[Senate Hearing 113-154]
[From the U.S. Government Printing Office]
S. Hrg. 113-154
A PIVOTAL MOMENT FOR THE EASTERN PARTNERSHIP: OUTLOOK FOR UKRAINE,
MOLDOVA, GEORGIA, BELARUS, ARMENIA, AND AZERBAIJAN
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HEARING
BEFORE THE
SUBCOMMITTEE ON EUROPEAN AFFAIRS
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 14, 2013
__________
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COMMITTEE ON FOREIGN RELATIONS
ROBERT MENENDEZ, New Jersey, Chairman
BARBARA BOXER, California BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware RON JOHNSON, Wisconsin
RICHARD J. DURBIN, Illinois JEFF FLAKE, Arizona
TOM UDALL, New Mexico JOHN McCAIN, Arizona
CHRISTOPHER MURPHY, Connecticut JOHN BARRASSO, Wyoming
TIM KAINE, Virginia RAND PAUL, Kentucky
EDWARD J. MARKEY, Massachusetts
Daniel E. O'Brien, Staff Director
Lester E. Munson III, Republican Staff Director
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SUBCOMMITTEE ON EUROPEAN AFFAIRS
CHRISTOPHER MURPHY, Connecticut, Chairman
JEANNE SHAHEEN, New Hampshire RON JOHNSON, Wisconsin
EDWARD J. MARKEY, Massachusetts JAMES E. RISCH, Idaho
BENJAMIN L. CARDIN, Maryland JEFF FLAKE, Arizona
RICHARD J. DURBIN, Illinois JOHN BARRASSO, Wyoming
(ii)
C O N T E N T S
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Page
Aslund, Anders, senior fellow, Peterson Institute for
International Economics, Washington, DC........................ 16
Prepared statement........................................... 18
Cohen, Dr. Ariel, senior research fellow, Heritage Foundation,
Washington, DC................................................. 22
Prepared statement........................................... 24
Johnson, Hon. Ron, U.S. Senator from Wisconsin, opening statement 2
Murphy, Hon. Christopher, U.S. Senator from Connecticut, opening
statement...................................................... 1
Nuland, Hon. Victoria, Assistant Secretary for European and
Eurasian Affairs, U.S. Department of State, Washington, DC..... 2
Prepared statement........................................... 5
Responses to questions submitted for the record by Senator
Edward J. Markey........................................... 44
Wilson, Damon, executive vice president, Atlantic Council,
Washington, DC................................................. 30
Prepared statement........................................... 32
Additional Material Submitted for the Record
Ardouny, Bryan, Executive Director, Armenian Assembly of America,
submitted statement............................................ 48
Gegeshidze, His Excellency Archil, Ambassador of Georgia to the
United States, submitted statement............................. 50
Munteanu, Igor, Ambassador of Moldova to the United States,
submitted statement............................................ 51
Suleymanov, H.E. Elin, Ambassador of the Republic of Azerbaijan
to the United States, submitted statement...................... 46
(iii)
A PIVOTAL MOMENT FOR THE EASTERN PARTNERSHIP: OUTLOOK FOR UKRAINE,
MOLDOVA, GEORGIA, BELARUS, ARMENIA, AND AZERBAIJAN
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THURSDAY, NOVEMBER 14, 2013
U.S. Senate,
Subcommittee on European Affairs,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 3:08 p.m., in
room SD-419, Dirksen Senate Office Building, Hon. Christopher
Murphy (chairman of the subcommittee) presiding.
Present: Senators Murphy, Shaheen, Johnson, and Risch.
OPENING STATEMENT OF HON. CHRISTOPHER MURPHY,
U.S. SENATOR FROM CONNECTICUT
Senator Murphy. This hearing of the Subcommittee on
European Affairs will now come to order.
Pleased to be joined today on our first panel by Assistant
Secretary Victoria Nuland. We will hear from her shortly.
First, we will have some brief opening remarks from myself and
Senator Johnson.
Today's hearing is entitled ``A Pivotal Moment for the
Eastern Partnership: The Outlook for Ukraine, Moldova, Georgia,
Belarus, Armenia, and Azerbaijan. I am very thankful that Ms.
Nuland has made the time to be here. We are also looking
forward to our second panel, in which we will have Damon
Wilson, Dr. Ariel Cohen, and Dr. Anders Aslund present.
On November 28 to the 29th, which is about 2 weeks from
today, European leaders are going to gather in Vilnius,
Lithuania, for an important summit on the Eastern Partnership.
Since its inception in 2009, the Partnership has provided an
important framework for countries that seek a closer
partnership with the European Union. Nearly 5 years later, the
concept of ``more for more'' will be tested, and several
partner states who have made significant progress on the reform
agendas will have the opportunity to sign or initial an
Association Agreement and Deep and Comprehensive Free Trade
Agreement. The sentiment I hope we will convey today is that
the United States strongly supports the institution of the
Eastern Partnership, and we will remain deeply involved, as
appropriate, to support the vision of Europe ``whole, free, and
at peace.''
Now, while these agreements are exclusively between the EU
and the Eastern Partnership countries, the United States does
have an interest in furthering democracy and stability
throughout Europe and Eurasia. We believe, just like the EU,
that integration of these nations only can happen when key
conditions are met by applicant nations, particularly around
issues related to the rule of law, government transparency, and
open economic policies.
And, as we begin negotiations around a new free trade
agreement with the EU, both America and these Eurasian nations
have a lot to gain through the expansion of the EU. Americans
will gain access to new markets and businesses, and places like
Ukraine, Georgia, and Moldova will enter an economic community
of nations representing the most robust consumer economies in
the world.
It is important to note, though, as we talk about this
today, that the Eastern Partnership does not preclude a
relationship with Russia. Indeed, by dint of geography, it
makes sense for each of these countries to maintain a healthy
relationship with the Russian Federation, as well as with the
European Union. Unfortunately, it seems as though Russia sees
this whole contest as a zero-sum game and has put considerable
pressure on each of the partnership countries to discourage
them from strengthening relations with the EU. We have seen a
ban on wine imports from Moldova, chocolate from the Ukraine,
fertilizer from Belarus, and the list just goes on and on and
on. This is both unnecessary and counterproductive for Russia,
because, just as the EU is interested in stable, prosperous
governments on their border, so, too, should Russia. Ukraine,
Moldova, Armenia, Azerbaijan, Georgia, and Belarus should be
free to chart their own future. Our message should be that the
door to Euro-Atlantic institutions is open, and if you are
prepared to meet reasonable conditions, we will support you.
So, we look forward to this discussion on the outlook, on
the eve of the Vilnius summit. We look forward to talking about
the pressures that these countries are facing, our current
United States strategy toward the eastern states, and what
more, if anything, we can be doing to help them make progress
on their reform agenda.
With that, let me turn it over to Senator Johnson for
opening remarks.
OPENING STATEMENT OF HON. RON JOHNSON,
U.S. SENATOR FROM WISCONSIN
Senator Johnson. Well, thank you, Mr. Chairman.
I have little to add, other than to welcome Secretary
Nuland. We look forward to your testimony.
Senator Murphy. Great.
Let me welcome Secretary Nuland, who is the Assistant
Secretary of State for European and Eurasian Affairs. Assistant
Secretary Nuland has been on the job since September. I know
that she has been working very hard and doing a fantastic job
in this brief amount of time representing the United States.
I now invite you, Assistant Secretary, to give your
testimony.
STATEMENT OF HON. VICTORIA NULAND, ASSISTANT SECRETARY FOR
EUROPEAN AND EURASIAN AFFAIRS, U.S. DEPARTMENT OF STATE,
WASHINGTON, DC
Ms. Nuland. Well, thank you, Chairman Murphy, Ranking
Member Johnson, and distinguished members of the Senate Foreign
Relations Committee. It is my honor to appear before you today
to discuss the EU's upcoming Eastern Partnership summit and to
highlight the opportunities and the challenges we face in this
part of Europe.
While the six Eastern Partnership countries have responded
in different ways to the EU's offer to integrate into Europe's
common structures, the United States strongly supports the
process as a key ingredient in our effort to cement a Europe
``whole, free, and at peace,'' a shared policy goal of the
United States and EU member states since the Berlin Wall fell,
almost 25 years ago.
At the November 28-29 summit in Vilnius, as you said,
Chairman, EU members will make decisions whether to sign an
Association Agreement and a Deep and Comprehensive Free Trade
Agreement with Ukraine and whether to initial these same
agreements with Moldova and Georgia. This is a historic moment
for all three of these countries and a key step toward their
dream of one day being fully integrated into Europe. All three
have worked very hard to bring their judicial and law
enforcement structures closer to the EU standard and to prepare
their political systems and their economic and energy markets
for greater integration with Europe.
Ukraine has passed over 18 pieces of implementing
legislation harmonizing with EU standards to prepare for
Vilnius. Georgia and Moldova have met the requirements for
initialing their AAs and completed their respective DCFTA
negotiations and embarked on key judicial sector reforms. In
each case, these reforms have required a national political
consensus that these countries' futures lie with Europe.
The United States supports the sovereign right of these
countries to choose their own future, and we welcome their
closer relationship with the EU. We have been working in
lockstep with our European allies and partners to help Ukraine,
Moldova, and Georgia meet the tough conditions for a ``yes''
vote at Vilnius. We have also been aligning future U.S.
assistance with that of the EU to ensure that these countries
can continue on the politically difficult but necessary path of
reform and economic adjustment, including after Vilnius, where
there will still be plenty of work to do.
At the same time, we have been working with the EU and each
candidate country to anticipate, and to prepare them for, any
negative reaction to their choice, whether it comes from inside
or outside their countries. I would note, in this regard, that
any form of pressure to prevent sovereign states from pursuing
greater integration with the EU or any organization of their
choosing would contravene obligations under the OSCE Helsinki
principles and the Charter of Paris. The message we are sending
in the neighborhood is that all countries benefit when their
neighbors open their markets and become more stable and
prosperous, as you said, Mr. Chairman.
The breadth and depth of U.S. assistance to the Eastern
Partnership countries over the past 25 years is well known to
this committee and to the Senate as a whole. You have been our
indispensable partners in shaping our policies and our programs
in support of a more democratic and prosperous Europe and
Eurasia. We ask for that support to continue.
In recent months, as Vilnius approaches, we have kicked our
political, economic, and technical assistance into higher gear.
The President gave vital political support to the Eastern
Partnership Project during the Baltic summit in Washington last
August and again when he met with his Nordic colleagues in
Stockholm in September.
The Vice President has discussed Eastern Partnership in all
of his bilateral meetings with European leaders over the last
months.
Secretary Kerry underscored the strategic importance of the
Eastern Partnership when he met with all of the EU Foreign
Ministers in Vilnius in August and again at the transatlantic
dinner that he hosted in New York in September.
And in the months since then, our Interagency Team on
Europe has worked with all the parties to build consensus for
the most forward-leaning outcome in Vilnius. We have met with
decisionmakers in all of the candidate countries to drive home
the need to make the tough choices and lock in the reforms
before Vilnius and to show that they are serious about their
commitments. We have also been in and out of Brussels and key
EU capitals, on a weekly basis, to fine tune our assistance
programs to ensure that they are effectively coordinated with
those of the EU and that they are supportive of the needs of
the countries.
I would like to briefly outline where we stand on Ukraine,
Moldova, and Georgia. I have submitted a longer statement, for
the record, which covers all six countries, and those three in
more depth.
As you know, Ukraine still needs to take three important
reform steps in order to meet the EU's conditions for signature
at Vilnius. It needs to pass justice reform legislation, it
needs to pass electoral reform legislation, and it needs to
take action to release jailed former Prime Minister Yulia
Tymoshenko for medical treatment.
In the past few months, Ukraine has come under pressure
from Russia, including bans on chocolate, stoppage of
refrigerated goods at the border, and reductions in other key
imports. We are working with the EU on options to help Ukraine
make difficult trade adjustments and weather the EU
implementation period if Ukraine makes the political decisions
necessary to sign its Association Agreement at Vilnius. We are
also discussing ways to broaden and deepen the United States-
Ukrainian bilateral relationship after Ukraine meets the
Vilnius conditions.
Moldova's initialing of an Association Agreement at Vilnius
has already been approved by the EU, and it is poised to attain
visa liberalization from the EU as early as this spring and to
sign its AA by September 2014, in advance of their next
elections. We and the EU are working together to try to
mitigate the impact of recent Russian decisions to block the
import of Moldovan wine and other agricultural exports. We are
also looking at steps to increase Moldova's energy security and
to expand its exports to the EU and to the United States.
In 2012 and 2013, Georgia took important steps forward with
truly competitive national elections resulting in the first
peaceful democratic transfers of power since it regained
independence. But, considerable political and economic
challenges remain, such as the unresolved conflicts in the two
Russian-occupied regions of Georgia, protracted displacement of
people, fragile democratic institutions, and the need for
further strengthening of the rule of law. With U.S. assistance,
Georgia has reoriented its trade toward Western markets and
increased its energy efficiency and diversity, and we are
working with the EU to strengthen Georgia's ability to resist
external pressure.
Finally, as you mentioned, Chairman, in our discussions
with Russia about the Eastern Partnership, we are encouraging
Moscow to abide by its commitments in the OSCE and elsewhere
regarding the rights of its neighbors to pursue any political
and economic arrangements that they choose. We have also
encouraged Moscow to see the benefits of deeper integration
between its neighbors' economies and the EU's 500 million
customers, including the likelihood that more prosperous
neighbors will buy more Russian exports. Both the EU and the
United States are also interested in increasing trade with
Russia, and we're open to further consultations on what might
be possible.
The Eastern Partnership is ultimately about far more than
closer relations between the EU and several countries in
Eastern Europe and the Caucasus. It is also a step toward the
longstanding vision of a more integrated economic and political
space stretching from Lisbon to Donetsk, animated by market-
oriented reforms, growing prosperity, and deepening democracy.
We strongly support it, and I look forward to your questions.
[The prepared statement of Ms. Nuland follows:]
Prepared Statement of Assistant Secretary Victoria Nuland
Thank you, Chairman Murphy, Ranking Member Johnson, and the
distinguished members of the Senate Foreign Relations Committee. It is
my honor to appear before you today to discuss the EU's upcoming
Eastern Partnership Summit and highlight the opportunities and
challenges we face in this part of Europe. While the six Eastern
Partnership countries have responded in various ways to the EU's offer
to integrate into Europe's common structures, the United States
strongly supports the process as a key ingredient in our effort to
cement a ``Europe whole and free and at peace''--a shared policy goal
of the United States and EU member states since the Berlin Wall fell
almost 25 years ago.
At the November 28-29 summit in Vilnius, EU Members will make
decisions whether to sign an Association Agreement (AA) and a Deep and
Comprehensive Free Trade Area Agreement (DCFTA) with Ukraine, and
whether to initial these agreements with Moldova and Georgia. This is a
historic moment for all three of these countries, and a key step toward
their dream of one day being fully integrated into Europe. All three
have worked hard to bring their judicial and law enforcement structures
closer to EU standards and to prepare their political systems and
economic and energy markets for greater integration with Europe.
Ukraine has passed over 18 pieces of implementing legislation
harmonizing with EU standards to prepare for Vilnius. Georgia and
Moldova have met the requirements for initialing their Association
Agreements, completed their respective DCFTA negotiations and embarked
on key judicial sector reforms. In each case, these reforms have
required a national political consensus that these countries' futures
lie with Europe.
The United States supports the sovereign right of these countries
to choose their own future, and we welcome their closer relationship
with the EU. We have been working in lock-step with our European allies
and partners to help Ukraine, Moldova, and Georgia meet the tough
conditions for a ``yes'' vote at Vilnius. We've also been aligning
future U.S. assistance with that of the EU to ensure that these
countries can continue on the politically difficult, but necessary,
path of reform and economic adjustment, including after Vilnius. At the
same time, we have been working with the EU and each candidate country
to anticipate and prepare them for any negative reaction to their
choice, whether it comes from inside or outside their countries. I
would note in this regard that any form of pressure to prevent
sovereign states from pursuing greater integration with the EU, or any
organization of their choosing, would contravene obligations under the
OSCE Helsinki Principles and the Charter of Paris. The message we are
sending in the neighborhood is that all countries benefit when their
neighbors open their markets and become more stable and prosperous.
The breadth and depth of U.S. assistance to the Eastern Partnership
countries over the past 25 years is well known to the Senate and to
this committee. You have been indispensible partners in shaping our
policies and programs in support of a more democratic and prosperous
Europe and Eurasia. From the Freedom Support Act to the Partnership for
Peace, the members of this committee have been critical players in
providing the support these nations have enjoyed from the United
States. This committee has also participated in our dialogue with our
EU partners on the importance of keeping the door open to the European
and transatlantic aspirations and identities of these emerging and
sometimes vulnerable states. We ask for your continued strong support.
In recent months, as Vilnius approaches, we have kicked our
political, economic, and technical assistance into high gear. The
President gave vital political support to the Eastern Partnership
project during the Baltic summit in Washington in late August, and
again when he met with his Nordic colleagues in Stockholm in September.
The Vice President has discussed developments in Eastern Partnership
countries repeatedly in his bilateral meetings with European leaders.
Secretary Kerry underscored the strategic importance of the Eastern
Partnership when he met with all the EU Foreign Ministers in Vilnius in
August. At the annual Transatlantic Dinner in New York in September,
Secretary Kerry again focused his comments on the Eastern Partnership,
and urged his European counterparts to make bold decisions at Vilnius.
In the months since, our interagency team on Europe has worked with
all parties to build consensus for the most forward leaning outcome in
Vilnius. We've met with decisionmakers in all the candidate countries
to drive home the need to make tough choices and lock in real reforms
before Vilnius and to show they are serious about their commitments.
We've also been in and out of Brussels and key EU capitals on a weekly
basis to coordinate our efforts, and fine-tune our assistance programs
to ensure they are effectively coordinated with EU programs and
supportive of the countries involved.
Now, let me turn to the prospects for each of the EaP countries,
their challenges and our support.
Ukraine still needs to take three important reform steps to meet
the EU's conditions for signature at Vilnius including: passage of
legislation reforming its Prosecutor General's Office; passage of
legislation reforming its parliamentary election code; and the release
of jailed former Prime Minister Yuliya Tymoshenko for medical
treatment. Since its independence in 1991, the American people have
supported Ukraine's transition to democracy and a free market economy
with over $5 billion in assistance. In FY 2013, our assistance topped
$100 million, and much of it went to help Ukraine meet European
standards in law enforcement, electoral reform, business climate and
the judicial sector, including key support for Ukraine's newly adopted
Criminal Procedure Code. If Ukraine meets the EU's conditions and signs
in Vilnius, it will be able to export its goods to the largest single
market in the world, tariff-free, by early 2014. This should provide a
great stimulus to an economy which has been in a difficult recession
for over a year. In the past few months, Ukraine has come under
pressure from Russia, including bans on chocolate, stoppage of
refrigerated goods at the border, and reductions in other key imports.
We are working with the EU on options to help Ukraine make difficult
trade adjustments and weather the EU implementation period if Ukraine
makes the political decisions necessary to sign its AA at Vilnius.
Moldova's initialing of an Association Agreement at the Vilnius
summit has already been approved by the EU, and it is poised to attain
visa liberalization from the EU this spring and sign by September 2014.
The United States has provided over $1.1 billion in assistance since
Moldova's independence in 1991, with approximately $22 million in FY
2013 dedicated toward improving governance, combating corruption,
increasing transparency and accountability, strengthening the rule of
law and the NGO sector, reducing bureaucratic barriers to trade, and
improving the business environment. The 5-year, $262 million Millennium
Challenge Compact with Moldova, launched in 2010, supports Moldova's
economy by rehabilitating roads and irrigation systems, and providing
technical assistance and access to finance to Moldovan farmers and
agribusinesses. Many of these programs are directly aligned with the
reforms needed for Moldova to initial the Association Agreement in
November. Recent Russian actions against the import of Moldova's wine
and other agricultural exports have a disproportionate impact on its
small economy, and could potentially expand into other sectors as the
country deepens its EU integration. We are exploring ways we can help
mitigate vulnerabilities including by increasing Moldova's energy
independence and promoting trade with the EU and the United States.
In 2012 and 2013, Georgia took important steps forward with truly
competitive national elections, resulting in the first peaceful,
democratic transfers of power since it regained independence; but
considerable political and economic challenges remain, such as the
unresolved conflicts in the two Russian-occupied regions of Georgia;
protracted displacement of people; fragile democratic institutions, the
need for further strengthening of the rule of law, and an economy that
requires additional focus. In recent years, Georgia has received $1
billion in post-conflict funds, a second Millennium Challenge
Corporation (MCC) compact, and it is one of the largest annual U.S.
bilateral assistance budgets in the region. The United States is
concentrating efforts on democratic institution-building, and the use
of innovation, both economic and technological, as a way to build
institutional and human capacity that further strengthens Georgia's
push toward Euro-Atlantic integration. We have also joined the EU and
NATO in protesting new fences and physical barriers that Russian
security forces have built along the Administrative Boundary Lines of
the occupied territories in Georgia; this is inconsistent with Russia's
international commitments and Georgia's sovereignty and territorial
integrity within its internationally recognized borders. With U.S.
assistance, Georgia has reoriented its trade toward Western markets and
increased its energy efficiency and diversity, and we are working with
the EU to strengthen Georgia's ability to resist external pressure.
On September 3, Armenian President Serzh Sargsian announced that
Armenia would join the Eurasian Customs Union of Russia, Kazakhstan,
and Belarus, which is incompatible with signing an Association
Agreement and a DCFTA. However, both the EU and Armenia remain
committed to pursuing a deeper relationship, and they are examining
ways to continue this partnership. The United States will also continue
broad engagement with Armenia on Euro-Atlantic integration, including
in the economic sphere.
Azerbaijan is currently negotiating the contours of its own
partnership track with the EU, and the United States continues to
encourage Azerbaijan to build the democratic and economic institutions
and conduct the reforms necessary for a deeper relationship with the
Euro-Atlantic community. We recognize that a democratic, prosperous,
and secure Azerbaijan will benefit not only the Azerbaijani people but
also its neighbors.
Belarus has not pursued any agreements within the Eastern
Partnership and is a founding member of the Eurasian Customs Union with
Russia and Kazakhstan. Nonetheless, we have worked closely with the EU
to promote the emergence of a democratic and prosperous society in
Belarus that shares common values, norms and standards with the United
States and Europe. The United States will continue to provide
assistance that promotes the open expression of political views,
supports civil society, and promotes media freedom.
Finally, in our discussions with Russia about the Eastern
Partnership, we are encouraging Moscow to abide by its commitments in
the OSCE and elsewhere regarding sovereign neighbors' rights to pursue
any political and economic arrangements they choose. We have also
encouraged Moscow to see the benefits of deeper integration between its
neighbors' economies and the EU's 500 million consumers, as well as the
significant prospects for economic reform and sustainable growth that
integration will bring to these countries. For one thing, more
prosperous neighbors will buy more Russian exports. Both the EU and the
United States are interested in increasing trade with Russia, and we
are open to further consultations on what might be possible.
The Eastern Partnership is, ultimately, about far more than a
closer relationship between the EU and several countries in Eastern
Europe and the Caucasus. It is also a step toward the longstanding
vision of a more integrated economic space, stretching from Lisbon to
Donetsk animated by market-oriented reforms, growing prosperity and
deepening democracy. To this end, the EU and the United States are
negotiating the Transatlantic Trade and Investment Partnership--which
promises to support growth, investment, and jobs on both sides of the
Atlantic as well as establish a high-standards, rules-based global
trading regime. That broader vision of Europe's integrated economic
space is becoming increasingly real and attractive and could ultimately
encompass not only Europe, but the entire Transatlantic space. We and
the EU believe that investing in the Eastern Partnership is thus in
everyone's long-term interest.
Senator Murphy. Thank you very much.
We will now begin a round of 7-minute questions.
As you know, a number of members of this subcommittee have
sponsored a resolution on the issue of Tymoshenko's release as
a condition of entering the Eastern Partnership. And you
certainly touched upon what has been the position of the EU
nations, as well as the United States. But, this is obviously
not just about Tymoshenko, this is about a broader commitment
on behalf of the Ukrainians to end a practice of selective
political prosecutions. And what maybe has been most worrying
in the last week is not necessarily just the lack of progress
on the release of Tymoshenko, but new news reports about the
detainment of one of Tymoshenko's lawyers for questioning that
suggests that this trend is not necessarily abating,
notwithstanding the earlier release, this year, of several
other prisoners that we believe were detained on political
grounds.
So, can you talk a little bit--and I would love to have a
little bit deeper update on where you believe the negotiations
stand with respect to Tymoshenko's release, but to talk a
little bit about whether--even if she is released, are we
confident that the Ukrainians have made the commitment to
changing the way in which they prosecute within their judicial
system?
Ms. Nuland. Well, thank you for that question, Senator.
First, I would say that a number of the steps that the
Ukrainians have taken in the past 6 months--I mentioned 18
pieces of legislation--are designed to improve the justice
system, improve the quality of democracy in Ukraine. This last
piece that is still pending in the Rada and which the major
parties are committed to passing is the final piece, in terms
of judicial reform, which needs to be passed, and it is
designed to ensure that the circumstances that led to the
judgment that there had been politics in the judicial process
cannot happen again in the Ukrainian system.
So, this is one of the great strengths of the EU
Association Agreement offer, that it allows Western democracies
to get in and mentor partnership countries in how to strengthen
the legal and judicial basis in the country to prevent these
kinds of things from happening in the future.
But, you are right, we have to stay vigilant in watching
what happens, including the recent calling in for questioning
of Mrs. Tymoshenko's lawyer.
Senator Murphy. President Yanukovych has made it pretty
clear for a long time that he sees his legacy as making Ukraine
permanently independent, of orienting it toward much bigger,
broader, and more prosperous markets to its west. And we hope
that
they will initial, or begin the process of initialing, an
Association Agreement.
And you mentioned that, at that moment, there will still be
a lot of work to do. No matter what happens at the Eastern
Partnership, Ukraine's economy is still in rough shape. And, of
course, the worry is that it could be made rougher by increased
sanctions from Russia, at the top of the list. Their worry
always is the cutting off of access to gas.
So, you mentioned that there are things that we can do, in
concert with the Europeans, to perhaps abate or address
existing sanctions or future sanctions. I wonder if you might
talk a little bit more about what those steps could be and what
steps are being taken today.
But, then the second piece is going to be our communal
effort to try to have real IMF outreach to the Ukrainians, and
that involves a whole different set of economic reforms that
are tough and painful related to the price of gas and the size
of their budget deficit.
So, what can we do to try to push back on potential Russian
sanctions and existing Russian sanctions? And then, what can we
do to try to help Ukraine--what is our proper role in trying to
help the Ukraine get in a position so that it can qualify for
the international support that they ultimately are going to
need in order to support their weakening economy?
Ms. Nuland. Well, thank you, Senator. You are right that
the number one thing that Ukraine needs to do to strengthen its
economic position is to work with the IMF on a standby
agreement. The IMF wants to see a number of significant and
difficult reforms inside the Ukrainian economy.
As you probably know, they began discussions in March.
Those discussions were broken off. They have now resumed
discussions. We have been encouraging the Ukrainians to improve
their offer to the IMF, in terms of some of the things that the
IMF is looking for, which are, frankly, in the long-term and
medium-term economic interest of Ukraine--as you said, cutting
energy subsidies, reducing tariffs, dealing with some of their
budget issues. We have also been in close consultations with
the IMF about the importance of this moment and working on a
plan that could conceivably match action for action.
If, in fact, there is a successful negotiation between
Ukraine and the IMF, it will unlock considerable amount of
funding from the EU and from the EBRD. It will also strengthen
our position to continue loaning, through Ex-Im and OPIC, which
has been challenging because of the current economic rating of
Ukraine.
And, more broadly, one of our messages to the Ukrainian
Government has been that, when they sign their Association
Agreement, when they take these hard last steps, including
releasing the former Prime Minister for medical treatment, we
believe--and they sign their AA--we believe that the commercial
markets will react positively to Ukraine.
As you know, we have a number of U.S. businesses who want
to do more. They are looking for a signal of confidence. That
said, we also have a number of major U.S. energy companies who
are quite close on shale gas deals in Ukraine and a number of
other investments. So, that would be the direction we would
hope to support them on the commercial side.
We also, as you may know, have not had the strongest of
political relationships in the last couple of years because of
the problems, and we have made clear that if Ukraine can get
over these hurdles, we can really broaden and deepen and get
back to good business with Ukraine, bilaterally.
Senator Murphy. Just--actually, at this point, let me end
my questioning. I will ask, maybe, a couple more in a second
round and turn it over to Senator Johnson.
Senator Johnson. Thank you, Mr. Chairman.
Secretary Nuland, you mentioned the benefits to, not only
those countries--to the EU, to America--but also to Russia. Can
you expand a little bit more, in terms of the win-win-win-type
situation that you are thinking of there?
Ms. Nuland. Well, as you know, Senator, we are--even as we
talk about the Eastern Partnership today, we are also in
discussions--the United States is--with the 28 members of the
EU on the Transatlantic Trade and Investment Partnership, which
is designed to reduce tariff and nontariff barriers to trade,
to increase trade between our countries, to grow our economies.
If we are successful in the TTIP context, and if the Eastern
Partnership countries are able to begin to gain the benefits of
the free-trade offering that the EU has, then you could see
this greater free-trade space, as I said--perhaps all the way
from Los Angeles to Donetsk. The EU has offered the same kinds
of trade benefits to Russia if Russia will take the internal
reform steps and open its market reciprocally to the EU. So,
there is an offer on the table to Russia to have the same kind
of relationship as Ukraine and Georgia and Moldova hope to have
with the EU.
We, on the United States side, are also very interested in
increasing bilateral trade with Russia and reducing barriers. I
do not have the numbers in front of me, but, given the size of
our respective economies, the trade two ways is pretty
pathetic, and we can do a lot better, but there are a lot of
built-in barriers to trade. One of the things we have proposed
to the Russian Government is a bilateral investment treaty, and
we are waiting for a response on that.
So, you could see a scenario, if everybody began moving in
a more free-trade direction, where our market really sets a
global example for low tariffs, low barriers, and jobs grow
everywhere.
Senator Johnson. So, how receptive have the Russians been
to those, you know, really, words of wisdom?
Ms. Nuland. It is a work in progress.
Senator Johnson. Are you prepared really to talk about the
state of the economies of Ukraine, Georgia, and Moldova? Have
they been pretty flat? Have they been declining?--what the
potentials would be?
Ms. Nuland. Senator, I do not have statistics in front of
me. We can get those to your staff.
Ms. Nuland. The Georgian economy has done better than
expected. As you know, after the difficulties of 2008 and the
Russia-Georgia war and the cutoff of most of Georgia's exports
to Russia, Georgia has worked very hard to diversify its
economy, to diversify its markets, and now it does most of its
trading to the West. So, that not only helped it weather that
difficult period, it also helped it significantly during the
larger economic recession that we have all been going through.
That said, the Georgian economy is now not growing at the
rate that it was, and the next, sort of, tranche of reform, et
cetera, and market opening, is necessary.
On the Moldovan side, it is a tiny, tiny market. It is not
well known, even to Europeans, let alone to Americans. So, I
think some of you had a chance to meet Foreign Minister
Gehrmann when she was here trying to put her country on the
map, in terms of American political leaders and American
business supporting Moldova. We believe that there is quite a
bit more that can be done, in terms of spurring trade and
investment from the EU, but also from the United States, in
Moldova, and not just in the traditional wine sector, but in
other aspects of agriculture and high technology. They have got
a very educated population. So, we are working with the EU on
that. But, they definitely need, now, growth West, and they
need to link their market more tightly to the EU.
On the Ukrainian side, I do not have the numbers in front
of me, but it is a pretty perilous situation right now, in
terms of their ability to borrow on investment markets, in
terms of the expenses primarily in the energy sector. When I
was there, about 10 days ago, they were speaking in terms of
very, very ambitious projects to have energy efficiency
programs in their major cities. It was already, you know, 20
degrees, but yet you could see government buildings with the
windows open because the heating and cooling does not work
properly and they lose a huge amount of money every year out
the windows. So, a culmination of that, anticorruption, and
more markets West so that they are not as dependent on one
market, will help the Ukrainian economy, plus the IMF deal.
Senator Johnson. You mentioned corruption in Ukraine. When
I was there a couple of years ago, I certainly saw the
potential, in terms of agriculture, in terms of wheat
production, but something really holding them back really was
the cronyism, the----
Ms. Nuland. Yes.
Senator Johnson [continuing]. The corruption within those--
you know, those markets, if you want to call them that. Has any
progress been made, or has it been backsliding?
Ms. Nuland. Well, again, some of the legislative changes
and market changes that they have had to make to be ready for
the EU Association Agreement go to greater transparency in
government, those kinds of things, but there is more work to be
done, and we would like to do more with Ukraine on countering
corruption.
The Georgians, I would say, have taken a great leap in
countering corruption, largely through efforts to do things
like put all government contracting on the Internet, those
kinds of things that could be done in other Eastern Partnership
countries.
Senator Johnson. There continues to be a big problem--this
is just true of fledgling democracies--is a smooth transition
of power from one government to the other--you know, where you
are not witnessing political prosecutions. We talked a little
bit about Ukraine. What about in Georgia?
Ms. Nuland. Well, Senator, as I said in my opening, I think
one of the great news stories of the last couple of months is
that we have had a smooth and democratic transition of power in
Georgia, for the first time since independence, through the
ballot box, and the elections were good. So, that is a step in
the right direction.
Senator Johnson. OK.
Thank you, Mr. Chairman.
Senator Murphy. Senator Risch.
Senator Risch. Ms. Nuland, as you probably know, Senator
Shaheen and I had the honor of going to the--overseeing the
first elections, just a year and a month ago, I think, in
Georgia, and we were impressed with the way the elections went
and what happened.
Since then, I have to say that--at least I--and I think
Senator Shaheen would agree with this; we compare notes
relatively frequently--that we are getting mixed reports on
exactly how smooth this transition is. There is a lot of at
least internal dissension, it seems to me, in Georgia, and
there is still some angst as they move forward. And some of
that has to do, of course, with the political prosecutions,
which we have underscored as being not the appropriate way to
do business. What are your thoughts on that? What are your
observations on that?
Ms. Nuland. Well, first of all, thanks to both of you for
your commitment to Georgia's democracy. It was very much
appreciated by the Georgians, as you know, that you made the
effort, in a bipartisan way, to go and observe, and it, I
think, made a significant difference.
We share your concern about the way former leaders are
dealt with. We have stressed to the Georgian Government the
importance of conducting investigations and prosecutions with
full respect for due process, in a transparent manner, avoiding
any political influence on prosecutorial actions.
I would say that, in the context of this period that we are
in now, where Georgia wants to have its Association Agreement
and its DCFTA initialed, it has been a powerful lever in that
conversation to remind them that it is not only the EU that is
watching, but the United States is also watching the way
political opponents are dealt with.
Senator Risch. Thank you.
Thank you, Mr. Chairman.
Senator Murphy. Senator Shaheen.
Senator Shaheen. Thank you.
Thank you very much for being here.
And let me pick up on what Senator Risch raised about
Georgia. As you talk about the ability of us to use the trade
agreements to help encourage Georgia's positive forward
movement, what kind of ongoing efforts can we also look at that
would help encourage emphasis on rule of law, addressing some
of the issues around imprisonment of opposition figures that
you mentioned, and concerns that have been raised about
continued--let me rephrase that--as the structure of government
and the role of the President and Prime Minister transition, to
continue to encourage that to transition in a positive way? Are
there other things that we should be doing in the United States
to--and with the EU--to help support continued positive
movement in Georgia?
Ms. Nuland. Well, thank you, Senator.
In fiscal year 2013, we have, as you know, allocated about
$70 million in assistance to Georgia. About a third of that
goes to programs that strengthen good governance, the justice
sector, et cetera, rule of law. We have worked with them on
some of these pieces of legislation that they have had to also
implement to be ready for the Association Agreement. So, we
will stay with them as they implement those things.
They have also got--particularly in order to be eligible
for visa-free travel, they have got more work to do on
transparency on their judicial system. So, we will stay with
them in that regard.
I think, you know, the fact that we have been in this
intensive conversation with them, the fact that they know that
you are watching how they deal with political opponents, that
we are and that the EU is, I think has had a profound effect.
And we have seen some of these concerns begin to abate in
recent months.
Senator Shaheen. And is there any progress at all on
Russia's continued occupation of Abkhazia and South Ossetia?
And any ability to help move the continued challenge that
Georgia is facing with respect to the Russian occupation of
those territories?
Ms. Nuland. Senator, I think, on the contrary, we have now
seen, as you know, in recent months, an effort to erect fences
around the administrative border line, in contravention of
international obligations and Russia's own commitments after
the Georgia war in 2008.
The one bright light, I would say, here is that, when
Georgia has completed all of the work for its Association
Agreement, it will be eligible for visa-free travel for
Georgians to Europe, it will be eligible for these trade
benefits and incentives from Europe. As I think about the
choice that young people in Abkhazia, young people in South
Ossetia, have to make individually about their future, it is
going to look a whole lot more attractive to be carrying a
Georgian passport, whether you are trying to travel to Paris or
whether you are trying to attract investment to your
neighborhood. So, I think the EU is playing a potent role in
the strengthening of Georgian sovereignty with this agreement.
Senator Shaheen. That certainly makes sense, and I would
agree with that. I think one of the concerns that I have is,
How do we keep this from becoming another one of those frozen
conflicts that exists in perpetuity without any movement, and
that those regions never continue in this sort of in-between
status and never really rejoin Georgia?
Ms. Nuland. Again, I think--you know that we have the
Geneva process, where we sit down with the Georgian Government,
we sit down with representatives from Abkhazia, and we talk
about a way forward. Again, I think the most potent force for
changing the status quo is going to be the people of those
territories themselves and the choices that they are going to
make. And our hope and expectation is that this association
with the EU is going to change the prospects for them, it is
going to change the outlook for them, they are going to see
real benefits as citizens of Georgia, and they are going to be
pushing for change, themselves. But, we will obviously stay
with this and work as hard as we can to protect the sovereignty
and territorial integrity of Georgia.
Senator Shaheen. Thank you.
You may have already addressed this, but obviously--or at
least the reports are that Russia is dead-set against the
European partnership. And as we think about how this
partnership agreement moves forward, are there ways in which we
can help the countries that are looking at their association
with the EU and the West so that they can resist the pressure
that they are going to get from Russia?
Ms. Nuland. Senator, we have a number of measures we are
taking, depending upon the country. In Moldova, we are working
with them on expanding export markets into the EU and into the
United States. We are also working with them on energy
independence--in the short term, more support from their
neighbors; in the longer term, interconnecter with Romania.
In the Georgian context, as we talked about, it is about
strengthening rule of law, it is about strengthening the
economy so we can get more direct foreign investment into
Georgia, and continuing to make it clear that we support their
sovereignty and territorial integrity.
In Ukraine, we actually have quite a vibrant U.S. business
community that would like to do more. We have got some U.S.
majors in the energy sector working on shale gas. If that plays
out, Ukraine will be a very rich country in the not-too-distant
future. So, we are working on all of those things, as well as
encouraging the EU to buy some of these Ukrainian exports that
have also been blocked now at the border.
Senator Shaheen. I know that--or, at least I think you have
already addressed the imprisonment of Yulia Tymoshenko, and
that we are sending a very strong message about the importance
of releasing her from prison so that they can send a message
that they are changing the way they are looking at their
opposition as they move toward democracy.
Ms. Nuland. We are, absolutely. As you know, Senator, it is
a condition for their signing of the association agreement,
that former Prime Minister Tymoshenko be released for medical
treatment outside of Ukraine.
The EU has made clear, and we have reinforced in our
bilateral conversations, that they will not have consensus to
sign with Ukraine if Mrs. Tymoshenko is not released for
medical treatment.
Senator Shaheen. And do we have any sense of how they
expect to respond to that? I understand that Parliament is
about to go out of session and that they have not passed
legislation to address that. So, what other options are there,
and what do we expect to happen?
Ms. Nuland. There are two routes currently before the
Ukrainian leadership to address this issue. One would be
Executive action by the President. It is in his hands to have
that option. I think the preference of the Ukrainian Government
would be to have broad national consensus for it via a bill
passed in the Parliament, in the Rada. There are currently four
or five drafts floating around. As you know, the EU's
negotiators, former Presidents Cox and Kwasniewski, really went
and rolled up their sleeves last week or earlier this week with
parliamentary factions to try to draft a common bill. Those
negotiations, our understanding is, will resume now, on Monday.
The Parliament will come back into session on Monday, and they
are going to endeavor to have a clean bill by Tuesday. Then we
will see whether it gains the support that it will need.
Senator Shaheen. Thank you very much.
Thank you, Mr. Chairman, for letting me go over my time.
Senator Murphy. Thank you, Senator Shaheen.
It strikes me that, you know, Yanukovych may think that he
can have it all, here, that he can keep Tymoshenko in jail,
that he can open up a relationship with the EU and that he can
also keep a deep political and economic relationship with
Russia. And two of those three are true, that there is no
reason that he cannot orient himself toward a relationship with
the EU and maintain a relationship with Russia. He cannot keep
Tymoshenko in jail. And I know you have made that perfectly
clear, as we have; we and the Europeans. But, it brings me to
just one additional question from me, and I know we have a
second panel, and I will ask others if they have a second
round. Is an Association Agreement, initialing or signing with
the EU, mutually exclusive from joining the Customs Union? For
instance, we, you know, obviously were surprised by Armenia's
decision to do an about-face and join the Customs Union. Does
that mean that we give up on Armenia as a potential partner
down the road with the EU?
Ms. Nuland. There is nothing in the Association Agreement
that precludes any of the Eastern Partnership states from
continuing to have strong trade relations with Russia or any of
the Customs Union countries. There are provisions in the
Customs Union that preclude Customs Union members from
associating with anybody else.
So, you know, the Armenians had a difficult choice to make.
They have made it. It does not change the fact that both the EU
and the United States will continue to try to build our
economic and trade relationship with Armenia. We think that
there is more that we can do together. But, they are not going
to be able to have the benefits of an Association Agreement,
under Customs Union rules.
Senator Murphy. I just think that is important to point
out, is that a decision to join yourselves with the European
Union not only opens yourself up to the benefit of that
association, but does not foreclose your ability to continue to
negotiate trade agreements with a multitude of other nations.
Once you are in the Customs Union, you are locked in, and you
have essentially sealed your fate as to essentially tie your
economy to one country, and one country only.
Let me just ask one additional question with respect to
Armenia. Given the fact that this was, to some people, a
surprise, that they chose to abandon efforts to join the EU,
what lessons are there to potentially be learned from Armenia's
decision to reorient itself toward the Customs Union with
respect to the tools that Russia used that worked, with respect
to the offers that the EU made--that worked or, in this case,
did not work? What lessons are there from the Armenian
experience, if any?
Ms. Nuland. You know, I think we are still going to be
learning the lessons over time. But, for reasons of geography,
political choice, economics, history, Armenia has, for quite a
long time, been significantly more dependent, in economic
terms, in security terms, on its big neighbor, and, frankly,
did not--well, I will not speak for the Government of Armenia,
but, as we have spoken to them, they found it a very difficult
choice, given how knitted together they are with Russia.
We, as you know, for 25 years since the fall of the Berlin
Wall, have been seeking to provide all of the countries of
Central Europe, Eastern Europe, the former Soviet space, with a
broad cross-section of economic and partner options, and to
diversify the way they think about their economies, the way
they think about their energy future, and to provide them the
security, if they want it, to make independent choices.
So, I think that is the most important trajectory as we
continue to work with these countries in the future.
Senator Murphy. Senator Johnson? Senator Risch? Senator
Shaheen?
Thank you, Secretary Nuland. We appreciate your time. We
know you are busy, a lot on your plate. Thank you for being
here. We will excuse you and now have our second panel join us.
Ms. Nuland. Thanks, to all of you.
Senator Murphy. Thank you.
As our second panel is seated, let me just welcome to the
committee and the audience--I know we have--the Ambassadors
from Georgia, Moldova, and the Ukraine are with us in the
audience today--welcome them. If there are any other
ambassadors that are here, let the staff know and we will
recognize you, as well. But, we appreciate you being here.
All right, let me welcome our second panel of witnesses. I
am not going to do long introductions, because we want to get
to your testimony and questions, as well.
We have with us, from my left to right, Dr. Anders Aslund,
senior fellow at the Peterson Institute for International
Economics; Dr. Ariel Cohen, no stranger to the subcommittee
this year, a senior research fellow for Russian and Eurasian
Studies in International Energy Policy at the Heritage
Foundation; and then another good friend, Damon Wilson, who is
the executive vice president of the Atlantic Council.
Why don't we start with you, Mr. Aslund, and go down the
table. Welcome.
STATEMENT OF ANDERS ASLUND, SENIOR FELLOW, PETERSON INSTITUTE
FOR INTERNATIONAL ECONOMICS, WASHINGTON, DC
Mr. Aslund. Thank you very much, Mr. Chairman, Ranking
Member Johnson, and members of the subcommittee. I would like
to thank you for this opportunity to speak on what I consider
the most important political event in Europe this year, the
European Union Eastern Partnership Vilnius--in Vilnius.
And, as you know, the EU has planned to sign the long-
concluded Association Agreement with Ukraine and initial Deep
and Comprehensive Free Trade Agreement with Moldova and
Georgia. It would indicate a substantial European integration
of Ukraine, Moldova, and Georgia.
The key question, of course, is whether Ukraine will
fulfill the European demands for political freedom and rule of
law. It is doubtful. Ukraine's President Viktor Yanukovych is
reluctant, especially, to pardon former Prime Minister Yulia
Tymoshenko. He defeated her narrowly in the Presidential
elections in February 2010 and had her sentenced to 7 years in
prison for no legal reason. If the EU does not accept to sign
in Vilnius, the Association Agreement remains, and it could be
signed after renewed Ukrainian Presidential elections in March
2015.
My specialty here is economics and Ukraine and Moldova, and
I will focus on this.
Russia has reacted strongly against Ukraine's intention to
sign the Association Agreement, and, instead, demands that
Ukraine joins its Customs Union with Belarus and Kazakhstan.
Moscow has already launched, or threatened with, three forms of
sanctions. First, trade sanctions, and is threatening with
more. It is likely to block most imports from Ukraine, to break
both financial finances and specific pro-European businessmen
in Ukraine. The EU has responded by offering to give Ukraine
increased market access, but that remedy will take some time to
be effective.
Because of poor economic policies, the Ukrainian economy is
currently vulnerable. The Kremlin has publicly threatened to
drive Ukraine in default. I was in Yalta in September, and
there heard how President Putin's advisor, Sergei Glazyev,
publicly threatened to drive Ukraine into default.
And Ukraine's public finances are so shaky that the
country, as you have already heard, might need a new agreement
with the International Monetary Fund. But, so far, the
government refuses to comply with sensible IMF demands, which
are essentially more flexible exchange rate, prior gas prices
which are now highly subsidized, and a cut in a large budget
deficit. And, once again, as in January 2006 and January 2009,
the Russian state-dominated gas company, Gazprom, has
threatened to cut its supplies to Ukraine. The Government of
Ukraine has already responded by stopping its gas purchases
from Russia. And the country has sufficient gas reserves to
manage through the winter.
The United States is well-liked and highly influential in
Ukraine. It can do a great deal to influence that country's
choice simply by speaking out. And I am very happy to see that
you are doing that here today.
The main objectives for United States policy on Ukraine
should be to support democracy. If democracy is secured,
Ukraine is likely to choose a Western geopolitical orientation.
If the United States wants to be important, it is important.
For the European Union, the Moldovan case is much simpler.
Moldova is more democratic and less corrupt than Ukraine. The
current Moldovan Government is pro-Western and supports
European integration wholeheartedly. The country is poor, but
pursues a sound economic policy leading to, actually, a high
economic growth, even today, and no longer requires any IMF
support. Yet, Moldova is more vulnerable to Russian threats
than Ukraine, because it is much smaller, poorer, and a part of
Moldova as territory Transnistria is controlled by Russian so-
called peacekeepers.
The role of the United States is even more important here
than in Ukraine. An obvious danger is that Russia would
recognize Transnistria as an independent state, as it did with
the Georgian territories, Abkhazia and South Ossetia in 2008.
Moreover, Moldova is completely dependent on Gazprom for its
supply of natural gas, and it could once again face a cut in
the Russian gas supply, which would hit Moldova much worse than
Ukraine.
Finally, Moscow can also cause major financial trouble, but
the IMF could arrange new financing for Moldova since it has
been a successful client before.
Thank you.
[The prepared statement of Mr. Aslund follows:]
Prepared Statement of Anders Aslund
executive summary
On November 28-29, the European Union has planned to sign the long-
concluded Association Agreement with Ukraine and initial deep and
comprehensive free trade agreements with Moldova and Georgia at its
Eastern Partnership summit in Vilnius. No political event in Europe
this year is more important than this summit. It would indicate a
substantial European integration of Ukraine, Moldova, and Georgia.
Yet, it is doubtful whether the EU will agree to sign the
Association Agreement with Ukraine. Its President Viktor Yanukovych is
reluctant to fulfill the European demands for political freedom and
rule of law. In particular, he does not want to pardon former Prime
Minister Yulia Tymoshenko, whom he narrowly defeated in the
Presidential elections in February 2010. He had her sentenced to 7
years in prison without any serious legal grounds. If the EU does not
accept to sign in Vilnius, the Association Agreement could be signed
after renewed Ukrainian Presidential elections in March 2015.
Russia has reacted sharply against Ukraine's intention to sign the
Association Agreement with the EU and demands that Ukraine instead
joins its Customs Union with Belarus and Kazakhstan. Moscow has already
launched some trade sanctions and is threatening with more. It is
likely to block most imports from Ukraine to break both the national
finances and specific pro-European businessmen. The Kremlin has
publicly threatened to drive Ukraine into default. Once again, as in
January 2006 and January 2009, the notoriously unreliable Russian
state-dominated gas company Gazprom may cut its supplies to Ukraine. It
has already made loud complaints about Ukrainian arrears.
Because of poor economic policies, Ukraine is economically highly
vulnerable. The EU has offered to give Ukraine more early market
access, but that remedy will take some time. In the short term, Ukraine
has sufficient gas reserves to manage through the winter. Ukraine's
public finances are so shaky that the country might need a new IMF
agreement.
For the EU, the Moldovan case is much simpler. Moldova is more
democratic, freer, and less corrupt than Ukraine. The current Moldovan
Government is pro-European and supports European integration whole-
heartedly. The country is poor but pursues a sound economic policy
leading to a high growth rate and no longer requires any IMF support.
Yet, Moldova is more vulnerable to Russian threats than Ukraine
because it is much smaller, poorer and a part of Moldova's territory,
Transnistria, is controlled by Russian ``peacekeepers.'' An obvious
danger is that Russia recognize Transnistria as an independent state as
it did with the Georgian territories Abkhazia and South Ossetia in
2008. Moreoever, Moldova is completely dependent on Gazprom for its
supply of natural gas, and it could once again face a cut in the
Russian gas supply. Finally, Gazprom has large claims on Moldova for
unpaid gas that has been delivered to Transnistria beyond the control
of the Moldovan Government. Moscow could utilize this large debt to put
Moldova into default. If this would happen, the IMF could arrange new
financing for Moldova, since it has been a successful client.
______
Mr. Chairman and Ranking Member Johnson, I would like to thank you
for this opportunity to speak on an important topic. No political event
in Europe this year is more important than the European Union Eastern
Partnership summit in Vilnius November 28-29. The key question is
whether Ukraine and the European Union will sign the long-concluded
Association Agreement. The Ukrainian Government is reluctant to fulfill
all conditions, leaving the signing in doubt. The Ukrainian economy is
in poor shape and most vulnerable, and the Russian Government is
threatening Ukraine with draconian sanctions if the country does sign
the EU agreement.
The United States is well liked and highly influential in Ukraine
and can do a great deal to influence that country's choice simply by
speaking up. The main objectives for U.S. policy on Ukraine should be
to support democracy. If democracy is secured, Ukraine is likely to
choose a Western geopolitical orientation. If the United States wants
to be important, it is important, and in few places is the Unites
States more appreciated that in Eastern Europe.
I first visited Ukraine in 1985 and have kept in close touch with
the country ever since. I worked as an economic advisor to the
Ukrainian Government from 1994 to 1997. I have continued to follow its
economic and political development. I have written extensively on
Ukraine, including one book of my own and two edited volumes.
the importance of the european association agreement
After Ukraine had become a member of the World Trade Organization
in 2008 under the government of Prime Minister Yulia Tymosehnko, the
European Union started negotiating a very substantial Association
Agreement, which includes a deep and comprehensive free trade
agreement. President Viktor Yanukovych has maintained a pro-European
line and his administration completed the negotiations in November
2011, but its signature has been delayed because of European concerns
about the Ukrainian Government's poor observation of rule of law, human
rights, and political freedom.
This free trade agreement would abolish nearly all customs tariffs
between the European Union and Ukraine as well as lead to regulatory
convergence in technical standards, food standards, competition policy,
state aid and energy policy. It would have a considerable positive
impact on the Ukrainian economy. The economists Veronika Movchan and
Ricardo Giucci have concluded that it would add 12 percent to Ukraine's
GDP in the long term, and Oleksandr Shepotylo has assisted that it
would expand Ukraine's exports by 46 percent in the long term.
It is not only a trade agreement but also a far-reaching reform
plan for the Ukrainian state. The EU has committed itself to
considerable technical assistance. Sixty state agencies in various EU
countries have committed themselves to reform their Ukrainian
counterparts. This could amount a cleansing of Ukraine's pervasive
corruption and the state-building that Ukraine itself so far has failed
to accomplish. The EU state agencies have already a successful record
from the previous enlargements of the Union.
The European Union and Ukraine are supposed to sign the Association
Agreement at the EU summit in Lithuania's capital Vilnius on November
28-29. The problem, however, is that the first declared aim of this
agreement is ``to promote gradual rapprochement between the Parties
based on common values . . .'' and
European values is not Yanukovych's comparative strength. He exercises
full control over courts and law enforcement, utilizing them at will,
not least for jailing opposition leaders. In August 2011, Yulia
Tymoshenko was arrested and later sentenced to 7 years in prison for
abuse of power in a blatantly flawed court proceeding.
Yanukovych has all reasons to sign the Association Agreement. A
pro-European policy enjoys solid majority support in Ukraine, so he
cannot be reelected in March 2015, if he fails to sign this month. All
the leading businessmen are eyeing the European market for their future
expansion. Russia's President Vladimir Putin seems to keep Yanukovych
in such low regard that Yanukovych has concluded that they cannot work
together.
For long the EU representatives had in unison demanded that
Yanukovych carry out several major legal and political reforms, but the
President just stonewalled them. But evidently Putin really scared
Yanukovych's, and at the end of August Yanukovych did not only
reconfirm his long-lasting pro-European stance but he completely
changed his tune on EU conditions. Suddenly, he promised to adopt all
the legislation that the EU demanded. This involved constitutional
amendments on the judicial system and the constitutional court, laws on
all arms of law enforcement, a new electoral law, and renewed elections
where parliamentarians had wrongly been deprived of their seats. A slew
of laws have been going through the Parliament.
The main stumbling block has been the treatment of Tymoshenko. The
EU and Yanukovych agreed that she needed medical treatment abroad. The
EU has demanded that Yanukovych pardons her, which he does not want to
do. Yanukovych desires to keep her out of the country or in prison
without political rights. The Ukrainian Parliament, where Yanukovych
has complete control over the majority, is currently adopting a law
that will not be acceptable to the EU. Will Yanukovych pardon
Tymoshenko or gamble? The EU is not likely to give in. Ukraine is a
pervasively corrupt country, and the EU experience is that its main
failures have been caused by excessive softness.
poor economic policy and great vulnerability
For years, the Ukrainian Government has pursued a miserable
economic policy, rendering a serious financial crisis possible or even
likely. As most former Soviet states, Ukraine is subject to predatory
rule. Its masters have one clear objective: To enrich themselves.
In February 2010, Viktor Yanukovych won free and reasonably fair
Presidential elections with a narrow margin over then-Prime Minister
Yulia Tymoshenko. He represented the Russian-speaking electorate in
eastern and southern Ukraine, while Tymoshenko found most of her
support in the Ukrainian-speaking west and center of the country. This
balance between west and east has kept Ukraine more open and pluralist
than Russia.
Most of all Yanukovych represented the interests of a limited
number of big businessmen in Donetsk, his eastern home region and its
metallurgical industry. President Yanukovych started off with full
control of parliament, government, and courts. His first government
represented nine big business groups, but he quickly reduced their
number to three. Instead, friends of his son, Oleksandr, have come to,
dominate the government since December 2012. These young businessmen
from Donetsk hold all key economic posts in the government.
Yanukovych started his Presidency by adopting an ambitious
structural reform program and on that basis he concluded a stand-by
agreement with the IMF of $15 billion for 2\1/2\ years. Yet, by
November 2010 reform came to an end, and Ukraine received only the
first two tranches of this loan of a total of $3 billion.
Yanukovych's economic policies have stayed off track. An IMF
mission visited Ukraine in February 2011, and it set three key
conditions that the government has not fulfilled. The IMF continues to
insist upon them. An additional demand is that some sense into the tax
system.
The most important IMF condition is to hike the domestically gas
prices. Incredibly, Ukraine imports natural gas from Russia for over
$400 per 1,000 cubic meters, but the Ukrainian Government insists on
purchasing natural gas produced in Ukraine at the ridiculously low
price of $53 per 1,000 cubic meters and it sells gas to consumers and
utilities at such low prices. The purchased and sold quantities at
these low prices do not add up. Apparently, somebody is buying gas at
the low regulated price and sells it at the higher, making fortunes on
this arbitrage. We do not know who benefits, but Yanukovych has
adamantly opposed raising these prices. To sell gas at lower than the
purchasing prices causes the state oil and gas company Naftogaz losses
amounting to 2 percent of GDP each year, which eventually are financed
by the state budget, that is, the taxpayers.
The second IMF condition is to reduce the budget deficit. Instead,
Yanukovych has let it expand because of a variety of populist social
expenditures. Competitive public procurement has basically ended. Large
public contracts are distributed among cronies, and the kickbacks or
overpricing reported by the independent media that still exist is often
50 percent of the contract. Yet, no legal measures are undertaken
against the senior officials, who have been singled out for large-scale
embezzlement.
This year, the budget deficit is likely to reach almost 6 percent
of GDP, and the public debt is set to exceed 40 percent of GDP, which
might be more than Ukraine can bear. The Ukrainian Government could
ignore IMF demands for the last 2 years because it could borrow on the
international Eurobond market at 10-year yields of 7.5-9.5 percent, but
now these yields have risen to 12-13 percent, depriving the Ukrainian
Government of access to the international capital market.
The third IMF condition is that Ukraine introduces a more flexible
exchange rate, which is a code word for depreciation. The exchange rate
of the Ukrainian hryvnia is pegged at too high a level. As a
consequence, last year Ukraine's current account deficit was 8.2
percent of GDP, though this year it might decline toward 6 percent of
GDP because of a contraction of imports. As a consequence of the
overvalued exchange rate, Ukraine's international reserves have shrunk
steadily since September 2011, when they peaked at $38 billion. In
October, they fell to $20.6 billion, corresponding to only 2.6 months
of imports, and they are set to contract further. The general market
expectation is a depreciation of the hryvnia, which is reflected in the
low and falling ratings of outstanding Ukrainian credits.
Rather than following the IMF suggestions, the Ukrainian Government
has imposed strict currency regulations, to make it exceedingly
difficult to take money out of the country. It has also pursued very
high interest rates. Last year, posters with the picture of Gerard
Depardieu promised 19.5 percent interest on 1-year time deposits in a
Ukrainian savings bank. The high interest rates have kept inflation at
zero, but they have also killed investment and thus liquidated economic
growth. Output has fallen for the last five quarters. The expected
contraction for 2013 is now 1 percent, but it might become 1.5 percent.
This is a truly poor economic policy. The IMF mission just
inspected the situation October 17-29 and issued a press release that
is more scathing than the IMF ever is. The only positive observation
was some improvements in the still awful business environment. Yet, all
relevant top officials from the Prime Minister down met with the IMF
mission, showing that the Ukrainian Government is anxious to keep the
doors to the IMF open, so that they call for IMF support on short
notice.
Ukraine is quite likely to end up with a financial crisis at the
end of this year. The most likely process would be a run on Ukrainian
bank deposits and on currency exchanges, leading to such a decline in
reserves that the country becomes forced to a disorderly devaluation,
which would be accompanied with plenty of bank and company defaults.
russian threats of sanctions
Since 2009, President Vladimir Putin's policy toward Ukraine has
had one aim: to compel Ukraine to join his Customs Union with Belarus
and Kazakhstan, which is supposed to evolve into a more political
Eurasian Union from 2015. Ukraine, however, has persistently opposed
such Russian proposals because it would preclude its European
ambitions.
For long, the Kremlin did not pay much attention to Ukraine's
dealings with Europe, possibly thinking that the EU could not accept
Yanukovych's behavior. But in the middle of the summer Moscow started
with a trade war with Ukraine. To begin with, it blocked exports to the
Russian market from a couple of big pro-European Ukrainian businessmen
producing steel pipes and chocolate. In August, Russia blocked most
Ukrainian exports for 2 weeks through redtape at the border. Russia has
hardly eased up but imposed new trade barriers on for example rail
cars, to drive Ukraine into default, and to cut gas deliveries once
again. Yanukovych and his government have pleaded by all means, but
President Putin has offered no concessions, only persistent threats.
Russia is already sanctioning Ukraine and it is threatening with
more sanctions. They are essentially of three kinds. First, Russia is
likely to block all kinds of imports from Ukraine with the clear intent
on breaking both the national finances and specific pro-European
businessmen. In 2012, Russia accounted for 26 percent of Ukraine's
exports, about as much as the EU. Some of these sanctions are already
in place.
Second, President Putin's Advisor Sergey Glaziev has threatened
that Russia will drive Ukraine into default. Russia accounts for only
6.5 percent of Ukraine's external debt, but Russian banks in Ukraine
account for 12 percent of Ukrainian banking assets.
Third, once again as in January 2006 and January 2009, the
notoriously unreliable Russian state-dominated gas company Gazprom may
cut its supplies to Ukraine. It has already made lout complaints about
Ukrainian arrears.
Both Russia and Ukraine are members of the World Trade
Organization, Ukraine since 2008 and Russia since August 2012, but
neither country complies with its WTO commitments. For Ukraine, WTO
complaints against Russia would take too long time to be useful, since
the country is in a rampant crisis. The EU can offer immediate
additional market access as compensation for Russian trade sanctions,
but Russia and the EU are equally large importers of Ukrainian goods
and services, each taking one quarter of Ukraine's exports.
Rather than complying with the clear and transparent EU conditions,
Yanukovych went to see Putin at his summer residence in Sochi on
October 27. The two men reportedly met for 4-5 hours, but came out
without agreement.
no happy end is likely
Yanukovych is walking on eggshells as a bull in a china shop. The
economic situation is precarious. The risk for a run by ordinary
Ukrainians both on banks and the Ukrainian currency is apparent. The
rating agencies mercilessly downgrade Ukraine ever lower, and corporate
defaults are all too common.
In order to survive this winter without major economic disruption,
Yanukovych needs to pardon Tymoshenko, sign the Association Agreement,
and then quickly conclude an IMF stand-by agreement. Russia is all too
likely to block Ukrainian exports to Russia, cut various forms of bank
financing, and probably also gas supplies. Yet, there is no sign of him
doing what it takes with regard to the EU, the IMF, or Russia.
On November 8, Yanukovych signed a law amending the Tax Code that
would make it possible to deny Vitaly Klichko, the opposition leader,
the right to run as a Presidential candidate. Meanwhile, the Parliament
is about to adopt a law on Tymoshenko that will not be satisfactory to
the EU. Just in case, Yanukovych also stated that he would not allow
any increase in the gas price for consumers.
As long as Ukraine does not join the Russian-sponsored Customs
Union, Russia is likely to deliver a triple-whammy to Ukraine, blocking
its exports to Russia through trade sanctions, cutting gas exports, and
imposing various financial sanctions. The United States can and should
protest against such actions. Trade sanctions, as those already
deployed, appear to violate Russia's commitment to the WTO. The EU can
offer expedited market access. Cuts in exports would mainly harm
Russia's gas company Gazprom. Ukraine has sufficient volumes of gas
stored for the winter, and Europe can manage by other means. Financial
sanctions are best countered through a renewed IMF agreement with
Ukraine, which presupposes that Ukraine carries out necessary financial
reforms.
moldova deserves all support
In Vilnius, the Republic of Moldova is supposed to initial the deep
and comprehensive free trade agreement it has concluded with the
European Union. This agreement is of great economic importance for
Moldova. It also opens novel perspectives of European integration and
government reform. The current Moldovan Government is pro-European and
supports the agreement whole-heartedly, so that the complications that
prevail in Ukraine are not at hand in Moldova. The country has
currently quite a good economic policy with an expected growth rate
this year of 5.5 percent and it no longer requires any IMF support.
Yet, Moldova is subject to a greater threat from Russia than
Ukraine because it is much smaller, poorer, and a part of Moldova's
territory, Transnistria, is effectively controlled by Russian
``peacekeepers.'' President Putin has appointed Deputy Prime Minister
Dmitri Rogozin his envoy for Moldova.
First, Rogozin has demanded that Russia is allowed to open a
consulate in Transnistria, which the Government of Moldova has refuted.
There is a clear danger that Russia will recognize Transnistria as an
independent state as it did with the Georgian territories Abkhazia and
South Ossetia in 2008. The United States can and should tell the
Russian authorities that such a step would be impermissible.
Second, Moldova is completely dependent on Gazprom for its supply
of natural gas, and it could once again face a cut in the Russian gas
supply. Moldova has agreed with Romania to build an alternative gas
pipeline, but it will be completed only next year.
Third, Gazprom has large claims on Moldova for unpaid gas that has
been delivered to Transnistria beyond the control of the Moldovan
Government. Moscow could utilize this large debt to put Moldova into
default. If this would happen, the IMF could arrange new financing for
Moldova, since it has been a successful client.
Senator Murphy. Dr. Cohen.
STATEMENT OF DR. ARIEL COHEN, SENIOR RESEARCH FELLOW, HERITAGE
FOUNDATION, WASHINGTON, DC
Dr. Cohen. Thank you, Mr. Chairman, Senator Johnson. It is
a great pleasure to testify.
For centuries, the territory between Germany and Poland
between the Baltic Sea and the Black Sea were the scene of
competition, and at times confrontation, between Western
European and Russian interests and influences. The South
Caucasus was a battlefield between the Ottoman Empire, the
Persian Empire, and the Russian Empire. But, the West and the
United States recognized our interests in those parts of the
world since World War I, and definitely during the cold war and
after the end of the cold war in support of forces of democracy
and independence in Eastern Europe and South Caucasus. Ukraine,
of course, is the key. This is a historic opportunity to turn
Ukraine from Russian domination that lasted over 300 years to
equal interaction between Russia and Western Europe. And, in
the long term, Ukraine integrated in Europe will be a good
model for Russia to pursue more European integration, more
markets, and more democracy.
Unfortunately for us, we, the United States, has somewhat
been low key in pursuing the strategic goal of Ukraine's
integration with Western Europe--with the European Union. The
Russians, on the other hand, went full bore and pulled
President Yanukovych to two meetings with President Putin at
the end of October and on November 9, both meetings lasting
many hours.
Putin's advisor, Sergei Glazyev, and the former Chief of
Staff of Ukrainian President, Mr. Medvedchuk, have designed a
program to force Ukraine to join the Eurasian Union led by
Russia. That program was leaked. We, at the Heritage
Foundation, published a backgrounder analyzing it, and this was
a multitool effort to force Ukraine, through economic
blackmail, through soft power, and through, if you wish,
blackmail, to abandon the Western path. In the last several
days, there are more and more indications that Ukraine will not
sign the Association Agreement with EU and the Free Trade Area.
The Russians are also threatening to impose trade
sanctions. They had a dry run, or had a run, in the summer,
when they blocked imports from Ukraine. Russia is the largest
export market for the Ukrainians. And this implacable position
gives Mr. Yanukovych, the President, second thoughts, as well
as his fear of release of Yulia Tymoshenko from jail, which, of
course, both the Europeans and the United States justly demand.
We do have a national interest that Ukraine anchors its
future in Europe, develops the rule of law and appropriate
rights and becomes a fully democratic country and leads the way
for Eastern Partnership countries in integration with Europe.
Moldova has come, also, to severe threats from Russia,
including Vice Premier Dmitri Rogozin, who threatened that the
Moldovans will freeze in winter if Russia stops gas supplies.
And he said, ``Moldova's train en route to Europe would lose
its railcars in Transnistria,'' the enclave that Russia
supports its claim to independence. Rogozin, in Moldova, said,
``'I hope you won't freeze.'' Chilling language. Pun intended.
Georgia has achieved many successes in the last 8 years on
the road to economic reform and democracy. The current
leadership of Georgia is trying to balance the country's
position between Moscow and the West, but the Georgian public,
the Georgian elites, are committed to NATO membership and to EU
integration. So, we hope that Georgia, as Moldova sign, initial
the Association Agreement in Vilnius. We also hope that Ukraine
signs, but, as I said, the chances are not as high.
To wrap it up, I do believe that Eastern and Central Europe
have been a national interest priority area for the United
States for a long time. Since the end of the cold war, we
helped the Baltic States--Poland, Czech Republic, and others--
to accomplish institutional development in the democratic way,
and transition to markets quite successfully. And Eastern
Europe and South Caucasus should not be an exception.
U.S. overarching interest is expanding participatory
government, the rule of law, free-market economies. And a
weakened leadership in the past 5 years, and Russia's expanding
meddling in economic and foreign affairs of Western European
states, with these post-Soviet countries are facing an
increased foreign policy conundrum.
It is wise for the Europeans to take a lead. After all,
these countries are their ``near abroad.'' But, we, too, should
support efforts to expand economic stability, freedom, and
sovereignty of our Eastern European and South Eastern European
friends and allies, continuing the bipartisan policy that Bush
1, Clinton, and Bush 2 administrations continued for a long
time. And this administration, in our view, should not be an
exception. And I hope that we will achieve these goals.
Thank you very much.
[The prepared statement of Dr. Cohen follows:]
Prepared Statement of Ariel Cohen, Ph.D.
My name is Ariel Cohen. I am the Senior Research Fellow in Russian
and Eurasian Studies and International Energy Policy at The Heritage
Foundation. The views I express in this testimony are my own, and
should not be construed as representing any official position of The
Heritage Foundation.
Thank you for inviting me to testify before you today on the
Association Agreement and the Deep and Comprehensive Free Trade Area
(DCFTA) between the Eastern Partnership (EaP) members (Ukraine,
Moldova, Georgia, Belarus, Armenia, and Azerbaijan).
For centuries, the territory between Germany and Poland and between
the Baltic Sea and the Black Sea was a scene of competition, and at
times, confrontation, between Western European and Russian influences
and interests. The South Caucasus was a battlefield between the Ottoman
Empire, the Persian Empire, and the Russian Empire. Western powers also
viewed South Caucasus as a crucial geopolitical nexus between Central
Asia, Europe, Russia, Turkey, and Iran. In Eastern Europe and in the
Caucasus, indeed geography was the destiny. Today, there may be a
chance to break this ancient dynamic by signing the Association
Agreement (AA) and DCFTA between the Eastern Partnership members and
the EU. The U.S. has national interests in the region, as it supports
integration of the EuP members into the greater Euro-Atlantic area.
Washington has not provided sufficient support to the Vilnius process
and needs to do so in the remaining 2 weeks. Ukraine is the key country
in this process.
Ukraine
Since the implementation of the Partnership and Cooperation
Agreement (PCA), the EU has continued to reach out to Ukraine,
requesting Ukrainian political and legal reforms in exchange for trade
expansion and economic integration with the EU, which would bring
distinct benefits for Ukraine. However, mounting Russian pressure
threatens to derail the EU's decade-long integration efforts.
At the end of October and on November 9, President Yanukovich met
with Russian President Vladimir Putin. Both sides published minimal
information about these meetings, but a number of signs suggest that
Russia's vehement opposition to Ukraine's AA and DCFTA membership is
the key dynamic in the relationships between Kyiv and Moscow, and
European capitals and Russia.
The future of the jailed former Prime Minister Yulia Tymoshenko and
President Yanukovich's resistance to European pressure to pardon and
release her seem to be playing a key role in the drama. First, the
Ukrainian authorities launched new proceedings against Tymoshenko,
which may lead to a jail term of up to 10 years. Second, a senior
representative of the ruling Party of Regions announced in Kyiv that
Ukraine may forgo the Association Agreement with the EU. The ruling
Party of Regions refused to consider the new legislation allowing
prisoners to leave abroad for medical treatment. It also pushed through
legislation aimed at blocking world heavyweight champion Vitaly Klichko
from running for presidency in 2014. Finally, Tymoshenko's attorney has
been detained on criminal charges. All this suggests that Russia's
pressure may have worked, and there will be no deal with the EU.
Economic factors play a key role.
Currently, Russia is Ukraine's largest market for exports ranging
from foodstuffs to metal pipes. Millions of Ukrainian migrant workers
are employed in Russia, with families dependent on their revenue. In
addition, Ukraine is in debt to its northern neighbor for $880 million,
mostly to the state-owned natural gas supplier Gazprom, which would
like to gain control over the Ukrainian gas distribution gas network
Naftohaz Ukrainy. Russia's soft power is dominating Ukraine through
pro-Moscow politicians; popular TV channels and other media; and
Russian speakers in the east and south of the country, especially in
the Crimea.
This situation offers Russia significant leverage.\1\ The creation
of the Russia-dominated Customs Union, and formation of the Eurasian
Union, allow Russia to place intense pressure on Ukraine. This is
happening not just since the beginnings of the trade war we witnessed
this summer,\2\ but also with the earlier promises of economic and
political gains.
Moscow does not demand reforms, including the rule of law and
anticorruption measures, which the EU does. These demands may annoy
some Ukrainian elites and high-ranking officials, making domination by
Moscow more palatable than European integration in the eyes of a myopic
few.\3\
However, Ukraine's hesitancy to enter the Customs Union with Russia
is warranted, as in the long term Moscow envisages subjugation, not
cooperation. Its ultimate goals are geopolitical, not just economic.
Recent events have made this clear. When negotiating over observer
status as part of the Eurasian Economic Commission, Ukraine made
several requests, including the right to attend all commission
meetings, to have the texts translated into Ukrainian, and other
reasonable safeguards of Ukrainian interests. All of Ukraine's requests
were summarily rejected.\4\
The implacability of the Russian position and the potential loss of
economic and eventually state sovereignty defeated Ukrainian elite's
desire, if any existed, to join the Customs Union and the Eurasian
Union. Yet, Kyiv is understandably apprehensive: if Moscow imposes high
import tariffs (up to 10 percent allowed by WTO) and nontariff
barriers, economic sanctions, as it were, could come into damaging
effect immediately; while EU and potentially World Trade Organization
(WTO) response would be painfully--and prohibitively--slow.
Additionally, many EU members are hesitant to reach out to Ukraine
until actual, measurable reforms are enacted. This, too, is
understandable. The EU places political and legal conditions that are
key to the signing of the Association Agreement, including the release
of imprisoned former Prime Minister Tymoshenko.
Expert recommendations vary greatly in regards to the EU's
response. Some argue that ``the sooner the EU signs the agreements with
Ukraine, Moldova, and Georgia, the stronger the insurance will be
against the vagaries of the East European political weather.'' \5\
Ukraine's signature on an Association Agreement is crucial to EaP
goals, as Ukraine is expected to demonstrate the benefits of the EU's
association agreements to other EaP countries. However, the signature
on an agreement would not immediately resolve the longstanding problems
in Ukraine. Whether or not Ukraine signs the Association Agreement in
Vilnius, ``Ukraine is likely to find itself in uncharted waters after
November 2013.'' \6\ One possible outcome may be that Kyiv remains
sitting between the two chairs: neither signing the DCFTA, nor joining
the Customs Union. Such an outcome makes the quickly deteriorating
economic situation of Ukraine particularly bitter.
Russia has already threatened to respond. Russian Presidential
adviser Sergei Glazyev publicly stated that numerous articles of the
EU-Ukrainian Association Agreement would violate several clauses of the
Ukrainian-Russian treaty of friendship and cooperation and ``will do
serious, irreversible, and long-term harm to us.'' \7\
Russia's economic and political pressure through high tariffs and
import delays, the possible implementation of a visa regime, and
increased energy costs in the middle of a cold winter are the threats
Moscow has held out in trying to prevent Kyiv from signing the
agreement with the EU. Moscow experts reiterate that if Ukraine signs
the EU Association Agreement, Ukraine would become a truly ``foreign''
country to Russia, estranged economically and politically. As I warned
in a recent Heritage Foundation Backgrounder, Russia is threatening to
retaliate, making the EU-driven process as painful as possible.\8\
It is in the U.S. national interest that Ukraine anchors its future
in Europe; develops the rule of law and property rights; and becomes a
fully democratic country. Unfortunately, the administration did not
view the future of Ukraine with due seriousness. It eschewed senior-
level state visits; economic deal-making; and high-impact public
diplomacy. Once again, in Eastern Europe and Eurasia, the U.S. punched
below its weight.
Instead of benign neglect, the administration should have
encouraged the Ukrainian leadership to sign the Association Agreement
and DCFTA at the Vilnius summit in November. The White House should
reaffirm the guarantees of Ukrainian sovereignty and independence
pledged by the U.S. in 1994, at the highest level, including protection
from economic pressure. After all, while Presidents Putin and
Yanukovich met many times, American officials made their trips to
Ukraine scarce, and the level of U.S visitors in the country lower than
necessary. Nor was the U.S. willing to coordinate its policies toward
Ukraine with the EU in order to link the IMF economic relief package
with European integration.
The Obama administration should have publicly denounced Moscow's
illegal economic pressure on Ukraine to force it to join the Customs
Union. The U.S. can and should provide technical advice on measures
Kyiv can take to oppose such pressure in the WTO and other
international frameworks. The U.S. should also promote the release of
former Prime Minister Tymoshenko from prison--a step that would further
encourage the Europeans to sign the Association Agreement.
Provided Ukraine signs the Association Agreement and DCFTA,
Congress and the Obama administration should expand U.S. and
international technical assistance to Ukraine, if requested, including
steps Kyiv may take in the WTO to defend its trade from discriminatory
Russian trade practices. The U.S. should offer advice to: facilitate
Ukraine's economic reforms, combat corruption, increase transparency of
government decisionmaking, make the civil service smaller and more
efficient, privatize government services where possible, improve law
enforcement practices, enhance the work of the courts, assist with the
training of judges and prosecutors, deepen legal reform, and improve
banking practices. The U.S. may lower tariffs on imports from Ukraine
to compensate partially for the imposition of Russian tariffs on
Ukrainian goods.
Finally, the administration should boost public and diplomatic
support of Ukraine's Association Agreement and DCFTA with European
capitals, signaling high-level U.S. attention to this matter, and
dispatch senior American officials to Kyiv to articulate support
through talks with the Ukrainian leadership and public appearances.
Other countries are also under pressure not to join the AA and
DCFTA. Moldova, too, has been a target of Russian threats.
Moldova
Moldova was effectively dismembered by Russia, which supported
Transnistria, the secessionist Russian-speaking enclave since 1992.
Europe's poorest country, Moldova has become the latest victim of
Russia's bullying.\9\ Nevertheless, it is planning to initial the
Association Agreement in Vilnius and sign it in 2014.
In September 2013, Dmitri Rogozin, Russia's Deputy Prime Minister
in charge of the military-industrial complex and special envoy to the
breakaway region of Transnistria, visited the country. A senior
Moldovan diplomat who requested anonymity disclosed that Rogozin has
applied pressure and threats during his talks with Moldovan officials.
``He said it would be a serious and costly mistake if we concluded an
agreement with the EU,'' the diplomat stated.\10\
Rogozin threatened to cut Moldova's trade with Russia, while
Moldova's migrant workers could face restrictions on entering Russia.
He also said that by moving closer to Europe, Moldova would have to
give up the secessionist Transnistria, which is backed by Russia.
``Moldova's train en route to Europe would lose its rail cars in
Transnistria,'' Rogozin said during a press conference in the capital,
Chisnau, effectively threatening to dismember the country. As a parting
shot, Rogozin, a former ambassador to NATO, told a closed meeting that
European Union integration was linked to integration with NATO, which
is entirely untrue. Then he reminded his audience about how Moldova is
completely dependent on Russia for its energy. ``Energy supplies are
important during the runup to winter,'' Rogozin said. ``I hope you
won't freeze.'' \11\
Most recently, in September 2013, Russia implemented a ban on
Moldovan fruits, vegetables, wines, and spirits, blaming Chisnau, for a
``lack of quality control at its wineries.'' \12\ This pattern is
similar to the earlier economic sanctions against Ukraine. As Moldovan
produce, wines, and spirits are very popular in Russia, accounting for
over 10 percent of the Russian market, and comprising over 50 percent
of Moldovan exports, the Russian import ban has a significant impact on
Moldova's economy.\13\ The EU promised to lift quotas on Moldovan wine
before the end of 2013.
However, Moldova continues to move ahead with EU integration,
although Russia's efforts may still dissuade Chisnau.\14\ The dispute
with the secessionist Russian-speaking exclave of Transnistria remains
unresolved and can be used a foil against the country's sovereignty,
while the EU demands that more needs to be accomplished in terms of the
rule of law and improvement of the business climate.
south caucasus countries
Georgia
Of all the Eastern Partnership countries, Georgia is historically
the most firmly set on engaging and integrating with the West. Like
Moldova, it is planning to initial the Association Agreement with
Europe in Vilnius.
Russia never fully accepted Georgian independence in
internationally recognized borders. In 1992, Russia provoked a civil
war in Georgia that led to the secession of Abkhazia and South Ossetia.
The Five Day War in 2008 completed the breakup, leaving over 25 percent
of Georgian territory (Abkhazia and South Ossetia) occupied.
The process of subjugating Georgia may have been further advanced
in the election cycle of 2012-2013, when Bidzina Ivanishvili, a former
Russian billionaire businessman, captured the majority in the
Parliament. On October 27, 2013, Georgians elected Giorgi
Margvelashvili, Ivanishvili's handpicked Presidential candidate, as
mostly ceremonial President,\15\ and on November 4, 2013, the
Parliament elected a close Ivanishvili ally, 31-year-old Irakli
Garibashvili, as a powerful Prime Minister.\16\
Moscow seeks to undermine Georgia's role as an energy transit hub
that links neighboring Azerbaijan to Turkey and Europe, thereby
bypassing Russia and its energy monopoly in Eurasia. Almost 5 years
after the Russian invasion of Georgia in August 2008, Russia has
recognized the independence of the Georgian provinces of Abkhazia and
South Ossetia while approximately 10,000 Russian troops continue to
occupy them.\17\ The future of Georgian independence, territorial
integrity, and sovereignty is severely challenged.
Just as Joseph Stalin, himself a Georgian, drew Georgian borders in
order to exploit and exacerbate ethnic differences, Russia's current
occupation of South Ossetia and Abkhazia reflects Moscow's desire to
divide and conquer Georgia, as it supports Abkhazia's and South
Ossetia's resistance to Tbilisi's offer to join Georgia as full
autonomies.
Former President Mikheil Saakashvili during his two terms
intensified the efforts of his predecessor and former U.S.S.R. Foreign
Minister Eduard Shevardnadze, seeking to counter Russian influence by
cooperating militarily with NATO and economically with the U.S. and the
EU.
Marene Laruelle notes that ``in Georgia, Moscow has soft power
instruments that it could activate,'' \18\ including pro-Russian
politicians, economic ties, and the popular Russian TV channels. The
Georgian Dream Party of Bidzina Ivanishvili, the Conservative Party of
Zviad Dzidzigouri, the Worker's Party of Shalva Natelachvili, the New
Right, the Democratic Movement--United Georgia of Nino Burjanadze, and
the Georgian Party of Irakli Okruashvili all call for a rapprochement
with Russia in one way or another.
Moscow has been deeply uneasy with Georgia's market reforms,
democratic elections, and Western orientation. That being the case,
Georgia's strategy has been to move toward the EU and NATO, which will
inevitably bring Russian ire on Tbilisi. Georgia's strategic dilemma is
that while the relations with Moscow improved only marginally, the
relations with Washington chilled down a lot since 2009. The EU was
cautious not to anger Russia, its principal gas supplier.
Georgia's dogged campaign for NATO integration also played a key
role in developing and affirming the country's desire to join in
Western alliance. Apart from its ties with the West, Georgia stands
alone, shadowed by Russia's looming threat to its national security and
sovereignty.\19\ If allied with and protected by the West, Georgia
stands a much improved chance of maintaining territorial integrity in
the long term.
Trade with Russia represents a significant portion of Georgia's
small economy and raises concerns of Georgia potentially falling
squarely again under the aegis of Russia. The return to the Russian
sphere of influence and economic frameworks would be a step backward
for Georgian independence.\20\
Azerbaijan
Azerbaijan has been caught between Russia and the West for almost
100 years, since its short-lived independence in 1918-1920.
Strengthening ties between Azerbaijan and Russia has become a top
priority for Putin, who visited Baku in August 2013.\21\ Azerbaijan and
Russia signed a protocol in July 2013 for the reconstruction of the
existing bridge at their border and to construct a new bridge across
the Samur River.\22\ In June 2013 Azerbaijan agreed to a $1 billion
weapons purchase from Russia, equipping Azerbaijani military with
updated tanks and armored vehicles.\23\
In addition, SOCAR and Rosneft--Azerbaijan's and Russia's
respective leading oil-producing companies--have begun negotiations on
increasing energy cooperation. The two companies are considering
resuming and expanding oil supplies to Europe via the Baku--
Novorossiysk pipeline.\24\
Yet, Russia's primary interests in the South Caucasus focus on
Armenia, its historic ally as discussed above. Moscow wants to dominate
the region militarily and strategically and to prevent or control the
export of hydrocarbons to the West from the Caspian region through the
Transcaucasian energy corridor,\25\ which rests outside of Russian
control. Moscow is particularly concerned by the 2012 agreement between
Turkey and Azerbaijan to build the Trans-Anatolian Natural Gas Pipeline
(TANAP)--and its extensions, the Trans Adriatic Pipeline (TAP), which
would connect Turkey, Greece, Albania, and Italy, and Nabucco West,
connecting Turkey, Bulgaria, Romania, Hungary, and Austria
respectively. This pipeline system would ease Europe's dependence on
Russian gas.\26\
Under the two Azerbaijani Presidents, Heydar Aliyev, who died in
2003, and his son, Ilham, Azerbaijan has pursued a mostly pro-Western
policy to date. The country was instrumental in the transit of U.S.
military materiel and personnel through the Northern Distribution
Network--a vital railroad and sea-lane link from the Caucasus across
the Caspian Sea and Turkmenistan into Afghanistan. Azerbaijan is also a
unique example of a secular regime in a state with a majority Shia
Moslem population, which treats its Russian Orthodox, Jewish, and Sunni
Moslem minorities quite well.
With U.S. support, Azerbaijan fiercely protected its sovereignty.
In 2012, Aydin Aliyev--head of the Azerbaijani State Customs
Committee--joined the Georgian Government in declining to enter the
Eurasian Customs Union. Aliyev announced that Azerbaijan is in the
process of implementing its own customs code and refused to sign the
Treaty on the Free Trade Area, signed in October 2011 by the Presidents
of eight CIS countries.\27\
Since President Aliyev has not shown interest in EAU membership,
Putin has attempted to create a counterweight to Aliyev's internal
political and economic dominance in Azerbaijan. So far, he has failed.
The Union of Azerbaijani Organizations of Russia (UAOR)--also known
as the Billionaires' Union--has been cited as a new tool that allows
Putin to meddle in Azerbaijan's internal affairs. Georgian ex-president
Saakashvili believes the UAOR was created for the purpose of
overthrowing the Aliyev government, while Vafa Guluzade, a former
senior foreign policy aide to the late President Heydar Aliyev, claims
to ``see it as one of the forms of pressure against, and intimidation
of, the Azerbaijani Government, which could be used when Putin needs
it.'' \28\ However, the Billionaires' Union failed to launch a viable
political alternative to Aliyev, and Putin paid a friendly visit to
Baku in August 2013. Yet, there is a strong lobby in Baku, including in
the corridors of power, which advocates abandonment of the Western
orientation and cozying up to Moscow. Baku is concerned about the
refusal of the EU to include language about territorial integrity and
occupation in the Associate Membership Agreement. Some in Baku may be
also upset over European critique of the levels of democracy, human
rights violations, and high levels of corruption. Over the past years,
Azerbaijan has expressed interest in the EaP because of its desire to
expand energy exports, including strategic TANAP and TAP gas pipelines
to Turkey and Europe respectively, as well as a desire to ally with the
West, but on its own terms.
As Azerbaijan is not a World Trade Organization member, it does not
meet DCFTA requirements, but an Association Agreement can still be
initialed. This would be a positive development that would speak
volumes to neighbors north and south. With Azerbaijan's energy
resources exported to the European markets, some of Eastern Europe's
reliance on Russian energy--and consequent susceptibility to Russian
pressure--would be diminished. Thus, Europe has a direct interest in
negotiating such an agreement with Baku.
Armenia
Armenia's recent capitulation to Russia's demands \29\ illustrates
Russia's willingness to threaten severe retaliation against any former
Soviet nation's attempted reorientation toward the West. Armenia needed
but a limited push to abandon its European path and join the Custom
Union. Eventually, Russia would like to see Georgia follow suit. If
that occurs, Azerbaijan would be isolated by Armenia and Iran in the
south, and its egress to the Black Sea corked by Georgia.
Erevan recently entered the Russian-led Customs Union, believing
that its alliance with the Kremlin best guarantees its security.
However, trading sovereignty for security came at a price. In September
2013, European Commissioner for Enlargement and European Neighborhood
Policy Stefan Fule stated that it was ``difficult to imagine'' the
initialing by Armenia of the Association Agreement at Vilnius in
November . ``Based on the information we presently have, the
compatibility of obligations to the Customs Union with those under an
Association Agreement/DCFTA with the EU looks problematic.'' \30\ EU
President and Lithuanian Foreign Minister Linas Linkevicius echoed
similar concern: ``We respect any choice of countries but they cannot
enter both organizations at the same time because of different tariff
requirements.'' \31\
Many analysts see Armenia's reversal after 3 years of negotiations
and a successful completion of talks with the EU a prime example of
Russia's powerful sway over the other four members of the Eastern
Partnership.
Armenia was scheduled to sign the formal Association Agreement in
November 2013 at the Vilnius conference. However, due to intense
Russian pressures, Armenia was forced to abandon EU negotiations and
seek entrance in the Russian-led Customs Union, which is likely to lead
to membership in the newly formed Eurasian Union.\32\ Russia's threats
to curb security cooperation and arms supply, in addition to
``interfering with gas supplies, pressuring Armenian migrants in Russia
. . . or reducing Russian support in Armenia's conflict with Azerbaijan
over Nagorno-Karabakh,'' have led Armenia to shift its position.'' \33\
Though the prospect of Armenia's integration with the EU suffered a
large setback, the EU invitations to Armenia and Azerbaijan to
participate in the Vilnius summit suggest that Armenia-EU negotiations
are by no means closed. Instead, Moscow may force the EU to develop a
``two-tier'' Eastern Partnership, wherein the countries that are fully
integrated receive full benefits, while those that only partially
comply receive benefits that are more modest.\34\
Regardless, such a radical and sudden volte-face in Armenia's
position on EU involvement demonstrates the dangers that lie ahead in
the EU negotiations with the other member states of the Neighborhood.
u.s. interests in the eastern european neighborhood
Eastern and Central Europe have been a national interest priority
area for the United States since World War I. After all, some of
Europe's most pro-American countries are located there. The U.S. fought
and won the cold war on their behalf. The region was also a major
battleground in both world wars and before.
Since the end of the cold war the U.S. has actively assisted
democratic forces in that part of the world. Democracy triumphed in the
Baltic States, Poland, Czech Republic, Slovakia, and elsewhere in the
region. There is no reason it will not succeed in the European
Neighborhood countries. The U.S. is also interested in developing the
East-West (``The New Silk Road'') corridor for trade, transportation,
energy pipelines, and communications from China to Europe, in keeping
the region free from outside domination, and for penetration of the
ideas of freedom to a part of the world which had little experience
with it.
The U.S.'s overarching interest in expanding participatory
government, the rule of law, and free-market economies in Eastern
Europe is well demonstrated. However, due to weakened American
leadership in the past 5 years, and because of Russia's expanding
meddling into the economic and foreign affairs of the Eastern European
states, these post-Soviet countries represent an increasing foreign
policy conundrum.
It is wise for the Europeans to take a lead in addressing these
challenges. After all, it is their neighborhood, their ``near abroad.''
The U.S. should support efforts to expand the economic stability,
freedom, and sovereignty of our Eastern and South East European friends
and allies, continuing the bipartisan policy of the both Bush and
Clinton administrations since 1992.
----------------
End Notes
\1\ ``West or East?'' The Economist, October 5, 2013, http://
www.economist.com/news/leaders/21587228-european-union-should-sign-
deal-ukrainebut-only-if-yulia-tymoshenko-freed-west-or (accessed
November 4, 2013).
\2\ Nicu Popescu, ``The Russia-Ukraine Trade Spat,'' European Union
Institute for Security Studies, http://www.iss.europa.eu/uploads/media/
Alert_Ukraine_trade.pdf (accessed November 4, 2013).
\3\ ``West or East?'' The Economist.
\4\ James Sherr, ``Ukraine and Europe: Final Decision?'' Chatham
House, http://www.chathamhouse.org/sites/default/files/public/Research/
Russia%20and%20Eurasia/0713pp_sherr.pdf (accessed October 4, 2013).
\5\ ``Keeping the Eastern Partnership on Track,'' European Union
Institute for Security Studies, http://www.iss.europa.eu/uploads/media/
Alert_Armenia-Russia.pdf (accessed October 4, 2013).
\6\ Sherr, ``Ukraine and Europe: Final Decision?''
\7\ ``Glazyev: Ukraine will fail to harmonize regulations with
Customs Union if it signs association agreement with EU,'' Interfax
Ukraine, November 4, 2013, http://www.kyivpost.com/content/politics/
russian-presidential-adviser-sergei-glazyev-ukraine-will-fail-to-
harmonize-regulations-with-customs-union-if-it-signs-association-
agreement-with-eu-331387.html (accessed November 4, 2013).
\8\ Ariel Cohen, ``Why the U.S. Should Support Ukraine's
Association and Free Trade Agreements with Europe,'' Heritage
Foundation Backgrounder 2849, October 21, 2013, http://
www.heritage.org/research/reports/2013/10/why-the-us-should-support-
ukraines-association-and-free-trade-agreements-with-europe.
\9\ Vladimir Socor, ``Russia and the Moldovan Communists' Red
October,'' Eurasia Daily Monitor, Vol. 10, Issues 176 and 177, (October
3 and 4, 2013).
\10\ Judy Dempsey, ``How Russia Bullies the EU's Eastern
Neighbors,'' Strategic Europe, September 9, 2013, http://
carnegieeurope.eu/strategiceurope/?fa=52903 (accessed November 4,
2013).
\11\ ``Moldova Says Will Stick to Pro-Europe Course Despite Russian
Pressure,'' Moscow Times, September 6, 2013, http://
www.themoscowtimes.com/business/article/moldova-says-will-stick-to-pro-
europe-course-despite-russian-pressure/485589.html (accessed November
4, 2013).
\12\ ``Russia Vague on Lifting Moldovan Wine Ban,'' RIA Novosti,
September 20, 2013. http://en.ria.ru/russia/20130920/183619894/Russia-
Vague-on-Lifting-Moldovan-Wine-Ban.html (accessed November 4, 2013).
\13\ Reuters, ``Russia, unhappy with Moldova's EU drive, bans its
wine and spirits,'' September 10, 2013, http://www.reuters.com/article/
2013/09/10/us-moldova-russia-wine-idUSBRE98916M201
30910 (accessed November 4, 2013).
\14\ Socor, ``Russia and the Moldovan Communists' Red October.''
\15\ David M. Herszenhorn, ``Georgia Elects New President, but Real
Power Will Rest With Next Premier,'', The New York Times, October 27,
2013, http://www.nytimes.com/2013/10/28/world/europe/georgia-elects-
new-president-but-real-power-will-rest-with-next-premier.html?_r=0
(accessed November 8, 2013).
\16\ Max Delany and Irakli Metreveli, ``Georgia PM names loyalist
minister, 31, as successor,'' Agence France-Presse, November 2, 2013,
http://news.yahoo.com/georgia-pm-names-interior-minister-successor-
113951447.html (accessed November 8, 2013).
\17\ Luke Coffey, ``Georgia and Russia: The Occupation Too Many
Have Forgotten,'' The Heritage Foundation, The Foundry, May 31, 2012,
http://blog.heritage.org/2012/05/31/georgia-and-russia-the-occupation-
too-many-have-forgotten.
\18\ Marlene Laruelle, ``When the `Near Abroad' Looks at Russia:
The Eurasian Union Project as Seen from the Southern Republics,''
Russian Analytical Digest, No. 112 (April 20, 2012), http://
www.css.ethz.ch/publications/pdfs/RAD-112-8-11.pdf (accessed October
28, 2013).
\19\ Eastern Partnership Community, ``Georgia,'' http://
www.easternpartnership.org/partner-states/georgia (accessed November 4,
2013).
\20\ Ariel Cohen, ``Russia's Eurasian Union Could Endanger the
Neighborhood and U.S. Interests,'' Heritage Foundation Backgrounder No.
2804, June 24, 2013, http://www.heritage.org/research/reports/2013/06/
russias-eurasian-union-could-endanger-the-neighborhood-and-us-
interests.
\21\ Donald N. Jensen, ``Putin Brings Disappointment Back from
Baku,'' Institute of Modern Russia, August 22, 2013, http://
imrussia.org/en/politics/538-putin-brings-disappointment-back-from-baku
(accessed October 28, 2013).
\22\ Nazrin Gadimova, ``Azerbaijan, Russia Ink Protocol on
Construction of Bridge Across Samur River,'' AzerNews, July 24, 2013,
http://www.azernews.az/azerbaijan/57293.html (accessed October 28,
2013).
\23\ ``Defense Minister's Press Secretary on Russian Supply of
Weapons to Azerbaijan,'' Lragir.am, http://www.lragir.am/index/eng/0/
politics/21691/30226 (accessed July 28, 2013).
\24\ Gulgiz Dadashova, ``Rosneft, SOCAR Eye Prospects for Co-op
under Future Projects,'' AzerNews, July 5, 2013, http://
www.azernews.az/oil_and_gas/56419.html (accessed October 28, 2013).
\25\ ``Connecting Caucasus with the World: Railways and
Pipelines,'' video, The Wilson Center, April 2, 2013, http://
www.wilsoncenter.org/event/connecting-the-caucasus-the-world-railways-
pipelines (accessed October 28, 2013).
\26\ Trans Adriatic Pipeline, http://www.trans-adriatic-
pipeline.com/ (accessed September 9, 2013).
\27\ A. Akhundov, ``Azerbaijan Not to Join Eurasian Customs
Union,'' TREND News Agency, July 16, 2012, http://en.trend.az/capital/
business/2046965.html (accessed October 28, 2013), and Sultan
Akimbekov, ``The Eurasian Response,'' http://magazine.asiakz.com/rus/
article/1022 (accessed October 28, 2013).
\28\ Shahin Abassov, ``Azerbaijan: Is the Kremlin up to Old
Tricks?'' Eurasianet.org, March 12, 2013, http://www.eurasianet.org/
node/66677 (accessed October 28, 2013).
\29\ ``Armenia's Dependency on Russia Continues to Deepen,''
Caspian Research Institute, http://caspianresearch.com/2013/10/02/
armenias-dependency-on-russia-continues-to-deepen/ (accessed October 4,
2013).
\30\ ``Stefan Fule: Difficult to imagine initialling Association
Agreement with Armenia in Vilnius as it had been negotiated,'' News.am,
September 6, 2013, http://news.am/eng/news/170092.html (accessed
November 4, 2013).
\31\ ``Armenia-EU free trade deal blocked,'' Global Post, September
3, 2013, http://www.globalpost.com/dispatch/news/afp/130903/armenia-eu-
free-trade-deal-blocked (accessed November 4, 2013).
\32\ Cohen, ``Russia's Eurasian Union Could Endanger the
Neighborhood and U.S. Interests.''
\33\ Caspian Research Institute, ``Armenia's Dependency.''
\34\ Nicu Popescu, ``Behind--and beyond--Armenia's choice,''
European Union Institute for Security Studies, October 2013, http://
www.iss.europa.eu/uploads/media/Alert_35_Armenia_U-turn.pdf (accessed
November 4, 2013).
Senator Murphy. Thank you.
Mr. Wilson.
STATEMENT OF DAMON WILSON, EXECUTIVE VICE PRESIDENT, ATLANTIC
COUNCIL, WASHINGTON, DC
Mr. Wilson. Thank you, Chairman Murphy, Ranking Member
Johnson.
In 2 weeks, European leaders will meet in Vilnius to chart
what is effectively the next wave of European immigration. The
United States will not have a seat at the summit, of course;
however, its results will have strategic consequences for U.S.
interests. The outcome of the Vilnius summit will help
determine whether the nations of the Eastern Partnership will
have the option of ultimately joining a Europe ``whole, free,
prosperous, and at peace.'' Therefore, I am here to urge Senate
backing for a clear U.S. strategy toward Europe's East and to
thank you for your leadership on this issue.
The Eastern Partnership began as a modest means to
strengthen the ties of Europe's East to the European Union
without offering membership. It has now become the leading
instrument to foster the transformation of post-Soviet nations
from Eurasian authoritarian kleptocracy to European democratic
prosperity. The Eastern Partnership offers political
affiliation with the European Union, economic integration, and
the elimination of barriers to travel. These are the
ingredients necessary to accelerate the adoption
of European norms and values in post-Soviet nations. Its
powerful unspoken premise is that true sovereignty requires
greater democracy.
So, at issue in Vilnius is whether Ukraine itself will join
Moldova and Georgia in making major advances in their
integration with Europe, but the Eastern Partnership's future
itself is also in play. The issue is whether European leaders
will evolve the partnership to become a pathway for successful
reformers to pursue membership in the union while keeping open
the long-term European option for the others.
And this is where the United States becomes relevant. U.S.
leadership has driven each wave of European integration, using
NATO as the lead and often paving the way for European Union
enlargement. The United States has stepped back from this
leadership role driving this historic process. If the United
States sits on the sidelines, this next wave of European
integration, and ultimately enlargement, will fail. Building a
Europe ``whole, free, prosperous, and at peace'' remains in the
American national interest as much as previous phases of this
process have. Indeed, the United States remains a European
power with enormous influence over this process.
The task today is to develop U.S. strategy to complement
and indeed support the European Union efforts to integrate its
neighbors in Europe's East. The United States should be an
enabler of European integration and a driver of future NATO
enlargement.
The EU's Eastern Partnership Initiative and future NATO
enlargement do not necessarily overlap, but they can be
mutually reinforcing. The Eastern Partnership is the latest
instrument of a common transatlantic strategy. We nearly
achieved our post-war goals of a Europe ``whole, free, and at
peace'' with the post-cold-war enlargement of NATO and the
European Unions, the twin instruments of the strategy. But,
even as we celebrate that success, we must recognize that our
work is not yet done. Our renewed U.S. strategy for Europe's
East should, therefore, consist of consolidating our gains,
preventing rollback of freedoms, and setting the stage for this
next advance of integration. In this context, the U.S. strategy
toward Europe's East could include five elements.
First, Washington can be clear, help articulate a clear
goal to complete Europe. Such a vision gives strategic impetus
to individual decisions that can at times seem small in impact
when considered in isolation.
Second, U.S. policy can back the EU's Eastern Partnership
Initiative unequivocally in order to mitigate ambivalence with
inside the European Union while strengthen the hands of its
advocates. A divided EU will fail in integrating Europe's East.
Third, the United States should assume a leading role in
addressing the security concerns afflicting the eastern
partners, because security is left unaddressed by the Eastern
Partnership process. This means, in Moldova, for example, the
United States should create a Strategic Partnership Council to
parallel the structures we have with Ukraine and Georgia, and
we should move from being observers in the negotiations over
Transnistria to being full participants.
Regarding Georgia, Washington should take the lead in
restoring a strategy for Georgia to join NATO, as long as that
country's leaderships pursue reforms and as long as they do not
pursue witch hunts, including, particularly, against President
Saakashvili.
Fourth, the United States should be working with the EU now
to support those nations to take decisive steps toward Europe
in Vilnius. This means, for example, making clear that the
Transatlantic Trade and Investment Partnership would be open to
the countries of the Eastern Partnership that successfully
reach agreements with the European Union, and, at the same
time, the United States and the EU should be anticipating and
countering Russian moves to derail these nations' move toward
Europe.
Finally, the United States should restore a sense of
momentum to the broader integration process by leading the
effort to welcome Macedonia and Montenegro into NATO, and
Bosnia, Herzegovina, and Georgia into NATO's Membership Action
Plan.
Ukraine presents a particular challenge. President
Yanukovych is not acting decisively to end selective justice
and to release former Prime Minister Yulia Tymoshenko from
prison. If he fails to do so, he should face consequences.
Therefore, the challenge in Vilnius is to lock in Ukraine's
European choice while gaining leverage to more effectively
check antidemocratic behavior and to ensure the Ukrainians have
a genuinely free choice in their 2015 presidential elections.
The Eastern Partnership is not meant to create a new
dividing line in Europe. It can help anchor a vulnerable and
insecured zone and the certainty of a stable and prosperous
Europe. Over the long term, the vision of a Europe ``whole,
free, and at peace'' also includes a democratic Russia, but the
pathway to reform in Russia might begin with choices in Kyiv,
Chisinau, and Tbilisi, in favor of a European future.
Thank you.
[The prepared statement of Mr. Wilson follows:]
Prepared Statement of Damon M. Wilson
Chairman Murphy, Ranking Member Johnson, members of the
subcommittee, in exactly 2 weeks, European Union (EU) leaders will meet
in Vilnius, Lithuania, with their counterparts from Europe's East to
chart the next wave of European integration. While most EU summits do
not merit the attention of the U.S. Senate, this Eastern Partnership
summit is different. The sovereignty of the nations between the
European Union and Russia is at stake. The outcome of the Vilnius
summit will help determine whether the nations of Ukraine, Moldova,
Georgia, Armenia, Azerbaijan, and Belarus will have the option of
ultimately joining a Europe whole, free, prosperous, and at peace.
The United States will not have a seat at the table at this summit.
However, its results will have enormous strategic consequences for U.S.
interests. Therefore, I am here to urge your backing for a clear U.S.
strategy in support of the EU's Eastern Partnership. In short, we need
a U.S. strategy for Europe's East.
Launched in 2008 as a Polish-Swedish initiative prior to the
Russian invasion of Georgia, European leaders envisioned the Eastern
Partnership as a modest means to begin to strengthen the ties of the
peoples of Europe's East to the EU, but without offering the goal of
membership. At its inception, the Eastern Partnership was very much
underestimated by the Eastern Partners themselves, as well as many
inside the EU and indeed in both Washington and Moscow. Within 5 years,
the Eastern Partnership has become the leading instrument to help
foster the transformation of post-Soviet nations away from a future of
Eurasian authoritarian kleptocracy to one of European democratic
prosperity.
The Eastern Partnership holds the potential to be a driver of
reform as it offers six post-Soviet nations three enticing elements:
political affiliation with the EU through Association Agreements,
economic integration through deep and comprehensive free trade
agreements, and elimination of barriers to travel through
liberalization of visa policies. In essence, these are the ingredients
to accelerate the adoption of European norms and values in post-Soviet
nations, creating facts on the ground in which individual choices shape
a country's strategic orientation. The enduring strength of the Eastern
Partnership is that its success is driven by attraction, not coercion.
Its powerful unspoken premise is that true sovereignty requires greater
democracy.
There are two key issues facing the Eastern Partnership. First,
will the Vilnius summit mark a major advance in the integration of
Ukraine, Moldova, and Georgia, the three Eastern Partnership nations
that aspire to closer integration with the EU and have made the most
progress in their negotiations? Second, will European leaders evolve
the Eastern Partnership to become a pathway for successful reformers to
pursue membership in the Union, while keeping open the long-term
European option for the others.
This is where the United States becomes relevant.
U.S. leadership has driven each wave of European integration, using
NATO as a lead instrument and often paving the way for EU enlargement.
With the failure of NATO allies to reach consensus on the path forward
for Georgia and Ukraine at the 2008 Bucharest summit, and in the
context of the Russo-Georgian War shortly afterward, the United States
in essence stepped back from its traditional leadership role of driving
this historic process.
While European leaders are not considering offering Eastern
Partners a membership option, make no mistake that ultimately the
process underway at Vilnius is about integration. If the United States
sits on the sidelines, this next wave of European integration and
ultimately enlargement will fail. It could fail because Europe remains
divided on its objectives, the Russians have chosen to challenge this
process, and the most significant obstacles to integration of Europe's
East remain security issues that are beyond the purview of the Eastern
Partnership.
There is no doubt that this next chapter of integration will be
more difficult than in the past. The bar is higher for today's aspiring
nations as the EU has become more integrated and intrusive into the
once-domestic affairs of its members. The base is also lower as the
nations of the Eastern Partnership start further behind in reforms than
their neighbors in Central Europe. Furthermore, as membership is not on
offer as of now, the cost of reforms at home can be high in the short-
term while the long-term reward remains abstract. Furthermore, the
Eastern Partnership nations are an extraordinarily diverse group of
nations, united only by their post-Soviet heritage and their European
geography. Some indeed do not aspire to greater integration with
Europe. Finally, there is great reluctance within the EU even to broach
the topic of future enlargement as the Union struggles with its own
economic crisis and vacuum in political leadership.
This is why the so-called ``European project'--building a Europe
whole, free, prosperous, and at peace--remains in the American national
interest, as much as previous phases of this process have. Indeed, the
United States remains a European power with enormous influence over
this process.
In recent years, there has been a perception among many in Europe's
East that the United States was leading on Russia policy while
deferring to the EU on policy toward the neighbors. This is overly
simplistic of course, but the United States has invested more energy
and creativity in forging a relationship with Russia than its
neighbors. This is a recipe for failure. We must do both. Thankfully,
the United States Government is beginning to do just that.
The task today is to develop U.S. strategy to complement and indeed
support EU efforts to integrate its neighbors in Europe's East. Yes,
the United States wants to avoid its efforts in Europe's East sliding
into a U.S.-Russia conflict. But we also do not want that fear to lead
to U.S. ambivalence or absence in Europe's East.
The objective of U.S. policy should be to serve as an enabler of
European integration and a driver of future NATO enlargement. The EU's
Eastern Partnership initiative and future NATO enlargement do not
necessarily overlap, but they can be mutually reinforcing just as NATO
and EU enlargements have been in the post-cold-war period.
Indeed, the Eastern Partnership is the latest instrument of a
common transatlantic grand strategy. The United States fought in World
War II not only to defeat the Nazi menace, but to help Europe emerge
from war in a way that would never force the United States to fight
again in Europe. After 45 years of cold war, we forged a bipartisan
U.S. policy to fulfill our original national aims of 1945. We nearly
achieved our goal, with NATO and EU enlargement, the twin instruments
of this strategy to secure a Europe whole, free, and at peace.
Even as we celebrate that success, we must also recognize that our
work is not done. With NATO enlargement having reached a temporary
pause, at least looking East, and EU enlargement in a slower phase, the
Eastern Partnership represents the best instrument to keep this vision
viable. A renewed U.S. strategy for Europe's East, therefore, should
consist of consolidating our gains, preventing rollback of freedoms,
and setting the stage for the next advance of integration. The Eastern
Partnership is the key instrument for this strategy.
In this context, effective U.S. strategy toward Europe's East in
the short-term could include five elements.
First, Washington can help articulate a clear vision and goal: to
continue to forge a Europe, whole, free, prosperous, and at peace. That
is, to complete Europe. The power of this simple message can be to
restore the prospect of integration and ultimate membership in either
NATO or the EU as an engine of reform in aspiring nations. Such a
vision gives strategic impetus to individual decisions that can seem
small in impact when considered in isolation.
Second, U.S. policy can back the EU's Eastern Partnership
initiative unequivocally in order to mitigate ambivalence among many EU
member states while strengthening the hands of its advocates.
Enthusiasm for a coherent EU strategy toward Europe's East varies
greatly depending whether you are in Paris and Madrid, or Warsaw and
Stockholm. The Bucharest summit experience suggests that a divided EU,
much like a divided NATO, will ultimately fail in integrating Europe's
East.
Third, the United States should assume a leading role in addressing
the security concerns afflicting the Eastern Partners and which are
left unaddressed by the Eastern Partnership process.
In Ukraine, this means intensifying mil-to-mil cooperation,
deepening intelligence ties, and laying the groundwork for long-term
influence with security structures which could either advance or
undermine Ukraine's European future. It also means supporting Ukraine's
efforts to ensure its energy security and buttress its sovereignty and
territorial integrity, including in Crimea.
In Moldova, the United States should build a security relationship
where very little currently exists. While officially neutral, Moldova
is keen to forge closer ties with the United States and NATO. The
United States should target some of its limited assistance on security
sector reform, as this sector remains an Achilles' heel for the
nation's long-term security. Specifically, the United States could
create a Strategic Partnership Council with Moldova to parallel the
structures the United States has with Ukraine and Georgia. Such a move
would demonstrate consistent support for the three leading nations of
the Eastern Partnership. Furthermore, the United States with the EU
should engage more seriously and creatively in the ``5+2 talks'' on
Transnistria, a breakaway region, which Moscow seeks to maintain as a
lever to complicate Moldova's aspirations. This would entail the United
States (and the EU) changing from observer status to full participant
in these negotiations and supporting a demilitarization of the
conflict.
Regarding Georgia, Washington will need to support the new
leadership if and as it pursues democratic and economic reforms, as it
asserts it seeks to do. At the same time, we must hold the country's
new leadership accountable not to pursue witch hunts or politically
motivated justice. The new government must understand that if it seeks
to imprison former President Mikheil Saakashvili, it is freezing its
path toward the EU and NATO. If Tbilisi focuses on advancing a European
future without litigating its past, Washington should take the lead in
restoring a strategy for Georgia to integrate with and eventually join
NATO, giving credibility to the Bucharest summit decision that Georgia
will become a member of the alliance.
Fourth, the United States should be working with the EU now to
support those nations that take a decisive step toward Europe in
Vilnius. For example, the United States should be explicit that as it
negotiates a comprehensive Transatlantic Trade and Investment
Partnership with the EU, Washington aims to extend this landmark
agreement to any Eastern Partnership nation that concludes a deep and
comprehensive free trade agreement with the EU. Similarly, as leaders
in Moldova, Ukraine, and Georgia take the right reform decisions and
create level electoral playing fields, they should expect to be
welcomed in Washington and to receive high-level visits in their
capitals.
At the same time, the United States and the EU should anticipate
and counter possible Russian efforts to derail these nations' move
toward Europe. Moscow has been vocal and specific in threatening these
nations with retaliation ranging from bans on imports and mass
deportation of labor migrants to energy cutoffs this winter. We know
the pressures the Eastern Partners already face and we should be
preparing now to assist or counteract such measures where we can. The
United States and Europe should work hand in hand with governments and
societies in the region to prevent Russian rollback of freedom's gains.
Finally, the United States should restore a sense of momentum to
the broader integration process by leading the effort to welcome
Macedonia and Montenegro into NATO and Bosnia and Herzegovina and
Georgia into NATO's Membership Action Plan (MAP). These steps can help
reinforce the EU's resolve to continue extending its hand to the East.
Many argue that the United States does not need a strategy toward
Europe's East--or rather that the best U.S. strategy is to leave the EU
in the lead and remain silent. There is a cost to having no strategy.
Some leaders in Moscow will conclude that they can maximize their
efforts to disrupt Eastern Partners' moves toward Europe without
consequences. Therefore, inaction increases the chance of greater
instability in Europe's East leading to even greater challenges in the
future for U.S. policy. A clear U.S. strategy in support of Europe now
will help advance our interests in advancing a free, democratic East
and mitigate opportunities for mischief-making in the short-term while
laying the groundwork for long-term security, stability, and
prosperity.
While Ukrainian President Yanukovych is all but guaranteeing last-
minute drama at the Vilnius summit, what happens beyond Vilnius is as,
if not more, important. The Vilnius agreements will begin a process of
transforming economies and societies in Europe's East; they do not
offer the prospect of EU membership.
By their next Eastern Partnership summit in Riga, Latvia, in 2015,
EU members states should aim to offer two tracks to their partners: the
prospect of beginning the long path to membership for those who make
the most progress on reforms, while keeping long-term options open for
those partners who either do not aspirate to membership or fail to
deliver on reforms necessary to start to the process.
Moscow's reaction to the Eastern Partnership provides clarity on
the broader strategic perspective of what will play out in Vilnius.
While the EU has been clear that the Eastern Partnership is not aimed
against Russia, President Putin has decided to treat it as a challenge.
Putin is clear that his objective is in essence the restoration of a
sphere of domination through the creation of a Eurasian Union and an
accompanying Customs Union (which is incompatible with a deep and
comprehensive free trade agreement with the EU). These instruments are
not premised on equality and respect for sovereignty; rather they would
enable Moscow to dominate the post-Soviet space. Russia's strategy, as
so clearly illustrated in Armenia's decision to drop its bid for an
agreement with the EU in Vilnius, is based on coercion and disruption.
Such a strategy may result in tactical wins, but ultimately it is not
sustainable, as it will not engender the support of individuals in
these nations who recognize the opportunities lost. Nor is it a formula
for long-term stability, as it rests on intimidation in the short run
and deprivation of the sovereign rights of other nations to choose
their own future in the long run.
Ukraine presents a particular challenge in Vilnius. Strategically,
Ukraine is by far the most important of the Eastern Partners. However,
the Yanukovych administration's perception of Ukraine's importance is
leading it to do the bare minimum, if that, to meet EU conditions.
Specifically, President Yanukovych is not acting decisively to end
selective justice and to release former Prime Minister Yulia Tymoshenko
from prison. President Yanukovych has the unique ability to unify
Ukraine around its European choice--that is to deliver the eastern
Ukraine electorate in a way a politician from western Ukraine could
not. But in the end, Yanukovych is a transitional figure; he is not
committed to the values of a democratic Europe. Even as he negotiates
in favor of Ukraine's European future, he is manipulating Ukrainian
legislation and institutions to help ensure he secures a second term.
Therefore, the challenge in Vilnius is to lock in Ukraine's European
choice while gaining leverage to more effectively check antidemocratic
behavior and ensure that Ukrainians have a genuinely free choice in
their 2015 Presidential elections.
The Eastern Partnership is not meant to create a new dividing line
in Europe. It can help anchor a vulnerable and insecure zone in the
certainty of a stable and prosperous Europe. Over the long-term, the
vision of a Europe whole, free, prosperous, and at peace also includes
a democratic Russia.
But the pathway to reform in Moscow might begin with choices in
Kyiv, Chisinau, and Tbilisi in favor of their European future.
Senator Murphy. Thank you.
Senator Johnson.
Senator Johnson. Thank you, Mr. Chairman.
Dr. Cohen, I believe what you said was, the United States
has been way too low key in our support for the Eastern
Partnership. Mr. Wilson laid out, kind of, a five-point plan. I
was going to ask you, similarly, What can and should the United
States do to be not quite so low key so we can be more
forthright in our support?
Dr. Cohen. Thank you, Senator.
First of all, the visibility matters. Diplomacy is
perception and symbols as well as actual action. We were
lagging behind in visibility. I challenged an administration
official to name one senior official--Vice Presidential level,
Secretary of State level, Deputy Secretary of State level--to
visit any of these countries to actively promote Vilnius
process. And I was left lacking. We did not put boots on the
ground, in terms of high levels of diplomacy. We did not link
economic assistance with membership. And, in case of Ukraine,
as we heard from our learned colleague, Dr. Aslund, the IMF
bailout, the economic help, is absolute vital for the
Yanukovych administration not to collapse, not to have popular
discontent overflowing if they mismanage the economy even
further beyond the way they mismanage it already. So, I think,
linkage of economic measures and economic assistance, including
the IMF pipeline, as well as visibility. Talking to the
Russians to dial it down, and explaining to the Russians what
kind of consequences they may have if they do not--not to
threaten the neighbors, in the worst traditions of the 20th-
century European politics--all of these avenues were either not
explored or explored insufficiently by the current
administration.
Senator Johnson. So, leadership strategy, more visibility.
Is there a danger, if we get too aggressive with our support,
that it might stiffen Russian spine to resist even further or
more aggressively?
Mr. Wilson.
Mr. Wilson. You know, I think that there are many that the
argument, ``We can't let this slip into a U.S.-Russian
confrontation, and so, we should take a backseat, let the EU
lead.'' I understand that, to some degree, on tactics, but it
cannot be an excuse for absence.
Russia is trying to prevent this from happening, regardless
of U.S. policy. So, I think it is incumbent upon us--this is
the game in town, we are at the center of it, and our interests
are at stake here. So, if you look at the record of Russian
behavior in trying to undermine these nations, it is actually
pretty outrageous, the steps that they have taken--explicit
blackmail and coercion. And I think we should call a spade a
spade, and speak clearly about that. At the same time, we need
to make the point--we did not choose--this is not about trying
to confront Russia. Unfortunately, President Putin has taken
that decision.
When you talk to educated folks in Moscow today, many of
them realize that this is an extremely counterproductive policy
on the part of Russia. President Putin has done more to stiffen
the spine of the European Union, and probably has done more to
stiffen the spine of some of those that were uncertain in the
Eastern Partnership, because who wants to be dominated by a
neighbor, a ruler that treats them in thuggish tactics.
So, there is a role to be savvy about our diplomacy, I
understand that. But, at the same time, we cannot use that to
be quiet or absence.
Senator Johnson. For whoever really wants to answer this,
What does Yanukovych fear in releasing Tymoshenko? Or, why is
he so reluctant?
Mr. Aslund. Well, you can say that President Yanukovych is
driven by two fears. One is Mr. Putin and one is Tymoshenko.
Why? Clearly, there is an enormous personal animosity between
them. According to the opinion polls, Vitali Klitschko is now
the most popular position leader in Ukraine, and President
Yanukovych has now lost stride, signed into law an amendment to
the Ukrainian tax code that means that Klitschko perhaps may
not fulfill the residence requirement to stand in the next
Presidential election.
Yulia Tymoshenko lost by 3\1/2\ percent in the Presidential
elections, to Yanukovych in February 2010. Elections were
deemed free and fair. But, of course, President Yanukovych had
far larger financial resources in that election, and much more
media support than Prime Minister Tymoshenko. So, he is afraid
of her as somebody who could win free elections against him.
And President Yanukovych popularity rating is likely over 20
percent.
Senator Johnson. OK.
Mr. Wilson, you want to chime in?
Mr. Wilson. If I could just add to that. I agree with much
of what Dr. Aslund just said. I had an opportunity to be the
first American to visit Yulia Tymoshenko in prison when she was
in Kharkiv. President Yanukovych let us visit as part of a
Freedom House delegation. It was clear, her determination from
her prison bed, to manage the opposition to President
Yanukovych. It was clear in conversations with him, this is
extraordinarily personal. And Dr. Aslund is right--he does fear
her more than he values what he is planning for Ukraine's
future. It is a very personal element of this. He is behind in
the polls. He is vulnerable headed into the elections.
The point that I wanted to make is, even as we focus on the
release of Tymoshenko from prison today, what we really need to
be focused on is also how he is setting the stage for the 2015
Presidential election, whether it is Tymoshenko in prison
trying to disqualify Klitschko because of foreign residency--
resident--the way he defines ``residency requirements,'' or
pursuing--open a new corruption case against the former speaker
of the Rada to disqualify him, or to consider other
constitutional means. The choice to join Europe is not a
technical process that they negotiate in a document. The
Ukrainians have done that well.
It is, at the end of the day, a fundamental choice about
values and principles. President Yanukovych has not
demonstrated that he has made that strategic choice yet. And I
think we want to lock Ukraine in this path, but we have to
continue to hold the leadership accountable, not just what
happens at Vilnius, but certainly the pathway to the 2015
election.
Senator Johnson. Dr. Cohen.
Dr. Cohen. Briefly, I am appalled that there is no
recognition of the historic value and historic significance of
this choice. In 1654, a quasi-democratic meeting of then-
Ukrainian Cossacks and such voted to join the Russian Empire.
It was called the Council of Peryaslav, 1654. And Ukraine lost
its independence as a result, and we did not see Ukrainian
independence then until 1918, for over 300 years. This should
not be another Council of Peryaslav, Mr. Senator.
Senator Johnson. Thank you all for your testimony.
And thank you, Mr. Chairman, for letting me go out of
order.
Senator Murphy. Thank you, Senator Johnson.
So, I mean, let me push back a bit on the contention that
the United States has been absent. We have been very clear with
respect to what Yanukovych needs to do with respect to
Tymoshenko. Our Assistant Secretary, who just testified, was
just recently in the region. And so, I certainly understand
your desire for more U.S. action. I would draw a little bit of
issue with the contention that we have been absent.
But, what do we do when we have a fundamentally uneven
playing field with respect to tactics? Dr. Cohen, you talked
about the outright blackmail that is happening right now with
respect to the conversations between the Ukraine and Russia. We
talked a little bit about the borderization that is occurring
right now in South Ossetia and Abkhazia. And part of my worry
about tactics, such as telling the Georgians, for instance, we
are going to withdraw our aid if they do not join, that we are
not going to provide IMF support to the Ukraine if they do not
sign an agreement, is that then, at some level, our tactics
start to look somewhat similar to the tactics that the Russians
are using.
And so, how do we counter tactics, that are clearly way
below the belt with respect to the Russians, with ones that are
true to our values and the norms that conventionally underlie
the carrot-and-stick approach that we give to countries when
our national interests are at stake?
I will ask the panel, and start with you, Mr. Wilson.
Mr. Wilson. Senator Murphy, thank you very much.
Just to be clear, I would not make the case that the United
States has been absent at all. If you look at the diplomacy
that is played out in Kyiv, the United States has been at the
heart of that. This was one of the first trips that Assistant
Secretary Nuland made; indeed, expressly for this purpose. In
part, getting her in office was a key issue at a key time
during the summer. But, I think she has very clearly laid out
an important strategy for the U.S. Government, and, more
importantly, led that strategy by providing the overall vision,
reestablishing the sense of what we are trying to accomplish
here. And the messaging matters, the presence matters in this.
You are absolutely right, there is a fundamental difference
between the option looking to a Customs Union or to the Eastern
Partnership, because it is based on their choice. And we have
to respect that. Our tactics, our strategies are fundamentally
different, because it is based on the sovereignty of the
country, the decision of the people. And I think what is of
concern in a country like Georgia or Ukraine is--it is quite
clear, at times, where the population, where the elites are
going, in terms of wanting to see their countries join Europe.
And it is the influence, because of the still lack of maturity
of the democratic institutions, but that does not always
translate to the decision that is playing out today.
Our strategy has to lead with the offer of what we are--the
prospect of what we are offering these countries by moving
closer to Europe, integrating through long-term economic growth
and prosperity. The reality is, a short-term framework, there
will be some pain for these economies to adjust to European
competition. This is about long-term benefits, long-term
anchoring their countries in a society of common values and
interests.
We actually cannot compete with the short-term approach
that the Russians would pay, whether it is a carrot of putting
money on the table today or a stick of bribing them. So, I
think our tactics and methodology are fundamentally different.
It has to be premised on the choice these countries make, and
that is why you see some of them--they are not moving in this
direction. And we, in the end, have to accept that. We just
need to make the choice clear that, I think, faces them.
Senator Murphy. Dr. Cohen, you--maybe I got you wrong, but
I thought I heard you suggesting that we should threaten to
withdraw supports if they do not sign the agreement.
Dr. Cohen. No, I would put it differently. I would say that
we would be more positively inclined to provide support if they
sign the agreement. And I think, Mr. Chairman, in this town,
the art of realpolitik and the recognition of the realities how
this world operates, including Eastern Europe, including the
Middle East and other parts of the world, is sometimes lacking.
And I do believe that wrapping our inaction in the rhetoric of
values or in the rhetoric of defense of abstract ideas which
result, eventually, in loss of significant geopolitical assets
to this country and to our European allies, is misguided and
came to bear in this administration more than before.
Senator Murphy. Mr. Aslund.
Mr. Aslund. Yes. There are several legal instruments that
the United States can use. Russia has now joined the World
Trade Organization, August last year, and the United States has
granted PNTR, but Russia is not obeying the rules at all. The
United States can help various countries bring out these issues
in the WTO. It will not get fast results. The WTO works very
slowly. But, it is an important instrument to use.
Secretary Nuland, previously today, mentioned TTIP, which
is a very attractive development. And if Ukraine would get the
Association Agreement, the assessment is that this would
increase Ukrainian GDP in the long term by 12 percent, increase
exports in total by almost 50 percent, while, if it joined the
Customs Union, GDP will decline. And Russia does not have a
viable trade alternative. The Customs Union is a small and
protectionist trade association, and the Russian economy is
only one-tenth of the EU economy. So, the point is that Russia
is taking two large costs upon itself, and if Ukraine does not
join the Customs Union, it does not look viable or even
sustainable.
So, I think that Russia is in a corner, where it has put
itself. And therefore, the United States have a lot of leverage
through the various international initiatives and organization.
Thank you.
Senator Murphy. Thank you.
The Partnership summit in Vilnius represents a very
important and convenient decision point for these three
nations. And, Dr. Cohen, at least you expressed some growing
skepticism that Ukraine may sign there. Do we risk overhyping
the summit itself, in the sense that, if there is a decision
perhaps by Yanukovych to continue negotiations, that this
process is a little bit more linear than we may point out? What
happens if we do not get everything we want and the Europeans
want at the Vilnius summit? How dire should we read a failure
for all three countries to initial or sign?
Dr. Cohen. The evaluations I reviewed yesterday are talking
of a quick decline of probability of signature in Vilnius, from
about 50 percent to 20 percent in a couple of days.
Senator Murphy. With respect to Ukraine.
Dr. Cohen. With respect to Ukraine.
Senator Murphy. Right.
Dr. Cohen. It is a worrisome process. I do not think it is
the end of the world. But, as I said before, (a) Mr. Yanukovych
is going to shoot himself and his country and his people in the
foot if he does not sign; (b) we will need to continue to
engage our European allies, and the Europeans will have to take
a leadership position on that, as they have been until now, and
bridge their own differences, let us say, between the Polish
position that they should sign the Association Agreement, no
matter what, with Ukraine, and the German position that human
rights are important. They have to work it out. We have to work
with them on that issue.
And yes, of course we should continue working past Vilnius
if there is no signature with Ukraine. However, the chances of
that process not coming to fruition will continue to decrease
if Vilnius brings no resolution, because the Russians will feel
strong and will continue doing what they are doing with the
results that they are gaining.
And I agree with Dr. Aslund, that, without Ukraine, the
Customs Union loses its viability; but, even without Ukraine,
if you will look at the Russian plans right now to bring in
Kyrgyzstan, Tajikistan--small countries, granted--but continue
to expend--Armenia--continue to expend that, and then move to
the Eurasian Union in 2015 as a fully operational bloc--I think
the Russians are playing that game.
And, if I may, sir, I would like my full testimony----
Senator Murphy. Certainly.
Dr. Cohen [continuing]. To be included for the record.
Senator Murphy. Yes. And I should have said that. We will
have all of your full testimony included into the record.
Building on that point, Mr. Wilson, when Secretary Nuland
was in Kyiv, she likely saw the proliferation of little
European flags all around that city, representative of a
longstanding belief that Yanukovych, as his legacy, was going
to deliver on a promise of a fully independent Ukraine with an
orientation toward the much broader, more open market of
Europe. If Yanukovych walks away from this summit without an
agreement, how does he explain this to the people of the
Ukraine, who, for the most part, have been of the belief that
this was Yanukovych's mission, to bring an Association
Agreement to fruition with the European Union?
Mr. Wilson. I think you have hit one of the most important
points. Ukraine is not a dictatorship. President Yanukovych
will face retribution from his own electorate and from his own
supporters, whether they be oligarchs and the economic
structure or they be an average voter on the street in a
village. First and foremost, would be a missed opportunity for
Ukraine, a failure for Ukraine--not as much a failure for the
United States or the European Union, which have handled this
right, have put the right offer on the table. But, it does
speak to--we have been there before with Ukraine. We have
experienced missed opportunities, unfortunately, on a cycle of
repetition that is a little bit too frequent. We saw that in
the wake of the Orange Revolution. We have seen it on numerous
times in Ukraine's recent history.
We have to be in this for the long term. President
Yanukovych is ``a'' President of Ukraine. He will be a
transitional figure. Whether he is a transitional figure that
demonstrably leads Ukraine to Europe or not, I think, is at
issue in Vilnius. If not, I think that he will have a political
challenge on his hands to explain that to his own population.
And that is, frankly, a good sign of the health of the emerging
civil society, the emerging, sort of, taste of democracy that
the Ukrainians are beginning to expect.
Senator Murphy. Dr. Cohen.
Dr. Cohen. Having studied the Russian sources on this
subject for the last 3 months, I would suggest that Mr.
Wilson's scenario holds, provided there is no massive Russian
intervention and there is no strong pro-Russian leader. If,
however, what the Russians want is launched and successfully
funded and accomplished, they may get, either in the person of
Yanukovych or in the person of somebody else, a strong pro-
Russian faction that then starts to put the squeeze on the same
civil society that both Damon and myself admire in Ukraine, and
leading to a different Ukraine, a Ukraine that would look more
like Belarus, for example, the neighboring country, with a
strong, basically, pro-Russian leader and with declining
democratic institutions and practices.
Senator Murphy. Thank you.
Go ahead. Mr. Aslund.
Mr. Aslund. Yes. Let me pull up on the same line as my
colleagues, here. Something that is very important is that
there is a solid and steady pro-European majority in Ukraine.
And, of course, the Ukraine now is less free than it was 3
years ago, but it is still quite a free country. So, President
Yanukovych needs some other pro-European votes in order to win
the elections in March 2015. So, the main victim, if the
Ukraine fails to sign in Vilnius, might probably be President
Yanukovych himself, because he has deprived himself of the
possibility of winning a reasonably free and fair election in
2015 and perhaps even a not very free election.
Senator Murphy. The title of this hearing includes Belarus,
which you referenced, Dr. Cohen, and Azerbaijan. We have not
spent much time on either, so let me just finish with a rather
open question on U.S. policy toward those two nations.
Obviously, Belarus is in a very different position, a member of
the Customs Union. What are the changes for any increased
orientation toward Europe in the future, a pro-Russian leader,
yet some rocky times currently with respect to the fertilizer
issue and others?
And then, in Azerbaijan, maybe I will frame the question
this way. What does Armenia's decision to join the Customs
Union mean for the prospect, in 2015 or sometime thereafter,
for Azerbaijan to initial an agreement with the EU? Clearly,
they have a long way to go, especially with recent reports on
the quality of these last elections, but a country, especially
with their energy resources, that would be an important--very
important partner, in a lot of ways, more important than some
of the nations that may be at Vilnius, for the European Union.
So, let me open that up for final comments on the future of
United States relations and European relations with Belarus and
Azerbaijan.
Go ahead. We will go down the line. Mr. Aslund----
Mr. Aslund. Yes.
Senator Murphy [continuing]. First.
Mr. Aslund. Let me start with Belarus. Belarus is, today,
in an awful financial crisis. Belarus gets about $10 billion of
subsidies from Russia each year, and, even so, as you have
mentioned, Mr. Chairman, it has a trade war with Russia. Russia
prohibits its dairy exports. They are fighting over the
ownership and all the Belaruskali, the, by far, biggest and
most valuable company in Belarus. And they are also fighting
over all the export duties.
So, President Alexander Lukashenko is very skillful on
fighting the Russians and get money out of them and staying in
power at home. But, if Russia would say that, ``You can't get
more than $10 billion a year from us,'' it is not clear how
Belarus will be sustainable. The reserves are now down to 2
months of imports, which is far too little for any country. And
President Lukashenko pursues a quite capricious economic
policy; in particular, increasing salaries far too much. So,
Belarus should not be considered stable, and the problem there
is likely to come from the economy rather than from the
outside.
Senator Murphy. OK.
Mr. Aslund. Thank you.
Senator Murphy. Dr. Cohen.
Dr. Cohen. I agree with what my colleague said about
Belarus. I would just add that Russia put that albatross on its
own neck, and it is stuck with it. And in order to accomplish
the number one geopolitical goal for Mr. Putin, which is to
have the Eurasian Union up and running by 2015, they need
Belarus, and they need Belarus in good enough shape to be there
and not fall apart.
On Azerbaijan, it is complicated, because Azerbaijan is
pro-Western, it is culturally Shia, but it is a secular state,
and it has a lot of oil and gas, and it is supplying Europe,
through an alternative path, not the path that is controlled by
Russia. Both the so-called Contract of the Century, which is
oil, and the new TANAP Pipeline that will be built by 2017
through Turkey, which is gas, with two spurs, one called TAP
and one called Nabucco West, all going to Europe, a gas source
outside of Russia.
What the underwater reef--the problem with the initialing
of the Association Agreement between Azerbaijan and the EU-AZ
was, I was told, the reluctance of Europe to recognize the
problems of territorial integrity of Azerbaijan and occupation,
and concerns about the Presidential elections. If Azerbaijan
and the Europeans are willing to work these differences out, if
there is a progress, in terms of the rule of law, in terms of
democracy, and the two sides can resolve that, I think it will
be in the interest of Europe, in the interest of Azerbaijan,
and in the interest of the United States that the Association
Agreement will be moving forward. And, as a nonmember of the
WTO, the Free Trade Area is not on the agenda right now.
Senator Murphy. OK.
Mr. Wilson.
Mr. Wilson. Senator, I would just add that--I would go back
to first principles--that what we are talking about here, of a
Europe ``whole and free,'' has, frankly, been our strategy
since the end of World War II. We are in this for the long
term. In Vilnius, we are talking about the next chapter of
European integration. That is not going to include Belarus and
Azerbaijan, in this particular chapter.
So, it goes back to your question about tactics. We do not
force countries into Euro-Atlantic institutions. That is not,
obviously, the approach of our--it does not reflect our
principles. Those decisions reflect the societies, they reflect
the countries, they reflect the leaders. And it is clear, in
Belarus today, while we are interested in an independent and
sovereign Belarus, this is not--Lukashenko is not a leader that
will take his country to Europe. And I think we need to be just
very up front and aware of that, and do what we can to help
support democratic opposition in a very difficult circumstance.
And Azerbaijan, as Dr. Cohen said, is quite a different
case, in that there is quite a strong interest in a
relationship with the West, and I think it is important that we
figure out how to be able to engage the right way without doing
so--without sacrificing or muzzling our own values and concerns
about the development of democracy there.
But, we are in this for the long term, and I think we need
to think about Belarus and Azerbaijan, not as being left out,
in Vilnius, but as a longer term strategy of forging
relationships with, frankly, the peoples of those countries. I
spend a lot of time with students from Belarus at the European
Humanities University in Vilnius, with students from
Azerbaijan. They think about their country in a way that is not
very different from Ukrainians today. And I think we have to
keep that perspective.
Senator Murphy. I will just note that, in the wake of a lot
of questions with respect to the elections in Azerbaijan, one
very positive step that the Azerbaijan Government could make is
the release of a list of prisoners, both held by the State
Department and human rights groups, that are being detained
currently.
Thank you, to our panel.
Let me just finish by including into the record statements
that we have from the Ambassadors of Moldova and Azerbaijan on
their countries' participation in the Eastern Partnership.
Senator Murphy. We will keep the record open until 5 p.m.
tomorrow, and, if we get any additional questions, hopefully
you will respond as quickly as possible.
With that, this hearing is concluded.
[Whereupon, at 4:40 p.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Responses of Assistant Secretary Victoria Nuland to Questions
Submitted by Senator Edward J. Markey
Question. After Armenia and the EU concluded negotiations for an
Association Agreement (AA) in July, it was widely expected that the
deal would be initialed at the Vilnius summit. However, President
Sargsyan announced in September that Armenia planned to join the
Russian-led Customs Union--a step the EU warned would be incompatible
with an AA. What factors led to Armenia's change of course? What
economic or other forms of pressure is Russia exerting on Armenia or
other nations in the region to pull them away from establishing closer
ties to the EU?
Answer. While the United States cannot speak for Armenia or the
rationale behind its decision to join the Eurasian Customs Union, we do
know that Armenia depends upon Russia for a significant amount of
security and economic assistance. We have regularly reminded Russia
that any form of pressure to prevent sovereign states from pursuing
greater integration with the EU, or other organizations of their
choosing, contravenes Russia's obligations under the Helsinki
Principles of the OSCE and the Charter of Paris, as well as its
obligations under the WTO, which includes a commitment to a
nondiscriminatory trading system. We will continue to work with Armenia
on its Euro-Atlantic integration to preserve the progress made in the
Eastern Partnership over the past 3\1/2\ years. The United States
continues to support Armenia's democratic, economic, and social reforms
designed to promote regional stability and a peaceful resolution to the
long-running Nagorno-Karabakh conflict. These efforts will also help
foster rapprochement with Turkey and Azerbaijan.
Question. In announcing Armenia's decision to join the Customs
Union, President Sargsyan stated on September 3 that the move would not
necessarily ``preclude our dialogue with the European structures.'' \1\
EU Enlargement Commissioner Stefan Fuele also suggested that although
Armenia would not be able to sign an AA with the EU if it joined the
Customs Union, Brussels would be prepared to engage with Armenia under
a different framework.\2\ What are the prospects for further
cooperation or followup agreements between the Armenian Government and
the EU, and what forms could such cooperation or agreements take?
Answer. Although Armenia is no longer a candidate for an
Association Agreement, both the EU and Armenia have stated their desire
to preserve the progress and reforms made over the past 3\1/2\ years.
The EU and Armenia are examining ways to demonstrate continued
cooperation short of an Association Agreement, in areas such as visa
facilitation, readmission, education, and transport. EU officials have
publicly stated they are seeking to sign a document to highlight areas
of continued cooperation, but it is not clear whether such a document
locking in this future partnership will be ready in time for the
Vilnius summit. The United States will continue to promote Armenia's
Euro-Atlantic integration by supporting its democratic, economic, and
social reform efforts.
Question. Russia has reportedly increased its arms trade with
Azerbaijan to a total of around $4 billion.\3\ This past summer, Russia
delivered a package of tanks, artillery, and rocket launchers to
Azerbaijan worth around $1 billion.\4\ What are the implications of
enhanced Russia-Azerbaijan defense relations for Armenia's security?
What are the implications for the conflict over the Nagorno-Karabakh
region?
Answer. As a cochair of the OSCE Minsk Group, we remain committed
to helping the sides find a peaceful resolution to the Nagorno-Karabakh
conflict. The United States has continued to make clear to Azerbaijan
and Armenia, both bilaterally and through the Minsk Group, that there
is no military solution to the conflict.
The arms race between these countries decreases trust and leads to
increased instability on the ground. Russia has a close military
relationship with Armenia as a fellow Collective Security Treaty
Organization (CSTO) member, but sells weapons to Azerbaijan as well. In
selling arms to both sides Russia has not fundamentally changed the
military balance, but the arms race it is fueling underscores why a
peaceful settlement is urgently needed.
Question. There is reason for concern that Russia could take
retaliatory measures against the countries that plan to complete
Association Agreements with the EU--including the Ukraine, Moldova, and
Georgia. Do you expect Russia to impose economic sanctions, cut off
natural gas supplies, or take other retaliatory actions against any of
these countries? What steps can the United States and European Union
take to assist these states in withstanding Russian pressure?
Answer. The Department of State fully shares your concerns about
Russian pressure on several Eastern Partnership countries, including
Ukraine, Moldova, and Georgia. We have been working with the EU and
each candidate country to help them in their efforts to anticipate and
prepare for any negative reaction to their choice, whether it comes
from inside or outside their countries. We cannot speculate on what
steps the Government of Russia might, or might not, take if certain
countries completed Association Agreements with the EU.
The United States strongly believes every country has a sovereign
right to choose its international relations. We have made this publicly
clear, as well as in our private discussions with EaP and EU countries
at the highest level. Through our assistance and actions, we have
supported EaP countries in exercising their choice to move closer to
Europe and assist them as they implement the reforms they need to sign
and initial Association Agreements. We will continue to work with the
EU to strengthen these countries' ability to resist external pressure.
Any form of pressure to prevent sovereign states from pursuing
greater integration with the EU, or any organization of their choosing,
contravenes obligations under the OSCE Helsinki Principles and the
Charter of Paris.
The U.S. Government provided over $260 million in assistance to the
Eastern Partnership region in FY 2013, the majority of which is used to
promote democratic, economic, rule of law, and other reforms that are
consistent with the Eastern Partnership's objectives.
We are continuing to consider ways to target our assistance to EaP
countries to strengthen their ability to resist external pressure aimed
at discouraging their European trajectory. For example, we are
exploring ways to help Moldova become more energy independent, and we
are coordinating with the Georgian Government as it identifies how the
international community can best assist those affected by Russia's
``borderization'' of the Administrative Boundary Lines of the occupied
territories in Georgia. Also, with the support of U.S. assistance,
Georgia has reoriented its trade toward Western markets and increased
its energy efficiency and diversity.
Our assistance to the region will also be targeted to help speed up
the implementation of the EU's Association Agreement and the Visa
Liberalization Action Plan, so that the EaP countries, and most
importantly their citizens, will sooner see tangible outcomes and enjoy
the benefits of living in a democracy.
Question. In the State Department's latest human rights report, I
was concerned by the judgment that Ukraine has seen a ``marked increase
in discrimination, social stigma, and violence against LGBT
individuals.'' \5\ The Ukrainian Parliament seems torn on this issue:
one bill under consideration would amend the Labor Code to ban
workplace discrimination based on sexual orientation \6\; yet another
would prohibit ``dissemination of any positive information about same-
sex sexual relations.'' \7\ The EU has demanded progress on LGBT rights
before allowing Ukrainians visa-free travel around Europe.
What are the prospects for legal reform measures to improve
conditions for Ukraine's LGBT community? How can the United
States and European Union support such reform efforts?
Answer. Lesbian, gay, bisexual, and transgender (LGBT) individuals
are stigmatized in Ukrainian society. Although in May 2013 Ukraine
allowed its first LGBT ``Equality March'' (Pride), LGBT individuals
continue to face discrimination in education, the workplace, and in
medical treatment, including impeded access to information on the
prevention of HIV/AIDS. LGBT individuals have been the targets of
violence and abuse by police and members of the public.
During the last year, the Ukrainian Parliament continued
deliberations on four conflicting draft laws relating to LGBT rights:
Two bills propose to criminalize the publication, broadcast, or
distribution of so-called ``homosexual propaganda.'' A third bill would
ban international adoptions of Ukrainian children by couples in same-
sex marriages. The fourth, which is required to fulfill a visa
liberalization agreement with the European Union, proposes to prohibit
employment discrimination based on sexual orientation. Since May 2013,
none of the draft bills has passed the first reading in the Parliament;
i.e., they have only been introduced, and not yet voted out of
committee.
In 2013, Embassy Kyiv used a multifaceted approach to promote the
human rights of LGBT people, including providing organizational support
to civil society activists, engaging the Ukrainian public with cultural
programming, and the targeted use of grants and exchange programs to
build LGBT NGO capacity in Ukraine. In advance of the first successful
national Pride March in Kyiv in May 2013, then-Ambassador Tefft
released a statement of support for those choosing to march.
We continue to work publicly and behind the scenes to encourage the
Ukrainian Government to protect the civil and human rights of all its
citizens, including LGBT persons. The EU, for its part, will continue
to engage Ukraine through the European Parliament's Intergroup on LGBT
rights. Ukraine's proposed legislation is both incompatible with the
European Convention on Human Rights and an obstacle for Ukraine
achieving visa-free travel to the EU.
----------------
End Notes
\1\ http://www.eurasianet.org/node/67482.
\2\ http://www.rferl.org/content/eu-armenia-fuele-russia-/
25105412.html.
\3\ http://www.bloomberg.com/news/2013-08-13/azeri-russian-arms-
trade-4-billion-amid-tension-with-armenia.html.
\4\ http://www.reuters.com/article/2013/06/18/us-russia-azerbaijan-
arms-idUSBRE95H0KM201
30618.
\5\ http://www.state.gov/j/drl/rls/hrrpt/humanrightsreport/
index.htm?year=2012&dlid=204349#
wrapper.
\6\ http://www.hrw.org/news/2013/11/04/dispatches-be-or-not-be-
anti-discrimination-and-lgbt-rights-ukraine.
\7\ http://www.hrw.org/news/2013/04/16/ukraine-reject-
discriminatory-lgbt-laws.
______
Prepared Statement by H.E. Elin Suleymanov, Ambassador of the
Republic of Azerbaijan to the United States
Thank you for this opportunity to present the perspective of
Azerbaijan on this pivotal moment for many of the nations of Eastern
Europe and the South Caucasus.
Relations between the European Union (EU) and Azerbaijan, which
were established shortly after our independence, have been steadily
progressing toward closer partnership during the last two decades. The
Partnership and Cooperation Agreement between our nation and the EU,
which entered into force in 1999, established a firm legal ground for
these relations and identified a wide range of areas for mutually
beneficial cooperation.
These relations deepened with Azerbaijan's participation, first, at
the EU's European Neighborhood Policy (ENP), which has been ongoing
since 2004, and then, through the Eastern Partnership initiative (EaP),
launched in 2009. Meanwhile, in 2006, Azerbaijan and the EU signed a
Memorandum of Understanding on a Strategic Partnership in the field of
energy. This agreement paved the way for, among other developments, the
adoption of a Joint Declaration on the Southern Gas Corridor during the
visit of the President of the European Commission Jose Manuel Barroso
to Baku in January, 2011.
The development and strengthening of a long-term partnership with
the EU in political and economic fields, as well as in people-to-people
contacts, bears particular importance for Azerbaijan. We see these
relations as close cooperation, coordination and interaction between
equal partners, based on the principles of mutual recognition and
respect. Azerbaijan's approach to European integration stems mainly
from our aspiration to raise the level of development in all spheres of
our country and society in accordance with European standards, rules
and legislations.
Anticipating the next Eastern Partnership Summit in Vilnius,
Azerbaijan assesses its relations with the EU quite positively. This
view was highlighted during the visit of President Ilham Aliyev to
Brussels on June 21, 2013, where he met with the European Council
President Herman van Rompuy and the European Commission President Jose
Manuel Barroso.
Speaking more specifically on our cooperation agenda during the
runup to the Vilnius Summit, let me briefly stress the following
points:
--The negotiations on the Association Agreement between Azerbaijan and
the EU are continuing, and progress is being made gradually. We
view these negotiations as a very serious and continuous learning
curve in our dialogue with the EU. We believe that the document on
the table should be as comprehensive and viable for our bilateral
relations as possible. There is no lack of desire on our part to
conclude the agreement with the EU. However, the Azerbaijani
government and Azerbaijani society have reasonably ambitious
expectations. More definite and clear language from the EU and its
member states on a few crucial issues may result in a substantial
breakthrough in negotiations of this legally binding document. From
this perspective the EU's commitment to the principles of
Azerbaijan's sovereignty, territorial integrity and inviolability
of borders is of key significance for the future of our relations.
--Azerbaijan is pleased to have completed negotiations on the Visa
facilitation and Readmission Agreements with the EU, which have
been already initialed on July 30. We hope very much that
everything will be done in order to sign at least the Visa
facilitation agreement at the Vilnius Summit. These agreements,
especially the understanding on visa facilitation, will have a
tangible impact on the life of Azerbaijani citizens, allowing them
to travel to EU countries with fewer difficulties. Once entered
into force, these arrangements will provide valuable contributions
to the development of people-to-people contacts and, ultimately,
will prompt a faster integration of Azerbaijan into the European
family of nations. It should also be noted that the Readmission
agreement with the EU will be the first-ever legal document of this
kind signed by Azerbaijan. This testifies to the trust that my
country puts in its relations with the EU.
--We have three additional documents that have been discussed with the
EU. The first is the Mobility Partnership between Azerbaijan and
the EU, which will foster bilateral cooperation in the field of
migration and migration-related issues through several projects. We
expect that these activities, combined with the implementation of
the visa facilitation and readmission agreements, will pave the way
for complete visa liberalization between the EU and Azerbaijan.
Hopefully, this document will also be signed during the Vilnius
Summit. If not, then we would expect its signature during the first
quarter of the next year.
The second document is the Strategic Partnership Program for
Modernization, which intends, among other things, to extend the
existing strategic partnership in the energy field to other spheres
that are important for ensuring a holistic approach to the development
of the country. This matrix document is not legally binding, but rather
encompasses a set of guidelines for programs for meeting some of
Azerbaijan's immediate needs and addressing our priorities.
The third document is the Framework Protocol on Azerbaijan's
participation in EU programs and agencies. Azerbaijan has already
joined FRONTEX (European Agency for the Management of Operational
Cooperation at the External Borders), and the necessary work is being
undertaken to facilitate our participation in EMCDDA (European
Monitoring Centre for Drugs and Drug Addiction) within the coming
months. Based on this protocol, we expect that Azerbaijan will join the
activities of more EU programs and agencies, with education programs
among the very first objectives.
Meanwhile, our strategic partnership on energy is developing quite
well. Azerbaijan continues to demonstrate our interest in contributing
to European energy security by offering diversified sources of supply.
The birth of the TANAP (Trans Anatolian Pipeline) project
demonstrated Azerbaijan's dedication to the development of the Southern
Gas Corridor, providing a vital link between the EU countries and the
Caspian basin. This means that Azerbaijani natural gas will have a
direct export route toward Europe and that Azerbaijan will remain
politically committed to further explore opportunities to increase its
role in European energy security.
Finally, the decision of the Shah Deniz Consortium to select the
Trans Adriatic Pipeline (TAP) in late June was also of particular
importance for the opening-up of the Corridor, through which Azerbaijan
will gradually and substantially increase its presence in the European
energy market. The decision was based on the previously announced
selection criteria: commerciality, project deliverability, financial
deliverability, engineering design, alignment and transparency, safe
and efficient operability, scalability and public policy
considerations. Azerbaijan is grateful to the EU Commission for its
support during the entire selection process. Azerbaijan and its
partners are investing in a 50 billion Euro mega-project.
We do so not only with our share of capital, but also with
politically sensitive responsibilities. Hence, our cooperation embraces
all areas of common interest. In this regard, the EU should take into
account Azerbaijan's priorities and needs in areas such as agriculture,
tourism, information and communications technology (ICT) and others.
Azerbaijan is also very interested in working more closely with the EU
in the field of human capacity-building, including education, research
and youth development, as a foundation for our future development.
Azerbaijan considers the comprehensive and viable resolution and
settlement of the conflicts within the EaP geography as an essential
part of the political association with the EU. When protracted
conflicts in the EaP area are discussed in various international fora,
we expect the EU to demonstrate firm support for the territorial
integrity and inviolability of the internationally recognized borders
of all partner countries. In the same vein, the EU should vigorously
reject any occupation and ethnic cleansing, and actively work for the
peaceful solution of conflicts where they exist.
In the case of the Armenia-Azerbaijan conflict, it is important
that the EU goes beyond simply supporting the activities of the OSCE
Minsk Group, and expresses a clear position based on the norms and
principles of international law and relevant international documents
adopted in this regard.
In conclusion, I wish to stress our belief that the 3rd EaP Summit
in Vilnius (28-29 November 2013) should accomplish several important
deliverables, paving the way for further progressive development of the
EU's engagement in the region of Eastern Europe and South Caucasus.
Among others, it should provide adequate, fair and just mechanisms of
response to the existing stability, security and development challenges
in the European neighborhood and reiterate the credibility of the EaP
agenda of the EU.
These goals are important to the United States, as well as
Azerbaijan and the EU, and I appreciate the opportunity to present this
perspective to the Senate Foreign Relations Committee.
______
Prepared Statement of Bryan Ardouny, Executive Director,
Armenian Assembly of America
Chairman Murphy, Ranking Member Johnson, and distinguished members
of the subcommittee, the Armenian Assembly of America welcomes the
opportunity to express its views regarding this important and timely
hearing.
Established in 1972, the Armenian Assembly is the largest
Washington-based organization promoting public understanding and
awareness of Armenian issues. Working closely with key government
agencies, officials, and charitable organizations, the Assembly
appreciates the opportunity to share its perspective on how to advance,
not only EU goals, but also U.S. policy objectives in the South
Caucasus.
We believe that it is now more critical than ever to deepen the
ties between Armenia and the United States, as there is no Russian-U.S.
competition in Armenia, and the ties between America and Armenia are
historic and permanent. In fact, I would like to express our
appreciation for the ongoing assistance the United States provides to
Armenia and Nagorno Karabakh. Armenian-Americans remember well the
response of the United States and its relief effort to help Armenia
after the devastating 1988 earthquake that struck its second-largest
city leaving 25,000 dead. America's humanitarianism and core values are
also reflected in our support for Nagorno Karabakh's fledging
democracy, the passage of Section 907 of the FREEDOM Support Act, which
requires Azerbaijan to cease its aggressive actions against Armenia, as
well as America's proud record and ground-breaking intervention during
the Armenian Genocide of 1915.
The enduring and natural bonds that exist between the U.S. and
Armenia are readily apparent in Armenia's ongoing support for America.
Armenians in Armenia and Nagorno Karabakh consider the United States a
close friend and ally. Today, this relationship is underscored by
Armenia's continued strategic partnership with the United States in
extending its full support for U.S.-led peace-keeping deployments in
Afghanistan, Iraq, and Kosovo. In addition, Armenia has tripled its
deployment of troops to the NATO International Security Assistance
Force in Afghanistan.
Given its central location, Christian heritage, entrepreneurial
spirit and western value system, Armenia can play a pivotal role in
helping the United States achieve its stated policy objectives in the
region, including a ``Europe whole and free and at peace.'' Thus, the
Assembly remains concerned that the shared objectives of the U.S. and
EU in terms of regional cooperation and economic integration in the
South Caucasus continues to be undermined by Azerbaijani and Turkish
policies against Armenia. For example, the ongoing blockade of Armenia
(the last closed border of Europe), Azerbaijan's interference with the
2009 protocols between Armenia and Turkey, Azerbaijan's ongoing war
rhetoric and repeated cease-fire violations in the Nagorno Karabakh
conflict, and Azerbaijan's pardon of an Azeri soldier, Ramil Safarov,
who was convicted of brutally murdering an Armenian officer, Gurgen
Margaryan, with an axe while the latter was sleeping during a NATO
Partnership for Peace training program in Hungary in 2004 represent
counterproductive actions taken by Turkey and Azerbaijan in particular
against Armenia. In the case of Safarov, he was not only pardoned, but
was promoted, received back pay for time spent in jail, given a new
condo residence in Baku and heralded as a national hero for his crime.
The Assembly remains deeply troubled by Azerbaijan's egregious
violation of international norms with respect to the Safarov pardon,
its continued move away from democracy and growing authoritarianism,
its excessive military buildup, including a recently concluded $1
billion weapons purchase from Russia with arms trade between the two
countries for 2013 totaling $4 billion, and the resulting impact on the
region, particularly on America's ally Armenia. Striving for stability
in the region, Armenia's President Serzh Sargsian in September of this
year announced that Armenia would join the Eurasian Customs Union led
by Russia.
With the ongoing developments in the Caucasus, the Armenian
Assembly believes that now more than ever the United States and the
European Union should continue to pursue--and moreover--redouble their
engagement and deepen their relationships with Armenia on a broad range
of issues, especially in the economic sphere.
As a leader on the world stage, the United States can and must do
more to ensure Armenia's Euro-Atlantic integration and that the last
closed border of Europe is finally open. We, therefore, urge the United
States to work with its European counterparts to: secure an end to
Turkey's and Azerbaijan's blockade of Armenia; increase trade
opportunities, including through the Transatlantic Trade and Investment
Partnership; as well as press for stronger democratic reforms, respect
for human rights and protection for minorities within the framework of
the Europe's Eastern Partnership initiative.
In conclusion, we commend you for holding this hearing and look
forward to working with you and members of the subcommittee on these
important objectives, as well as the challenges that confront us in the
runup to the Vilnius Summit, including its continued implementation in
the months that follow. As Armenia expands its relations with Europe,
it is incumbent upon the United States to further strengthen and expand
its relationship with Armenia. We stand ready to assist you in any way.
______
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