Welcome to the U.S.-Ukraine Business Council


By Susan Farlow/Special Contributor to The Dallas Morning News
The Dallas Morning News, Dallas, TX, Sunday, July 26, 2009

Reuters, Brussels, Belgium, Monday, July 27, 2008

By Roman Olearchyk in Kiev, Financial Times, London, UK, Friday, July 24 2009

Business Wire, Dallas, Texas, Friday, July 24, 2009

By Peter Spiegel, The Wall Street Journal, NY, NY,  Sat, July 25, 2009

The vice president pays important visits to Ukraine and Georgia.
Editorial: The Washington Post, Wash, D.C., Saturday, July 25, 2009

Interviewee: Steven Pifer, Visiting Fellow, Foreign Policy Center,
United States and Europe, Brookings Institution
Interviewer: Bernard Gwertzman, Consulting Editor, CFR.org, 
Council on Foreign Relations, New York, NY, Friday, July 24, 2009

Elite still doesn’t understand need for big internal changes
OP-ED: by Myron Wasylyk, Kyiv Post, Kyiv, Ukraine, Fri, July 24, 2009


By Susan Farlow/Special Contributor to The Dallas Morning News
The Dallas Morning News, Dallas, TX, Sunday, July 26, 2009

KIEV, Ukraine – My head is spinning. And it has little to do with the fact that I have learned to drink like a Cossack. 
The Khans' palace in Bakhchysaray, in the southern Crimea region of Ukraine, was built in the 16th century and designed by Persian, Ottoman and Italian architects. I wasn't in Ukraine long before I began to suspect that nation could single-handedly support its own edition of Trivial Pursuit. For example:

•  Where do you find those beautiful women the Beatles sang, "really knock me out"?
•  Where is the birthplace of the balaclava, that woolly mask used by skiers the world over?
•  Where is the birthplace of Russian culture?


Although it's only slightly smaller than Texas, Ukraine is surprisingly overlooked. Only a couple of recent guidebooks spotlight the country. But just because Ukraine is terra incognita doesn't mean there's nothing of interest there. Ukraine is one happening place. Past and present.
Yet, how to explore it? A river cruise is a good idea.

The Dnieper River slices through the heart of this 1,000-year-old country. And it would be difficult to find a river with a more complicated and bloodstained history than the 1,420-mile Dnieper, Europe's fourth-longest river (after the Volga, Danube and the Ural). Plus, a number of companies offer cruises here, making it a fairly effortless way to visit a country that can be a challenge on your own.

My trip begins in Kiev, Ukraine's leafy capital and one of Europe's oldest cities. In the taxi from the airport into the city, I spot posters for a concert by former Beatle Paul McCartney. Other posters advertise upcoming shows of Nelly Furtado, Lenny Kravitz and Julio Iglesias. Gorgeous young women in shrink-wrapped jeans sashay atop stilettos on cobblestone streets.

Mostly though, I gawk at the many gold-domed churches we pass, especially the Pechersky Lavra, a vast complex of churches and monasteries where mummified monks are entombed in caves. Founded in 1051, it's a spiritual center for the Orthodox world.

Cars are bumper-to-bumper. A statue of Lenin stands near a Bentley showroom.  "Traffic!" says the taxi driver. "It's one of our city's biggest problems."

Actually, you could say traffic – in the form of invaders – has been moving through this region for centuries.

By the ninth century, Kiev was a major trading center on the Dnieper. A hundred years later, Kiev was one of the largest cities in Europe, with 50,000 people, my guide enthused. (The population now is nearly 3 million.) Kiev also was the capital of the powerful Rus Empire, which stretched from the Baltic Sea to the Black Sea. Historians say the Rus Empire, which takes its name from a Viking tribe, is the cradle of Slavic civilization.

For more than a millennium, Ukraine has been a revolving door for invaders, including the Vikings, Mongols, Poles, Lithuanians, Tatars and Soviets. They pillaged and plundered this crossroads between Europe and Asia.

I was invading aboard the river boat Viking Lavrinenkov, a 212-passenger ship operated by Viking River Cruises. My 11-day "Footsteps of the Cossacks" itinerary ran between Kiev and Odessa, stopping in towns and villages along the river, as well as at several Ukrainian ports in the Crimea on the Black Sea.
Our first port, Zaporozhye, is the ancestral home of Ukrainian Cossacks, a militaristic society that lasted from the mid-1500s to 1775.

Cossacks are heroes to Ukrainians. They're symbols of national independence, and their exploits live in songs, legends, dances, art, street names, monuments and a vodka named Hetman, the word for a Cossack chieftain.

At Zaporozhye, passengers are taken to Khortytsya Island mid-Dnieper, once the stronghold of the Zaporozhye Cossacks, Ukraine's most famous.

Students on a field trip to the Cossack Museum jostle to be photographed next to a Cossack statue. Passengers head for a horsemanship exhibition. Cossacks were fabled horsemen, and the program supported that fame. Riders in Cossack attire of pantaloons and boots put their horses through impressive gymnastic tricks.

Afterward, we sample traditional snacks of rice and vodka, the Ukrainian national drink. With my vodka shot in hand, I walk to a blacksmith who is working on horseshoes. Through an interpreter, he tells me how to drink like a Cossack.

"Na konya!" the smith says as he holds an imaginary shot glass to his lips. I do as shown and toss back my drink. Missing is the Cossack toast – "On to the horse!" – exclaimed before they'd gulp the last drink of the evening, jump on their horses and ride away.

The Dnieper has many faces. Sometimes, it's narrow with marshy shores. Sometimes, it's like a sea, and you can't see the shore. At other times, we glide past sandy beaches where children wave, or past high-rise apartments, or villages with fishing huts on stilts.

We dock at Sevastopol on the Black Sea. It's home port for both the Ukrainian Navy and Russian Black Sea fleet. (Once a Soviet Republic, Ukraine became independent and democratic in 1991. Russia's port lease at Sevastopol expires in 2017.)

We sample Soviet secrecy at the town of Balaklava at a mountainside hollowed out by the Soviets and used as nuclear submarine repair station. Passageways in the formerly hush-hush facility are curved to deflect the force of a possible nuclear blast. Scant light makes the place seem sinister.

A short drive from the Cold War submarine station takes us to the Crimean War (1854-56), where the ill-fated charge of the British Light Brigade was cut down by Russian forces on Oct. 25, 1854. Immortalized in Alfred Tennyson's poem, the "valley of death" is now a field of gnarled grapevines.

Winters can be brutal here. During the Crimean War, British wives and mothers read in London newspapers about the bitter cold their loved ones were enduring in the Balaklava area. The women knitted full-head hoods for the men. The headwear came to be called balaclavas.

Later we visit the Crimean Khans' palace, built in 1519 at Bakhchysaray. The Baltic playground of Yalta lies between us and trip's end at elegant Odessa, where we'll toast a cruise through history. Na konya!


• Viking River Cruises offers 11- and 12-day "Footsteps of the Cossacks" cruises, from May through October. Prices begin at $1,730 per person, double occupancy, and include 10 guided shore tours (nine tours in 2010 season), but not airfare. Contact: 1-800-304-9616; www.vikingrivercruises.com

• Gate 1 Travel offers a 13-day Dnieper cruise (from about $1,900) and a 17-day Dnieper with Istanbul itinerary (from about $2,400). Contact: 1-800-682-3333; www.gate1travel.com/european-river-cruise/default.aspx

• Imperial River Cruises feature 12- or 15-day cruises, with prices beginning at $1,950. Contact: 1-800-555-0678; www.imperialrivercruises.com

[USUBC Editor's Note:  For a discount on Imperial River Cruises go to the home page of the Travel To Ukraine website, sponsored by the U.S.-Ukraine Foundation (USUF), www.TravelToUkraine.org, and click on the box in the upper right hand corner labeled "Book Ukraine Cruises."]

• Uniworld offers 17-day "Ukraine, the Black Sea & Istanbul" voyages, with prices starting at $3,099 per person, double occupancy. Contact: 1-800-733-7820; www.uniworld.com/ukraine.asp

• European River Cruises: www.europeanrivercruises.com.

• Guidebooks: Ukraine: The Bradt Travel Guide by Andrew Evans ($19.95) and Ukraine by Sarah Johnstone (Lonely Planet, $22.99)
• U.S.-Ukraine Foundation: www.traveltoukraine.org

NOTE:  Susan Farlow is a writer in Maine.

LINK: http://www.dallasnews.com/sharedcontent/dws/fea/travel/thisweek/stories/DN-ukraine_0726tra.ART.State.Edition1.4c5edf8.html

Reuters, Brussels, Belgium, Monday, July 27, 2008

BRUSSELS — Ukraine is close to agreeing to gas sector reforms that international lenders have demanded before they can extend loans to help prevent a cut in Russian gas supplies to Europe, a European Commission spokesman said Friday. The talks are intended to help Naftogaz Ukrainy pay its debts and prevent a repeat of a gas crisis.

“Good progress was made,” spokesman Mark Gray said following talks in Kiev among the commission, Ukrainian authorities and lenders, including the International Monetary Fund.

Ukraine is seeking as much as $4 billion, partly to buy gas for storage ahead of the winter so that it can keep pace with soaring European demand.
Banks have refused to lend money until Naftogaz ends years of subsidizing household gas supplies and finds ways to force companies to pay their bills.

“The parties are close to agreement regarding the necessary short- and medium-term commitments by the Ukrainian authorities on reform … which would make it possible for the international financial institutions to prepare a package of support,” Gray said. “This would be designed to address both payment difficulties for the storage of Russian gas … as well as reform and modernization of the gas sector,” he said.

By Roman Olearchyk in Kiev, Financial Times, London, UK, Friday, July 24 2009

Lawmakers in Ukraine, one of the world’s most recession-battered economies, overcame weeks of deadlock on Friday to adopt key banking legislation in the hopes of unlocking fresh aid from the International Monetary Fund.

In a statement released soon after the vote, the IMF stopped short of saying the law was sufficient for approval of a fresh loan instalment, but said it represented “significant progress towards restoring financial stability” in Ukraine’s shaky bank sector.

The IMF also said the legislation provided a “robust framework for resolving problem banks consistent with international good practices”. Yet some lawmakers suggested the law was unconstitutional and may be blocked by a presidential veto.

Earlier this month, an IMF delegation visiting Kiev said it would recommend for the board to grant Ukraine an additional $3.3bn, pending adoption of the bank legislation. A board decision could come as early as July 28 but it remained unclear if the bank sector amendments were sufficient for approval of a fresh aid.

A sum of $7bn already received from a $16.4bn IMF standby loan granted last autumn has helped to stabilise Ukraine’s overstretched finances. The country’s currency has stabilised this year at about 8 relative to the US dollar, an exchange rate that has provided a boost for exporters.

Economists say Ukraine’s economy has shown resiliency this year in absorbing difficult adjustments, including a dramatic reversal from a mushrooming trade deficit. The government and central bank have moved to bail out three banks but others are struggling to stay financially afloat as non-performing loans rise.

Meanwhile, Ukrainian companies are in tough talks to restructure more than $10bn in debt owned to foreign creditors.


Business Wire, Dallas, Texas, Friday, July 24, 2009

DALLAS - Today SigmaBleyzer, a leading emerging markets private equity firm with $1 billion in assets under management, announced the acquisition of Jus-Made, LP, a beverage manufacturing company based in Dallas. The purchase marks a first for the firm as it expands to take advantage of opportunities in the US market.

With 15 years experience in emerging markets in Eastern Europe and portfolio companies in food and beverage and other consumer products sectors, the acquisition is a natural transition based on the firm’s core competencies and ability to create value at the operational level without the use of leverage.

“After over 100 transactions in Eastern Europe, it is very exciting for us to return to our home base and apply our experience to the many attractive opportunities that have become available in the US as a result of the financial crisis. And of course there's no better place to start than in our own state of Texas.

"Having looked at a number of opportunities available here, we concluded that Jus-Made represents a great entry into this market. This 50-year old business has rich culture, a great long-term customer base and superior manufacturing capabilities that can produce high quality products. The financial difficulties that the company has faced over the last couple of years have been resolved by our investment.

Our commitment to customers and superior manufacturing has been renewed and a combined team of Jus-Made and SigmaBleyzer professionals is ready to serve our customers. Our goal is to develop Jus-Made into a world class beverage engineering company. I am very excited about this new chapter in Jus-Made’s history and delighted to be a part of it,” said Michael Bleyzer, President and CEO of SigmaBleyzer.

Jus-Made, LP has manufactured a wide variety of products in the beverage sector for the last 54 years. The company was originally founded by Lamar Dial, one of the creators of Orange Julius as well as a member of the development team that eventually created the 7-Eleven Slurpee©. Mr. Dial’s family had retained control of the company since its inception and will continue to maintain partial ownership.

"The family is proud of Jus-Made's rich history and excited to pass that legacy on to such capable individuals, and a company with the wealth of experience SigmaBleyzer provides," said Josh Barfield, great-grandson of founder Lamar Dial.

The company has received an “A” rating from the BRC certifying body for the Global Food Safety Initiative and its facility in Dallas includes modern beverage processing equipment, efficient pasteurizing processes, large blending tanks, and effective production measures also certified under HACCP (Hazard Analysis and Critical Control Points System). Jus-Made’s products can be found throughout the United States in grocery stores, wholesale clubs, convenience stores, restaurants and bars. Website: www.jus-made.com

“The experience and financial stability of our new owners and our new capabilities including a hot-fill line, which was funded by SigmaBleyzer’s investment, will help to further separate Jus-Made, LP from its competitors,” said John Hampton, President of Jus-Made, LP.

Since 1994, SigmaBleyzer has been active in private equity in the emerging markets of Eastern Europe and the Former Soviet Union. Having invested in 130 different companies and realized exits over 100 times, the firm has a strong record of creating value in portfolio companies.

Operating in markets that had little or no leverage available resulted in a strong company culture focused on creating value at the operational level of the business and not through financial engineering. New opportunities created in the US as a result of the financial crisis will benefit significantly from this approach to private equity. The firm has offices in the United States, Bulgaria, Romania, Kazakhstan and Ukraine. Website: www.sigmableyzer.com.

Photos/Multimedia Gallery Available: http://www.businesswire.com/cgi-bin/mmg.cgi?eid=6014766&lang=en

Permalink: http://www.businesswire.com/news/google/20090724005457/en

NOTE: SigmaBleyzer is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.


By Peter Spiegel, The Wall Street Journal, NY, NY,  Sat, July 25, 2009

WASHINGTON -- Vice President Joe Biden said in an interview that Russia's economy is "withering," and suggested the trend will force the country to make accommodations to the West on a wide range of national-security issues, including loosening its grip on former Soviet republics and shrinking its vast nuclear arsenal.

Mr. Biden said he believes Russia's economic problems are part of a series of developments that have contributed to a significant rethinking by Moscow of its international self-interest. The geographical proximity of the emerging nuclear programs in Iran and North Korea is also likely to make Russia more cooperative with the U.S. in blocking their growth, he said.

But in the interview, at the end of a four-day trip to Ukraine and Georgia, Mr. Biden said domestic troubles are the most important factor driving Russia's new global outlook. "I think we vastly underestimate the hand that we hold," he said.

"Russia has to make some very difficult, calculated decisions," Mr. Biden said. "They have a shrinking population base, they have a withering economy, they have a banking sector and structure that is not likely to be able to withstand the next 15 years, they're in a situation where the world is changing before them and they're clinging to something in the past that is not sustainable."

Mr. Biden's remarks were the most pointed to date by a senior administration official on why the Obama administration believes its "reset" with Russia is likely to succeed, while previous efforts to engage Moscow by the Clinton and Bush administrations ended with little progress.

The remarks also are among the administration's most critical of Russia's current role in the world, and come just weeks after President Barack Obama insisted that the U.S. seeks a "strong, peaceful and prosperous Russia" in an address at his high-profile July summit in Moscow with Russian President Dmitry Medvedev.

Natalya Timakova, a spokeswoman for Mr. Medvedev, declined to comment on Mr. Biden's remarks. Ms. Timakova acknowledged that the Russian government is currently looking at many of the issues he raised -- including economic challenges, the banking sector and the country's shrinking population.

Despite Russia's economic and geopolitical difficulties, Mr. Biden said, Moscow could become more belligerent in the short term unless the U.S. continues to treat Russia as a major player on the international stage. He said Russian leaders are gradually beginning to grasp their diminished global role, but that the U.S. should be cautious not to overplay its advantage.

"It won't work if we go in and say: 'Hey, you need us, man; belly up to the bar and pay your dues,' " he said. "It is never smart to embarrass an individual or a country when they're dealing with significant loss of face. My dad used to put it another way: Never put another man in a corner where the only way out is over you."

Since the end of the Cold War, consecutive U.S. administrations have tried to re-engage with Moscow on a range of foreign-policy issues, in the belief that the two countries had increasingly common national-security interests. After initial charm offensives, however, both the Clinton and Bush administrations' efforts were stymied.

Mr. Biden's remarks illustrate the extent to which the Obama administration believes the balance of power is shifting toward Washington, giving the White House a new opening to leverage its strategic advantages to persuade Moscow to reduce Russia's nuclear arsenal, loosen its grip on emerging democracies on its border, and cooperate on Iran and North Korea.

"It's a very difficult thing to deal with, loss of empire," Mr. Biden said. "This country, Russia, is in a very different circumstance than it has been any time in the last 40 years, or longer."

Specifically, he said, economic troubles played a central role in Moscow's strong desire to restart nuclear-reduction talks. He noted that Russia can no longer afford to maintain an arsenal that, while much smaller than Cold War levels, is still one of the two largest in the world by far. "All of sudden, did they have an epiphany and say: 'Hey man, we don't want to threaten our neighbors?' No," Mr. Biden said. "They can't sustain it."

He also argued that Russia's domestic struggles have made it less able to influence events in its so-called near abroad -- the former Soviet republics that, to varying degrees, are seeking increased independence from Moscow.

Russia maintains thousands of troops in the northern Georgian provinces of Abkhazia and South Ossetia, and has shut off gas flows into Ukraine twice in the last three years. Despite such shows of power, Mr. Biden said, even a close Russian protectorate such as Belarus has shown signs of bucking Moscow recently.

Mr. Biden said Moscow's efforts to strong-arm former Soviet republics through use of its energy resources have backfired. He noted that Russia's running dispute with Ukraine has galvanized European efforts to build a new pipeline through Turkey and southern Europe, known as Nabucco, that would bypass Russia.

"Their actions relative to essentially blackmailing a country and a continent on natural gas, what did it produce?" he said. "You've now got an agreement that no one thought they could have."  [Alan Cullison in Moscow contributed to this article. Write to Peter Spiegel at peter.spiegel@wsj.com]

LINK: http://online.wsj.com/article/SB124848246032580581.html
LINK to more of interview: http://online.wsj.com/article/SB124835911309475853.html
LINK to excerpts: http://online.wsj.com/article/SB124846217750479721.html
The vice president pays important visits to Ukraine and Georgia.

Editorial: The Washington Post, Wash, D.C., Saturday, July 25, 2009

DURING A GENERALLY upbeat visit to Moscow this month, President Obama made clear that the United States and Russia still have a major difference over the Kremlin's view that some of the countries that formed the Soviet Union must now live under its autocratic "sphere of influence."

Mr. Obama urged the regime of Vladimir Putin to abandon such "19th century" thinking, but since it shows no sign of doing so, governments such as those of Ukraine and Georgia -- both democratically elected and Western-leaning -- could be excused for worrying that a "reset" of U.S.-Russian relations might happen at their expense.

That's why Vice President Biden performed a valuable service this week by traveling to the capitals of both countries. Mr. Biden met the Ukrainian and Georgian presidents as well as their leading political opponents, and he delivered major public addresses in which he reaffirmed U.S. support for the two countries' sovereign choices.

"As we reset the relationship with Russia, we reaffirm our commitment to an independent Ukraine," he said in Kiev. "We understand that Georgia wants to join NATO. We fully support that aspiration," he said in Tbilisi.

To his credit, the vice president didn't limit his messages to stroking. In Ukraine he forcefully urged feuding political leaders to overcome their quarrels and address their country's heavy dependence on Russian energy imports.

In Georgia Mr. Biden publicly prodded President Mikheil Saakashvili to deliver on promised political reforms and met with his opposition. He emphasized that two provinces invaded and occupied by Russia last year could be recovered not by military means but only by building a tolerant and prosperous country.

The administration must now determine how best to follow Mr. Biden's words with actions. The vice president announced the establishment of a U.S.-Ukrainian working group on energy security, which could help Ukraine achieve the efficiency reforms that would free it from dependence on Russia -- which has twice cut off supplies of gas in midwinter.

But in Georgia the U.S. delegation was noncommittal in response to Georgian requests that the United States supply defensive weapons and join a European Union mission that monitors the volatile ceasefire line with Russia. The administration may be right to be cautious about weapons sales, while continuing to train the Georgian army. But, if requested by the European Union, it should join in the monitoring mission.

Placing U.S. personnel on the ground would eliminate any doubt about America's stance against Russian neo-imperialism -- and make it less likely that Mr. Putin would again attempt to subdue a neighbor by force.

LINK: http://www.washingtonpost.com/wp-dyn/content/article/2009/07/24/AR2009072403561.html


Interviewee: Steven Pifer, Visiting Fellow, Foreign Policy Center,
United States and Europe, Brookings Institution
Interviewer: Bernard Gwertzman, Consulting Editor, CFR.org, 
Council on Foreign Relations, New York, NY, Friday, July 24, 2009

Steven Pifer, a former U.S. ambassador to Ukraine and expert on former Soviet republics, says Vice President Joseph Biden's recent trip to Ukraine and Georgia was meant to balance President Barack Obama's Moscow summit earlier in the month. But in both countries, Pifer says, Biden had to convey tough messages.

In Ukraine, his message to Ukraine's feuding leadership  was to repair relations and resolve their energy crisis, caused in large part by heavily subsidized domestic prices.

In Georgia, Biden wanted to press Georgia's leaders on domestic political reforms, but he also made it clear that there was no way for Georgia to use military force to regain South Ossetia and Abkhazia, the two provinces that have now been recognized by Russia as independent.

Vice President Joseph Biden has just completed a trip to Ukraine and Georgia to reassure both of those former Soviet republics that the American desire to "reset" relations--Biden's words in Munich last February--with Russia were not meant at their expense. But he also had what one Biden aide called "tough love" for both of them.

QUESTION: Could you elaborate on this trip?
That was the first point of the trip: to reassure Kiev and Tbilisi that the United States remains interested in robust relations with Ukraine and Georgia, and that we will work to keep open their pathways to Europe and the North Atlantic community. When I was in Ukraine about five or six weeks ago, what I heard from the Ukrainians was a concern--and I suspect there is a parallel concern in Georgia--that the effort to reset relations with Russia would somehow come at Ukraine's expense.

So part of the trip by the vice president was to assure both Ukraine and Georgia that the United States is not going to undercut relations with those two countries as it tries to develop relations with Russia.

You've seen points made by this administration, indeed going back to the Munich speech itself, saying the reset of relations would not mean recognition of a Russian "sphere of influence" over the former Soviet states, and then repeated assurances that the United States supports the rights of countries such as Ukraine and Georgia as sovereign states to choose their own foreign policy course.

What was also interesting to me was that in his speech in Ukraine, Biden was virtually demanding that the Ukrainian leadership get their act together. In Georgia, I don't think he was publicly as tough. Can you elaborate on the "tough love" part of the visits?

Let me start with Ukraine. Certainly the primary goal of the visit was to reassure Ukraine, but there was also a tough message there. In Ukraine, it's not only due to the presidential election, but you've had a situation in the past year and a half where the government really hasn't functioned because of infighting between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko.

It's meant that Ukraine has passed up opportunities to accomplish some important things. A big part of the vice president's message in Kiev was to say, "You need to put aside political differences, come together as mature political leaders, find compromises, and get things done."

A big part of the vice president's message in Kiev was to say, "You need to put aside political differences, come together as mature political leaders, find compromises, and get things done."

He also singled out the importance of Ukraine getting serious about reforming its energy sector. This is a huge national security vulnerability for Ukraine because they have a distorted price structure where people buy natural gas at prices that don't begin to cover the cost of the gas that Ukraine buys from Russia. As a result, Naftogaz, the national gas company, is perpetually in debt to Russia and on the verge of bankruptcy. That creates vulnerabilities for Ukraine.

Part of the vice president's message was, "You need to get serious about this." Part of the problem in Ukraine is if you are a household, you are probably paying a price that amounts to less than 30 percent of the actual cost of the gas bought from Russia. It's no wonder why Naftogaz is always in financial straits. But it's not just an economic problem because of the way it factors into the Ukraine-Russia relationship.

It creates a national security issue for Ukraine. So there are two aspects to the tough message: One, the need for political leaders to get together, compromise, and produce good policy; and second, the special importance of tackling this energy security issue.

QUESTION: At the time of the 2004 Orange Revolution in Ukraine, Yushchenko and Tymoshenko were united. What's caused this major rift?
This has been one of the surprises and one of the disappointments since the Orange Revolution. Yushchenko and Tymoshenko were allies during the
revolution. Tymoshenko was prime minister for eight months in 2005. She's been prime minister again since December 2007, but the relationship between the president and the cabinet just has not worked. There's been continual infighting where the president blocks cabinet actions and vice versa.

Over the last fifteen or sixteen months, it's been hard to get the $16 billion loan from the IMF [International Monetary Fund]. And it's hard to find too much else that the government has been able to accomplish, in large part because the president, the presidential secretariat, the cabinet, and the prime minister seem to be undercutting each other so badly.

QUESTION: Is it a personal thing?
I suspect part of it is personal. If you go back to December 2007, the initial shots seemed to have been fired by the chief of staff to the president, Viktor Baloga, who has since left that position. In that fight, it seemed to reflect a concern on the part of the presidential administration that in the presidential election, which will be held in January 2010, Tymoshenko would be a strong rival to the president.

There seems to have been an effort to undercut her. Unfortunately, this means the government has not performed as expected. Interestingly in politics what we've seen is that President Yushchenko's rating has fallen to the low single digits. Tymoshenko's rating remains at about 15 percent, falling second in most polls for the president.

QUESTION: It's interesting how the leader of the Orange Revolution has fallen so low in the polls. There's a similar situation in Georgia with President Mikheil Saakashvili, right?

There's a different situation in Georgia. There are two factors motivating opposition to Saakashvili. One is a concern that goes back to the fall of 2007, when Saakashvili was walking back on some of the democratic achievements that Georgia had obtained since the Rose Revolution. And significant opposition has been generated to Saakashvili in the aftermath of the conflict between Russia and Georgia last August.

There's a feeling held by many in the opposition that while the Russians may have provoked the conflict, Saakashvili made a huge mistake. He took the bait and sent the army into South Ossetia, bringing about a strong Russian response that crushed the Georgian military in a matter of days.

QUESTION: Biden met with the opposition both in Ukraine and in Georgia on this rather brief trip, which I guess presidents and vice presidents usually do.

In the case of Ukraine, in addition to meeting with President Yushchenko and Prime Minister Tymoshenko, he also had meetings with Regions Party head Yanukovych, the former parliamentary speaker Yatsenyuk, and the current parliamentary speaker Volodymyr Lytvyn. That's natural. That's appropriate in a country that's five months out from a presidential election.

No matter who wins the election in January, the vice president has met with that person on this trip. That's the appropriate way to show that the United States doesn't have a favorite in that election, and as the vice president made clear, the important thing is that Ukraine continue to demonstrate that it knows how to do free and fair elections, and that it is a leader in the region in terms of democratic progress.

The simple fact is that there's no conceivable defense assistance program the United States could do with Georgia that would give the Georgians the ability to defend themselves against Russia.

In the case of Georgia, there was an effort to meet with the opposition to show some balance. This may reflect some quiet concern on the part of this administration that the Bush administration's policy toward Georgia may have become too personalized with Saakashvili. There's an effort to say the United States wants a strong, robust relationship with Georgia, but perhaps without the personal attachment to Saakashvili.

Certainly there are figures in the opposition--the former head of the Georgian parliament, Nino Burjanadze, and the former Georgian ambassador to the United Nations, Irakli Alasania--who are in favor in Washington. So the approach to Georgia will be more balanced and not so personalized as what we saw in the Bush administration. There's a fine line to walk here, and the vice president is doing it fairly well, where you don't want to signal to the Russians that we're chopping off Saakashvili completely.

QUESTION: Russian President Dmitry Medvedev showed up in South Ossetia just a week before Biden arrived in Georgia, to demonstrate Russia's presence inside what used to be Georgia. There was also a strong message from Moscow during Biden's trip warning against any military aid to Georgia. Are the Russians really worried that the United States may do something that might provoke them?

The Russians, since last August, had a very sharp rhetorical stance against Georgia and against Saakashvili in particular. But it seems to me that if they look at how the United States has engaged with Georgia since the conflict, there was passage of a major assistance program, but that assistance has been primarily on economic recovery and such.

Certainly I suspect that the administration is going to have a military-to-military relationship with Georgia, but I don't think providing weapons to Georgia is high on anybody's priority list in the United States. And the simple fact is that there's no conceivable defense assistance program the United States could do with Georgia that would give the Georgians the ability to defend themselves against Russia, to say nothing of trying to take back South Ossetia or Abkhazia.

In fact, in his speech to the Georgian parliament , Biden said specifically: "It is a sad certainty, but it is true there is no military option to reintegration, only peaceful and prosperous Georgia--a peaceful and prosperous Georgia that has the prospect of restoring your territorial integrity by showing those in Abkhazia and South Ossetia a Georgia where they can be free and their communities can flourish."

QUESTION: You did a report for the Council on Foreign Relations, "Averting Crisis in Ukraine," in which you pointed out some of the danger possibilities. What is the situation now?

My read now is that the one crisis possibility out there that is real is another gas conflict. It's a possibility because, due to the weakness in the energy sector in Ukraine, the country is perpetually in danger of missing payments. In fact, Ukraine is technically in default on the gas contract it signed in January because it hasn't bought the minimum amount of natural gas that it contracted to buy. Russian Prime Minister Vladimir Putin has said they won't push that point, but the Russians haven't amended the contract.

So Ukraine is still in technical default. And there are suspicions that the Russians may look for an opportunity in the fall or early winter to again apply some pressure on the gas side with a view of having an impact on Ukraine's internal politics. So there's that concern. The other concern that I wrote about in January between Ukraine and Russia is that somehow they might get into a conflict over Crimea. My sense is that the probability of that is declining now.

LINK: http://www.cfr.org/publication/19906/delivering_tough_love_to_ukra

NOTE:  Former U.S. Ambassador to Ukraine, Steven Pifer, serves as a Senior Advisor to the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
Elite still doesn’t understand need for big internal changes

OP-ED: by Myron Wasylyk, Kyiv Post, Kyiv, Ukraine, Fri, July 24, 2009

U.S. Vice President Joe Biden’s visit to Ukraine this week accomplished three very important objectives not only for the U.S.-Ukrainian bilateral relationship, but also for communicating Washington’s security policy views to Central and East Europeans.

[1] First, Biden affirmed for official Kyiv the continuity of U.S.-Ukrainian relations and their strategic importance to both sides on a wide range of issues. This ended speculation in both capitals about the status and nature of the bilateral relationship and affirmed that an independent, democratic and prosperous Ukraine remains a strategic priority for America. 

During meetings with Ukraine’s political and business leaders, Biden specifically affirmed Washington’s support for the 1994 Budapest Memorandum, which gave Kyiv security assurances from the United States, United Kingdom and Russia in exchange for Ukraine’s getting rid of its nuclear weapons arsenal, one of the world’s largest at the time. The term of the memorandum expires this year and the Ukrainians were keen to receive a signal of support from Washington. 

In another important step for Kyiv, the Charter on Strategic Partnership signed by Presidents George Bush and Victor Yushchenko was renewed. Biden announced a bilateral commission would be established to focus on economics, trade, energy, security and rule of law with an inaugural meeting of the commission scheduled for this autumn in Washington, D.C.  Biden also affirmed U.S. support for Ukraine’s Euro-Atlantic integration without mentioning NATO by name.

Official Kyiv also received confirmation of plans for a visit of U.S. Secretary of State Hillary Clinton and a possible meeting between Presidents Barack Obama and Yushchenko this fall.

While the Ukrainians received almost all the items on their bilateral “wish list,” how Ukraine ranks with regard to America’s other global priorities remains to be seen.  Debates among Washington bureaucrats and policy wonks continue regarding Ukraine’s importance and relevance to the U.S.-Russia relationship.  Nonetheless, Biden’s high-level assurances in Kyiv this week about Ukraine’s importance to the U.S. have left a positive impression here.

[2] Secondly, Biden offered Ukrainians and other Eastern Europeans a wider view of the Obama Administration’s thinking and rhetoric with regard to U.S. foreign policy and international relations in the region. His remarks at the Munich Security Conference earlier this spring and Obama’s “reset theme” in U.S.-Russian relations has caused trepidation and misunderstanding throughout East European capitals. 

Last week, 22 intellectuals and former leaders from Central and East European countries signed a letter to Obama stating their fear that spheres of influence are being re-established in the region with a “revisionist Russia.” They fear the U.S. will trade off its support of Central and East European democracies in exchange for securing Russia’s support for America’s nuclear disarmament agenda, particularly in Iran.

The intellectuals stated: “We know from our historical experience the difference between when the United States stood up for democratic values and when it did not.  Our region suffered when the United States succumbed to “realism” at Yalta. And it benefited when the United States used its power to fight for principle during the Soviet era.

Biden explained that a reset in U.S.-Russian relations is not a threat to Kyiv or any other capital in the region. He said the United States is not seeking to build spheres of influence or domination in the region, countering that “zero-sum thinking” is a 19th century idea with no relevance in the 21st century, where “America recognizes state sovereignty as the cornerstone of the existing international order.”

Biden echoed earlier remarks made by Secretary of State Clinton, who said the U.S. wants to create a multi-partner world, as opposed to a multi-polar one, where partnerships are not aimed against anyone. He assured Ukrainians that the U.S. is looking for strong partners and called upon them to help meet common challenges.     

[3] Thirdly, Biden delivered to Ukrainians a bitter pill on their economic policies and an indication of what Washington expects from Kyiv in the coming weeks and months.  If Ukraine’s government wants to receive assistance from international financial organizations and U.S. support on a number of policy fronts, ranging from economics and energy sector reforms to international security cooperation, Biden said unpopular moves are required. 

So far, Ukraine’s government has been reluctant to take austere and unpopular economic decisions due to a January 2010 presidential election.
Instead, government subsidies continue on a wide range of social programs that have widened Ukraine’s budget deficit to historic levels. It’s currently predicted to reach 6 percent of gross domestic product this year.

On the other hand, opposition calls for populist measures such as raising the minimum wage as Ukraine’s unemployment soars and private sector contracts; and has blocked the work of parliament for the past several weeks. These two facts alone have turned away international investors from Ukraine this year and possibly next year too.

Biden said the International Monetary Fund program was “an opportunity for Ukraine,” if the government cuts the budget deficit, enacts tax reforms, revives the banking sector and removes energy subsidies. “Energy efficiency alone,” he said, “would be a boon to Ukraine’s economy.”
In summary, Biden’s visit to Kyiv helped soothe the nervous mood in Eastern European capitals with affirmation of U.S. commitments to regional security issues that have been on the back burner since the transition from one American administration to another.

However, with regard to Biden’s message to Ukraine on domestic economic policies, this author believes a bare minimum will be done by government officials in the run-up to the 2010 elections.

Unfortunately, Ukraine’s political elite still does not understand that economic prosperity and global competitiveness are just as important a factor to Ukraine’s national security as the security promises made by world leaders through treaties, memorandums and various charters.

NOTE: Myron Wasylyk is senior vice president of PBN Company, a leading international public relations firm. In 2004, he was a speechwriter for Victor Yushchenko’s presidential campaign and wrote on behalf of several officials, including Prime Minister Yulia Tymoshenko.

LINK: http://www.kyivpost.com/opinion/op_ed/4579