first half of the 1990s.
Administrative Reform. The executive needs to be streamlined
and decentralized to allow for more effective and accurate
application of law. Many government ministries and state
committees have overlapping responsibilities, duplicating
functions and wasting resources.
Strengthen the Rule of Law. In Ukraine the law continues to
be viewed as an instrument of partisan governmental power. That
which is construed to be ``illegal'' is whatever the government
in power finds to be politically expedient. Procedural
safeguards that are at the heart of a rule of law legal system
are absent or ignored. Ukraine should fundamentally and
profoundly transform its legal system if it is to spread
European values and the rule of law. This means coming to grips
with the legal system's catastrophic Soviet past; reforming the
legal academy; and reforming the laws, procedures and
mechanisms that remain in place as holdovers from Ukraine's
totalitarian legacy. The Prosecutor's office needs to be
overhauled or replaced. It has become highly compromised
through corruption and under Yanukovych it has returned to its
Soviet function as a state arm of repression.
Judicial Reform. In a system that respects the rule of law,
judges are professional, independent and impartial; they are
not ``accountable'' to prosecutors. Prosecutors, in turn, do
not act as the partisan political arm of the government. That
is not the case in Ukraine today. The court system is
endemically corrupt, incompetent and subject to commercial and
political influence. Judges are routinely bribed to secure
convictions or release of those charged or to alter title deeds
in businesses in the widespread practice of corporate raiding.
The President exerts political influence over the judiciary
through the High Council of Justice, which is dominated by
representatives of the ruling party and the Chairman of the
Security Service, a direct conflict of interest. Ukraine's
judicial system is in dire need of overhaul. The competence and
jurisdiction of differing courts must be clarified. Training
and selection of judges need to be made more transparent and
meritocratic. Courts and judges require sufficient financing so
as to discourage corruption. Concepts along these lines were
approved five years ago, but have yet to be implemented. Court
proceedings should be made more transparent, impartial, and
effective. Procedures for mediation, independent arbitration,
and enhanced use of notaries should be introduced. The power of
the High Council of Justice to select or discipline judges
should be transferred to a nonpartisan body comprising of
authoritative and experienced judges, such as the High
Qualifications Commission. The President's and Parliament's
role in appointing or removing judges should be limited to mere
approval of the Commission's recommendations with few clearly
specified exceptions.
Eradicate Systemic Corruption. The presence or absence of
rule of law in a society is closely related to the level of
corruption. Corruption has become endemic in Ukraine and is
growing; it has degraded the country's governance, undermined
its democracy, reduced public trust in state institutions,
distorted the economy, discouraged foreign direct investment
and been exported to Europe. To reduce corruption, Ukraine
needs political leadership committed to and greater societal
awareness that corruption impedes economic development,
democratization and European integration. Organizations and
individuals committed to combating corruption need to mobilize
behind specific, concrete initiatives--such as draft laws
regarding codes of criminal procedure, professional ethics, and
financial declarations by public servants. There is a wealth of
international experience on how to reduce corruption,
particularly from other post-Soviet or post-socialist
countries; Ukraine should take advantage of such experience.
Strengthen Civil Society and Independent Media. Media
censorship under Yanukovych has not yet reached the level
characteristic of Kuchma's presidency and is different in
nature. Nonetheless, even though major media outlets in Ukraine
have not yet fallen fully under the government's control, their
independence has eroded substantially due to the excessive
interference of owners keen to remain on good terms with the
executive in news coverage. Television news is dominated by
good media coverage of the authorities and either paints the
opposition in a negative light or ignores them. Only print and
Internet-based media still function as an instrument of
accountability and a source of reliable news. Further
international assistance to these media outlets is vital for
supporting media pluralism.
economic growth and modernization
During the last two decades Ukraine has moved from a command
administrative system but has still to arrive at the final destination
of a market economy, despite recognition by the U.S. and EU in 2005-
2006 of a ``market economy'' status. Ukraine's ``partial reform
equilibrium'' is stuck between the Soviet past and European future and
only concerted reforms will move the economy towards a Europeanstyle
social market economy. Ukraine was hit hard by the global economic and
financial crisis. The combination of weaker demand from Ukraine's
trading partners, falling export prices, rising import prices and
reduced access to international financial markets sliced GDP by 14.8
percent in 2009, and it will take until 2013 to recover that lost
ground. Inflation is hovering above 9 percent and unemployment at 8
percent. The hryvnia, Ukraine's national currency, has lost almost half
of its value against the U.S. dollar since July 2008. Pension
expenditures increased from 9 percent of GDP in 2003 to 17.6 percent in
2010, one of the highest levels in the world--yet pension fund revenues
cover only two-thirds of expenditures, the rest being covered by
transfers from the budget. Demographic pressures will increase the
burden on the working population even further. Ukraine's successful
accession to the WTO in May 2008, after 15 years of negotiations, was
an isolated foreign policy achievement of the Yushchenko presidency.
President Yanukovych launched reforms in summer 2010, but
implementation has been very slow due to a lack of political will,
populist concessions ahead of parliamentary elections in 2012, and a
deficit in government capacity to draft EU-compatible legislation. The
refusal to implement further stages of the 2010 MF agreement, including
raising household utility prices for a second time, has led to the
suspension of IMF tranches. It is imperative that Ukraine return to the
IMF agreement in order to introduce reforms and boost foreign investor
confidence.
The following areas are urgent on the road to an Open Ukraine:
Pension reform has been long delayed, yet is critically
important for restoring Ukraine's financial sustainability. The
IMF demand to raise the pension age from 55 to 60, as part of
the July 2010 agreement for Ukraine, was adopted by parliament
in 2011.
Simplified taxation and licensing, including simplified
accounting of revenues, should be introduced for small and
medium businesses. Previously introduced reform principles must
be made operational, such as the ``one-stop shop'' for
registering and licensing businesses. Any permits other than
those directly stipulated by the law should be abolished.
Remaining permits and activities subject to mandatory licensing
should be compiled into a single piece of legislation.
Corporate legislation reform. The Economic Code of Ukraine
is a confused mix of Soviet command economy elements and market
institutions. It should be abandoned. The Civil Code of Ukraine
should comply with EU Directives on company law. The new law on
joint stock companies must be amended to comply with EU
Directives on company law, and internationally accepted
principles of corporate law and corporate governance best
practices, by replacing the profit-extracting legal model for
such companies to one of investor protection. Modern legal
structures are needed for small and medium enterprises and
domestic and foreign investors via a separate limited liability
company law that provides for an efficient system of
governance, control bodies and reliable protection of minority
participants. The law on re-establishing solvency of a debtor
or declaring a debtor bankrupt must be amended to prevent
abuses by related-party (conflict of interest) transactions and
by enhancing the personal responsibility (liability) of company
officers and the bankruptcy commissioner.
Agricultural Reform. The moratorium on trading agricultural
land should be ended and free access of citizens and
agricultural producers to land resources ensured. Prices for
agricultural land should be liberalized and work on
establishing a land cadastre should be continued. Consideration
should be given to allowing foreigners and foreign-owned
companies to own some agricultural land deposits (e.g. up to 10
percent of land in each region [oblast]). Such reforms would
attract more capital, help to import and disseminate modern
agricultural technologies, and facilitate greater access to
international channels of distribution of agricultural
products. Moreover, Ukraine has a strong interest in the
liberalization of global trade in foodstuffs. Administrative
restrictions on exports should be abandoned and delays in VAT
refunds to exporters urgently fixed. Targeted income support
measures should be introduced for poor families to compensate
for the rise in foodstuff prices. Social support and re-
training programs for redundant agricultural workers need
strengthening. Ukrainian law on state support of agriculture
should be consolidated into one piece of legislation. An
information service for agricultural markets should be
established to monitor and forecast global food markets and
collect information on standards in other countries. Sanitary
and safety standards should, as a matter of high priority, be
aligned with international and EU norms. Establishing WTO-
compatible free trade agreements with other non-EU trade
partners is in Ukrainian interests.
energy efficiency and independence
Ukraine's energy sector is plagued by aging infrastructure,
widespread corruption, political manipulation of utility rates and
statistics, and minimal foreign direct investment. Although Ukraine has
oil, gas and coal reserves, it is one of the most energy inefficient
economies in the world and only able to cover 47-49 percent of its
energy demand. Gas imports account for 7-8 percent of Ukrainian GDP and
are clearly unsustainable. Around half of Ukraine's total energy
consumption comes from natural gas. Although Ukraine has large
conventional and unconventional gas resources, it will be unable to
boost domestic gas production without deeper and comprehensive reforms
and significant foreign direct investment. While it has coal reserves
for another 100 years, the productivity of coal extraction is very low
and its production costs are high. Coal mining is highly dangerous and
Ukraine has one of the highest rates of accidents in the world, close
to Chinese levels. Without restructuring, modernization and liberalized
market reforms, Ukraine will be unable to cope with its energy supply
challenges, including decreasing its extremely high energy consumption.
Moreover, Ukraine is deeply dependent on Russia, which supplies 85-
90 percent of Ukraine's oil imports and 75-80 percent of its natural
gas imports. In addition, in 2010 Ukraine signed agreements with Russia
to build two nuclear reactors and to deliver only Russian fuel to all
Ukrainian reactors until they cease operation. These arrangements have
stunted necessary domestic reforms and weakened Ukraine's bargaining
position vis-a-vis Russia, particularly with regard to gas imports and
transit. Moscow uses the gas issue to exert pressure on Kyiv over
various bilateral issues. Kyiv signed a gas agreement with Moscow
disadvantageous to Ukrainian interests, yet Moscow insists that any
review of that agreement would only be possible if the state gas
company Naftohaz Ukrainy merged with Gazprom, ownership of the
Ukrainian GTS was transferred to Gazprom, or if Ukraine joined Russia's
Customs Union with Belarus and Kazakhstan. Yanukovych has publicly
rejected such conditions as ``humiliating,'' and Ukrainian law prevents
the selling, renting or leasing of critical energy infrastructures to
foreign countries and companies. Russia is pushing for a new gas
consortium over the GTS acquiring majority control, leaving Ukraine
just 20 percent of its shares. Such an arrangement would question
Ukrainian sovereignty and independence, threaten efforts at deeper
democratic and market reforms, and pose considerable challenges to EU
energy security and foreign policy. Giving up sovereignty over the GTS
is seen by the Nikolai Azarov government as a better option than
implementing unpopular IMF reforms (such as raising household uility
prices to reduce Naftohaz Ukrainy's contribution of 2 percent to the
budget deficit) as Russia will provide gas at a subsidized price in a
new contract.
An Open Ukraine requires Kyiv to boost domestic energy efficiency;
eradicate endemic corruption in the energy sector; adopt all of the
elements in the European Energy Community that it signed on to; and
diversify its energy mix and strengthen its national security by
reducing its dependence on Russia.
Boosting Energy Efficiency. Ukraine's energy infrastructure
is inefficient and wasteful. The country has invested little in
energy efficiency, yet such efforts are critical to Ukraine's
energy security. A major step forward would be for Kyiv to take
the politically unpopular decision to raise gas prices for
households and utilities, which are heavily subsidized (a first
increase was undertaken in 2010 but the Cabinet balked at
taking a second increase ahead of the 2012 elections). The
domestic political fallout could be mitigated by compensatory
measures for low-income households. Artificially low gas prices
in the past have dampened any incentive to boost domestic gas
extraction or to improve efficiency and a new gas contract with
a return to subsidized prices will again freeze Ukraine's
inefficient and wasteful energy sector. These have fuelled
high-price gas imports from Russia, compromising Ukraine's
national energy security and its overall economic
competitiveness. Most Ukrainian energy producers have been
unable to finance even their replacement investments because
their revenues from domestic sales do not cover their costs.
The only real beneficiary of the artificially increased demand
for gas is the Russian state gas company Gazprom. In contrast,
the Ukrainian state gas company Naftohaz Ukrainy needs
budgetary support because of highly subsidized utility prices.
Eliminate endemic corruption in the energy sector. The lack
of strong market reforms is linked to systemic corruption and a
nebulous legal and legislative framework, which have unnerved
the markets and scared away foreign investment. If Ukraine is
serious about its energy security, it will work to eradicate
systemic corruption and establish clear legal ground rules for
investments in its energy sector.
Adopt European Standards. On February 1, 2011, Ukraine
became a full member of the European Energy Community (EEC),
which extends the EU's internal energy market to Ukraine. It is
strongly in Kyiv's interest to live up to the obligations such
membership entails, including full adherence to anticorruption
norms of European law and implementation of the EU's third
energy package of unbundling energy production from its
distribution in gas and electricity markets by January 2015.
The implications of this third package are far-reaching and
often not fully understood. EEC members are obliged not only to
revise their laws and to adopt secondary legislation but also
to promote fundamental changes in market structures by
introducing market rules and legislation. Central European
practice offers Ukraine a means to implement EU acquis in
energy despite its dense interwoven ties with Russia, whereby
long-term Russian contracts could enjoy temporary derogation
from EU regulations.
Diversify. Energy cooperation with the EU and other foreign
partners could help Kyiv diversify its fossil-fuel imports and
its overall energy mix and reduce its dependence on Russian gas
and oil. Ukraine has excellent wind resources and possesses
significant unconventional (shale) gas deposits. Ukraine's
Parliament has already passed more investor-friendly
legislation to open its domestic natural gas market to foreign
shale gas and coal-bed producers. Exploitation of these
reserves could give buyers more leverage to renegotiate the
high Russian oil-indexed gas price demands that are included in
long-term contracts, and could drastically reduce Ukrainian
dependence on Russian gas. Moreover, the confluence of EU
energy market liberalisation, stepped-up antitrust enforcement,
and the emergence of unconventional gas supplies in European
markets may prompt Russia to increase its own efforts at energy
efficiency and to invest in its own unconventional gas
resources, which may be much cheaper than investing in the
extremely costly Yamal Peninsula and Shtokman projects, and
perhaps lead to greater reciprocity and symmetry in both
Ukrainian and EU energy relations with Russia. On the other
hand, if Ukrainian and European gas policies remain hostage to
long-term contracts, ``take-and-pay'' clauses and oil price
linkages, even though international gas markets have de-linked
from oil price markets prospects are dim for new and
sustainable integrated energy and climate policies.
a strategy for the west: open door, straight talk, tough love
Given Kyiv's turn to autocracy, it would be tempting for Western
policymakers, besieged with other priorities, to turn their backs on
Ukraine. This would be a strategic mistake. The United States and the
EU have a strong stake in an Open Ukraine secure in its borders and
politically stable. A more autocratic, isolated and divided Ukraine
would be a source of continued instability in the heart of Europe. It
would make it harder for Georgia and Moldova to pursue their pro-
Western course. It would diminish prospects for reform in Belarus. It
would perpetuate a gray zone of borderlands on a continent that has
until now enjoyed an historically rare moment to transcend the
tragedies of its past divisions. Western leaders should avoid falling
into the same short-term mindset that currently befalls Ukrainian
elites, and adopt a broader strategic perspective.
Ukraine is beset by regional and cultural divisions that will have
a profound impact on the country's political evolution. As Ukrainians
debate the norms that should guide their society, normative consistency
by their Western partners can provide orientation and strength. This
does not mean softening norms or conditions for effective engagement,
but it does mean being clear about the benefits that could result from
adherence to such norms. The West has a vested interest in ensuring
that Ukrainian leaders understand the opportunities and consequences
that could result from their decisions, and should be consistent in
setting forth a coherent and coordinated framework of relations that
can help shape those choices.
As Ukraine struggles to find its place in 21st century Europe,
therefore, the door to that Europe should be kept open. There is no
consensus at present within the EU about the possibility of ultimate
Ukrainian membership. Yet if the door to Europe is closed, the
Ukrainian Government will have little incentive to advance political
and economic reforms, and could either turn to alternative geopolitical
frameworks or remain isolated in a geopolitical gray zone, generating
instability and insecurity throughout its wider neighborhood. Clear EU
support for the principle of the Open Door, on the other hand, can help
Ukrainians build the courage and political will to implement tough
reforms at home--not as a favor to others, but because they understand
it is in their own interest to do so. have an effect on internal
developments in Ukraine. And if Kyiv begins to implement reforms that
promise to move Ukraine toward an open, democratic and market-based
society, such actions can in turn affect what leaders in EU capitals
are willing to offer Ukraine.
Based on the continued validity of the Open Door, Western strategy
should advance along two tracks that work together. The first track
should demonstrate the genuine interest of North America and Europe in
close and cooperative ties with Ukraine, and should set forth in
concrete terms the potential benefits of more productive relations.
They should make it very clear that Europe and the U.S. stand as
willing partners if Ukraine decides to invest in its people, forge
effective democratic institutions, build a more sustainable economy
grounded in the rule of law, tackle endemic corruption, diversify and
reform its energy economy; and build better relations with its
neighbors. U.S. and European efforts should seek to strengthen
democratic institutions; promote the growth of civil society,
especially independent media; support economic reforms; provide
technical assistance for energy reforms; and facilitate interaction
between Ukrainian citizens and their neighbors, including visa
liberalization, business and student exchanges. If Kyiv signals by its
actions that it is interested in deepening its engagement with the
West, North America and the EU should be equally ready to engage while
pushing for more comprehensive economic and political reforms aimed at
facilitating Ukraine's integration into Euro-Atlantic institutions.
At the same time the U.S. and Europe should make it clear that if
Ukraine's leadership abuses the rule of law, facilitates corruption,
fails to advance effective reforms, and resorts to intimidation
tactics, as is currently the case regarding the Tymoshenko conviction,
the prospects for an open, prosperous and secure European Ukraine will
fade. International efforts to deter Ukraine's further backsliding
should combine the threat of costly sanctions toward the ruling elite
with calls for unencumbered engagement of citizens in political life,
targeted assistance to key civil society actors and specific proposals
for reforms that could pave the way toward a more open Ukraine. Outside
pressure on Ukrainian authorities clearly has its limits, of course,
and the main brunt of responsibility for the evolution of Ukraine's
political regime lies with domestic actors. However, as the Orange
Revolution demonstrated, Western influence can restrict the range of
options available to authorities who choose to fight their own people,
and can help to weaken the internal legitimacy of some of the
government's antidemocratic policies.
In short, a proactive Western policy might be best characterized as
Open Door, Straight Talk, and Tough Love. Such an approach requires
persistence, patience, and consistent engagement on the following
priorities:
Support Civil Society. By monopolizing political space and
marginalizing the opposition, Ukrainian authorities undermine
the reform process and weaken public trust in government
activities. Transformative reforms of the magnitude needed in
Ukraine require support across the country and from political
forces on both sides of the major political divide. North
American and European governments and international
organizations should stress the critical importance of a free
and fair parliamentary campaign in October 2012 ahead of the
process and cast a spotlight on even minor violations of
democratic procedures. They should weigh in against any signs
of abuse of state-administrative resources or biased
limitations on opposition activity or campaign financing, in
order to prevent further emasculation of civic groups or
further closure of the civic space for independent political
action. They should encourage Kyiv to lower barriers to
independent media and to ensure media access to the opposition.
They should encourage active involvement of opposition parties
and leading NGOs in the process of drafting reform strategies
and ensuring government accountability at all levels.
International organizations should provide technical assistance
in training election observers and electoral commission members
representing all political parties.
Advocate Institutional Reform. Western governments and
international organizations, particularly representatives of
post-Communist countries, should advocate targeted
institutional reforms aimed at establishing a legally grounded
balance of authority among the executive, legislative, and
judicial branches; increasing the government's accountability
to the Parliament; and strengthening oversight agencies, such
as an independent anticorruption bureau, accounting chamber,
the office of the ombudsman and the financial regulatory body.
They should offer concrete suggestions to depoliticize the
judiciary and the civil service, which are still dominated by
vested political and business interests.
Support Ukrainian Efforts to Tackle Systemic Corruption. The
West should develop consistent medium- to long-term strategies
to help Ukraine fundamentally reform its legal system and to
reduce systemic corruption.
Offer Technical Support for Reforms. Ukraine's Cabinet lacks
staff to develop draft legislation and government employees are
not qualified enough to develop modern economic legislation.
Provision of technical assistance will be crucial to Ukrainian
political, administrative, economic and energy reforms.
Be Clear about the Consequences of Undemocratic Activities.
North America and the EU demonstrated impressive unanimity in
condemning the trial and conviction of Yulia Tymoshenko in
October 2011 and issued strong demands for her release and
resumption of her ability to participate in the political life
of the country. They should link such condemnation with
concrete measures that would raise the cost to Ukrainian
authorities of further undemocratic steps. Such measures should
include suspension of Ukraine's membership in the Council of
Europe; introducing visa bans for those officials responsible
for ordering the crackdown against protesters or persecution of
the opposition; a freeze on negotiations for an Association
Agreement (including the DCFTA); and limiting bilateral
contacts with top Ukrainian officials and state visits to Kyiv.
At the same time, the West must maintain its clear message that
the door to Europe and Euro-Atlantic institutions remains open
should Ukraine work to create the conditions by which it could
in fact walk through that door.
Make Better Use of the Eastern Partnership. In order to
articulate a policy for neighbors for whom membership is a
distant goal, the EU launched the Eastern Partnership in 2009
with Armenia, Azerbaijan, Belarus, Georgia, Moldova, and
Ukraine. Yet instead of using the EaP to deepen engagement in
Ukraine and other Partnership countries, EU officials dampen
their own influence with rhetoric that distances themselves
from the prospect of a space of stability, prosperity, and
democracy as far across the European continent as possible. The
EU should be far more proactive in its use of the Eastern
Partnership.
Combine Broad Visa Liberalization with Targeted
Restrictions. Kyiv has a strong interest in visa
liberalization with the EU; one in every ten Schengen visas
goes to a Ukrainian. The EU should calibrate its approach
by offering a generous broad-based approach to visa
liberalization for Ukrainian citizens (particularly young
people and students) and facilitating special possibilities
for study abroad and cultural, educational, business and
local government exchanges, so that the average man and
woman in the street, especially in the east and south of
the country, can gain personal awareness of the benefits to
be derived from closer relations; This strategy of
maintaining an Open Europe for Ukrainian citizens should be
combined with targeted visa bans and restrictions for
Ukrainian officials engaged in undemocratic or illegal
activities.
Engage Ukraine Actively via a Transcarpathian Macro-
regional Strategy. New EU macro-regional strategies, for
interest with the Danube states, offer a potential model
for engagement with Carpathian states. This special area is
surrounded by four EU member states, namely Poland,
Slovakia, Hungary, and Romania. All four are neighbors to
Transcarpathia and to each other by cultural, historical
and ethnic ties. The Transcarpathian Region could be
developed into a strategic Ukrainian bridgehead for
integration into Europe. It is already linked by broad-
gauge railway to Hungary and Slovakia, and its special
location and multiethnic traditions are convenient for
offshore zones and assembling factories.
Support Ukraine's democratic development. The proposed
European Endowment for Democracy should disburse aid to
Ukrainian civil society and encourage and defend Ukraine's
democratic development to monitor Eastern Partnership
policy toward Ukraine. The EU should ensure that its
assistance is coordinated with U.S. and Canadian efforts to
ensure they are complementary and not duplicative.
Use the Association Agreement and DCFTA to Advance the
Broader Strategy. With neither NATO nor EU membership on the
horizon, the primary vehicle for keeping open the prospect for
Ukraine's closer ties to the European mainstream is the
Association Agreement and Deep Comprehensive Free Trade
Agreement (DCFTA) currently being negotiated between Ukraine
and the EU. However, the EU has frozen the final negotiations
slated to led to initialing of the agreement, due to concerns
in various EU member states about the political repression and
serious violations of rule of law--particularly the arrest and
trial of former Prime Minister Tymoshenko--that have occurred
since President Yanukovych took office. The DCFTA offers the EU
a mechanism by which it can calibrate a two-track approach to
Ukraine. Initial but . . . [insert language here]. The DCFTA is
in fact a new generation economic agreement ranging far beyond
a standard free trade agreement, not only liberalizing 95
percent of bilateral trade but aiming for deep and
comprehensive harmonization of economic legislation. The
opportunities for Ukraine are immense, given that the EU is the
largest single market in the world, about 130 times larger than
the Ukrainian domestic market and 15-20 times larger than the
Russian, Belarus, and Kazakhstan markets combined. The benefits
to all sectors of Ukrainian society of joining the DCFTA far
outweigh the small number of benefits from entering a free
trade agreement with the CIS.
Keep NATO's Open Door while Engaging Closely. Ukrainian
membership in NATO has again been pushed off the international
agenda for the immediate future. While the door to NATO
membership remains open to Ukraine (and Georgia) in principle,
in reality there is little support in Western capitals for
further enlargement of the Alliance in the near term. Focusing
on NATO membership now will only inflame the political
atmosphere and make progress in other important areas more
difficult. The main obstacle is not Russian opposition--though
this is an important factor--but low public support for
membership in Ukraine itself. \1\ On the other hand, Ukraine
was the first CIS state to join the Partnership for Peace, has
been one of the most active participants in its exercises, and
the NATO-Ukraine Charter on a Distinctive Partnership gives
Ukraine a unique status. Rapprochement with NATO increased
Ukraine's freedom of maneuver and led to an improvement of ties
with Moscow. Ukraine contributes to nearly all U.N. and NATO
peacekeeping operations, in some cases more than some NATO
members.
---------------------------------------------------------------------------
\1\ Popular support for NATO--22-25 percent and below 10 percent in
the Russified areas of eastern Ukraine--is much lower in Ukraine in
comparison to other states in Eastern Europe. See the chapter by F.
Stephen Larrabee.
---------------------------------------------------------------------------
Nonetheless, as long as only about a quarter of the population
favors membership, prospects for Ukraine being admitted to NATO
remain remote. In the meantime, other steps in the security
field could be taken to strengthen cooperation within the NATO-
Ukraine Partnership in areas where there is mutual interest
while encouraging progress toward more open democratic
institutions. Such activities include engaging the Ukrainian
military in a dialogue on military reform; continuing to
involve Ukraine in peacekeeping operations, both within NATO
and bilaterally; enhancing cooperation on nuclear safety;
further developing their crisis consultative mechanism; and
further developing ties in such areas as civil-military
relations, democratic control of the armed forces, armaments
cooperation, and defense planning. Information campaigns should
highlight how NATO provides practical help to Ukraine in
emergency situations, cyber-security, security to the Euro-2012
football championship, orders for Ukrainian industry, and
support for the training of Ukrainian officers. A critical area
of concern, as Ukraine turns autocratic, is democratic control
and reform of internal security forces (Security Service,
Interior Ministry, border guards, customs officers,
Prosecutor's office) whose numbers far outweigh the armed
forces, are used in political repression and involved in
corruption.
Engage Ukraine on Its Own Merits, Not as a Subset of Russia
Policy. A successful Euro-Atlantic policy of engagement toward
Ukraine cannot be a subset of Western policy toward Russia; it
must consider its own substantial interests in an open Ukraine
on their own merits. At the same time, the United States,
Canada, and European allies should send a clear message to
Moscow that they oppose any attempts to undermine the
sovereignty of Russia's neighbors, including threats to their
territorial integrity. Upon entering office Yanukovych acted
quickly to remove key irritants with Moscow, such as the
international campaign to recognize the Holdomor (1933
artificial famine) was genocide; shelving plans to join NATO;
and ramming through an unconstitutional measure that prolongs
the stationing of the Russian Black Sea Fleet in Crimea to
2042-2047. Russia has demanded more, however, including
Ukrainian membership in its CIS Customs Union or Russian
ownership of the Ukrainian GTS. It is clear that Russia finds
it very hard to respect Ukrainian sovereignty and independence.
Yanukovych has received little in return for his efforts at
appeasing Moscow, and despite his interest in closer relations
with Russia, he has also shown that he still prefers being the
leader of a sovereign country to being the governor of a
Russian province. Nonetheless, he faces strong and consistent
Russian pressure on key issues; Western policy should make the
implications of his choices clear. For instance, Ukraine faces
a choice between entering the CIS Customs Union of Russia,
Belarus and Kazakhstan, which is likely to block all
fundamental domestic market reforms; or proceeding with the
kinds of domestic reforms that would enable Ukraine to reap the
benefits of the DCFTA with the EU and closer integration with
the European mainstream, including visa liberalization,
competitiveness, transparency and accountability in Ukraine's
energy markets, greater investments in infrastructure and new
technologies, and reduced energy dependency. The first choice
demands far less than the second choice in terms of domestic
reform, but the second choice promises substantially greater
rewards. And joining the Eurasian Customs Union with countries
that are not members of the WTO (Russia may soon join, but not
Belarus and Kazakhstan) would require a renegotiation of
Ukraine's membership in the WTO and end Ukraine's hopes for an
Association Agreement and DCFTA.
We have no illusions about the difficulty of realizing the vision
of an Open Ukraine. Yet the gains, both for Ukraine and for Europe,
would be considerable. Ukraine's choices are it's to make, but it is
the West's responsibility to make the costs and benefits of those
choices clear and credible to Ukraine's leaders and its citizens..
______
Letter from Ambassador Olexander Motsyk, Embassy of Ukraine,
Washington, DC
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