Group lobbies Congress to bolster relationship between U.S., Ukraine

The Foundation for Effective Governance (FEG), a Ukrainian group launched in 2007, is mounting a campaign to press Washington to treat the newly democratic nation as a key ally in Europe.

The Foundation hosted its first-ever event in Washington with The Hill on Tuesday, and keynote speaker Sen. Jack Reed (D-R.I.) said: “We share a common goal, a common objective … the people of the Ukraine and the United States stand shoulder to shoulder, proudly so.”

{mosads}Reed said that the U.S., grappling with its own major economic concerns, had also embarked on a search for effective governance.

He acknowledged the problems Ukraine faces and said the U.S. had a role to play in putting the country on the right track.

“We are all vexed and perplexed and troubled by a world economy that is in flux — and in some cases, total disarray,” he said. “Our first testimony by the new director of national intelligence cited the No. 1 threat to the United States and our allies and across the globe [as] the weakening economic situation.”

Joining Reed at the breakfast was former Rhode Island Sen. Lincoln Chafee (R), who is a member of the FEG’s international advisory board.

Sen. Chris Dodd (D-Conn.) addressed the event via video message, echoing Reed and saying government must have the capacity to do more for the people of Ukraine. “Institutional capacity is true in Ukraine, as it is in our country and elsewhere. It is essential to strong, stable and functioning societies,” he said. “One key element to building a strong economy for the real Ukraine is building mature, agile and smart institutions.”

The group sees itself as a force that can drive the country toward stability and a strong economy.

“It is serving the Ukrainian citizens through promoting the economic growth of the country,” said Nataliya Izosimova, managing director of the Foundation, adding: “The political parties and the political players [should] sit down and define … ground rules that are consensus-based in terms of the economy. There is a certain point in time … where the ideological differences should be put apart and forgotten about, especially given the circumstances of the crisis. Some very crystal-clear economic priorities should be identified and executed.”

The dire situation Ukraine faces was laid out by several speakers.

“Ukraine was one of the countries worst hit by the international financial crisis,” said Anders Aslund, senior fellow at the Peterson Institute for International Economics. “Everything was booming; the problem was it was booming too much.

“The economy was overheated … the big blow to Ukraine was the international steel crisis. Ukraine’s specific problem is that over 40 percent of its exports used to be steel, and in one blow … one-quarter of Ukraine’s exports totally disappeared.”

Aslund described the economic situation in the country: Ukraine’s gross domestic product declined 20 percent in January year over year; steel production fell by 40 percent; construction declined tenfold from January 2008; inflation hit a record 22.3 percent last month; the currency closed at a record low against the dollar Tuesday; and Moody’s Investors Service announced it is reviewing Ukraine’s credit rating, already four levels below investment grade.

{mospagebreak}The global economic crisis is also testing Ukraine’s institutions.

“There’s rampant corruption going on everywhere, at all levels,” said Margaret Drzeniek Hanouz, senior economist at the World Economic Forum. “There needs to be an overhaul of the judiciary, which is currently prone to influence by vested interests … property rights are weakly defined and weakly protected, and regulations are burdensome.”

Ukraine could benefit from technologies abroad, she added, but that is not happening quickly enough.

{mosads}Domestic Ukrainian political gridlock also is stymieing the country’s growth: After running together on the Orange Revolution ticket in 2004, President Victor Yushchenko and Prime Minister Yulia Tymoshenko have publicly battled for power over the federal budget, causing the International Monetary Fund to hold the last portion of a $16.4 billion loan intended to stabilize the country’s currency and financial markets.

Because the political process ground action to a halt, Izosimova said the group is working to earn the trust of Ukrainian politicians, businessmen and average citizens.

“We have to earn our credibility on a day-by-day basis, and this is not a very simple task,” said Izosimova.

Oleh Shamshur, the Ukrainian ambassador to the U.S., said the crisis comes with some opportunity.

The economic crisis “only intensifies our search for new innovative ideas, new innovative recipes for world economies and individual economies like Ukraine,” he said.

Paula Dobrianski, a former undersecretary of State for global affairs in the Bush administration, who also spoke, said, “It’s worth underscoring the assets that Ukraine has, and its tremendous potential for being an economic powerhouse. There are many assets that can be further developed.”

However, Aslund underlined the situation in stark monetary terms. “Ukraine today badly needs Western support,” he said, adding that the most important support is about $8 billion to fill the finance gap. “The European Union and the U.S. should be able to put up this money.”