Ukraine’s National Survival and the US-Ukraine Relations

Ukraine’s Euro-Atlantic Future:
International Forum VI

Ukraine at the Crossroads

Ukraine’s National Survival and the US-Ukraine Relations:
Looking Ahead at Geopolitics, Energy and Economics

Ariel Cohen

Remarks by Ariel Cohen, Senior Research Fellow at The Heritage Foundation, presented at Ukraine’s Euro-Atlantic Future Forum VI in Ottawa, Canada on March 7-8, 2012.

Twenty years after the independence, Ukrainian people and elites are still facing the basic challenges of national survival. And the survival is impossible without the leadership committed to basic goals of democratic and prosperous Ukraine based on good governance and the rule of law.

A confluence of negative economic and geopolitical factors

The 2004 Orange revolution led by Viktor Yushchenko, the former president, and Yulia Tymoshenko, the former prime minister, promised a vision of a more democratic and prosperous life for the people of Ukraine. However, the leadership’s incompetence and inter-party bickering, as well as the global economic crisis and domestic bureaucratic corruption plagued the Orange Revolution. These factors have led to the ultimate weakening of the Ukrainian pro-democratic forces and President Viktor Yanukovich’s win in the presidential elections. It also did not help that Ukraine became a victim of negative geopolitical and economic factors: a partial US disengagement from Eastern Europe and Eurasia and the 2008 economic meltdown, which sent the Ukrainian GDP plummeting by 15 percent, among the highest in the world.

Since then, the ruling party managed to roll back some of Orange Revolution’s democratic accomplishments. The Tymoshenko’s trial made considerable damage to Ukraine’s relations with the West and to integration with the European Union. Today, the Associate Membership in the EU may be in jeopardy. Ukraine would improve its international standing and its attractiveness for the United States if this, as well as other cases of pursuing selective justice, was resolved. At the same time, the United States managed to lose some of its influence and credibility in the region as the result of the failed Obama Administration’s “reset” policy with Russia. Levels of the US’ political, military and economic engagement in the CIS, including with Ukraine have dropped precipitously, especially in the first two years of the Obama Administration.

Russia: in Search of a “Big Country”

In Russia, this policy was interpreted as a U.S. implicit admission that the Commonwealth of Independent States (including Ukraine) is within Russia’s sphere of influence. This led to an increase of the Russian pressure in its so-called “near abroad”, including Ukraine.

The Russian pressure in Ukraine has been partly successful. On one hand, Moscow managed to conclude the Kharkiv Accords in April 2010. This agreement extends the Russian lease of naval facilities in Crimea until 2042 (with a 5 year extension option) in exchange for natural gas.

The U.S. government barely reacted to these developments. Apart from apparent encroachment of Ukraine’s sovereignty, Russian military presence would complicate Ukraine’s accession to NATO should the political leadership pursue it in the future. Indeed, during the 2008 Bucharest summit, it was agreed that Ukraine will become a member of the Alliance. However, there was limited enthusiasm in Ukraine with regards to NATO membership, both among the elites and among the public opinion. The Yanukovich Administration passed a legislation declaring a non-aligned status in the summer of 2010. This legislation prevents Ukraine from a membership in any military alliances, including NATO.

On the other hand, Moscow’s attempts to pressure Ukraine since the bilateral Russian–Ukrainian accords of 2010 have already led to a steady deterioration in Russian–Ukrainian relations, as Moscow’s pressure upon Kyiv is unremitting.

What Can the Hromada Do?

What should Ukraine and the Diaspora (the Hromada) do to get the United States interested in its affairs? More than 1 million Americans of Ukrainian origin live in the United States. These represent a formidable force, if properly organized, to exercise pressure on the Congress and the Administration to get more engaged with the country. If more organized and mobilized lobbies can do it, why not Ukrainians?

Unfortunately, ordinary Americans often don’t know first thing about Ukraine. Ukraine’s territory is Europe’s largest (excluding Russia). Its 46 million consumers constitute the biggest market in Eastern Europe; it is an ideal platform for manufacturing and exporting to both Russia and the EU provided both open their borders and zero out their tariffs. Its extensive transportation infrastructure positions Ukraine as a major international trade hub. 80 percent of Russia’s gas for Europe is transported via Ukraine.

The United States must be reminded over and over again why Ukraine matters. The country is coming closer to its pivotal moment. It is on the crossroads between rapprochement with Europe and falling into Moscow’s orbit.

The Kremlin would want nothing better, including membership in the Unified Economic Space, Customs Union and the Eurasian Union.

U.S. decisions will tremendously impact the country’s future. Geopolitically, Ukraine’s “very existence as an independent country helps to transform Russia,” says Zbigniew Brzezinski. If Russia wins Ukraine, it will “regain the wherewithal to become a powerful imperial state, spanning Europe and Asia”. One can imagine that this would be if the new/old President Vladimir Putin’s dream were to come true. And today this dream is being implemented in the form of the Eurasian Union, or what the former Speaker of the Duma Boris Gryzlov called “bolshaya strana” – the big country. That term harkens back to the German “Grossraum” — a notion of the early 20th century sphere of influence based on economic and military domination, common currency, cultural superiority, and an imperial language as a tool of soft power control.

Russia has been using every possible tool from its toolkit to regain its control of Ukraine. Military might is one. Recently, Putin announced the beginning of the most ambitious armed forces modernization programs since the end of the Cold War. Kremlin plans to spend about 23 trillion rubles (about $770 billion dollars) over the next decade to purchase more than 400 intercontinental ballistic missiles, more than 600 combat aircraft, dozens of submarines and other navy vessels and thousands of armored vehicles.

Russia has also been using trade, investment, political subversion, intelligence penetration, and expansion of military bases, energy, culture and the media – even organized crime as tools of geopolitical pre-eminence. This is an impressive tool kit.

Ukraine’s leadership and elites need to concentrate and formulate policies aimed at saving the country’s sovereignty. They need to think fast on their feet to protect their country’s sovereignty – not haggle over morsels of business or fight nasty internal political fights which split the nation. An elite consensus on sovereignty and implementation an agreed upon policy package to this effect is a pre-condition of a national survival. And a leadership sense of national mission is a must for a country to survive. Thus, national unity is a tool of geopolitics.

Russia’s worst instincts would be amplified by a geopolitical victory in Ukraine. Even more importantly – and to the detriment of the Russians, — the leadership in the Kremlin would gain an impression that expansion work better than the rule of law and democracy. The U.S., on its part, would be caught in their strategic impotence moment – not a desirable outcome.

Much of the history of conflict in Europe is about insecurity in the lands between Germany and Russia. If Russia wins over Ukraine, it could increase the friction in the country and possibly lead to instability over the long-term. U.S. engagement is critical to prevent this from happening. The traditional U.S. bipartisan policy, of Ukraine whole, free, democratic and European, and that of Moscow, in which Ukraine is a mladshyi brat (little brother) fundamentally differ in their visions for Ukraine.

For this reason, the United States has a vested interest in democratic, free, and prosperous Ukraine. In addition, a successful construction of a well-functioning body politic in Kyiv and in the country would send a powerful signal to other post-communist countries including Russia: it is possible to reform politically, fight corruption, and become integrated into western institutions.

It would prove that democracy is not a danger and counter President Putin’s narrative. A dialogue and consultations on Ukraine between Washington and the key European capitals, as well as the bureaucracy in Brussels, is necessary for coordination of Ukraine policy between the US and the EU members.

Energy security.

One of the key factors in assuring Ukraine’s independence is its energy security. Ukraine has significant reserves of coal and natural gas. However, Ukraine is still energy-dependent on Russia. This opens up an opportunity for the United States to engage in joint project aimed at diversification of Ukraine’s energy resources. Especially promising with this regard are nuclear and natural gas sectors.

Shale gas exploration has the potential to strip Russia of one of its most powerful tool of political coercion. There is cheaper LNG in Europe available. The expansion of shale gas production, especially in Poland, and eventually in Romania and Ukraine is coming. These factors will force Gazprom, the Russian state-owned natural gas behemoth, to reduce prices and partially decouple gas pricing mechanisms from the very high crude oil prices.

A more diverse energy supply benefits consumers and limits the current dominant exporters in the energy market. This makes electricity prices in Europe grow slower than in the past.

Diversification of energy sources, however, will have to be accompanied with investments in the energy infrastructure, including pipelines and power transmission networks. A capstone project with this regard will be the new Trans-Anatolian gas pipeline between Azerbaijan and Turkey. This pipeline can be extended to supply gas to Central Europe and the Balkans, providing an alternative source of gas
for these countries. Why not to extend a spur to Ukraine? The United States should use its political influence to make sure that this project does not meet the fate of the Nabucco pipeline.

In addition, the United States has technologies that would increase energy efficiency of Ukrainian factories, governmental buildings, shopping centers, and homes. This would help the country mitigate some of its energy dependence on Russia. Corruption and the lack of transparency, however, remains an obstacle for an increased U.S. involvement in Ukrainian energy sector.

The United States, given the current President’s focus on “nuclear zero,” welcomed Ukrainian initiative to agree to eliminate its high-enriched uranium. Perhaps there are opportunities to create diplomatic, business, and professional, partnerships that would encourage investments of U.S. firms to Ukraine’s nuclear sector. Today, Ukraine currently has 15 nuclear reactors in operation, all of them designed by, and dependent on, Russia. Such dependence undermines its energy security.

And speaking of security improvements in Ukraine’s nonproliferation record, including conventional weapons are almost certain to gain appreciation from the U.S. side. The first step has been taken as Ukraine decided to get rid of its high-enriched uranium stockpile.

On the other hand, Ukraine is also planning on selling Al-222-25 aircraft engines to China, to power the JF-17 fighter jet. Kyiv sold tanks to Sudan, a country whose president and defense minister are convicted of crimes against humanity.

Still, the reform of the defense-industrial sector is in Ukraine’s interest. It would bring the country closer to NATO’s standards regarding weapons procurement standards and transparency. This, in turn, can open up opportunities for an engagement with other European defense companies.

And increase in the number of people-to-people contacts, be it officials, young students, businessmen, members of nonprofit organizations, or tourists, is essential to groom the next generation of Ukrainian government and civil society leaders. Its leadership would be wise to use it to foster the relationship with other U.S. and EU member states’ officials. This is impossible without expanding ties with neighbors near and far.

Trade is an important area of U.S. interest in Ukraine which promises formidable benefits for both countries. US-Ukraine Business Council, where I have an honor of serving as a Senior Advisor, is doing all it can to improve trade ties between Ukraine and the U.S.

Back to Bipartisan Consensus on Ukraine Free, Whole and Democratic

In conclusion, the U.S. should continue its 20 year old policy of supporting Ukraine’s independence and sovereignty. Ukraine can help itself by returning to and expanding its democratic practices and the rule of law; eradicating corruption; streamlining bureaucracy; doing away with costly regulations. Ukrainian government needs to create a level playing field for all its entrepreneurs – and for foreign entrepreneurs as well. Only then the US can honestly encourage U.S. investment to assure success of Ukraine’s modernization.

Finally, Ukraine’s energy diversification is key to its independence and creating an open and transparent nuclear sector and exploring for shale gas in the country is key for such diversification. If Ukraine addresses these issues, it can optimistically look into the future and benefit from friendship with the US.

Ariel Cohen, Ph.D., is Senior Research Fellow at The Heritage Foundation and the author of Russian Imperialism: Development and Crisis, as well as 4 other books and over 500 articles. He was born in Ukraine. The article is based on remarks delivered at a conference in Ottawa, Canada, on March