Ukraine Has Increased Volatility As New Russian Sanctions Introduced

Wes Martin Retired Colonel, U.S. Army
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As Vladimir Putin aggressively retaliates to America’s new sanctions against Russia by ordering the American diplomatic mission in Russia to reduce its staff by 755 employees, Ukraine might be facing new immediate threats of another invasion and land grab from the East.  Unfortunately since the latest revolution, Ukraine’s own government has become a major source of Western frustration. Despite the talk of reforms and an end to the era of corruption, not much has changed, as reflected by the World Ranking of Corruption Perception. Despite its problematic neighbor, Ukraine has become its own worst enemy. Before the Pentagon and the State Department propose to the White House a plan to supply Ukraine with anti-tank missiles and other arms, as was reported recently, we need to make sure Ukraine’s house is in order first.

Twice I have been fortunate to work with Ukrainian citizens for extended periods.  Once was in the 1970s during my days in the U.S. Berlin Brigade, and more recently in Iraq. Under Soviet control, they looked for the day when they did not have to take orders from Moscow. When they became independent, they looked for an opportunity to appear on the world stage.

Seventy years ago Germany and Japan were picking themselves up from total devastation. Twenty years later they were pushing themselves into the global market. Today Germany and Japan are two of the world’s largest economies.  Ukraine possesses the necessary resources, has a work force ready to be employed, and is in prime position to become a successful economy. Unfortunately, widespread internal corruption is Ukraine’s biggest obstacle. Instead of dedicating themselves to developing a long-term future, the political and judicial leaders are primarily focused on their own short-term financial gain.

Ukrainian citizens understand this.  A survey developed by Ukraine-based Dragon Capital confirmed that the country’s citizens were more concerned about widespread government corruption and a broken judicial system than another attack from Russia.  The financial situation is very volatile and prohibits the citizens, as well as potential foreign investors, from knowing what the currency will do from week to week.

Even when foreign investors show potential interest, they are being scared away.  The Ukrainian-born Segal brothers is a blatant case in point.  Now U.S. citizens operating an investment firm in New York City, the brothers had built a financial stake in the future of their original homeland.  Unfortunately, their 50-million-dollar soybean plant was power-grabbed by Ukrainian billionaire Dmitry Firtash (currently waiting to be extradited to the USA from Austria to face a corruption trial). Fraud, extortion, physical threats were all tools used by Firtash.

When the Segal brothers turned to the Ukrainian government to make things right in 2010, Firtash and his business partners had the courts and police under their control. Firtash used intimate connections to the Government and the Ministry of Interior to submit a request to Interpol to arrest the Segals. After a few recent legal victories during President Poroshenko’s time, the Segals are still struggling to get full control of the plant as allegedly Sergei Levochkin (former head of the Yanukovich Administration) and lawmakers Oleksandr Granovsky and Ivan Fursin managed to capture the judicial system. The situation in Ukraine is so bad even its own Prime Minister recently stated: “The weakest link in our fight against corruption is the Ukrainian court.”  The Firtash partners allegedly control a significant fraction of the “opposition block” in the Parliament, and the country’s leadership is forced to conduct a politics of compromise and concession, given the financial strength of its backers.

Secretary of State Rex Tillerson and other U.S. officials for some time have been pushing Ukraine to press ahead with reforms that would curb corruption and improve governmental transparency.

Ukrainian leaders are not only robbing the citizens of financial stability, they are robbing the citizens of their future.  Parallels with what the Organization for Economic Co-operation and Development stated: “While the political and security situation has deteriorated in recent years, the problems are long-term and have to do with poor business environment, weak institutions, and widespread corruption.”

Investors are willing to take some risk.  That is the nature of their business.  They are not willing to invest in a guaranteed failure.  That is what Ukraine is offering right now.  To encourage foreign investment, the environment must change – starting with judicial and business reform.  Situations such as what happened to the Segal brothers must be stopped, and that travesty reversed.

Meanwhile, the systematic failure of Ukraine to protect western investors will trigger economic and personal sanctions against individuals and institutions involved.  Ukraine will need US government support to build its future and defend its borders.  Supporting crimes committed against US investors and proving the government of Ukraine cannot be trusted are guaranteed to alienate the US Congress and State Department.

Prime Minister Groysman came into his office pledging to fight corruption.  Taking him at his word, the Ukrainian people and government officials need to get behind him and fix the problems, which are at the level of severe international embarrassment.  Organized crime and government corruption can be overcome.

My experience with Ukrainians assures me reformers are immediately available to them.  Backed Prime Minister Groysman, the Global Magnitsky Human Rights Accountability Act, special legislation similar to our Racketeer Influenced and Corrupt Organizations Act (RICO), could clean up that entire broken system if this act is enforced with the right people behind it.

Until the Government of Ukraine successfully takes aggressive action to fix itself, it is guaranteed to retain its designation of one the world’s most corrupt governments.  Meanwhile, its own citizens will remain the biggest victims.

Colonel (Retired) Wes Martin, U.S. Army Military Police. Colonel Martin has served in law enforcement positions in North America, Asia, and Europe.