Report on U.S. investments in Ukraine to determine aid allocation (04/12/98)

Report on U.S. investments in Ukraine to determine aid allocation

by Roman Woronowycz
Kyiv Press Bureau

KYIV - What U.S. Secretary of State Madeleine K. Albright will recommend in her certification report on whether the U.S. Congress should give Ukraine the second portion of the $225 million in U.S. foreign aid promised for 1998 is still not certain and depends on the resolution of complaints by U.S. firms doing business in Ukraine.

Secretary Albright is due to report to the House of Representatives on April 30 on the status of complaints filed by 12 U.S. companies on various issues related to their investment in this country.

Her certification - which will decide whether the Congress will release the foreign aid funds - is contingent on Ukraine showing that "significant progress has been made with regard to these cases," said Richard Morningstar, U.S. special ambassador to the newly independent states of the former Soviet Union, at a press conference in Kyiv on April 8.

"I cannot tell you what the end result will be," said Ambassador Morningstar. "Both the U.S. and Ukrainian sides are working hard on the issues."

The foreign aid bill that the U.S. House of Representatives approved for fiscal year 1998, earmarked $225 million in aid to Ukraine but conditioned the release of 50 percent of the funds on the resolution of the 12 complaints that were filed with the U.S. Embassy in Kyiv prior to April 30, 1997. The appropriations bill, which passed the Congress in the fall of 1997, requires the secretary of state to report to the House before April 30 of this year on the status of the complaints.

The earmark excludes money appropriated for nuclear reactor safety and for election assistance, so Ukraine stands to lose about $90 million if Secretary Albright decides to give Ukraine a failing grade in her certification.

Ms. Albright will make her recommendation after consultations with U.S. Ambassador to Ukraine Steven Pifer and with Mr. Morningstar.

Both ambassadors said that intense discussion are now under way at the highest levels of both governments. "Vice-President [Al] Gore has worked with President [Leonid] Kuchma on this issue. Secretary Albright spoke with President Kuchma with regard to this issue on her most recent visit here," said Ambassador Morningstar.

Neither he nor Ambassador Pifer would say what their recommendations would be. However, in an interview in the Kyiv Post published on March 20, Ambassador Pifer said he had not seen any movement to resolve the problems. "I guess that, at this point, I'm not comfortable that we have a lot of progress to point to," said Ambassador Pifer.

At the April 8 press conference he said the climate for dialogue and resolution of the issues had changed. "I have seen a new seriousness on the part of Ukraine," he said. Ambassador Pifer attributed the mood change to the March 6 visit of Secretary of State Albright to Kyiv.

The two U.S. diplomats refused to name the 12 firms that filed complaints (some of which have been resolved) with the U.S. Embassy in Kyiv, but they are believed to include such corporate giants as Boeing, Motorola, Monsanto and Case Tractor, as well as smaller firms. Included are issues surrounding the ownership of the Grand Hotel in Lviv, established and formerly run by Ukrainian American Marta Fedoriw, and Gala Radio, the Kyiv radio station owned by U.S. citizen Joseph Lemire, whose license was revoked two years ago.

While refusing to talk about specific issues, Mr. Morningstar said that all of them can be put into four groups: contract enforcement difficulties; regulations that are "too numerous, too burdensome, too complicated and too arbitrary"; a tax system that has yet to develop a consistent rationale and that allows certainty for investors; and enforcement of legal judgments.

The special ambassador explained that the problems are much the same that most foreign investors have in Ukraine, and that the point of the discussions is not simply to resolve the 12 cases but to make the business climate in Ukraine more friendly.

"We are not just worried about foreign investment, we are not only concerned about U.S. businesses," explained Ambassador Morningstar. "We're concerned about the ability of Ukraine to operate businesses, and we're concerned about the importance of achieving economic growth so that Ukraine can become a prosperous market democracy."

He did admit that there was also a concern about wasting U.S. taxpayer dollars in granting foreign aid to Ukraine.