September 22, 2016

Message of YES conference: Ukraine cannot rely solely on Western support

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YES © 2016/Sergei Illin, Aleksandr Indychii, Aleksandr Pilyugin and Valentіna Tsymbaliuk

At the Yalta European Stategy conference, speakers included Mikheil Saakashvili (on the left), the former president of Georgia and current governor of the Odesa Oblast; and Swedish economist Anders Aslund, senior fellow at the Washington-based Atlantic Council.

Kyiv must act on improving how the country is run

KYIV – Last year, foreign technocrats and Western-educated Ukrainians represented the government at the annual Yalta European Strategy, the pre-eminent event that gathers high-profile officials and business leaders to discuss the country’s place in a constantly changing world.

At the Yalta European Stategy conference, speakers included Mikheil Saakashvili (on the left), the former president of Georgia and current governor of the Odesa Oblast; and Swedish economist Anders Aslund, senior fellow at the Washington-based Atlantic Council.

YES © 2016/Sergei Illin, Aleksandr Indychii, Aleksandr Pilyugin and Valentіna Tsymbaliuk

At the Yalta European Stategy conference, speakers included Mikheil Saakashvili (on the left), the former president of Georgia and current governor of the Odesa Oblast; and Swedish economist Anders Aslund, senior fellow at the Washington-based Atlantic Council.

This year, they were replaced by political stalwarts like Prosecutor General Yurii Lutsenko, former Prime Minister Arseniy Yatsenyuk, and technocrats who’ve left government like Natalie Jaresko, who was serving as finance minister in 2015, but now chairs the Aspen Institute in Kyiv.

Taking place for the third time in Kyiv instead of Yalta because of Russia’s illegal annexation of Crimea, the yearly meeting sent a clear message to the Ukrainian panelists and speakers: Kyiv cannot count on Western support if it doesn’t improve how the country is run, especially in rule of law and how government institutions function.

Speaking  on a panel titled, “Changing Elites in Ukraine,” Mikheil Saakashvili, the former president of Georgia and current governor of the Odesa Oblast, likened Ukraine to a joint-stock company in which the nation’s oligarchs are the shareholders, the ministers are the management executives, and the Verkhovna Rada is simply the supervisory board.

He accused ex-President Leonid Kuchma, the father-in-law to the event’s organizer, oligarch Victor Pinchuk, of setting up the allegedly oligarch-run system during his rule in 1994-2005.

Perhaps the most significant conclusion came from attendee Timothy Ash, the London-based head of Central Eastern Europe, Middle East and Africa credit strategy for Nomura International.

After the September 15-17 gathering closed, he said the following in a note to investors: “Ukraine… cannot rely on the West to defend its sovereignty, which is in disarray… and it might end up as defending itself and European values in the process – with Europeans no longer sure what those very same values are (perhaps now just taken for granted) or indeed willing to fight to defend them.”

President Petro Poroshenko invoked this connection during his 40-minute opening speech on September 16. Referring to the Ukrainian military fighting against combined Russian-separatist forces in the Donbas, the president said, “they defend our sovereignty, our freedom and our democracy… Not our – Ukrainian, but our – European. And this is the battlefield.”

Domestically, the consensus was that reforms and the fight against corruption must move ahead to unleash additional Western financial assistance and diplomatic support. Still, most foreign panelists thought that local expectations of having “revolutionary” instead of “evolutionary” change were too high following the Euro-Maidan Revolution of 2014, given the stiff resistance that vested, oligarchic interests have in the face of a weakened government that inherited only $10 million in the treasury.

One exception came in remarks by Swedish economist Anders Aslund, senior fellow at the Washington-based Atlantic Council. During the “Fighting Corruption” panel, he called for all prosecutors and judges to be replaced and for their number to be cut in half.

It’s good news, however, that Ukraine isn’t among the top five current issues on the European Union’s agenda, former Swedish Foreign Affairs Minister Carl Bildt tweeted during the event. Speaking to the Kyiv Post, Mr. Bildt, who also sits on Mr. Poroshenko’s International Advisory Council on Reforms, said: “Be happy that it isn’t. It means that Ukraine doesn’t have an acute crisis.”

Among other speakers at the YES conference was Leon Panetta, former U.S. secretary of defense and former director of the CIA.

YES © 2016/Sergei Illin, Aleksandr Indychii, Aleksandr Pilyugin and Valentіna Tsymbaliuk

Among other speakers at the YES conference was Leon Panetta, former U.S. secretary of defense and former director of the CIA.

Indeed, Ukraine expects its economy to grow by up to 1.5 percent this year and has stabilized the macroeconomic situation in the country. Last week, the International Monetary Fund disbursed an additional $1 billion as part of its stick-and-carrot lending program, and the U.S. is expected to guarantee a $1 billion loan. A 680 million euro low-interest loan is pending.

The former Swedish minister did acknowledge that Ukraine’s leadership sometimes “doesn’t show enough commitment to the reform path,” the Kyiv Post reported.

Another reason that the EU is distracted is the rise of populist and nationalist forces in the 28-member political bloc that challenge the liberal governments which have dominated since the end of World War II.

A panel was even devoted to the topic called, “Refugees, Populism, Brexit – Is the EU coming apart?”

A heated discussion took place with disagreements over what caused Great Britain this summer in a referendum to leave the EU. Should more fissures emerge amid upcoming elections in Germany and France this year, Ukraine must prepare to do battle with Russia alone on the economic, military and economic fronts, according to Mr. Ash and  former CIA Director Leon Panetta.

“What was interesting during the YES conference was the focus by speakers on the global trend towards the emergence of new anti-establishment, nationalist and populist forces and movements,” Mr. Ash wrote. “There was a failure (amongst the speakers) to link this back to Ukraine itself… Putin’s strategic objectives with regard to Ukraine… remain to bring the country back under Russia’s orbit of control… But Putin thinks that the West is facing inevitable decline, and the coalition ranged against it, to defend Ukraine (via sanctions) will more than likely crumble if populists/nationalists emerge victorious in looming U.S., French and German elections.”

Mr. Panetta, who also served as U.S. secretary of defense, also warned Ukraine of worst-case scenarios.

“You don’t want to become just one of the chess pieces in a power game between Russia and the United States,” he said, as cited by the Kyiv Post. “And it’s for that reason it’s really important for Ukraine to develop and strengthen its independence, to strengthen its economy, to deal with corruption and strengthen the government.”

Ukraine’s flourishing civil society and emerging young leaders are a bright side, according to Lviv-born billionaire Mikhail Fridman, the co-founder of Alfa Group, one of Russia’s largest conglomerates with assets in banking, retail trade and utilities.

Speaking on the panel “Global Vision: Threats, Innovations, Economy,” he said the fact that young people want to “enter politics, change the country and believe that their country’s future lies with them,” is one of the biggest changes that have taken place in Ukraine.

Ukraine must also stop comparing its progress relative to time and start looking at its peers to draw foreign investment, according to panel moderator Fareed Zakaria of CNN.

“Maybe part of the key is that capital isn’t looking at your past, they’re looking at your country compared to others. In the World Bank Doing Business index, Ukraine is doing worse than Russia, Azerbaijan. That should be the metric – how do you compare with other countries,” he said.

So far Kyiv isn’t doing enough, according to Mr. Kuchma, post-Soviet Ukraine’s second president. “Name one big project with the West in the best of times,” he said, as quoted by Novoe Vremya magazine. “Hope can only be placed on oneself. We have huge potential, but nobody believes in that. Even our own businesses are afraid of investing money in Ukraine.”

There have been remarkable achievements in the past 18 months of Mr. Poroshenko’s presidency, it’s that the population hasn’t felt their benefits yet, Mr. Ash noted.

“The stage has been set for growth, development and improvements in living standards,” he said, adding, “Try telling them (the public) that though.”

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