INTERVIEW: Ambassador John Herbst on developments in Ukraine

by Roman Woronowycz
Kyiv Press Bureau

KYIV - John Herbst arrived in Ukraine on September 13, 2003, replacing Carlos Pascual and becoming the fifth United States ambassador to Ukraine in the country's short, 12-year history. Previously Mr. Herbst served as ambassador to Uzbekistan at a time when the country took on significance in the Central Asia region as one of the jumping off points for international peacekeepers and humanitarian aid workers entering beleaguered and war-torn Afghanistan.

The following is an exclusive interview with Mr. Herbst, which took place in the ambassador's office on January 21.

Q: Is there reason to believe that the United States and European foreign investment could increase this year, as the government of Prime Minister Viktor Yanukovych is suggesting? Has Ukraine done enough to make the conditions right for an influx of foreign investment?

A: I would love to see more U.S. investment in Ukraine. Fostering greater economic contact, mutually profitable economic contact, is a very important part of any American diplomat's job.

As to whether there will be more investment this year, it is hard to say. On the one hand, the macroeconomic policies of the government have been excellent for the past several years and we have seen exceptional economic growth - some years approaching 10 percent. Ukraine is a big country with a population approaching 50 million, significant natural resources, the best agricultural land in the world. All of these facts are known to American business, and they all are attractions. They are all reasons for American business to look here for investment.

On the other hand, there are serious problems with the microeconomic area - the specific conditions facing firms when they come into a country. These have to do with the far too large a role of government in economic activity, which, in turn, gives individual officials high and low the opportunity to meddle, to put it politely, in profitable businesses; and a legal system, which is subject to various influences.

All of these factors in the microeconomic sphere place profitable investments at risk. Our firms are well aware of this too. Now some American firms are doing wonderful business here - Cargill, Coca-Cola, to name two. We have an active American Chamber of Commerce. But I believe if some of these questions in the microeconomic area were addressed and fixed there would be substantial, absolutely major investment.

Q: So it is not just a lack of public relations on Ukraine's part, as some would have it?

A: I think that American firms are pretty sophisticated at spotting local opportunities, and it's not just American firms. I'm saying that the same holds true for Western firms in general and Japanese firms, but I am not responsible for those companies.

If the conditions here are favorable, the money will come, and this would be absolutely wonderful for economic development in Ukraine. There would be lots of jobs and faster economic growth. But, again, we already give the government high marks for its macroeconomic policy and the strong growth rates that policy has achieved.

Q: Has the U.S. considered - and how would it view - that President Kuchma and his supporters may organize a campaign to draft the sitting president for a third term, which might include a scenario in which Mr. Kuchma would agree to run again, albeit "reluctantly," at the urging of the nation?

A: This seems to be a hypothetical question to me. President Kuchma has said publicly many times and he told my predecessor - and he told me when we met last fall - he was not planning on running again. I would think that this would be in keeping with all kinds of procedures and traditions and constitutional provisions.

Q: There are those who would say that when you take a look at the constitutional changes per se, as they are written today, they are not really undemocratic. Would you agree that it is the process that is suspect and not the wording of the political reform legislation?

A: There are many forms of democracy. The United States has a presidential system, but also a very strong Congress. Constitutional scholars - one of our most famous constitutional scholars - described how the [U.S.] Constitution created war between the President and the Congress of the United States over the conduct of foreign policy.

There are parliamentary systems that are just as democratic as ours; and there are systems where there is a strong president and systems where there is a weak president. So if you look at the provisions of the proposed changes, I wouldn't say that any one in the United States is claiming that they are per se anti-democratic.

I think that there is some concern about the fact that these changes might be in the process of being put into effect so soon before the elections. There is concern that there seems to be far from a consensus in favor of these changes.

When you are talking about changing the Constitution it is important that the overwhelming majority of the people and many if not all the significant segments of the political spectrum support it. That does not seem to be the case here.

Different polls conducted by think-tanks suggest that over 80 percent - I think its 86 percent - of the Ukrainian people would like to continue to elect their own president. Of course, it's clear that the proposed changes are strongly supported by some parties and strongly opposed by others, so that's why questions are raised.

It would be much more reassuring if there was agreement - again, with most if not all political groupings - that these changes make sense for the long-term good of the country, as opposed to the short-term interests of specific groups.

Q: Generally, regarding the transformation of the country, do you believe that democratic evolution in the country is continuing at the earlier pace or has it slowed or been halted? Have changes occurred in that process recently?

A: I think that if you look at Ukraine as a newly independent country and a country that emerged from a truly horrific totalitarian system, then there are a lot of good things that we see. It started from truly difficult circumstances, and substantial progress has been achieved.

The hallmark of all democracies - or a democracy - is a strong opposition. That's something that Ukraine clearly has. If you look at most of the other states that emerged from the chaos of the Soviet Union this is not true, so this is a major, major achievement. I would not say that the opposition has become weaker in Ukraine in recent years.

But it is true that, perhaps, the greatest achievement in the area of democratization of Ukraine since independence was the peaceful transition of presidential power in 1994. It is true that since then, when it comes to elections - the presidential election in 1999 and the parliamentary elections in 2002 - there have been some serious problems. And, of course, in connection with this year's presidential election, there have been some serious problems.

The opposition parties, Nasha Ukraina [Our Ukraine] in particular, have tried to organize events in Donetsk and Sumy, and they faced administrative obstacles from local officials. That should not happen in a truly democratic campaign. These are issues that we hope will be resolved. We have raised these questions with them. And we have raised them because Ukraine says it would like to be a part of NATO, would like to become part of the EU [European Union], and of course we would be delighted to see Ukraine in NATO, but NATO's a club for democracies. So we need to see the honoring of the democratic processes.

Q: Is there any substance to information floating about the Internet and within the Ukrainian American community that preliminary plans are being laid for a visit by Secretary of Energy Spencer Abraham to Ukraine, to lead an international meeting of oil firms on the transport of Caspian oil to Western Europe to give impetus to utilization of the Odesa-Brody oil pipeline in its originally planned direction rather than in reverse?

A: I am not aware of such a conference, but I know that Secretary Abraham is very interested in the Odesa-Brody issue and had a very good conversation with Prime Minister Yanukovych in October. He was in touch with a variety of people after that conversation. I know that he follows this closely.

I think that this is an extremely important issue for the future of Ukraine and also for our relationship with Ukraine if Ukraine hopes for energy independence and integration into the West, into the Euro-Atlantic community.

Q: How does the U.S. look at the current effort to promote a reverse flow? Does it see the economic viability as presented by those who support use of Odesa-Brody in this way?

A: I think that there is no economic advantage for Ukraine, none whatsoever, in the reversal of Odesa-Brody, and extensive economic harm.

The facts are very simple. I've spoken with many, many senior officials and oil people, and these are the facts.

One, no one is talking about shipping more oil through Ukraine as a result of the possible reversal of Odesa-Brody. So any oil that comes through Ukraine via the reversal of Odesa-Brody would mean less oil coming through Ukraine via other means. I have heard this from many, many sources, including the officials of the companies who would like to see reversal of Odesa-Brody.

My understanding is that, if Russia would like to send more oil through Ukraine by pipeline rather than by railway, they could do it by the Prydniprovska line, and it would even be cheaper for them (than by rail). It is also true that the Prydniprovska line has a capacity of 4 million tons a year and only 2 million tons are being utilized at present. So there it is, you get 2 million right there.

My understanding is that if in fact more oil is going to be sent through Ukraine then Turkey will not permit it to go through the Bosporus.

Finally, Western oil companies - most of the world's oil companies - when they make a deal to use a pipeline use what's called a ship or pay agreement, which means that when they say that they will be able to ship - as TNK says it would like to ship from Brody to Odesa 9 million tons a year - they agree to pay for 9 million tons even if they don't ship it.

The point is that they agree to pay for the capacity without reference to how much of that capacity they actually use. But this is not the way TNK signs agreements.

Given all of these factors, any potential revenue that Ukraine will receive from the reversal of Odesa-Brody, it will lose whether in use of the Prydniprovska pipeline or in use of the railway lines. So there is zero economic gain. The argument that this is a concrete contract and Ukraine gets some money in the short run is simply false.

If a decision is taken for the use of Odesa-Brody in reverse it is not going to be for these false economic reasons, it will be a decision of geopolitical consequences, suggesting that the orientation towards Europe and integration is not serious. Ukraine needs energy independence, and it needs to get oil from the Caspian Basin. Odesa-Brody in its western flow as originally conceived would provide a new source of oil and a new source of oil revenue. It would cement its relations with Western European economies.

The Czechs are just waiting for Caspian oil. What would be very useful would be for a senior Ukrainian official to be given authority to negotiate the many elements of a deal for use of Odesa-Brody. That means to be in contact with suppliers in the Caspian Basin and with consumers in the Czech Republic and Slovakia and elsewhere.

By the way, this could all very much become a positive situation for Ukraine and Russia and Caspian users, because there are factories in the Czech Republic that are looking to get Caspian oil. If they can get Caspian oil via Odesa-Brody, they would agree to the shipping of more Russian oil, which is not the light, high-quality crude you get from the Caspian region, through the Druzhba pipeline.

Currently Russia ships some through the Druzhba pipeline, but additional amounts have to go through the Bosporus Straits and then through a pipeline from southern Europe up into the Czech Republic. So, if everyone were interested in profits for all countries for multiple sources of energy coming by multiple means from both Russia and Central Asia to Europe, then western flow of Odesa-Brody would be in everyone's interest.

It begs the question then, is this exclusively a political problem? I want to bring Russia's attitude into the question.

I don't want to get into this because, as far as I know, most of the conversations relating to reversal concern oil companies. The only point that I made is that given the clear economic justification for western flow, there seems to be something other than economics in the decisions taken for reversal.

Q: Let's move on then to two final questions on rather less weighty subjects. Thus far, how does your posting in Ukraine, where you have been for some four months now, compare to your earlier assignment in Uzbekistan?

A: I love Ukraine. It's a fascinating and a wonderful country.

I think that the United States has very important interests here. I consider myself fortunate to work in a place where I believe the interests of the United States and the interests of the country and the people where I am working are very similar.

It's clear that this country, after decades of being subjected to Soviet totalitarianism, wants to be free. And it's clear that the people here want freedom not just in the political sphere, but in the economic sphere, too. There is a tremendous amount of talent in this country.

The United States wants to see the Ukrainian people truly free, truly independent in all ways. Our policies are designed to facilitate achievement of those goals, our mutual goals.

Living in Ukraine is a lot of fun. The cultural life is wonderful, world-class. Ticket prices are fairly reasonable. Kyiv is a jewel of a city. I think that when you are standing in the long square between St. Sophia's [Sobor] and St. Michael's [Golden-Domed Sobor], you are at one of the most beautiful places in the whole world. It amazes me to think that the Soviets destroyed [the original] St. Michael's, one of the world's greatest architectural treasures. You stand there, and especially on a sunny day and with the snow, it is just spectacular.

Q: Finally, what can the Ukrainian American individual or organizations do to promote change and democracy in Ukraine?

A: It seems to me that having an active American community interested in a country overseas, having a Ukrainian American interest in Ukraine, is a big plus for both the United States and Ukraine. Nothing beats good people-to-people contacts and clearly Ukrainian Americans have a particular interest in Ukraine.

I think that perhaps the most positive part of American life is the concept of volunteerism. We are a nation of joiners and doers. One of the reasons why America has done so well is that we haven't waited for the government to do stuff for us - or worse, do stuff to us. We have done things for ourselves.

I think that Ukrainian Americans coming here and volunteering, whether it's to build a water project or a health clinic, or to help out with an orphanage, or to help out with a hospital, shows that Americans truly care what goes on in Ukraine.

It also teaches at a personal level what individuals can do, how they can make their own lives better. So the more Ukrainian Americans I see over here, the happier I am.

Copyright © The Ukrainian Weekly, February 1, 2004, No. 5, Vol. LXXII

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