Trump, Putin and Sluggish Reforms Push Ukraine Toward Russia

  • Losing U.S. as impetus for change puts progress at risk
  • Ukraine would be collateral damage in any U.S.-Russia deal

Putin in Two Minutes: A Quick Look Into His Soul

In Ukraine, ever on the fault line between Russian power and western influence, the prospect of losing Uncle Sam’s protection under a new U.S. president is bad enough. The more immediate loss may be “Uncle Joe.”

U.S. Vice President Joe Biden has been essential to cajoling the government in Kiev to keep up with the economic and anti-corruption reform commitments in the International Monetary Fund’s bailout package, together with successive U.S. ambassadors and the European Union. The IMF program underpins all the foreign aid on which Ukraine depends.

With President-elect Donald Trump taking office in January, that American engagement looks set to wane. Although it isn’t clear if he will follow through on campaign proposals to recognize Russia’s 2014 annexation of Crimea or lift sanctions, U.S. efforts to integrate Ukraine and its economy into the West would be collateral damage in any U.S.-Russian rapprochement. On Monday, Trump agreed in a phone call with Russian President Vladimir Putin to normalize ties and cooperate in the fight against terrorism.

The best Ukraine can do now is “to reform and become self-reliant,” Mikheil Saakashvili, the former Georgian president who fought and lost a war with Russia in 2008, said in an interview in central Kiev. On Friday he launched a new political movement in his adopted homeland, with a Trump-style call to sweep away the “corrupt elite” that has governed Ukraine since it gained independence in 1991.

Though less strident, Ukraine’s Western backers also see Trump’s election as raising the urgency for the government in Kiev to finally take ownership of the IMF program and double down on efforts to create a stronger economy and institutions.

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“It was the first thing that came to my mind when I saw the result” of the U.S. election, said Ivan Miklos, the former Slovak finance minister who is advising the Ukrainian government. “They need to do the things the country needs,” and no longer just what Ukraine’s Western backers demand, he said at a restaurant on Kiev’s Khrushevskovo street, still lined with dozens of small shrines to the protesters shot dead during the 2014 Maidan revolt.

Reverse Gear

The sad part is that Ukraine was finally headed in the right direction, if too slowly, according to Miklos. Now even that progress has been thrown into question, at a time when it is still reversible, he said.

That sentiment is playing out in the bond market, where Ukrainian debt had been a lucrative bet for most of this year as the currency and inflation stabilized and growth edged back into positive territory. The yield on Ukraine’s three-year bonds have risen by more than two percentage points since the U.S. vote as investors took flight.

The shock of Trump’s victory for a Ukrainian government that backed the wrong horse was evident last week. Officials, including the interior minister, hurriedly took down Facebook posts in which they had criticized Trump during the campaign.

A senior Ukrainian official, who asked not to be named due to the sensitivity of the issue, said the authorities are now banking on strong support among Republicans in Congress to influence Trump in Ukraine’s favor.

‘Under a Bus’

That’s probably wishful thinking, said Ian Bremmer, president of Eurasia Group, the New York-based political risk consultancy. Two and a half years after Russia launched a covert military operation to back separatists in Ukraine’s eastern Donbas region, Ukraine’s interests are likely to be sacrificed as the new administration in Washington prioritizes cooperation with Moscow.

“Trump will want to put points on the board and I think it is highly likely the U.S. under Trump will move quickly to re-establish the relationship with Russia, on Syria in particular,’’ said Bremmer. “That clearly throws Ukraine under a bus.’’

Read More: Ukraine’s Bloody Standoff -- a QuickTake

Sunday’s election of pro-Russian leaders in Moldova and Bulgaria underscored a sense that the geopolitical ground is shifting in Russia’s favor, leaving Ukraine increasingly alone.

Few have a more pessimistic view of what Putin plans for his ex-Soviet neighbors than Saakashvili, who helped lead the Rose Revolution in Georgia before facing off with Putin over the breakaway region of South Ossetia. Yet, he too believes Ukraine needs to rely less on the U.S. and instead focus on revamping a post-Soviet system that left the country vulnerable to invasion and destabilization.

“People are very scared now,” Saakashvili said in an interview at a temporary campaign center in central Kiev. “They are too much used to looking to the U.S.’’

He gave the example of older generation U.S. anti-tank weapons Ukraine has been trying, in vain, to secure from Washington. The country has more advanced models that its own defense companies could produce themselves, but are too inefficient and corrupt to deliver, according to Saakashvili. What’s needed is much more radical reform, but “this government will not do it,” he said.

On Friday, he called for early elections and lashed out at President Petro Poroshenko for allegedly protecting a system based on corruption. Saakashvili also showed a video clip of Trump praising him on a visit to Georgia, when he was still president.

“I have to be very tough towards them,’’ said Saakashvili, who resigned as governor of Ukraine’s Odessa region just a week ago, and now has his eyes on the premiership. “It’s a bit like Trump,’’ he added, laughing.

Poroshenko dismisses accusations that he is a reluctant reformer. The trouble is that opinion polls show a vote today would produce a less reform-minded parliament than the current one. For his part, Saakashvili is given little chance by analysts of winning an election.

The former Georgian president’s anti-corruption message does, however, resonate. In the days before the U.S. election upset, the talk in Kiev had been about Ukraine’s own reality-TV-style drama: the forced public declarations by the nation’s public servants of wealth they had somehow managed to accumulate on salaries of a few hundred dollars per month.

Ticket to Space

Outrage at the multi-million dollar cash piles and valuables that legislators declared –- they ranged from a $6.4 million collection of Japanese netsuke dolls, to a Virgin Galactic ticket to fly in space -- drowned out any concerns over the coming U.S. election.

The IMF, which had made the declarations a condition for the government to receive further aid, welcomed them as progress. It also said it expected to see cases brought to court.

Aivaras Abromavicius, a former economy minister who quit earlier this year, said he frequently used the U.S. embassy as a sounding board. By showing decrees to American officials before sending them on to the Ukrainian bureaucracy, he could fight off demands to dilute them by warning they were already approved by “our partners,’’ he said.

Without “Uncle Joe’’ and an engaged U.S., that might no longer be possible. Those same officials will now have to take ownership of politically unpopular IMF reforms and drive them through themselves, at a time when they will be starting to prepare the ground for elections scheduled for 2019.

“Given the track record of some of the people in power, it is hard to believe it will be so easy to change their mindset,’’ said Abromavicius.

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