Mr. Chairman, Senator Corker, distinguished members of the Committee, thank you for the opportunity to appear today to testify on the Ukraine-Russia crisis and how the United States should respond.
As Ukraine struggles through the ongoing crisis, Ukrainians went to the polls in large numbers on May 25 in an election that observers agreed met international democratic standards. Petro Poroshenko will take office on June 7 with renewed democratic legitimacy, having won a clear mandate from the Ukrainian electorate.
The president-elect faces significant challenges. He must find a way to manage eastern Ukraine, where clashes continue between armed separatists and government forces. He must oversee implementation of the economic reforms to which Ukraine agreed in its program with the International Monetary Fund. He must address the important questions of decentralization of power and political reform.
Mr. Poroshenko also faces the major challenge of dealing with Russia. Although Vladimir Putin said that Russia would respect the will of the Ukrainian electorate, Russian actions suggest a different approach. There is no evidence that Moscow has used its considerable influence with the armed separatists in Donetsk and Luhansk oblasts (provinces) to urge them to deescalate the crisis. Numerous reports indicate that arms, supplies and fighters cross from Russia into Ukraine, something that Russian border guards could interdict.
What apparently triggered Russian efforts to destabilize the interim Ukrainian government after former President Victor Yanukovych fled in February was the interim government’s affirmation of its desire to draw closer to the European Union and sign the Ukraine-EU association agreement. Mr. Putin opposes that. Given that Mr. Poroshenko also supports the association agreement, Russia will likely continue its destabilization efforts.
The U.S. government’s response has been organized along three vectors: (1) bolster the Ukrainian government; (2) reassure NATO allies unnerved by Moscow’s aggressive behavior; and (3) penalize Russia with the objective of promoting a change in Russian policy. The administration generally deserves high marks on the first two vectors. More should be done, however, to raise the consequences for Moscow should it not alter its policy course regarding Ukraine.
Why Should the United States Care about Ukraine?
At a time when the U.S. foreign policy in-box is overflowing, why should Americans care about Ukraine? Let me offer three reasons.
First, Ukraine has been a good international partner of the United States for more than two decades. When the Soviet Union collapsed in 1991, Ukraine had on its territory the world’s third largest nuclear arsenal—including some 1900 strategic nuclear warheads arming 176 intercontinental ballistic missiles (ICBMs) and 45 strategic bombers—all designed to strike the United States. Ukraine agreed to give up that arsenal, transferring the nuclear warheads to Russia for elimination and destroying the ICBMs and bombers.
In 1998, Ukraine was participating in the construction of the nuclear power plant at Bushehr in Iran. At U.S. behest, the Ukrainian government aligned its non-proliferation policy with U.S. policy and withdrew from the project, forcing Russia to find another and more expensive provider of turbine generators for the Iranian reactor.
In 2003, following the downfall of Saddam Hussein, Kyiv responded positively to the U.S. request for contributions to the coalition force in Iraq. At one point, the Ukrainian army had nearly 2000 troops, the fourth largest military contingent, in country.
And in 2012, Ukraine transferred out the last of its highly-enriched uranium as part of the U.S.-led international effort to consolidate stocks of nuclear weapons-usable highly-enriched uranium and plutonium.
This kind of partnership merits U.S. support when Ukraine faces a crisis.
Second, as part of the agreement by which Ukraine gave up its nuclear weapons, the United States, Britain and Russia committed in the 1994 Budapest Memorandum on Security Assurances to respect the sovereignty and territorial integrity of Ukraine and not to use or threaten to use force against Ukraine. Russia’s illegal seizure and annexation of Crimea constitute a gross violation of its commitments under that document, as does Russia’s ongoing support for separatists in eastern Ukraine. The United States and Britain should meet their commitments by supporting Ukraine and pressuring Russia to halt actions that violate the memorandum.
Third, Russia’s actions constitute a fundamental challenge to the post-war order in Europe. The illegal seizure of Crimea is the most blatant land-grab that Europe has seen since 1945. The United States and Europe need to respond adequately and ensure that Russia faces consequences for this kind of behavior. Otherwise, the danger is that Mr. Putin may pursue other actions that would further threaten European security and stability.
The Situation in Ukraine: the May 25 Presidential Election
Ukrainians went to the polls on May 25 to elect a new president. The success of that election has important implications. Since Mr. Yanukovych fled Kyiv (and Ukraine) at the end of February, many Ukrainians, particularly in the east, had seen the acting government as illegitimate. The May 25 election will put in office a president with renewed democratic legitimacy.
By all accounts, the election proceeded normally in most of the country. Sixty percent of the electorate voted, an impressive number given that armed separatists in Donetsk and Luhansk—where about 14 percent of Ukraine’s voters reside—prevented voting in most precincts in those oblasts.
On May 26, the Organization for Security and Cooperation in Europe election-monitoring mission released its preliminary assessment of the vote. While noting some problems, it concluded that the election was “largely in line with international commitments … in the vast majority of the country.” Virtually all election observers—including the European Network of Election Monitoring Organizations and Committee of Voters of Ukraine—concurred in the positive assessment of the election’s conduct.
According to Ukraine’s Central Electoral Commission, Mr. Poroshenko won with 54.7 percent of the vote, a figure that tracked closely with the number reported in the two major exit polls released on the evening of May 25. The strength of that victory was remarkable and, by crossing the 50 percent threshold, Mr. Poroshenko avoided the need for a run-off ballot. Every previous presidential election since Ukraine regained independence had to go to a second round.
Two other things were notable in the election results. First, of the top five candidates, four—who together won a combined total of 77 percent of the vote—supported Ukraine drawing closer to the European Union. Second, in contrast to all the talk in Russia of neo-fascists running things in Ukraine, the two candidates from far right parties won a combined total of less than two percent of the vote.
Mr. Poroshenko will be sworn in as Ukraine’s fifth president on Saturday.
Eastern Ukraine poses the first of several difficult challenges awaiting him. Dozens, if not hundreds, have died in clashes between Ukrainian military and security forces and armed separatists in Donetsk and Luhansk over the past month. Mr. Poroshenko has said his first trip as president will be to Donetsk.
Many in eastern Ukraine are troubled by how government power in Kyiv changed in February and regard the acting government as illegitimate. Polls show, however, that more than 70 percent wish to remain a part of Ukraine. Mr. Poroshenko’s election should lift some of that cloud of illegitimacy. If he can successfully assure the population in the east that he will listen to and address their political and economic concerns, he can undercut support for the armed separatists, whose welcome may be wearing out. That could also give a boost to the roundtable process launched by the Organization for Security and Cooperation in Europe aimed at resolving Ukraine’s internal divisions.
Mr. Poroshenko’s second challenge will be implementing the economic reforms to which Ukraine agreed in order to receive $17 billion in low-interest loans from the International Monetary Fund over the next two years. Ukraine has the potential to receive as much as $25-35 billion from the International Monetary Fund, other international financial institutions and Western governments to help it meet its external debt obligations—provided that it implements its reform program.
The reforms are necessary to put the country’s economic house in order and end rampant corruption. But the reforms will hurt many households across the country. Mr. Poroshenko will need to find a way to sustain the public’s support for pursuing those reforms, a potentially difficult political test.
The third challenge is decentralizing Ukraine’s government, in which too much power rests in the capital. Transferring some political authority to the oblasts—such as making regional governors elected as opposed to appointed by the president—would promote more effective, efficient and accountable governance. It would also address demands in the eastern part of the country for more local authority.
Mr. Poroshenko has said that he would like to see early Rada (parliament) elections this year. That would be a wise move, as it would revalidate the Rada’s democratic legitimacy in the aftermath of February’s turmoil and would put in place Rada deputies reflecting the country’s current mood.
With regard to foreign policy, Mr. Poroshenko supports bringing Ukraine closer to the European Union, which includes signing a Ukraine-EU association agreement that contains a deep and comprehensive free trade arrangement. That will expand access to EU markets for Ukrainian exporters. Opinion polls show that a majority of Ukrainians supports a pro-European Union course.
Mr. Poroshenko has also expressed a desire to develop a working relationship with Russia—a sensible position given the many links and interactions between Ukraine and Russia. The principal challenge, however, is that Mr. Putin and the Kremlin oppose Ukraine’s pro-Europe course, which would remove the country from Russia’s sphere of influence. There are no significant indications to suggest that Moscow’s goal of holding Ukraine back from Europe has changed.
Russia’s Approach and Motives
On May 23, Mr. Putin said he would respect the results of the Ukrainian presidential election. If Moscow is prepared to deal directly with Kyiv in a normal manner and cease its support for the separatists who have created chaos in Donetsk and Luhansk, that would be a positive and welcome step. But skepticism is in order: this would amount to a total reversal in Russia’s course over the past three months—and it is not clear why the Kremlin now would decide to do that.
Kyiv, the United States and European Union will watch closely to see how Russia deals with Mr. Poroshenko in the coming weeks. After two months of intimidating military maneuvers on Ukraine’s eastern border, it appears that Russia now has finally returned most of the troops to their bases. That is a welcome step.
Russia has legitimate interests in Ukraine. But those interests do not mean that it should resort to force, seize Ukrainian territory, and support separatism. There is much that the Russians could do if they truly wished to defuse the crisis. There are many indicators that the Russian government has been supporting the armed separatists in eastern Ukraine, including by providing leadership, such as Colonel Chirkin (Strelkov). The Russian government could end that support and order its personnel to cease fighting. Moscow has taken no visible steps to urge the separatists in eastern Ukraine to lay down arms and evacuate occupied buildings, as was agreed in Geneva in mid-April. It could do so now. The flow of arms, including sophisticated anti-aircraft weapons, other supplies and fighters, including from Chechnya, continues from Russia into eastern Ukraine. That is something Russian border guards could interdict if ordered to do so.
Mr. Putin’s approach toward Ukraine thus far appears driven by several factors.
Russia’s main focus has not been Crimea, which it illegally occupied in March. The Kremlin appears to seek a weak and compliant Ukrainian neighbor, a state that will defer to Moscow and not develop a significant relationship with the European Union. For Mr. Putin, possessing Crimea while mainland Ukraine draws closer to Europe is no victory.
Although he lamented the collapse of the Soviet Union as the greatest geopolitical catastrophe of the 20th century, Mr. Putin does not seek to rebuild it. Doing so would require that Russia subsidize the economies of others, an economic burden that Moscow does not wish to bear.
What Mr. Putin does want is a sphere of influence, which he views as a key component of Moscow’s great power status. Countries within that sphere are expected to eschew policies, such as drawing too close to NATO or the European Union, that the Kremlin regards as inconsistent with Russian interests. A Ukraine that has signed and is implementing an EU association agreement would be a country moving irretrievably out of Moscow’s geopolitical orbit.
Domestic political factors also motivate Mr. Putin’s policy. The seizure of Crimea was popular with most Russians, particularly his conservative political base. His domestic approval rating now exceeds 80 percent. Trying to pull Ukraine back toward Russia, given the historical and cultural links, is also popular with many Russians.
Another factor apparently motivating Mr. Putin is to see the Maidan experiment—which began with the demonstrations that started in late November and continues as Ukraine shapes a new government—fail. As was evident in 2012 following the brief period of large demonstrations in Moscow, the Kremlin greatly fears civil protest and moved quickly to clamp down. It does not want to see protest succeed in neighboring Ukraine.
Finally, while it is difficult to understand how the Kremlin functions, some suggest that Mr. Putin operates in a bubble in which he receives information from relatively narrow channels dominated by the security services. When the Russian president talks about what has happened in Ukraine over the past six months—or about what happened ten years ago during the Orange Revolution—he does not describe protests motivated by popular discontent with an increasingly authoritarian leadership or a stolen election. He sees an effort orchestrated and led by the CIA and its sister European services, aimed in large part at hemming in Russia. Such a flawed understanding of Ukraine is worrisome, as bad analysis offers a poor foundation on which to base policy.
How will Russia proceed regarding Ukraine? The April 17 meeting of the U.S., Russian, Ukrainian and European Union foreign ministers offered a chance for a diplomatic solution. Little appears to have come of it. Moscow did nothing to get illegal armed groups in cities such as Donetsk or Slavyansk to disarm or evacuate the buildings that they occupied. Instead, it appears to have encouraged and supported those groups. Today, unfortunately, the Russians continue to do little to exercise the very considerable authority that they have with the armed separatists to defuse the crisis.
It is not clear that Mr. Putin has a grand strategy on Ukraine. He may be making decisions on an ad hoc basis. He likely did not decide to move to seize Crimea, for example, until he saw how events played out in Kyiv at the end of February. He then saw an opportunity, and he took it.
We must bear in mind that Mr. Putin surprised the West. Once it became clear that the acting government in Kyiv would pursue the EU association agreement, most analysts expected a negative reaction from Moscow. But we anticipated that Russia would resort to its considerable economic leverage: block Ukrainian exports to Russia, press for payment of outstanding loans, or raise the price of natural gas for Ukraine. Russia instead used its military to take Crimea.
The West should also bear in mind Mr. Putin’s claim to a right to protect Russian “compatriots”—ethnic Russians and Russian-speakers who do not have Russian citizenship. This was the justification for Russian action in Crimea. What does it mean for other states neighboring Russia with significant ethnic Russian minority populations?
The U.S. Policy Response
The U.S. policy response over the past three months appears to have three vectors: support Ukraine, reassure NATO allies, and penalize Russia with the goal of effecting a change in Moscow’s policy.
The first vector has aimed to bolster Ukraine. Since the acting government took office in late February, there has been a steady stream of senior U.S. officials to Kyiv, including Deputy Secretary of State Bill Burns, Secretary of State John Kerry and Vice President Joe Biden. The vice president will return to Kyiv for Mr. Poroshenko’s inauguration. President Obama has hosted Acting Prime Minister Arseniy Yatseniuk and met Mr. Poroshenko yesterday during his visit to Warsaw. These demonstrate U.S. political support and bolster the government in Kyiv.
The United States worked closely with the International Monetary Fund to develop the current program for Ukraine. Provided that Ukraine implements the program’s reforms, it is front-loaded to give Ukraine early access to significant funds, much more so than in most two-year IMF programs. U.S. assistance programs should now focus on helping Ukraine implement the agreed reforms.
U.S. officials have launched particular programs to assist Ukraine. Of particular importance is the effort to help Ukraine diversify its energy sources and increase energy efficiency so that it can reduce its dependence on Russia. A second program seeks to help Ukraine track where funds stolen by officials in the previous government went, with the goal of freezing and securing the return of those monies to Ukraine.
One area where the United States should do more is military assistance. The Ukrainian military needs help in strengthening its defensive capabilities. Given that most Ukrainian army bases are in the western part of the country—a legacy of Soviet times when Soviet forces in Ukraine were deployed primarily against NATO—many units that deployed to Donetsk and Luhansk lack infrastructure. MREs and other non-lethal equipment such as sleeping bags, tents and logistics are needed to help sustain soldiers in the field.
The decision to provide body armor, night-vision goggles and communications equipment is welcome, if overdue. The United States should also offer counterinsurgency advice and intelligence support. It is appropriate to consider providing light anti-armor weapons and man-portable air defense systems, particularly since the Ukrainian military, at U.S. and NATO request, eliminated many of its man-portable air defense systems so that they would not be subject to possible theft and terrorist use. Finally, the U.S. military should continue its program of exercises with the Ukrainian military, which has been a standard element of the U.S.-Ukraine military-to-military cooperation program for more than 15 years.
The second vector of U.S. policy has been to reassure NATO allies in the Baltic and Central European regions, who are more nervous about Moscow’s intentions and possible actions following the seizure of Crimea. U.S. and NATO military forces have deployed to the regions with the objectives of reassuring those allies of the Alliance’s commitment to their defense and of underscoring that commitment to Moscow.
The most significant deployment has been that of four U.S. airborne companies, one each to Estonia, Latvia, Lithuania and Poland, for what the Pentagon has described as a “persistent” deployment. These units lack heavy weapons and pose no offensive threat to Russia, but they are a tangible indicator of U.S. commitment to the four allies. It would send an even stronger message were the U.S. companies joined by companies from other Alliance members. For example, a German company might be paired with the U.S. company in Lithuania, a British company with the U.S. company in Estonia, and so on.
Speaking on Tuesday in Warsaw, President Obama proposed a $1 billion program to increase the U.S. military presence in Central Europe. This is an appropriate step, given new concerns about Russia and Russian policy since the Kremlin’s seizure of Crimea. Congress should approve expedited funding for this.
The third vector of U.S. policy has to been to penalize Russia with the goal of effecting a change in Moscow’s course on Ukraine. Washington has ratcheted down bilateral relations, and G7 leaders—the G8 less Mr. Putin—met today in Brussels instead of in Sochi, as had originally been planned.
The U.S. government has worked with the European Union to impose visa and financial sanctions on selected individuals and entities over the past two months. While the Russian economy was already weakening in 2013, the sanctions imposed to date, although modest, appear to be having an impact.
The Russian finance minister has projected that Russian GDP growth in 2014 would be one-half percent at most and perhaps zero. That is down from projections of 2.0-2.5 percent in 2013. The Russian economy minister said that the Russian economy could be in recession by June, a development that he attributed to geopolitical circumstances, i.e., the effects of Russian policy toward Ukraine and the resulting sanctions.
The Russian finance minister also noted that capital flight in the first quarter of 2014 amounted to $50 billion. Other sources suggest it was higher, perhaps on the order of $60-70 billion. Standard & Poor’s has reduced the investment grade of sovereign Russian debt to one level above junk bond status. According to Bloomberg, no Russian company has been able to sell foreign currency bonds since March, in contrast to 2013, when Russian companies sold $42.5 billion worth of such bonds.
The sanctions are having an economic impact, but they thus far have failed in their primary purpose. Russia has not significantly altered its course on Ukraine.
The U.S. government has been more restrained than it should have on sanctions. Part of the reason is the administration’s desire to move in concert with the European Union, so as to minimize the opportunity for Russian wedge-driving or selectively targeting American companies for retaliation. Unfortunately, the European Union has been overly cautious on sanctions, in large part due to concern for its trade with Russia, which is more than ten times U.S.-Russia trade, and the need to find consensus among 28 member states, which generally produces a lowest common denominator approach.
The West needs to recognize that Moscow remains part of the problem in Ukraine and is not yet part of the solution. Absent a change in the Russian course, the United States and European Union should apply further and more robust sanctions, which are already more than justified by Russia’s actions. Additional sanctions could include:
• Expanding the list of individual Russians—inside and outside of government—targeted for visa and financial sanctions. Sanctions should apply to family members as well.
• Applying targeted sanctions on the Russian financial sector, beginning with the sanctioning of at least one major Russian financial institution (as opposed to smaller pocket banks).
• Blocking Western energy companies from new investments to develop oil and gas fields in Russia, just as the United States and European Union have moved to block their companies from investing in the development of oil and gas resources on the Black Sea shelf around Crimea.
The goal of sanctions should be to change Mr. Putin’s calculus. Russian analysts have long described an implicit social contract that he has with the Russian people: diminished individual political space in return for economic stability, growth and rising living standards. He delivered spectacularly on his part of the bargain from 2000-2008, when the Russian economy grew by seven-eight percent per year. Some Russian economists in 2013 questioned, however, whether the projected 2.0-2.5 percent growth would suffice; the objective of sanctions should be to inflict economic pain on Russia and undermine Mr. Putin’s ability to deliver on his side of the bargain. That may—may, not necessarily will—lead him to adopt a new policy course.
There is an alternative view. It holds that Mr. Putin will use the sanctions as a scapegoat and attempt to put all the blame on the West for Russia’s poor economic performance. How sanctions will affect the Russian public’s view toward Mr. Putin and his calculations regarding policy regarding Ukraine remain to be seen. The egregious nature of Russian actions over the past several months nevertheless argues that the West should impose significant consequences.
In considering and applying sanctions, the U.S. government should be smart. Where possible, it makes sense to use a scalpel and carefully target sanctions rather than a sledgehammer. It also makes sense to avoid policies that would not help Ukraine and would damage other U.S. interests—such as halting implementation of the New START treaty or accelerating the deployment of SM-3 missile interceptors that may not be technically ready for deployment in Poland.
Possible Elements of a Settlement
Washington should encourage Kyiv to pull together the strands of a package to stabilize its internal situation, including elements of interest to many in eastern Ukraine. Elements of a settlement could include the following:
De-escalation of the fighting in eastern Ukraine. The Ukrainian military could cease security operations if the armed separatist groups stand down and negotiate an evacuation of the buildings that they have occupied over the past two months. Moscow has called on Kyiv to halt its operations; it could greatly increase the chances of this if it persuaded the separatists to abide by the Geneva agreement to evacuate occupied buildings and disarm. For its part, the government in Kyiv should disarm the far-right Praviy Sektor movement.
Decentralization of political authority. Members of the acting government and Mr. Poroshenko have suggested the possibility that some political authority could be shifted from Kyiv to regional and local leaders. Mr. Poroshenko should put forward concrete proposals for decentralization, which may require constitutional reform. One obvious step would be to make the oblast governors elected as opposed to appointed by the president. It would also be sensible to transfer some budget authority to regional governments.
Early Rada elections. The May 25 presidential election gives Mr. Poroshenko a strong democratic mandate. It would make sense to hold early Rada elections in order to renew the democratic legitimacy of the parliamentary body as well.
Russian language status. The acting government has indicated its readiness to give the Russian language official status (which it already enjoys in certain regions as the result of a language law passed during the Yanukovych presidency). Mr. Poroshenko could affirm his readiness to support official status for Russian.
International relations. Kyiv’s foreign policy is of interest to many Ukrainians. Some, as well as Russia, are concerned about the prospect of deepening relations between Ukraine and NATO, despite the fact that the acting government and Mr. Poroshenko have indicated that they have no desire to draw closer to NATO. That is and should be Kyiv’s decision. But not pursuing a deeper relationship with NATO now seems an appropriate policy for Ukraine: deepening relations with NATO would antagonize Moscow, and there is no appetite in the Alliance to accept Ukraine as a member or offer a membership action plan. Most importantly, a push toward NATO would be hugely divisive within Ukraine, where polls show at most only 20-30 percent of the population would support such a policy; it would be particularly controversial in eastern Ukraine. Without forever foreclosing the option, Kyiv should be able to articulate a position that assures Russia that NATO is not in the cards in the near- or medium-term, a policy that the Alliance could acknowledge.
Mr. Poroshenko, the Rada and a majority of Ukrainians favor drawing closer to the European Union and signing the Ukraine-EU the association agreement. Moscow has complained that the European Union refused last year to discuss with it the association agreement. Kyiv might indicate that it would be prepared for a trilateral EU-Ukraine-Russia discussion on steps that the European Union and Ukraine could take to ameliorate negative effects of the association agreement on Ukraine-Russia trade—but not on the question of Ukraine’s right to decide for itself whether or not to sign the agreement.
Crimea. It is very difficult to envisage a scenario by which Ukraine regains sovereignty over Crimea. That does not mean that Ukraine or the West should accept Russia’s illegal occupation and annexation. However, in a broader dialogue to find a settlement, it might make sense for Kyiv and Moscow to set Crimea aside for the time being and return to the issue later after a settlement of other issues has been reached.
These elements, which build on many points that the acting Ukrainian government and Mr. Poroshenko have already articulated, could provide a basis for stabilizing Ukraine. They address a number of issues that the Russians have raised over the past three months—though they do not go as far as Moscow would want. The big question is whether the Kremlin would be prepared to support any settlement that shaped up along the above lines. At the moment, it is not clear that the Russians would.
Mr. Chairman, Senator Corker, members of the Committee,
The Ukraine crisis will likely continue for some time to come. With the election of a new president, the government in Kyiv is better prepared to meet the challenges confronting it than was the case three weeks ago. Still, the challenges are steep.
Addressing those challenges would be substantially easier were Russia to cease its efforts to destabilize Ukraine and adopt a more helpful policy. But it does not appear that the Kremlin is ready to cease those destabilization efforts. If it does not, the United States and European Union should move to apply more robust sanctions on Russia, with the goal of persuading Moscow to change its policy.
International financial institutions and Western governments have pulled together a substantial financial package for Ukraine. The Uni
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