Kuchma, Gore convene first session of U.S.-Ukraine commission

by Khristina Lew

WASHINGTON - Ukrainian President Leonid Kuchma and Vice-President Al Gore presided over the first full session of the U.S.-Ukraine Binational Commission at the White House on May 16 before meeting with President Bill Clinton in the late afternoon to discuss security issues and Ukraine's commitment to economic reform.

The daylong meeting of the commission culminated in President Kuchma and Vice-President Gore signing a joint initiative on gas sector reform (for full text, see page 10) and a far-reaching joint statement on the work of the commission in the areas of foreign policy, security, trade and investment, and sustainable economic cooperation.

In a separate meeting on May 16, Foreign Affairs Minister Hennadii Udovenko and Secretary of State Madeleine K. Albright signed a joint statement welcoming the entry into force of the CFE Flank Document, noting that the document "does not give any state party the right to station or temporarily deploy conventional armaments and equipment limited by the [Conventional Forces in Europe] treaty on the territory of other states parties to the treaty without the freely expressed consent of the receiving state party."

The joint statement also reiterated Ukraine's position that "the temporary presence of foreign troops on Ukrainian territory may be based only on a duly concluded agreement with Ukraine according to its Constitution and in conformity with international law and relevant multilateral documents, or otherwise be pursuant to decisions of the U.N. Security Council and be consistent with the U.N. Charter."

President Kuchma and his delegation of senior Cabinet ministers arrived at Andrews Air Force Base for a two-day working visit to the nation's capital on the afternoon of May 14 and were greeted by Vice-President Gore.

Capitol Hill focuses on corruption

On May 15, the day before co-chairing the inaugural plenary meeting of the U.S.-Ukraine Binational Commission, the Ukrainian president devoted a large block of time to reassuring lawmakers on Capitol Hill that he was focused on combating corruption in Ukraine and determined to settle disputes with American investors.

A recent spate of articles in U.S. newspapers indicated that the investment climate in Ukraine has worsened due to government corruption, arbitrary licensing practices and disregard for judicial rulings.

Roman Shpek, chairman of Ukraine's National Agency for Reconstruction and Development and a member of Mr. Kuchma's advance team, challenged those assertions and outlined the Kuchma administration's efforts to improve foreign investment in Ukraine. Mr. Shpek said the Ukrainian president has created two bodies that will ameliorate the investment climate: an advisory committee of Western corporations such as Boeing, Cargill, Siemens and Royal Dutch Shell that will counsel Mr. Kuchma on problems facing foreign investors in Ukraine, and an independent Chamber of Ombudsmen that will assess conflicts between foreign investors and local and central authorities.

In a meeting with Mr. Shpek prior to Mr. Kuchma's arrival in the nation's capital, Rep. Sonny Callahan (R-Ala.), chairman of the Foreign Operations Subcommittee of the House Appropriations Committee, linked continued U.S. assistance to Ukraine with President Kuchma's ability to halt dumping of Ukrainian steel in the United States and resolve disputes with American investors. Ukraine is currently the third largest recipient of direct U.S. aid after Israel and Egypt. Mr. Shpek said he believed the dumping issue would be resolved through "mutual understanding."

Of the Foreign Operations Subcommittee meeting with the Ukrainian president on May 15, Rep. Callahan said, "members of the subcommittee made it very clear that we have some very serious concerns over the degree of corruption in that country and the harm American companies are experiencing." He specifically cited investment disputes involving Gala Radio and the Grand Hotel.

The Alabama congressman warned President Kuchma that "if American businesses continue to suffer, Congress will find it difficult to justify further strong support to Ukraine." President Kuchma asked for American tolerance as Ukraine struggles to achieve a free market and cited progress in resolving several high-profile investment disputes.

On the evening of May 15, the House of Representatives voted to authorize President Clinton to cut off foreign aid already appropriated for Ukraine for Fiscal Year 1997 if he determined that the Ukrainian government is not making "significant progress" toward eliminating corruption and instituting economic reform.

Sen. Mitch McConnell (R-Ky.), chairman of the Foreign Operations Subcommittee of the Senate Appropriations Committee, said he was "very encouraged" by his May 15 meeting with the Ukrainian president. He applauded President Kuchma's May 14 decree to privatize Bread of Ukraine, one of Ukraine's largest monopolies, and said Mr. Kuchma had "committed to resolve all outstanding disputes involving U.S. companies."

Sen. William Roth (R-Del.), chairman of the Senate's NATO Observer Group and president of the North Atlantic Assembly, the parliamentary arm of the military alliance, told reporters after his meeting with Mr. Kuchma that "Ukraine is a very important Central Eastern European country, one we seek closer relations with. We congratulate President Kuchma on the passage of a Constitution, and we look forward to continued reform of the economy of Ukraine."

Sen. Roth and President Kuchma discussed the NATO-Russia Founding Act and Ukraine's own agreement with NATO. The Ukrainian president said he "welcomes" the May 14 signing of the NATO-Russia accord and told reporters, "This corresponds with the interests of Ukraine. Russia supports the signing of an analogous agreement between Ukraine and NATO." Ukraine is due to initial a NATO-Ukraine agreement on May 30.

While at the Capitol Mr. Kuchma also held meetings with Sen. Arlen Specter (R-Pa.), to whom he presented a painting of the senator's native Cherkasy, and Speaker of the House Newt Gingrich. Rep. Benjamin Gilman (R-N.Y.), chairman of the House Committee on International Relations, hosted a working luncheon for the Ukrainian president with members of the committee.

At Blair House, the Ukrainian president's official residence during his working visit to Washington, Mr. Kuchma met with Michel Camdessus, managing director of the International Monetary Fund, James Wolfensohn, president of the World Bank, and philanthropist George Soros.

Mr. Camdessus hailed Ukraine's completion of the IMF system regime of full convertibility of the Ukrainian currency and said, "This very important achievement puts Ukraine in the first league of international financial systems." Ukraine and the IMF have been negotiating a three-year, $3 billion loan to Ukraine that Mr. Camdessus said would be enacted in the "next few weeks" after the Verkhovna Rada passes a budget, tax laws and a few other structural measures. But the IMF managing director warned that "we cannot support a country without a budget."

An afternoon meeting with heads of large American corporations - attended by Mr. Kuchma and Ukraine's new economic team of Vice Prime Minister for Economic Reform Serhii Tyhypko, Finance Minister Ihor Mitiukov, Economy Minister Yurii Yekhanurov, Minister for Foreign Economic Relations Serhii Osyka and Mr. Shpek - was characterized by one American insider as successful in terms of developing future investment projects in Ukraine. The American companies - Deere & Co., FMC Corp., Raytheon International, Westinghouse, Mutual Shipping, Boeing, Cargill, Archer Daniels Midland, General Electric and others - did indicate, however, that they expected significant improvements in the over-all business climate in Ukraine.

On May 15 President Kuchma took the opportunity to recognize the achievements of American friends of Ukraine. During an afternoon ceremony in the courtyard at Blair House the Ukrainian president presented former Secretary of Defense William Perry and Zbigniew Brzezinski, chairman of the American-Ukrainian Advisory Committee, with the State Award of Ukraine.

In turn, at an evening banquet at the State Department hosted by the International Foundation for Election Systems and the Ukraine-U.S. Business Council, President Kuchma received the 1997 IFES Democracy Award.

U.S.-Ukrainian Binational Commission convenes

While the first full day of the Ukrainian president's working visit was devoted to reiterating Ukraine's commitment to eradicate corruption and stay the course of economic reform, on May 16 President Kuchma focused exclusively on the work of the U.S.-Ukraine Binational Commission.

After a private meeting in his office with Mr. Kuchma, Vice-President Gore officially opened the first plenary session of the joint commission, which was established by President Clinton in September 1996. The United States has similar commissions with Russia, South Africa and Egypt. The U.S.-Ukraine commission's four committees - foreign policy, security, trade and investment, and sustainable economic cooperation - have been working since the commission's inception and reported on their achievements at the May 16 session.

In his opening remarks Vice-President Gore noted that "This is indeed an historic moment for our nations and our peoples, for today we begin a grand new turning point in our relationship."

He warned, however, that there is much work ahead of the commission. "Though the bulk of this work must be accomplished by the citizens of Ukraine themselves, we continue to be ready to help where possible, but there are many things we cannot do for you. In the end, economic development, trade and investment can only proceed in Ukraine if the objective conditions for such progress exist and if investors, Ukrainian and foreign, conclude that they have reasonable conditions in which to operate."

President Kuchma acknowledged that the "unsatisfactory" investment conditions in his country were due to "corruption in government." "The Ukrainian government is always open to criticism that is constructive," he said, but added that "the placing of guilt on the government of Ukraine for unwillingness to improve the conditions is unjust."

Despite repeated discussion of corruption on Capitol Hill and in the press, participants of the daylong commission meeting said that corruption was not the focus of talks. A senior administration official said the United States would assist Ukraine in streamlining government and liaison operations. Specific assistance will be offered in licensing processes to make the investment climate more "transparent, simpler and more compatible with what business needs to do." The official emphasized that Ukraine needs to create a system that precludes the potential for corruption.

"Corruption in Ukraine is still at a young enough stage where it can be stemmed, effectively controlled and eventually eradicated. This will primarily involve the strong will of the government, buttressed by already accepted programs such as 'Clean Hands' and anticipated downstream legislation such as the tax-reduction and deregulation package," said Andrew Bihun, commercial attaché at the U.S. Embassy in Ukraine.

Mr. Bihun took part in meetings of the trade and investment committee, which in the course of the day and in the weeks preceding the commission meeting resolved a significant number of disputes involving American investors in Ukraine. More significantly, he said, specific government institutions and individuals on both sides were designated to resolve the remaining disputes and stimulate new U.S. investment projects in Ukraine.

The work of the commission is far-reaching. Both President Kuchma and Vice-President Gore noted that the commission "should serve as an effective mechanism for practical work relating to our strategic partnership and for frank dialogue about the challenges that both countries face."

In the joint statement signed by the two principals, the United States pledged to use its influence to support full implementation of the commitments made in connection with the Trilateral Agreement signed by Ukraine, Russia and the U.S. in January 1994, including compensation to Ukraine for nuclear material transported to Russia.

Ukraine announced that it will begin eliminating its SS-24 missiles. The United States will help finance this effort through its Nunn-Lugar program.

The United States and Ukraine have agreed to begin negotiating an Agreement for Peaceful Nuclear Cooperation, and the United States agreed to promote accession by Ukraine to the Missile Technology Control Regime. On May 16 President Kuchma and Vice-President Gore initialed the first U.S.-Ukraine civil aviation agreement. In November the first Ukrainian astronaut will participate in a scientific experiment aboard the U.S. space shuttle.

In the economic sphere, the vice-president reaffirmed that the administration would continue to work with Congress to secure renewal of the Generalized System of Preferences program that expires on May 31 and take the next step toward extending most-favored-nation treatment to Ukraine on a permanent and unconditional basis. Both sides agreed to accelerate negotiations on completing Ukraine's accession to the World Trade Organization on commercial terms generally applied to newly acceding members.

President Kuchma and Vice-President Gore agreed to focus bilateral assistance and trade programs on land privatization. The government of Ukraine announced its decision to move ahead with privatization of most of Ukraine's grain elevators and state organizations for distribution of agricultural inputs and machinery, as well as demonopolization and privatization of state-owned companies in agriculture.

The highlights of the commission's work were discussed with President Clinton in the Oval Office during a meeting with President Kuchma, Vice-President Gore, Secretary of State Albright, Foreign Affairs Minister Udovenko, Secretary of the National Security and Defense Council Volodymyr Horbulin, Vice Prime Minister Tyhypko and Ukrainian Ambassador Yuri Shcherbak.

President Clinton said he was "delighted to have President Kuchma back at the White House. He and the vice-president have worked hard today. They've made a lot of progress on economic issues and on security issues, and I'm quite encouraged by the report I have received and quite hopeful about our future partnership with Ukraine."

Later Mr. Clinton said "the United States values its partnership with Ukraine and believes that we cannot have a successful, undivided, democratic Europe without a successful, democratic, progressive Ukraine."

During a press conference at the conclusion of the commission's work, Vice-President Gore noted that "our challenge now and in the months ahead is to move from words to concrete deeds."

President Kuchma hailed the work of the commission as "fruitful and successful," adding that "it is necessary to stress that the development of all-sided cooperation with the United States is the top priority within the whole system of foreign policy priorities of Ukraine. And it's not surprising, because to fulfill the strategic goal of our country, to integrate it into European structures, the support of such an influential country as the United States is of key importance."

Copyright © The Ukrainian Weekly, May 25, 1997, No. 21, Vol. LXV

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