2002: THE YEAR IN REVIEW

U.S.-Ukraine relations on a downward spiral

Relations between the United States and Ukraine, which had worsened in 2001, continued on a downward spiral in 2002. As some of the previous year's irritants - such as high-level corruption, the pirating of entertainment and computer recorded media and the unsolved murder of the journalist Heorhii Gongadze - continued to fester, new, more serious problems for the relationship, came to the fore.

There were a few signs of a continuing normal bilateral relationship - the opening of a consulate here and the announcement of a small aid program there - and some efforts to improve relations - proposals in Congress to remove the Soviet-era Jackson-Vanik Amendment restrictions - but, for the most part, the news was negative, and it centered on an anti-aircraft detection system that Ukraine was suspected of selling to Iraq. And, by year's end, Ukraine was hit by two punitive actions: a cutback on U.S. aid in response to the Iraqi sale and threatened limitations on financial transactions for money laundering.

As the new year began in the wake of the 9/11 terrorist airliner attack on New York's World Trade Center and the Pentagon, and new alliances were being formed in the resulting U.S. war on terrorism, the U.S. and Russian press began reporting about an emerging new U.S. policy that seemed not to be concerned about developing closer relations between Kyiv and Moscow, as in the past. Indeed, as The New York Times reported, Washington now was encouraging them. Earlier, the Russian newspaper Nezavisimaya Gazeta called the change in policy the "Rice Doctrine," after its supposed author, President George W. Bush's national security advisor, Condoleezza Rice. According to this leading Russian paper, the new doctrine provided that "Russia has a right to special interests outside its borders and, consequently, to the special handling of Ukraine."

These newspaper accounts about what would amount to a major shift in U.S. foreign policy went unchallenged by the administration. The U.S. ambassador in Kyiv, Carlos Pascual, however, discounted the suggestion that Washington was ceding Ukraine to Moscow's sphere of influence.

"Absolutely not," he told The Weekly in an interview. "The U.S. policy on Ukraine has always been that we support a sovereign, independent, democratic, market-oriented Ukraine - and you have heard us say it for the last 10 years. As neighbors, Russia and Ukraine are going to have a relationship, Ambassador Pascual said. "And it's better for that relationship to be a good relationship rather than a bad relationship."

Ukraine's ambassador in Washington, Kostyantyn Gryshchenko, in a separate interview, also stressed the positive nature of improving relations both between Washington and Moscow, and between Moscow and Kyiv.

"We have always adhered to the position that, in general, Russia and the United States should maintain the best possible relations. We believe that this helps create a better condition for Ukraine's own development," he said, adding that "the absence of conflict with Russia should not be seen as a negative factor in determining the level of the dialogue between the United States and Ukraine."

Ambassador Gryshchenko indicated that one of the ways U.S.-Ukrainian relations could be improved would be to get rid of the Jackson-Vanik Amendment. Imposed on the Soviet Union to pressure Moscow on Jewish emigration, the law's restrictions on economic relations continue to this day, despite the breakup of the USSR and the fact that emigration no longer is an issue.

To this end, U.S. Reps. Marcy Kaptur (D-Ohio), Sander Levin (D-Mich.) and Bob Schaffer (R-Colo.) introduced bills in the House in 2002, and Ukrainian American diaspora leaders discussed the issue with Jewish leaders in Washington. The bills never made it to the floor for a vote, however, and died in the last session of Congress.

The predominant subject in the U.S.-Ukrainian relationship during the first quarter of 2002 was the election of deputies to the Verkhovna Rada. Ukrainian and foreign human rights and democratic action groups that monitored the pre-election campaigns in Ukraine reported government intrusion and coercion with the intent of influencing election results.

Citing these disturbing reports, the U.S. Congress passed a resolution urging the Ukrainian government "to enforce impartially" Ukraine's new election law and "meet its commitments on democratic elections" agreed to with the Organization for Security and Cooperation in Europe (OSCE). Meanwhile, the Helsinki Commission on February 27 held a public briefing to examine the parliamentary elections scheduled for March 31.

One of the pre-election observers was former U.S. Secretary of State Madeleine K. Albright, who later indicated that the resolution made the Ukrainian government sit up and notice. She said she was surprised during a meeting with President Leonid Kuchma at how "very concerned" he was about it. "He does think - at least that's the way I read it - that what Washington thinks about him is important to him," she said during a briefing about her visit which was organized by the National Democratic Institute, which she chairs.

Former U.S. Ambassador to Ukraine William Green Miller, who accompanied Dr. Albright to Ukraine, was a bit more skeptical. While President Kuchma understood the value of how he and Ukraine are perceived internationally, he said, "the difficulty is that he is in the middle of a power struggle, in which his interests may require - in his own mind - the kind of actions that are taking place in this election."

Similar actions were to follow in the recent shake-up of the government and the leadership in the Verkhovna Rada, which also raised some eyebrows internationally about President Kuchma's political intentions.

Also visiting Ukraine in February was Undersecretary of State Paula Dobriansky, who, during a two-day stay in Kyiv, underscored the importance Washington attached to the bilateral relationship and to the elections.

As the election issues died down, the secret recordings of President Kuchma's discussions made by a member of his security detachment, Mykola Melnychenko, kept re-emerging with new revelations and allegations of high-level wrongdoing. The Gongadze murder case, which emerged from those recordings, dominated in the previous year, but re-surfaced on occasion, such as June 18, when the BBC documentary "Killing the Story" was screened in the Dirksen Senate Auditorium of the U.S. Congress, and on September 15-16, when protesters in Washington and New York gathered to draw attention to the cases of Mr. Gongadze and other journalists and political activists who died under mysterious circumstances in Ukraine.

In 2002, however, it was the Melnychenko tapes' references to the Kolchuha that took center stage. During his numerous meetings with U.S. government officials, and later with the press in May, Mr. Melnychenko disclosed that one of his recordings show that President Kuchma actually gave his consent to the sale of the Ukrainian-built Kolchuha air defense system to Iraq in July 2000. If so, the sale would have been in violation of United Nations Security Council sanctions.

Mr. Melnychenko also disclosed in May that he had testified before a U.S. grand jury in California in connection with an investigation into organized crime. He declined to reveal the specific case - though he did say it was not the case of former Ukrainian Prime Minister Pavlo Lazarenko (whose case, at last report, was scheduled to begin on March 24, 2003).

As the Kolchuha issue continued to ferment through the summer months, in September the State Department announced that the United States analyzed the Melnychenko tape and concluded that it was authentic. This, a State Department spokesman said, "has led us to re-examine our policy toward Ukraine, in particular toward President Kuchma" and to initiate "a temporary pause" in providing $54 million in Freedom Support Act assistance to Ukraine.

The Ukrainian government denied the allegations, but allowed U.S. and British technical experts to inspect several sites in Ukraine connected to the development and production of the Kolchuha air defense system. The resulting report of the Anglo-American inspection team released in November neither proved nor disproved that Ukraine sold the Kolchuha system to Baghdad.

Later, the State Department expressed disappointment that the inspectors "did not meet with the cooperation and openness promised by the Ukrainian authorities" and warned that Kyiv's failure to fully respond with the information and documents requested in the report could further damage Ukraine's relations with the United States and with NATO.

The highest U.S. official to visit Ukraine in 2002 was Treasury Secretary Paul O'Neill (who was replaced late in the year in a shakeout of the Bush administration economic team). During his three-day stay there in mid-July, he spoke with Ukrainian political and business leaders about the need to make their economy attractive to foreign investment.

"Capital is a coward," he said in a speech to a business group. "Money is more likely to go where it is treated well." When he was the chief executive officer at Alcoa Aluminum, he said, he didn't bother to even consider investing in countries where the rule of law, good corporate governance and enforcement of contracts were doubtful. "Frankly, I did not spend much time looking at places where this did not exist," he said.

Another noteworthy visit, this one to the United States from Ukraine, came in September as the chairman of the Donetsk Oblast Administration, Viktor Yanukovych, led a delegation on a visit to Baltimore, where issues of mutual interest to the United States and Ukraine, especially the Donetsk region, were discussed. What was most notable about the visit was Mr. Yanukovych himself - exactly two months later he emerged as the new prime minister of Ukraine.

In an effort to improve bilateral economic relations, the Washington-based U.S.-Ukraine Foundation got together with the Embassy of Ukraine in conducting two business roundtable discussions in October for representatives of government, industry and non-profit development organizations.

Among the leading reasons generally mentioned for worsening U.S.-Ukrainian economic relations have been high-level corruption and the absence of adequate laws governing such corrupt business practices as intellectual property piracy and money laundering. In both cases, Ukraine had passed laws that were judged by Washington to be inadequate and resulted in the U.S. Trade Representative announcing trade sanctions for piracy on December 20, 2001, and on that very same day one year later, the U.S. Treasury Department threatened to impose various restrictions on American financial institutions in their dealings with Ukrainian entities because of Ukraine's lax attitude toward money laundering.

Although overshadowed by the negative, there were some positive entries in the 2002 bilateral relations ledger:

Copyright © The Ukrainian Weekly, January 12, 2003, No. 2, Vol. LXXI

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