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Ukraine: Foreigners Will Supervise Unpopular Policies, Control Money Flows

Ukraine: Foreigners Will Supervise Unpopular Policies and Control Money Flows
Several key positions in the new Ukrainian government have been handed over to foreign citizens. What could that spell for Ukraine? Radio Sputnik is discussing the issue with Kirill Koktysh (MGIMO) and Professor Alexander Domrin (High School of Economics and the University of Virginia).

Several key positions in the new Ukrainian government have been handed over to foreign citizens. What could that spell for Ukraine? Radio Sputnik is discussing the issue with Kirill Koktysh, political analyst and Associate Professor at Moscow's State University of International Relations (MGIMO), and Professor Alexander Domrin, Professor of the High School of Economics and Visiting Professor of Law at the University of Virginia.

Ukraine has to learn from "foreign experience" — that’s what Ukrainian President Petro Poroshenko told the Ukrainian parliament, Verkhovna Rada. He signed decrees giving Ukrainian citizenship to three foreign citizens, who got the key ministerian posts.

Aivaras Abromavicius, Lithuanian investment banker is now in charge of the ministry of economic development and trade; Alexander Kvitashvili, a former Georgian citizen, became the health minister and Natalie Jaresko, an American citizen and an ethnic Ukrainian, is the new minister of finance. Ms Jaresko has worked in Ukraine for more than 20 years, and before that she was holding various positions in the US State Department.

Kirill Koktysh: Actually, this is a very special practice. Usually foreigners are invited to deal with the problems in a way for which nobody would say “thank you”. That means that actually those positions are usually reserved for those actors and everything that they would do, would produce hardship for the rest of the citizens. That means that the first reason to invite foreigners is just to secure your own internal political players, because usually the foreigners are invited when you have to do something extremely unpopular.

The second reason, for example, if you are getting a foreign financing. That means that a foreigner would be in charge of the money flow. And, probably, both of these reasons are relevant to explain the current situation with the Poroshenko’s Government. As far as I know, the Minister of Finance and the Minister of Economy are the positions that should be responsible for the money flows from the outside and for the monetization of the Ukrainian economy, which is actually half destroyed, on the other hand. So, that means that, probably, those foreigners would be both the controllers of the money flows and, on the other side, these persons should be blamed tomorrow for everything bad that occurs in Ukraine.

Usually, semi-independent states are doing this. We can remember the Russian example when the Russian privatization was done by the foreign hands under the foreigners’ advice. The result of the privatization was the illegitimate business in Russia. And it is a problem we are suffering up to now. In some other countries the foreigners are usually invited not because they would be sharing their professionalism, but also their interest. And any executive political player would first of all have his own interest, and not the interest of the country he is working for, because foreigners should be loyal to their native states and not the state that hires them.

So, Dr. Koktysh, do we need to understand that Ukraine is now de jure turning into some kind of American colony?

Kirill Koktysh: Yes, actually you do, because de facto Ukraine lost its independence last year. It is practically bankrupt and that means that those states who gave money, first of all the US, should take care about how to get their money back and the income as well. And now there is a political control over the Ukrainian debt that was made with the American money. So, actually, yes, the colonization of Ukraine is the system that de facto existed in all the previous years, but not as de jure.

You said that appointing these people might signal that new measures, that would be extremely unpopular, are going to be implemented. And we see here the Minister of Economy, the Minister of Finance and Minister of Health…

Kirill Koktysh: The trend would be the privatization of the social goods. That means that social goods will be reduced, and in the worst scenario they would be reduced to zero. And they all would be monetized. The Health Ministry is the first one, because the healthcare is one of the most tremendous social goods. And, I guess, the other social goods would be liquidated or monetized, which would be the same quite soon.

So, this is the managers’ case, but the matter is not who manages but who orders. And that means that those banks and those states, probably, who gave money to Ukraine and to which Ukraine has to return these debts, would dictate the conditions. And these ministers would be just following what they would be ordered to do…

Well, Ms Jaresko has already promised to come up with an ambitious cost-cutting 2015 budget by Dec. 20. Ms Jaresko is a graduate of Harvard University's Kennedy School of Government, and Russians still keep special memories of Harvard experts who  used to advise the Russian government on privatization campaign of the early 1990-s….

Alexander Domrin: Thinking about Ukraine, I'm thinking not only about this particular event when foreigners were invited to join the Government of Ukraine, but in general, when I think about Ukraine today, it reminds me of Russia back in the 1990’es. Somehow since 1990’es Russia has made a tremendous improvement in its internal politics, in its internal development, in its governmental structure. But let’s take a look at Russia back in the 1990’es. Didn’t we have foreigners in our Government? Was it good for Russia when we had foreigners in the Russian Government? I want to remind you of, let’s say, Boris Berezovsky, who was the citizen of Israel. There was another member of the Russian Government Boris Brevnov, who happened to be the US citizen.

You know, what is interesting here, it is not only that Ukraine decided to invite foreigners to join its Government, I'm absolutely sure that those new members of the Ukrainian Government will bring their own staff from their own countries, from other countries of the world. And once again, didn’t we have a similar situation back in the 1990’es here in Russia? Didn’t we have numerous and numerous assistants, advisors and consultants who worked for the Russian Government from other countries of the world? Didn’t Anatoly Chubais surround himself by dozens of American advisors, consultants? Was it good for Russia? I don’t think so.

Just one detail, I want to remind you of some of those advisors who were invited by Anatoly Chubais form America to assist Russia in its transition to the market economy, in privatization etc. It was one of the most famous scandals back in the 1990’es when the two individuals from the Harvard Institute for International Development – Shleifer and Jonathan Hay – when they were working as the advisors to the Russian Government, when they were advising the Russian Government  on how to transfer Russia into a civilized market economy, what did they do?

Their program received $58 million from the US Government to assist Russia in the privatization reform. And, of course, it was such a temptation for them when they had some inside information about what enterprises, what factories were supposed to be privatized. It was such a temptation for them that they decided to use that inside information to enrich themselves. They invested money into those enterprises that were supposed to be privatized, basically, to invest their money and get back their money after the privatization of those enterprises.

What was even more interesting is that they didn’t invest their own money, they actually invested the money of the US Government – the money which was supposed to assist Russia in its transition to a civilized market economy. It was an absolutely incredible scandal. As the result of that scandal not only this program was stopped, but the whole Harvard Institute of International Development. Originally, it was founded by Jeffrey Sachs. The Harvard Institute of International Development was killed. Jeffrey Sachs in disgrace had to move from Harvard to Columbia University. And as the result of that there was a famous trial. Shleifer and Hay were found guilty and they were supposed to pay more than $100 million back to the US Government.
You see, when I think about Ukraine today, it reminds me of Russia back in the 1990’es so much. And I don’t think that it was a good idea of the Ukrainian Government to invite those people. I don’t expect any major improvements. And I feel so sorry for my Ukrainian friends.

Do you think that Ukraine eventually would follow the same pattern? How good are the chances that they are going to ultimately gain real independence?

Alexander Domrin: Russia realized that we made huge mistakes back in the 1990’es. That’s why Russia decided not to repeat those mistakes. Unfortunately, Ukraine didn’t learn from our mistakes. And once again, looking at Ukraine back in the 1990’es and at Ukraine today, I have a feeling that this is the kind of groundhog’s day, when the mistakes are being repeated again and again, and nobody wants to correct them.
Why do you think the people who have already failed on their positions, like Mr. Saakashvili, are positioned to play a role in Ukraine? Haven't they failed already once?

Some people have no shame. And that’s exactly what I think about Saakashvili. But I believe that it is an even more disgusting position of the Ukrainian Government which invites people like Saakashvili, or people who were so close to Saakashvili, to work for Ukraine today. Those people failed their own country and now they are invited basically to fail another country – Ukraine. And that was the decision of the Ukrainian Government. So, it is up to them.

What is the agenda of Kiev’s allies? Are they really working to create an independent Ukraine?

Alexander Domrin: I don’t consider Ukraine to be a sovereign country. I don’t consider Ukraine to be a truly independent country, but, once again, Russia was not a truly sovereign country back in the 1990’es either. And from this point of view, of course, the external regulation of Ukraine will continue. But now it will be not just the external regulation, but also with the infiltration of external specialists, external ministers into the Government of Ukraine itself.

In Russia their agenda was to get the control of our resources….

Alexander Domrin: The Ukrainian Government needs to start thinking about the improvement of lives of their own compatriots. So far the main agenda of the Ukrainian Government was to fight their own people in some parts of Ukraine that pronounced themselves to be independent or to be sovereign. Of course, I speak about Donetsk and Luhansk. And I think that winter, which has already arrived, it will be a very important period of time for Ukraine and for the Ukrainian economy, because if by the spring there won’t be any major improvements in the Ukrainian economy, either with those foreign ministers or without them, then it will be a major disappointment, even for those who still support the Ukrainian Government.

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