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THE ECONOMIC AND POLITICAL 

FUTURE OF UKRAINE 

HEARING 

BEFORE THE

COMMITTEE ON FOREIGN RELATIONS 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

OCTOBER 8, 2015 

Printed for the use of the Committee on Foreign Relations 

( 

Available via the World Wide Web: https://www.govinfo.gov 

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COMMITTEE ON FOREIGN RELATIONS

BOB CORKER, TENNESSEE, Chairman

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RON JOHNSON, Wisconsin 

JEFF FLAKE, Arizona 

CORY GARDNER, Colorado 

DAVID PERDUE, Georgia 

JOHNNY ISAKSON, Georgia 

RAND PAUL, Kentucky 

JOHN BARRASSO, Wyoming 

BENJAMIN L. CARDIN, Maryland 

BARBARA BOXER, California 

ROBERT MENENDEZ, New Jersey 

JEANNE SHAHEEN, New Hampshire 

CHRISTOPHER A. COONS, Delaware 

TOM UDALL, New Mexico 

CHRISTOPHER MURPHY, Connecticut 

TIM KAINE, Virginia 

EDWARD J. MARKEY, Massachusetts 

LESTER MUNSON, Staff Director

JODI B. HERMAN, Democratic Staff Director

JOHN DUTTON, Chief Clerk

(II)

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C O N T E N T S 

Page 

Hon. Bob Corker, U.S. Senator From Tennessee .................................................. 1 

Hon. Benjamin L. Cardin, U.S. Senator From Maryland .................................... 2 

Hon. Victoria Nuland, Assistant Secretary, Bureau of European and Eurasian 

Affairs, U.S. Department of State, Washington, DC ......................................... 3 

Prepared Statement ......................................................................................... 6 

Hon. Paula J. Dobriansky, Former Under Secretary of State for Democracy 

and Global Affairs, Senior Fellow for the Future of Diplomacy Project, 

Harvard University JFK Belfer Center for Science and International Affairs, Cambridge, MA ........................................................................................... 18 

Prepared Statement ......................................................................................... 20 

Hon. Clifford G. Bond, Former Ambassador to Bosnia and Herzegovina and 

U.S. Assistance Coordinator in Ukraine, U.S. Department of State, 

Washington, DC ................................................................................................... 21 

Prepared Statement ......................................................................................... 23 

(III)

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(1) 

THE ECONOMIC AND POLITICAL FUTURE 

OF UKRAINE 

THURSDAY, OCTOBER 8, 2015 

U.S. SENATE, COMMITTEE ON FOREIGN RELATIONS, Washington, DC. 

The committee met, pursuant to notice, at 10:39 a.m., in room 

SD–419, Dirksen Senate Office Building, Hon. Bob Corker (chairman of the committee) presiding. 

Present: Senators Corker, Gardner, Cardin, Menendez, Shaheen, 

and Kaine. 

OPENING STATEMENT OF HON. BOB CORKER, 

U.S. SENATOR FROM TENNESSEE 

The CHAIRMAN. Our hearing will come to order, and we want to 

thank you for being here today, and thank you for your service to 

our country. We look forward to your testimony. We thank our witness from the State Department and our panel of private witnesses 

for being here today. 

We believe and our European allies agree that Ukraine should 

be free to choose its future. Ukraine can, over time, be like its 

neighbor, Poland. Ukraine has a number of resources and educated 

and determined people. Most Ukrainians, as the Secretary knows 

well, want to be a part of a united, free, and prosperous Europe. 

If Ukraine wants to go in the right direction, if Ukraine wants 

the rule of law, it has to keep making real changes, and, again, I 

know our Secretary is working hard toward that end. This cannot 

be done without political will on their part. The United States for 

our part needs a sustained bipartisan commitment to Ukraine for 

as long as necessary. Today we will examine where the Minsk process and the Normandy Group stand. Any progress on that front 

will only be worth something if it creates space for Ukraine to become a part of Europe. 

Ukrainians are wondering if the West will walk away. Candidly, 

I have concerns about our real commitments to Ukraine and the 

length of that time that a real commitment will be sustained. And 

so, we need to make sure that that is not the case. Ukraine’s leaders are enacting key reforms, but they will also be judged on how 

they address corruption. We and our allies will be judged on what 

we do now and over the next decade to support Ukraine. 

Here in Congress we are working to authorize a long-term framework for Ukraine, but given all that has happening, our executive 

branch also needs to act to set the right course and not posture. 

Obviously, we can never accept Russia’s land grabs through frozen 

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2 

conflicts and outright annexation. We need to be prepared to invest 

resources and put significant effort behind that. 

A reformed Ukrainian economy needs to be fully engaged with 

the West so that it can grow and withstand Russian pressure. We 

obviously need to be firm and reinforce Ukraine’s economic and political reforms, including decentralization and punishing corruption. And we need to ensure that all Ukrainians, including Russian 

speakers, benefit from Ukraine’s democratic future. 

We need to make sure that we are assisting and training and 

supporting Ukraine’s military and security forces, and we need to 

do whatever is necessary to ensure NATO readiness in the Baltics 

and Europe east of Germany. We need our NATO allies, including 

Germany, Poland, United Kingdom, France, Canada, and others to 

also make a real long-term commitment to work with us to see that 

Ukraine has a future tomorrow, and that it is as secure as Poland’s 

is today. 

And I just want to say one more time, our friends in Europe, so 

few of them—I am sorry—so few of them are honoring their basic 

NATO commitments. Basic NATO commitments. I know the Secretary has pushed hard to change that. I know that our NATO Secretary General is pushing hard to change that. We continue to be, 

our Nation, the provider of security services. Europe continues to 

be the consumer of security services, and that dynamic has got to 

change. 

I would like to recognize our distinguished ranking member for 

any opening comments that he would like to offer, and thank him 

for his service. 

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 

U.S. SENATOR FROM MARYLAND 

Senator CARDIN. Well, thank you, Mr. Chairman, and thank you 

for convening this hearing. Secretary Nuland, it is always a pleasure to have you here and our distinguished guests on the second 

panel. It is nice to have both of you here also. 

Let me first make an observation as it relates to Ukraine. 

Ukraine has a dual challenge. It has the external interference by 

Russia, which has affected not only its territorial integrity, but also 

its ability to advance a strong, independent state. And then it has 

its internal challenges, a country that has been plagued for many, 

many years with weakness in democratic institutions and its susceptibility to the plague of corruption. Both need to be dealt with 

for Ukraine to be successful. 

Many of us have visited Ukraine on many occasions. I have, and 

I have seen the people. I have been there during the different revolutions and seen the will of the people. I have been to the Maidan 

and could sense the frustration. And what I got from my visits is 

that the people of Ukraine want a government that is honest, that 

gives them a fair shake, and that represents all the people. It is 

not so much whether it is affiliated with Europe or Russia. It is 

more of whether you have an independent country that can make 

independent judgments and can represent all of its people. 

So our Ukraine strategy has been to try to make sure that we 

accomplish both objectives, and, quite frankly, I have supported a 

more aggressive approach than the administration on the defensive 

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3 

side. I thought we should have been providing more military equipment so that Ukraine could defend its borders more successfully 

than it has been able to defend its borders. And I understand the 

administration has been slow on that mainly because of our coalition, but I do think we have paid the price because of the porous 

borders between Ukraine and Russia, particularly on the eastern 

part and what has happened. 

Secondly, we need to aggressively work to establish strong democratic institutions in Ukraine, and we have worked with the international community, and I am interested in seeing where we are 

on that and what more can be done. Part of that is fighting corruption. I am going to say this over and over. Fighting corruption. And 

I know the commitment of the President to fight corruption, but it 

is still a huge problem, and how much have we done in order to 

make that possible. 

We have seen progress, as the chairman has pointed out. The Association Agreement with the EU is certainly a positive step forward. We have seen anticorruption laws passed by their legislature, which is certainly a positive step. The question is how they 

are being implemented. And we have seen energy reform, which is 

a critical issue for Ukraine’s future. 

But much work remains. The interaction of the oligarchs with 

the government and its impact on democratic reforms is a matter 

that we can get into some discussion about. The inability to remove 

corrupt officials still remains in Ukraine, and what efforts are 

being made in order to remove corrupt, particularly in the judicial 

branch of government. Humanitarian assistance is problematic in 

the territories that are not controlled by the government. Can we 

be more effective in providing humanitarian need? 

And one last point I added as a result of this morning’s business 

discussion, and that is, Madam Secretary, I think if you had your 

full complement, including the assistant administrator for Europe, 

it would be helpful. That is not the fault of this committee. Tom 

Little has been lingering on the floor of the United States Senate 

for 71 days, and I think we could help if we confirmed that position 

for you to give you the full complement at the State Department. 

So, Mr. Chairman, I look forward to our witnesses, and I look 

forward to how we can work together to strengthen Ukraine’s ability to become a strong, independent state. 

The CHAIRMAN. Thank you. Our witness for the first panel is the 

Honorable Victoria Nuland, Assistant Secretary for the Bureau of 

European and Eurasian Affairs at the State Department. We thank 

you for being here. You have been here many times. I know that 

a summary of 5 minutes is probably what you want to do. Any 

written materials will be made part of the record, without objection. 

With that, we would like to recognize you and thank you for 

waiting to testify as you have. Thank you. 

STATEMENT OF HON. VICTORIA NULAND, ASSISTANT SECRETARY, BUREAU OF EUROPEAN AND EURASIAN AFFAIRS, U.S. 

DEPARTMENT OF STATE, WASHINGTON, DC 

Ms. NULAND. Thank you very much, Chairman Corker, Ranking 

Member Cardin, members of this committee, for the opportunity to 

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4 

join you today and for the bipartisan spirit in which you have supported Ukraine in its difficult times, and for the personal investment that so many of you have made in Ukraine’s democratic European future. 

I have submitted a longer statement with more detail, particularly on the reform side, but I will summarize here. 

As you noted during the business meeting, this week we celebrate 25 years since Germany’s reunification, the first major step 

on our collective bipartisan journey toward a Europe whole, free, 

and at peace, a goal of administrations of both parties, and today 

that journey goes through Ukraine. 

In the 6 months since I last appeared before this committee, 

Ukraine can be proud of the progress that it has made. Last spring, 

the IMF approved a 4-year $17.5 billion economic support program 

for Ukraine, and disbursements have begun. The Rada has passed 

legislation to reform the energy and agriculture sectors, to devolve 

authority to the regions, and to create oversight structures to clean 

up corruption. Last month, Ukraine reached a landmark debt relief 

deal with its creditors, and the September 1 cease-fire in Eastern 

Ukraine is largely holding. Heavy weapons are starting to be 

pulled back. 

While we welcome this progress, as you both mentioned, Ukraine 

still has a long, hard road to travel. Today I want to talk about the 

status of the Minsk agreements, Ukraine’s reform agenda, and the 

tough work ahead to cement Ukraine into a European future. 

We continue to believe that the Minsk package provides the best 

hope for the return of Ukraine state sovereignty in its east. Yet in 

the 8 months since the February signing of the implementing 

agreement, Eastern Ukraine has seen almost constant violence, 

continued weapons shipments from Russia, separatist filibustering 

at the negotiating table, and repeated Russian efforts to relitigate 

basic elements of Minsk. 

Yet on September 1, the guns largely fell silent, and on October 

2, President Putin agreed to put a stop to the separatists to hold 

another round of fake elections. Instead he committed to Presidents 

Poroshenko and Hollande and to Chancellor Merkel to withdraw 

heavy weapons, to allow full OSCE access all the way to Ukraine’s 

border, and to negotiate modalities for real elections in the 

Donbass under Ukrainian law and monitored by ODIHR. 

If these commitments are kept, Ukraine will once again have access to its own people and its territory in the East. And as President Obama did with President Putin in New York last week, we 

will also keep pushing for the return of all hostages, including 

Nadiya Savchenko and Oleg Sentsov, who are being held in Russia, 

for full humanitarian access to Donbass for relief agencies, Ukrainian and Russian international, U.N. as well, and the removal of all 

foreign forces, weapons, and landmines as Minsk dictates. 

We understand why after almost 2 years of violence, war, and 

lies, many Ukraine patriots and some in the West doubt that Russia and its proxies will ever allow full implementation of Minsk. 

But Minsk remains a goal worth fighting for because the alternatives for Ukraine are bleak. At best, we will have a frozen conflict in the Donbass; at worst, a return to the war that has already 

claimed too many lives. 

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5 

So we will keep supporting Ukraine as it does its part to implement Minsk, and we will keep pushing Russia and its proxies to 

demonstrate good faith. But we will judge Russia and the separatists not by their words, but by their actions, and we will work with 

the EU to keep sanctions in place until the Minsk agreements are 

fully implemented. And, of course, Crimea sanctions must stay in 

place so long as the Kremlin imposes its will on that piece of 

Ukrainian land. 

While 7 percent of Ukraine territory remains under threat, the 

other 93 percent is fighting a different battle. To build a democracy 

that is closer to its people and a colony where what you know matters more than whom you know, and a society where law rules 

rather than corruption and greed. 

The reforms Ukraine have already enacted are impressive in 

their scope. Just a few examples. With U.S. help, newly vetted and 

trained police officers are now patrolling the street of Kiev, Odessa, 

Lviv, and Kharkiv. A new national anticorruption bureau has been 

approved, and with the help of the IMF, the government is rebuilding its financial sector, closing insolvent banks, and strengthening 

protection of depositors’ rights. 

These efforts are beginning to bear some fruit. The latest IMF 

forecast released this week predicted Ukraine’s economy could grow 

by 2 percent in 2016. And Ukraine’s foreign reserves have already 

increased to $12.8 billion, up from a low of only $5.6 billion in February. 

With Congress’ support, the United States has committed to pro- vide over $548 million in assistance to Ukraine since the start of 

this crisis, plus the two $1 billion loan guarantees. With continued 

progress on economic reform and as conditions warrant, we will 

come back to work with you on a third loan guarantee later this 

winter. 

Because there can be no reform in Ukraine without security, $266 million of our United States support has been in the security 

sector. This includes sending 130 Humvees, 150 thermal and night 

vision devices, over 300 secure radios, five explosive ordnance disposal robots, and 20 counter mortar radars. Just last week we notified Ukraine that two defensive longer range counter artillery radars are on the way, and in November we will successfully complete our train and equip program for Ukraine’s national guard, 

and begin training six battalions of Ukraine’s army and special 

forces. 

Ukraine has already put this training and equipment to good 

use. When combined Russian and separatist forces tried all summer to break Ukraine lines, particularly at Marinka and at 

Starohnativka, they were pushed back by Ukraine’s increasingly 

capable military. 

As I said, though, much difficult work remains to reform the 

economy and the justice sector and to clean up endemic corruption. 

Next steps for the reform agenda should include the following 

kinds of things: a cleanup of the prosecutor general’s office so that 

it begins to serve the Ukrainian people rather than ripping them 

off; procurement and revenue management reform, particularly in 

the gas sector, and the unbundling of services making way for the 

restructuring of Naftogaz by June 2016; transparent privatization 

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of the many state-owned companies and cutting of ???red tap??? for 

investors; constitutional amendments to reform the judicial sector, 

limit immunity, and improve judicial ethics and standards; and 

continued recapitalization of the banking system; and, of course, on 

October 25 when local elections are held across Ukraine, good, free, 

fair elections. 

While Ukraine works through these tough challenges, the United 

States, Europe, and the international community must continue to 

keep faith with Ukraine, and we thank this committee for continuing to highlight Ukraine, making clear we stand with them. 

America’s investment in Ukraine is about far more than protecting 

the free choice of a single European country. It is about protecting 

the rules-based system across Europe and around the world. It is 

about saying no to borders changed by force, to big countries intimidating their neighbors or demanding a sphere of influence. 

I thank this committee again for its bipartisan support and its 

commitment to the sovereignty and territorial integrity of Ukraine 

and to a Europe whole, free, and at peace. I am delighted to take 

your questions. 

[The prepared statement of Ms. Nuland follows:] 

PREPARED STATEMENT OF ASSISTANT SECRETARY VICTORIA NULAND

Thank you Chairman Corker, Ranking Member Cardin, members of this committee for the opportunity to join you today and for the personal investment so 

many of you have made in Ukraine’s democratic, European future. Your bipartisan 

support, your visits to Ukraine, the assistance you and your fellow members have 

provided are truly making a difference. 

This week we celebrate 25 years since Germany’s reunification—the first major 

step on our journey toward a Europe whole, free, and at peace. Today that journey 

goes through Ukraine. Across Ukraine, citizens are standing up and sacrificing for 

the universal values that bind us as a transatlantic community: for sovereignty, territorial integrity, human rights, dignity, clean and accountable government, and justice for all. America helps Ukraine because that country’s success is central to our 

own profound national interest in an ever more democratic, prosperous, stable 

Europe. Ukraine’s aspirations are ours. 

In the 6 months since I last appeared before this committee, Ukraine can be 

proud of the progress it has made: 

• Last spring, the IMF approved an augmented 4-year, $17.5 billion economic 

support program for Ukraine, $6.7 billion of which has already been disbursed; 

• The government has proposed and the Rada has passed legislation to reform the 

energy and agriculture sectors, strengthen the banks, shrink and modernize 

government bureaucracy, devolve more authority to the regions, and create 

oversight structures to clean up corruption; 

• Last month, Ukraine reached a land-mark debt-relief deal with its creditors, 

opening the door for more intensive support; 

• The September 1 cease-fire in Eastern Ukraine is largely holding, the Minsk 

parties have signed and begun to implement agreements to pull back their 

heavy weapons, and some IDPs are returning home. 

While we welcome this progress, Ukraine still has a long, hard road to travel. 

In my remarks today, I will first discuss implementation of the Minsk package 

of agreements; I will also give an update on the work that Ukraine is doing, with 

U.S. and international support to reform the country, tackle corruption, and to 

strengthen democratic institutions; and, finally, I will focus on the tough work 

ahead to cement Ukraine into Europe and the community of successful democracies. 

THE MINSK AGREEMENTS

The September 2014 and February 2015 package of Minsk agreements remains 

the best hope for peace, weapons withdrawal, political normalization, decentralization in Eastern Ukraine, and the return of Ukrainian state sovereignty over that 

part of its border. Yet in the 8 months since the February signing of the implementing agreement, Eastern Ukraine has seen almost constant violence all along 

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the contact line, continued weapons shipments from Russia masquerading as 

humanitarian aid, separatist filibustering and threats at the political negotiating 

table, and repeated Russian efforts to relitigate basic elements of Minsk. 

On September 1, however, the guns largely fell silent. And on October 2, in Paris, 

President Putin agreed to put a stop to the separatists’ threat to hold another round 

of fake elections. Instead, he committed to Presidents Poroshenko and Hollande and 

Chancellor Merkel to withdraw heavy weapons, allow full access to the OSCE all 

the way to the border, and to negotiate modalities for real elections in Donbas under 

Ukrainian law, safe conditions, and observation by OSCE’s ODIHR. 

If these commitments are kept—if weapons are pulled back and stored, if the 

OSCE gets in, and legal, monitored elections are negotiated and held—Ukraine will 

once again have unfettered access to its own people and its territory in the East. 

That is what Minsk promises: peace, weapons withdrawal, political normalization, 

then a return of the border. 

As President Obama did with President Putin in New York, we will also keep 

pushing to complete other unfinished aspects of Minsk—the return of all hostages, 

including Nadia Savchenko, Oleg Sentsov, and those held in Russia; full humanitarian access for U.N. agencies, Ukrainian NGOs, and government relief agencies; 

and the removal of all foreign forces, weapons, and landmines. 

We understand why—after almost 2 years of violence, war and lies—many 

Ukrainian patriots and some in the West doubt Russia and its proxies will ever 

allow full implementation of Minsk. But Minsk implementation remains a goal 

worth fighting for because the alternatives are bleak: at best, a frozen conflict in 

which Donbas becomes an unrecognized gray zone for the foreseeable future; at 

worst, a return to the war that has already claimed too many Ukrainian lives—and 

Russian lives, as well. 

So we will keep supporting Ukraine as it does its part to implement Minsk. Along 

with the Normandy powers, France and Germany, we will keep pushing Russia and 

its proxies to demonstrate equal good faith. As the President and Secretary Kerry 

have repeatedly said, we will judge Russia and the separatists by their actions, not 

their words. We will work with the EU to keep sanctions in place until the Minsk 

agreements are fully implemented. And of course, Crimea sanctions remain in place 

so long as the Kremlin imposes its will on that piece of Ukrainian land. 

REFORMS UPDATE

While 7 percent of Ukrainian territory remains under threat, the other 93 percent 

is fighting a different battle: to build a democracy that is closer to its people; an 

economy where what you know matters more than whom you know; and a society 

where law rules rather than corruption and greed. 

The electoral, judicial, financial, and anticorruption reforms already put forward 

by the government and enacted by the Rada are impressive in their scope and political courage. 

Here are just a few examples: 

• With generous U.S. support, newly vetted and trained police forces are now 

patrolling the streets of Kiev, Odesa, Lviv, and Kharkiv, with another three 

provinces to be covered by year’s end. By the end of 2016, every Ukrainian oblast will have them; 

• A new National Anti-Corruption Bureau is being stood up and will work with 

a new special anticorruption prosecutor once the latter is appointed; 

• With U.S., EU, and U.K. help, new local prosecutors are being hired, old ones 

are tested and retrained, and all will now submit to periodic performance evaluations to root out corruption and malfeasance; 

• Ukraine is closing loopholes in its pension system to help reduce the system’s 

$3.7 billion annual deficit; 

• It is working hard to increase energy efficiency, cut subsidies for state-owned 

gas producers, and establish a market-oriented model; 

• And, with the help of the IMF, the government is rebuilding its financial sector, 

closing insolvent banks and strengthening protection of depositors’ rights. 

These efforts and more are beginning to bear fruit: 

• The latest IMF forecasts released this week predict Ukraine’s economy will 

grow by 2 percent in 2016. 

• Ukraine exported a record-breaking 33.5 million tons of grain in 2014, and in 

2015 will increase agricultural exports by 6 percent; 

• And, Ukraine’s foreign reserves have increased to $12.8 billion, up from a low 

of $5.6 billion in February. 

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WHAT THE U.S. IS DOING

With Congress’ unwavering support, the United States has committed to provide over $548 million in assistance to Ukraine since the start of this crisis, in addition 

to two $1 billion loan guarantees. With continued progress on economic reforms and 

as conditions warrant, we will ask you to work with us on a third loan guarantee 

of up to $1 billion. U.S. economic and technical advisors advise almost a dozen 

Ukrainian ministries and localities. Our $69 million in humanitarian support helps 

2.4 million displaced Ukrainians through international relief organizations and local 

NGOs. 

Because there can be no reform in Ukraine without security, $266 million of our 

support has been in the security sector. This includes sending: 130 HMMWVs, 150 

thermal and night vision devices, over 300 secure radios, 5 Explosive Ordnance Disposal robots, and 20 counter mortar radars. 

Just last week, we notified Ukraine that two more life-saving long-range counter fire radar batteries are on the way. And, in November, we will complete a $19 million train and equip program for Ukraine’s National Guard and begin training 

Ukrainian Ministry of Defense forces using $45 million in European Reassurance 

Initiative funding. 

Ukraine has already put this equipment and training to good use. When combined 

Russian-separatist forces tried all summer to break Ukrainian lines at Maryinka 

and Starohnativka, they were pushed back again and again by Ukraine’s increasingly professional military, and Ukrainian lives were saved. 

WHAT UKRAINE STILL MUST DO

Because the best antidote to Russian aggression and malign influence is for 

Ukraine to succeed as a democratic, prosperous, European state, the Ukrainian Government must continue to live up to its promises to its own people and maintain 

the trust of the international community. 

As I said, much difficult work remains to clean up endemic corruption throughout 

government and society, at every level; to stabilize the economy; break the hold of 

corrupt state enterprises and oligarchs; and reform the justice system. 

Key steps toward these reforms include: 

• Procurement and revenue management reform in the gas sector, and unbundling of services along with the restructuring of Naftogaz by Ukraine’s deadline 

of June 2016; 

• Like Ukraine’s police force, the Prosecutor General’s Office has to be reinvented 

as an institution that serves the citizens of Ukraine, rather than ripping them 

off. That means it must investigate and successfully prosecute corruption and 

asset recovery cases—including locking up dirty personnel in the PGO itself; 

• The newly created Inspector General’s Office within Ukraine’s prosecution service must be able to work independently and effectively, without political or judicial interference; 

• And, the government must appoint the NABU Anti-Corruption Prosecutor 

ASAP in order to start investigating these crimes. 

Ukraine is well situated to provide products and services to Europe and Eurasia, 

but must improve the business climate by dismantling thousands of duplicative 

functions and transparently privatizing approximately 1,800 state-owned enterprises, and do more to recapitalize and repair its banking system. Clean governance 

and business practices that root out corruption are essential to attracting more foreign investment and development opportunities. 

Ukrainians also need a justice system that cannot be bought, one that will deliver 

verdicts, uphold the rule of law, and stop injustice, which was a key demand of 

the Maidan protests. Currently, only 5 percent of the Ukrainian population completely trust the judiciary. Inspiring confidence will require passing the constitutional amendments to limit judges’ immunity, improve judicial ethics and standards, 

and rigorously investigate judicial misconduct and enforce disciplinary rules and 

dismissals. 

WHAT THE INTERNATIONAL COMMUNITY MUST DO

While Ukraine works through these tough challenges, the United States, Europe, 

and the international community must keep faith with Ukraine and help ensure 

that Russia’s aggression and meddling cannot crush Ukraine’s spirit, its will, or its 

economy before reforms take hold. 

We must challenge the false narrative that nothing can or will change in Ukraine. 

To fight disinformation not only in Ukraine and Russia, but across Russian-speaking communities in Europe, we are joining forces with our partners in the EU to 

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support alternatives to state-sponsored, Russian programming. We are also training 

foreign journalists and civil society actors in the art of fighting lies with the truth. 

Mr. Chairman, Mr. Ranking Member, members of this committee, America’s 

investment in Ukraine is about far more than protecting the choice of a single European country. 

It is about protecting the rules-based system across Europe and around the world. 

It is about saying no to borders changed by force, to big countries intimidating their 

neighbors or demanding a sphere of influence. 

I thank this committee for its bipartisan support and commitment to the sovereignty and territorial integrity of Ukraine and to a Europe whole, free and at 

peace. 

The CHAIRMAN. Well, we thank you very much for your testimony and your continued efforts sometimes swimming upstream to 

make things happen in an appropriate way in Ukraine. And I had 

a lot to say over the last hour. I am going to defer our ranking 

member. 

Senator CARDIN. Well, thank you, Mr. Chairman, and, Secretary 

Nuland, again, thank you for your leadership on this area. I want 

to talk about one area. I want to talk about corruption. To me, if 

they cannot deal with this issue, their future is not going to be very 

bright. 

Prior to the current revolution, the government was very corrupt 

at all levels. It is my understanding that very few people have been 

sent to jail for corruption in Ukraine. It is my understanding that 

there are still corrupt officials in the judicial branch of government 

that have not been rooted out. And I heard what you said about 

moving forward in dealing this issue. If the impunity rate cannot 

be reduced, it is not going to make much difference these reforms. 

So how do we anticipate leveraging our involvement so that there 

is real progress made on dealing with the problems of corruption 

in Ukraine? 

Ms. NULAND. Well, thank you, Ranking Member Cardin. We 

could not agree more. As I said in my opening, this is a central 

tenet of the work that we are doing with your support with the 

Ukraine Government. We have U.S. and European advisors in the 

prosecutor general office’s helping with the reforms, to stress test 

all of the individuals there, to insist that those who are found to 

be corrupt are dismissed, and the hiring and retraining of new personnel. And that has to happen not just at the federal level, but 

at every level in the districts. 

As I said in my testimony, there need to be constitutional amendments and then new legislation to eliminate impunity in the judicial sector to ensure that the highest standards of ethics apply. 

That has not been the case in Ukraine. The Ukrainian people, 

when you look at public opinion polls, fighting corruption is their 

number one demand. And as you have said, there are too many instances, even in the last months, of cases not being made of folks 

being put back on the street who should not be. 

So this is a major, major focus of our effort. It is a major focus 

of international attention on Ukraine. A lot of the support that you 

are giving us we are applying to this question. Every time we meet 

with senior Ukrainian leadership we push on this, including when 

the Vice President saw President Poroshenko in New York last 

week. 

Senator CARDIN. So let me make a suggestion, and it deals with 

transparency and metrics. 

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10 

Ms. NULAND. Yes. 

Senator CARDIN. Where you can show progress being made or not 

made, that there is expectations. The United Nations is developing 

metrics right now for anticorruption measures with the implementation of Sustainable Development Goal Number 16. I think 

Ukraine could be a case in point of how the international community, working with the Government of Ukraine, which I think is 

sincere in trying to root out corruption, can address this issue. 

Whether Ukraine is capable of doing so, or not, is another story. 

But developing achievable goals on reducing the impunity rates 

on the expectations of an independent judiciary, of independent 

prosecutors, of funding these offices, of implementing the 

anticorruption laws, transparency, those types of issues, is important so that the public can gauge how well the government is meeting the goals, which then gives the government more power to 

make—to implement that because they know the public is looking. 

It helps the government achieve these goals and fight some of the 

corruptive influences of the powerful who do not want this to 

change. 

Ms. NULAND. We agree completely. The IMF agrees. In fact, 

some of the benchmarks that you are looking for are part and parcel of the IMF’s program. And some of the things that the Ukrainians have already done are because the international community is 

demanding it, the standing up of the anticorruption bureau, et 

cetera. The things that I mentioned in my testimony, which are 

outlined in more detail, are not only requirements of the IMF and 

the EU, they are also requirements that we put forward with regard to the loan guarantees that you have been so generous in 

helping us to attack. So we will continue to be on this. We are also 

working on things like e-governance, customs reform, things that 

can squeeze out the ability for graft. 

But I would say that given how endemic this has been in 

Ukraine, this is going to be a relatively long journey because you 

can change the tops of ministries. You have to change the entire 

culture and not just at the federal level, but all through the localities. So this is a major challenge for Ukraine and something that 

we agree we must stay on. 

Senator CARDIN. I agree it is long term. I just urge you to set 

it up in a way that we can evaluate if we are making progress. 

Ms. NULAND. Right. 

Senator CARDIN. Not only that we can evaluate, not only IMF 

can evaluate, not only the international investors can determine, 

but also the people of Ukraine need to know that there is progress 

being made. Without that, I am afraid the stability in the country 

will not be there. 

Ms. NULAND. Absolutely. And, you know, they are going to measure it by when cops stop taking bribes, when you do not have to 

bribe your way into a hospital or into a school, and when cases are 

actually made such that they have the courage to come forward 

with cases because they know that folks will be convicted. 

Senator CARDIN. I agree. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Shaheen. 

FOREI-MBP-19 with DISTILLER

11 

Senator SHAHEEN. Thank you. Just to follow up on that line of 

questioning, and thank you for being here. To what extent do you 

think the leadership in the Rada, the elected officials, understand 

the importance of addressing corruption? 

Ms. NULAND. I would say that particularly in the broad reform 

coalition, many of those Rada deputies, particularly those serving 

for the first time, got elected on a promise of trying to clean up the 

system. I think some of them are concerned about how difficult it 

is, and that they need support, particularly on the justice and prosecutorial side, and that this is a long-term project. 

One of the most popular programs we have, as you know, and 

I think you have seen some of them when you have traveled, is this 

investment that we have made in clean police. And as I mentioned 

in my testimony, they are now present in five cities in Ukraine, 

and every city in Ukraine is now asking for them because they are 

setting a new standard for serving the people rather than shaking 

down the people, so that is a small first step. Now we have to see 

that in the justice system. We have to see that in every ministry. 

We have to see that in daily life for Ukrainians. 

Senator SHAHEEN. And in terms of the measures that Senator 

Cardin was talking about, is this something that the commission 

on corruption is actually looking at implementing as they are 

thinking about the challenge that they have? 

Ms. NULAND. Again, the anticorruption bureau is responsible for 

oversight of the various ministries and trying to root out the corrupt deep state in all of these ministries. That is only one piece of 

the puzzle. So this is part of the challenge that almost every sector 

of the Ukraine Government has to be working on anticorruption, 

so the judicial reforms, the prosecutorial reforms, e-governance, 

what it feels like in the regions as well. 

So the anticorruption bureau will be one of the monitors, one of 

the stress testers, but every ministry is going to have to be involved, and is going to have to prove that it is making progress. 

Senator SHAHEEN. You talked about Putin’s commitments on the 

2nd to hold elections not with the separatists, but with the rest of 

the country, and to remove heavy weapons. Have we seen any evidence yet? I mean, it has only been a week, but have we seen any 

evidence that they are actually going to move in that direction? 

Ms. NULAND. The agreement that was finally achieved on the 

second phase, the tanks and weapons under 100 millimeters, allows for the withdrawal in two phases, a northern phase and a 

southern phase. Ukraine wanted to do it that way to ensure that 

the most sensitive areas come second, and that the OSCE can truly 

get in and monitor. 

My understanding, and I checked this morning with our folks 

who work with the OSCE, is that we are starting to see on both 

sides, on the Ukrainian side and on the separatist Russian side, 

some pullback of heavy weapons, some increased access in that 

northern first segment. The question will be whether that remains 

the case, whether access is allowed for the OSCE because we have 

seen occasions where this has been incomplete, and we did have 

one violent incident overnight, so the sort of first break in the 

cease-fire in a little bit. So we are watching very, very carefully. 

FOREI-MBP-19 with DISTILLER

12 

Senator SHAHEEN. Okay. One of the things that I think we would 

probably all agree that has helped with progress in Ukraine has 

not just been the will of the people of the country, which is obviously the most important, but it has been support from the international community to try and help them as they are making these 

changes. And I wonder to what extent we feel like we are continuing to be in sync with President Hollande and Chancellor 

Merkel with respect to the progress on the Minsk II agreements, 

and how willing do we think they are to continue with a sanctions 

regime if Russia does not respond as they have committed to. 

Ms. NULAND. We have very good—we have had very good coordination at every level going forward. We had superb coordination at 

the leader level, I would say, in New York when everybody was in 

the same place in advance of the October 2 Normandy meeting. 

And as you know, President Obama met with President Putin early 

in that New York week. 

And I think, you know, one of the reasons why the Normandy 

meeting went better on October 2 was because what President 

Putin heard from President Obama, from Chancellor Merkel, and 

from President Hollande, particularly on canceling fake elections, 

on pulling back heavy weapons, and on having real elections in 

Ukraine and on hostages, was identical. So that is extremely important that we continue to work moving forward. 

The EU continues to join us in saying that there will not be sanctions relief until Minsk is fully implemented. That means until 

Ukraine has sovereignty again over its eastern border. Given the 

shifting timelines of Minsk, that is likely going to take more time 

than we originally anticipated, so that is probably going to mean 

we will have to have some rollover next year. 

Senator SHAHEEN. Some of us just met with some Ukrainian parliamentarians who were here, and they were quite—seemed very 

anxious about what is going to happen with Minsk II, not just with 

the elections, but also with withdrawal of weapons, and talked 

about how important it was for us to support and to push for the 

other provisions. Are there other provisions that we think Ukraine 

is particularly concerned about other than those two that we 

should be aware of and be pushing for here? 

Ms. NULAND. As I mentioned in my opening, the return of hostages, including those held by Russia, like Nadiya Savchenko, that 

is an extremely important humanitarian issue for Ukraine. The 

issue of the OSCE having access not just where weapons are being 

pulled back, but all the way to the border is an essential prerequisite to Ukraine itself having access, which you have to have 

before you can have an election. I think the concern also is that 

heavy weapons need not just to be pulled back, but Minsk ultimately calls for the full withdrawal of all foreign weapons and 

troops, so that needs to happen. 

You know, it is not surprising that there is skepticism, as I said 

in my opening, among many Ukrainian patriots given the 7 months 

of nonimplementation that we have had. With the cease-fire now, 

with the beginning of the pullback, we need to use this time now 

to push for continued demilitarization so that a real election can 

happen because that is the only way for Ukraine to get its territory 

back. 

FOREI-MBP-19 with DISTILLER

13 

Senator SHAHEEN. All right. Thank you very much. Thank you, 

Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman, and thank you, 

Madam Secretary. Look, I want to focus on the reality. We had the 

IMF managing director here in a private session with the members 

of the committee, and there is one statement, I think, that is pretty 

open and public that is pretty universal, which is that when you 

take 20 percent of a country’s GDP, which is the eastern part of 

Ukraine, and when you are ultimately and still are in war, for all 

intents and purposes, as is evidenced by your own statement, that 

in the eight months since the February signing of the implementing agreement Eastern Ukraine has seen almost constant violence all along the contact line, continued weapon shipments from 

Russia masquerading as humanitarian aid. Then it is very difficult 

to be able to steady yourself and advance economically in a way 

that we want Ukraine to advance. 

So notwithstanding all the other elements of your testimony and 

questions that have been raised about focusing on corruption, 

which I am all for, and other elements of economic reforms that 

they have been, I think, pretty aggressive on and need to continue 

to move forward. It seems to me the central question as the administration comes up a new ask of assistance to Ukraine, as we look 

at the future of Ukraine, as someone who has been very supportive 

on the committee. 

The question is, Where are we headed with Russia, because at 

the end of the day you cannot continue to have 20 percent of GDP 

under assault. You cannot continue to have new armaments being 

shipped into Ukraine by Russia and simply think that this is not 

the ultimate plan of President Putin is either to have, by de facto 

or default, a quasi-annexation of the eastern part of the country, 

or at least a leash that you can pull at any given time when President Poroshenko and the Ukraine people want to move westward. 

So what are we going to do with Russia because they have shown 

themselves, so they now think that military intervention, not only 

here, but in Syria, serves their aims. So what are we ready to do? 

Ms. NULAND. Well, thank you, Senator Menendez. You know, 

this is one of the reasons why we focus so much on the Minsk 

agreements because if these weapons can be pulled back from the 

line, if the cease-fire can hold as it has now for a month, you can 

start to have economic activity from the Donbass benefit all of 

Ukraine. So just in the last couple of weeks, coal is beginning to 

flow out of the Donbass back into the rest of Ukraine so that they 

will not have to import as much coal as they did last year. If we 

can get the OSCE in in a real election, you can reintegrate the population, all those kinds of things. 

Senator MENENDEZ. I do not want to interrupt you—— 

Ms. NULAND. Yes. 

Senator MENENDEZ [continuing]. Because I did read your testimony. I know some people do not read testimonies before. I read 

your testimony. It is why I stepped outside and did something else 

knowing that I had read your testimony. I have the whole section. 

FOREI-MBP-19 with DISTILLER

14 

If the commitments are kept, my concern is what if they are not 

kept? What are we ready to do? What do we think we should do 

in anticipation or in trying to ensure that the commitments are 

kept, because for me, if there are no consequences for Russia not 

to keep their commitments other than that which exists, there is 

not necessarily a reason for them to pursue their commitments, at 

least in the way that we would like to see. You know, we have this 

one step forward, two steps back situation going on. 

So I am trying to get a sense of what we are willing to do. For 

example, the Russians went ahead and at the height of the Maidan 

protests extended a $3 billion bond to then President Yanukovych 

in power to try to help him stay in power. Yanukovych fled the 

country with unknown millions, but as far as I understand, the 

Ukrainian citizen still ends up with the debt. The terms of the 

bond are pretty exorbitant, and Russia could demand an immediate 

payment, which they have not done. I acknowledge they have not 

done so, but they could, so it is an economic weapon at the end of 

the day potentially. 

So should they pay a price with that issue? Should the international community suggest to them if you do not go ahead and 

pursue the elements of Minsk fully, that there is going to be a consequence as it relates to your bond, because we are not necessarily 

going to, in essence, help the Ukrainians pay the Russian bond, 

right? 

Ms. NULAND. Well, first, Senator, as I said and as you have 

helped us to implement throughout this, the first line with regard 

to pressure on Russia from Minsk is the sanctions that the United 

States and the EU have in place, and which will have to be rolled 

over if Minsk is not implemented by January 1. Those sanctions, 

we believe, are biting the Russian economy deeply. I can go 

through the figures if you would like. 

We have also said that if there is a return to violence, if there 

is a new land grab, and we have worked with our European partners on this, there will be an increase in sanctions. I think that the 

message that we sent is that if another round of fake elections 

were held, that would also draw a conversation about more sanctions, had an impact on the decision to prevail and the separatists 

to cancel what would have been a bad scene. 

You are right that there is a $3 billion note coming due for 

Ukraine because Yanukovych took this $3 billion loan as he was 

in his final months. My understanding is that the Ukrainian Government is now approaching the Russian Government, and that 

conversation may begin in coming days at the Lima Bank Fund 

meeting to say we have now made a debt relief deal with our private creditors. If you, Russia, are prepared to accept the same 

terms, then that would be acceptable to Ukraine. We will see what 

Russia does in that circumstance. 

Senator MENENDEZ. Was that not offered and rejected already 

once? 

Ms. NULAND. There has not been a formal conversation about it 

because the deal with the private creditors was only completed a 

couple of weeks ago, so we will see how Russia deals there. Russia 

has said it wants to help Ukraine with its recovery. This would be 

FOREI-MBP-19 with DISTILLER

15 

one way that it could do so. If it does not accept those terms, then 

we will have to work with Ukraine on other options. 

Senator MENENDEZ. Mr. Chairman, if I may, one final comment, 

and that is that, look, I hope that this all works out. But from my 

perspective, hope is not a national security strategy. 

Ms. NULAND. Absolutely. 

Senator MENENDEZ. So the question then becomes, what are we 

ready to do. And I will say that if we wait for Minsk and it does 

not get fulfilled by Russia, and then start thinking about what we 

are going to do, other than keep what we have, and obviously keeping what we have, if they violate or do not fulfill the Minsk agreement, then there will be no reason for them to change course. 

So I hope that we are ready to go with a series of other actions 

to ratchet up the consequence, even putting Syria aside for the moment. But just on this because one of my concerns is that what is 

happening in Syria, for which I think Putin has a series of reasons, 

but not the primary, but a collateral reason is I have got you all 

paying attention over here, and when the time comes, we will do 

what we want to do in Ukraine. So I just hope that we are being 

proactive at the end of the day. 

Ms. NULAND. If I may just say that we did over the summer do 

considerable work with the European Union on what an increase 

in sanctions would look like if that were necessary. 

The CHAIRMAN. Thank you. If you would, share with us the sanctions relief that Russia will receive in the event they satisfactorily 

implement Minsk II. 

Ms. NULAND. Senator, we have—Mr. Chairman, we have talked 

about a rollback of sanctions if Minsk is fully implemented. As I 

said in my testimony, there are certain sanctions that were applied 

for Crimea, about Crimea. Those stay in place. There were other 

sanctions that were applied in direct response to the violence in 

Eastern Ukraine, primarily the sectoral sanctions, the banking 

sanctions. It would be those that we would look at rolling back 

should Minsk be fully implemented, meaning all weapons and foreign forces withdraw and a real election and return of sovereignty 

at the border and hostages. 

The CHAIRMAN. So I know there have been some discussions with 

others about the $3 billion bond payment. And I think what Senator Menendez may have been referring to is maybe those negotiations were not between two real parties, and the former President 

left the country, and was $3 billion the right number, if you will. 

Now, the country certainly is bound by that. 

So I guess there has been some discussion about Russia would 

have huge amounts of war reparations, would they not, that Russia 

would owe Ukraine for what they did. And I am just curious as to 

how people are thinking about ensuring that Ukraine, with their 

economy tanked, with the illegal actions that Russia has taken, is 

there not going to be some type of compensation, if you will, to offset some of the issues that Ukraine has gone through, or is that 

just going to be washed over? 

Ms. NULAND. Well, I do not want to speak for the Ukraine Government and how it would pursue those reparations. But our understanding from our conversations with them is that they are 

working on International Court of Justice cases. They are working 

FOREI-MBP-19 with DISTILLER

16 

on ICC cases, which could apply in some of those cases. But I think 

we can prepare a separate briefing for you on what they are thinking if you are interested in that. 

With regard to, as I said, the debt, our understanding is that 

Ukraine will offer Russia the same proposal that it had with its 

private creditors. We will see if Russia accepts that, and if it does 

not, we will have to see where Ukraine wants to go thereafter. 

The CHAIRMAN. The recent discussions regarding the moving 

back of the elections until February and some of the demands that 

have been placed on Ukraine have read as if the United States and 

Europe have placed additional demands on Ukraine that were very 

much in Russia’s favor. And could you talk just a little bit about 

what those additional demands on Ukraine have been relative to 

moving things back so that Minsk possibly could be successful? 

Ms. NULAND. I would actually argue the opposite, that what we 

have been doing with Ukraine is working with that country to ensure that it can make the case that it has met every single one of 

its Minsk obligations, and thereby shining the spotlight on the nonimplementation by Russia and the separatists. And it is because 

Russia and the separatists have not pulled back weapons, it is because they have not been serious at the political negotiating table 

that the timelines of Minsk are probably going to have to be moved 

out. 

But as I said, that also means that sanctions will stay in place 

longer. So it is Russia that has, by not meeting the original Minsk 

timelines, ensured that it stays under sanctions longer than was 

originally intended. 

Now, in working with the Ukrainians to ensure that their record 

was completely unimpeachable on Minsk implementation, we did, 

along with our European partners, support early work on the constitutional amendments on decentralization, which are good for the 

country nationally, but which include this very difficult concession 

that Ukraine made at the Minsk table to codify in the constitution 

special status for these territories in Donetsk and Luhansk Oblast. 

This caused a huge reaction in the Parliament when it was originally reviewed in August and again in September because a number of Ukraine legislators—probably you met some of them—felt 

that they should not be forced to make those moves in advance of 

a real cease-fire in advance of a real weapons pullback. They did, 

though. They did the statesman-like thing, and now it will be on 

Russia and the separatists to implement their portions. 

The CHAIRMAN. On the corruption front, you know, we have 

heard good reports about the police that you referred to, and certainly they are making significant efforts within the country, a 

country that, let us face it, is at least 20 years behind the rest of 

Europe because of its inheritance from the Soviet Union, but also 

all the corruption that takes place within the country. 

We understand the, you know, big power center, if you will, in 

Ukraine is the oligarchs, and it would seem to me that that would 

be—those would be a group of people that can help determine success and certainly help make it not happen. Can you talk to us a 

little bit about that evolution? 

Ms. NULAND. Well, you are absolutely right, Chairman, that 

there is a 20-, maybe longer, year tradition in Ukraine of the bigFOREI-MBP-19 with DISTILLER

17 

gest business folk, the oligarchs having sweetheart deals with corrupt politicians. In the context of the IMF reform process, the 

Ukrainian Government, both the Prime Minister and President sat 

down individually with each of the major power brokers, and renegotiated some of the deals that they had had with Yanukovych 

so that they would be more transparent, so that these guys would 

be paying their taxes, so that the royalties owed to the state for 

resources of the state were appropriate and at world market prices. 

And most of the major oligarchs were willing to sit down and cut 

those deals. A number of them are now paying their taxes, as I 

mentioned. The coal is now being delivered to Ukraine, et cetera. 

But there are a few that have either broken deals, or are not paying their taxes, or are using ill-gotten gains to throw money around 

in the political system. And the Ukrainian Government is now considering what kind of legal action it can take against those people. 

And we are making clear as the Vice President has, as the President has in all of his statements, the Secretary has, and as I did 

at a conference in Ukraine, that there should be zero tolerance for 

anybody who does not pay their taxes, for anybody who continues 

in this environment to rip off the people of Ukraine. 

The CHAIRMAN. Thank you. I do not—if there are additional 

questions, I am glad for those to be asked. I would just ask in closing, I know we have another panel, and thank you for being here. 

Are there additional things that you plan to be asking Congress to 

pursue relative to Ukraine? Are there things that we might do to 

provide even more assistance to the administration and others as 

we deal with Ukraine? 

Ms. NULAND. Mr. Chairman, the Congress has been extremely 

generous in fulfilling and sometimes over fulfilling our requests, so 

we are very grateful for that. As I said in my testimony, if Ukraine 

stays on track, we do anticipate coming and asking you some time 

this winter to support a third loan guarantee for Ukraine. The conditions that we will put on it in our negotiations with Ukraine will 

cover many of the issues we discussed here today, primarily implementation of anticorruption measures. 

The CHAIRMAN. I do think it would be helpful, maybe not in a 

hearing, but for there to be a small briefing of some kind for us 

to fully understand the sanctions relief that is going to be taking 

place relative to Russia. And I hope that we are not sending signals 

to Russia that they come into countries like this, destabilize countries like this, in many ways get their wishes relative to how Eastern Ukraine is going to be governed, and leave, and have all sanctions released. So I do hope we can, and we will be following up 

to make sure we fully understand what is happening there. 

We thank you for your testimony and your service to our country. 

Thank you. 

Ms. NULAND. Thank you, Chairman. Delighted to come brief. 

The CHAIRMAN. So we will bring the next panel up. We thank 

you for your patience. 

This panel consists of two witnesses. The first witness is Ambassador Paula J. Dobriansky, the former Under Secretary of State for 

Democracy and Global Affairs., senior fellow for the Future of Diplomacy Project at Harvard University, JFK Belfer Center for 

Science and International Affairs. Thank you so much for being 

FOREI-MBP-19 with DISTILLER

18 

here and for listening to us. Our second witness will be Hon. 

Clifford G. Bond, the former Ambassador to Bosnia, and former 

United States assistance coordinator in Ukraine. 

We thank you both for being here. I know you all have been before us before and certainly participated. If you could keep your 

comments to around 5 minutes, and your written testimony, without objection, will be entered into the record. And with that, in 

whichever order you feel like is best, begin. 

Ambassador BOND. Ladies first. 

The CHAIRMAN. Ladies first apparently. Thank you so much. 

STATEMENT OF HON. PAULA J. DOBRIANSKY, FORMER UNDER 

SECRETARY OF STATE FOR DEMOCRACY AND GLOBAL 

AFFAIRS, SENIOR FELLOW FOR THE FUTURE OF DIPLOMACY PROJECT, HARVARD UNIVERSITY JFK BELFER CENTER FOR SCIENCE AND INTERNATIONAL AFFAIRS, CAMBRIDGE, MA 

Ambassador DOBRIANSKY. Thank you, Chairman Corker and 

members of the Senate Foreign Relations Committee. I appreciate 

the opportunity to testify before you today concerning why 

Ukraine’s economic and political future matters and what should 

be done to secure it. 

This hearing is both timely and essential. While Russian airstrikes in Syria have properly caused the global community to 

focus on events playing out in the Middle East, attention unfortunately has been diverted from the grave situation in Ukraine. Russia continues its illegal occupation of Crimea and has embarked on 

a variety of measures designed to finalize its unlawful annexation 

of that portion of Ukraine’s territory. 

Meanwhile Russian-led aggression continues unabated in Eastern Ukraine in violation of the Minsk cease-fire agreement. More 

than 6,400 Ukrainians have lost their lives, and more than 1.5 million have been displaced because of Russia’s invasion. At the same 

time Ukraine is fighting a war on its eastern front, the Kiev government seeks to revitalize its economy and secure needed Western 

aid. Their circumstances are extremely difficult as Moscow continues to destabilize Ukraine by adding to its war costs, keeping 

energy prices artificially high, resisting efforts at debt rescheduling 

or reduction, blocking Ukraine’s trade, and inhibiting foreign investment there. 

Despite these major challenges, the Ukrainian Government has 

achieved some notable progress: partial debt rescheduling, improved tax collection, reduced government procurement, passage of 

anticorruption laws, disclosure of assets of members of Parliament, 

and curbed energy subsidies. Change and substantial reform in 

Ukraine will take time—but it is an effort which is both in 

Ukraine’s interest and in our national security interest. Accordingly, it deserves our steadfast, long-term support. 

Moscow’s aggression against Ukraine is a component of Putin’s 

strategic vision, which he has laid out openly in a series of speeches, not isolated misbehavior. Clearly understanding his desire to 

reverse the consequences of the Soviet Union’s collapse and a rejection of the existing international system’s legitimacy is central to 

understanding why long-term support for Ukraine is so crucial. 

FOREI-MBP-19 with DISTILLER

19 

The Atlantic Council has outlined the task at hand—‘‘Secure Europe’s East—Support Ukraine.’’ Their experts call for three basic 

steps: stop Putin through enhanced economic sanctions, support 

Ukraine through increased U.S. economic assistance and military 

and humanitarian aid, and strengthen NATO. What happens in 

Ukraine is not just Europe’s concern. Both the United States and 

Europe have a stake in seeing a democratic, economically strong 

Ukraine. 

Russia’s invasion of Ukraine starting in February 2014 in Crimea marks the first annexation of one European country’s territory 

by another since World War II, and threatens the normative order 

and geostrategic stability in Europe. Our values, institutions, and 

alliances have been directly challenged. Putin abrogated the 1994 

Budapest Memorandum and other agreements which have kept the 

peace in Europe for decades and buttress nuclear nonproliferation. 

To not act and leave Putin’s aggression unchallenged sends a signal to other authoritarian regimes that they, too, can commit acts 

of aggression without consequences. 

The crisis in Ukraine has created a highly dangerous situation 

in Europe fraught with risks of further Russian aggression. There 

are several important implications to consider. First, this crisis underscores that the end of the cold war, which saw the collapse of 

the Soviet Union and the creation of many European economic and 

security institutions, has not rendered Europe immune to new security and political challenges. 

Second, as the developments in Ukraine since it became independent demonstrate, the path to democracy in post-Communist 

countries is a difficult one filled with dangers, especially if domestic 

problems are exacerbated by other countries. To survive Ukraine 

needs long-term economic assistance and targeted military aid that 

can augment the fighting capabilities of the Ukrainian military. 

Third, the Ukraine crisis highlights the precarious security of the 

Baltic States and their extreme vulnerability to Russian pressure 

and potential military action. The failure of the West to confront 

Russia more directly in Ukraine has emboldened Moscow to take 

provocative actions along other parts of its periphery. 

Fourth, new thinking is needed on sanctions. Fifth, the assumption that post-Communist Russia has become a responsible member 

of the international community, seeking to work within the framework of existing international institutions and the rule of law, has 

proven to be unfounded. Last, there is no substitute for an engaged 

American policy to exercise robust leadership. 

Let me close by briefly elaborating on economic sanctions and 

military assistance to Ukraine. Ukraine’s President, Poroshenko, 

has requested military aid and training from the West. Specifically 

he has requested antitank weaponry, antibattery radar systems, 

and other types of defensive military equipment. We must act upon 

this request. We must also extend and expand economic sanctions 

which will impose a heightened cost for Russia’s aggressive actions. 

Despite Moscow’s far-reaching strategic aspirations, Russia is operating from a weak posture. The Russian economy continues to 

shrink. Russia’s greatest vulnerability may be its refineries. While 

Russia is one of the world’s top energy producers, its refining faciliFOREI-MBP-19 with DISTILLER

20 

ties are antiquated, have no spare capacity, and must be refurbished with Western spare parts on a continuous basis. 

Much of this equipment is of U.S. origin. If Congress were to 

enact statutory sanctions placing an embargo on exports to Russia 

of refinery pumps, compressors, control equipment, and catalytic 

agents, it would cause widespread shortages of refined products, 

putting tremendous pressure on Russia’s civilian economy and 

Moscow’s ability to carry out military operations. 

In sum, the most effective strategy is to provide military, economic, and humanitarian assistance to Ukraine in the long term. 

I look forward to your questions. Thank you. 

[The prepared statement of Ambassador Dobriansky follows:] 

PREPARED STATEMENT OF AMBASSADOR PANLA J. DOBRIANSKY

Chairman Corker, Ranking Member Cardin, and members of the Senate Foreign 

Relations Committee, I appreciate the opportunity to testify before you today concerning why Ukraine’s economic and political future matters and what should be 

done to secure it. 

This hearing is both timely and essential. While Russian airstrikes in Syria have 

properly caused the global community to focus on events playing out in the Middle 

East, attention has unfortunately been diverted from the grave situation in Ukraine. 

Russia continued its illegal occupation of Crimea and has embarked on a variety 

of measures, designed to finalize its unlawful annexation of that portion of 

Ukraine’s territory. Meanwhile, Moscow-led aggression continues unabated in Eastern Ukraine, in violation of the Minsk cease-fire agreement. More that 6,400 

Ukrainians have lost their lives and more than 1.5 million have been displaced 

because of Russia’s invasion. 

At the same time Ukraine is fighting a war on its eastern front, the Kiev government seeks to revitalize its economy and secure needed Western aid. Their circumstances are extremely difficult, as Moscow continued to destabilize Ukraine by 

adding to its war costs, keeping energy prices artificially high, resisting efforts at 

debt rescheduling or reduction, blocking Ukraine’s trade and inhibiting foreign 

investment there. Despite these major challenges, the Ukrainian Government has 

achieved some notable progress: partial debt rescheduling, improved tax collection, 

reduced government procurement, passage of anticorruption laws, disclosure of 

assets of members of Parliament, and curbed energy subsidies. Change and substantial reform in Ukraine will take time—but it is an effort which is both in Ukraine’s 

interest and in our national security interest. Accordingly, it deserves our steadfast, 

long-term support. 

Moscow’s aggression against Ukraine is a component of Putin’s strategic vision, 

which he has laid out openly in a series of speeches, not isolated misbehavior. 

Clearly understanding his desire to reverse the consequences of the Soviet Union’s 

collapse and a rejection of the existing international system’s legitimacy is central 

to understanding why long-term support for Ukraine is so crucial. 

The Atlantic Council has outlined the task at hand—‘‘Secure Europe’s east—support Ukraine.’’ Their experts call for three basic steps: (1) stop Putin through 

enhanced economic sanctions, (2) support Ukraine through increased U.S. economic 

assistance and military and humanitarian aid, and (3) strengthen NATO. 

What happens in Ukraine is not just Europe’s concerns. Both the United States 

and Europe have a stake in seeing a democratic, economically strong Ukraine. 

Russia’s invasion of Ukraine, starting in February 2014 in Crimea, marks the 

first annexation of one European country’s territory by another since World War II 

and threatens the normative order and geostrategic stability in Europe. Our values, 

institutions and alliances have been directly challenged. Putin abrogated the 1994 

Budapest Memorandum and other agreements which have kept the peace in Europe 

for decades and buttress nuclear nonproliferation. To not act and leave Putin’s 

aggression unchallenged sends a signal to other authoritarian regimes that they too 

can commit acts of aggression without consequences. 

The crisis in Ukraine has created a highly dangerous situation in Europe fraught 

with risks of further Russian aggression. There are several important implications 

to consider: 

• First, this crisis underscores that the end of the cold war, which saw the collapse of the Soviet Union and the creation of many European economic and 

FOREI-MBP-19 with DISTILLER

21 

security institutions, has not rendered Europe immune to new security and 

political challenges. 

• Second, as the developments in Ukraine since it became independent demonstrate, the path to democracy in post-Communist countries is a difficult one 

filled with dangers, especially if domestic problems are exacerbated by other 

countries. To survive, Ukraine needs long-term economic assistance and targeted military aid that can augment the fighting capabilities of the Ukrainian 

military. 

• Third, the Ukrainian crisis highlights the precarious security of the Baltic 

States and their extreme vulnerability to Russian pressure and potential military action. The failure of the West to confront Russia more directly in Ukraine 

has emboldened Moscow to take provocative actions along other parts of its 

periphery. 

• Fourth, new thinking is needed on sanctions. 

• Fifth, the assumption that post—Communist Russia has become a responsible 

member of the international community seeking to work within the framework 

of existing international institutions and the rule of law has proven to be 

unfounded. 

• Last, there is no substitute for an engaged American policy to exercise robust 

leadership. 

Let me close by briefly elaborating on economic sanctions and military assistance 

to Ukraine. Ukraine’s President Poroshenko has requested military aid and training 

from the West. Specifically, he has requested antitank weaponry, antibattery radar 

systems, and other types of defensive military equipment. We must act upon this 

request. 

We must also extend and expand economic sanctions, which will impose a heightened cost for Russia’s aggressive actions. 

Despite Moscow’s far-reaching strategic aspirations, Russia is operating from a 

weak posture. The Russian economy continues to shrink. Russia’s greatest vulnerability may be its refineries. While Russia is one of the world’s top energy producers, its refining facilities are antiquated, have no spare capacity and must be 

refurbished with Western spare parts on a continuous basis. Much of this equipment is of U.S. origin. If Congress were to enact statutory sanctions, placing an embargo on exports to Russia of refinery pumps, compressors, control equipment and 

catalytic agents, it would cause widespread shortages of refined products, putting 

tremendous pressure of Russia’s civilian economy and Moscow’s ability to carry out 

military operations. 

In sum, the most effective strategy is to provide military, economic, and humanitarian assistance to Ukraine in the long term. 

I look forward to your questions. 

The CHAIRMAN. Thank you very much. Thanks for being here. 

Mr. Bond, sir. Ambassador. 

STATEMENT OF HON. CLIFFORD G. BOND, FORMER AMBASSADOR TO BOSNIA AND HERZEGOVINA AND U.S. ASSISTANCE 

COORDINATOR IN UKRAINE, U.S. DEPARTMENT OF STATE, 

WASHINGTON, DC 

Ambassador BOND. Thank you very much. It is a pleasure being 

here. I met several of you gentlemen and lady in Kiev over the past 

17 months when I was working on coordinating and expanding our 

assistance program in Kiev. My work focused on the technical and 

humanitarian aspects of the assistance program, though an important security component was built up over those months as well. 

I am going to make a few comments about the economic transition in Ukraine. Those comments are informed by my experience 

in Eastern Europe and Prague for the Velvet Revolution, and then 

working in Washington on the support for East European Democracy Act and implementing it, and then later, my experience in 

Moscow where we saw a failed economic transition. And what I 

have to say now, I want to be clear is not criticism and should not 

be viewed as criticism, but is a hard-headed approach to what 

FOREI-MBP-19 with DISTILLER

22 

needs to be done if we want to see Ukraine develop a functioning 

market economy. 

First off, the current Kiev government is the most reformedminded and technically the most competent team Ukraine has had 

since post-Communist times. But I am afraid its goals are not ambitious enough and they are not radical enough, and the process of 

reform, as others have said, is only just beginning in Ukraine. 

There have been important successes. Raising energy tariffs and 

meeting other IMF conditions. The patrol police reform in Kiev, 

which was already discussed, is a big success, and is now being repeated in many cities, and we have had agreement on debt restructuring. 

But the reformers are facing serious resistance in a number of 

key areas, including the fight against corruption. The prosecutor 

general’s office should be ground zero for that fight. Unfortunately, 

the prosecutor general’s office has not completed a single criminal 

investigation or criminal prosecution of any senior-level figure from 

the Yanukovych era. We have Department of Justice and FBI advisors working with reformers inside the prosecutor general’s office. 

They are being resisted and fought by old thinkers and old timers 

in that bureau, and they need the support of senior members of the 

government if they are to succeed. 

A new anticorruption bureau, which was discussed and which is 

being formed, will rely on the PGO’s office for any corruption prosecutions. And the PGO’s office is, frankly, just not doing its job 

right now. In the health ministry, there are efforts to reform the 

procurement system. That is essential because the procurement 

system was deeply corrupt and resulted in a catastrophically low 

level of vaccinations of Ukraine youth, and we have just seen the 

first signs of polio outbreaks in Western Ukraine. In some areas, 

in fact, privatization and deregulation, for example, reforms are 

only just beginning. 

My bottom line is what the Ukrainian economy basically needs 

is a fundamental liberalization and deregulation to include broad 

privatization of more than 2,200 state-owned enterprises. What 

economists sometimes refer to as the factor markets of production 

for land, labor, and capital just are not functioning in Ukraine. If 

you are an SME owner or an entrepreneur, you find it very difficult 

to buy real estate, you cannot get capital or a loan from a bank. 

There are hiring practices and restriction that make it very difficult for you to set up your business. This is a key problem. 

Again from my experience in Eastern Europe it is important for 

macroeconomic policies to be coordinated and focused. Some ministries are doing outstanding work, but there is no central figure 

in the government who is pulling all of those pieces together for a 

comprehensive macroeconomic strategy. 

In Eastern Europe countries where transitions were successful, 

they were led by a Deputy Prime Minister, who usually was double-hated as the Finance Minister. I am thinking of Leszek 

Balcerowicz in Poland and Vaclav Klaus in Prague. There is no figure like that in Ukraine, and I think the Prime Minister and the 

President need to agree and empower such an individual to lead 

the whole process of market reforms. 

FOREI-MBP-19 with DISTILLER

23 

A big part of the problem is a lack of understanding on the part 

of the general public, a lack of communication by political leaders 

on what a market economy is and how it works. Significantly, there 

is a recent poll conducted by the International Republican Institute 

that shows two-thirds of the citizens of the country believe that 

government should be supplying jobs and investment. Less then 10 

percent understand that it should be the private sector. This is 

part of the Soviet legacy that needs to change. 

In Eastern Europe, focusing on developing the private sector was 

key to the success of the transitions. Poland, for example, focused 

on SME creation, and that resulted in investment, growth, and 

jobs. The GOU seems to be—the Government of Ukraine seems to 

be focused on meeting the conditions required by the IMF, and that 

is important, it is essential it is how you are going to get the 

money to pay the bills. But it is not a substitute for a growth strategy that gets out in front of that IMF demanded reform curve to 

get things moving in the broader economy. 

Energy is a perfect example of this. They have raised the tariffs 

as required by the IMF, but have not done anything to fundamentally reform the Ministry of Energy or the energy sector itself, 

which is not really a market, but a battleground of competing oligarchic interests. This point was made at a recent Ukraine Foundation Conference which discussed the energy situation. 

I have more to say on the question of assistance, but we do need 

assistance so that we can work with reformers to build institutions, 

fight corruption, and create conditions for growth. And that that is 

going to require a long-term assistance strategy with our partners, 

other donors, and a commitment from Congress to multiyear funding and additional resources. 

Visiting congressional delegations, including your members of 

your committee, have repeatedly told us that they are ready to consider substantial expansion of assistance to Ukraine, and that they 

understand its importance. Ukraine’s success is essential for the 

wider security of Europe and fulfilling the vision of a continent 

whole, free, and at peace. 

Now, if we were able to get substantial new resources, I have 

some ideas about how they could be used. We have been trying to 

direct the resources we do have to make more of an impact on reforms in Ukraine already. One thing I think we need to do is consider new forms of macroeconomic support. The loan guarantees 

that we are providing are very costly in terms of our assistance dollars. They also place a very heavy sovereign debt burden on 

Ukraine itself. 

We can look to the Support for East European Democracy 

(SEED) Program of the early 1990s for successful ideas of how we 

support successful reforms then. With more macroeconomic support, in particular, we would create a financial cushion that would 

allow Ukraine reformers to be more radical. 

Thank you very much, and I welcome your questions. 

[The prepared statement of Ambassador Bond follows:] 

PREPARED STATEMENT OF CLIFFORD G. BOND

It is a pleasure to appear before the committee today and join my fellow panelist. 

I returned only a few weeks ago from Kiev where I worked for 17 months on 

expanding and coordinating our assistance program to Ukraine. Over those months 

FOREI-MBP-19 with DISTILLER

24 

our assistance grew by more than four times and included a significant security 

component. I arrived as the aggression was beginning in Eastern Ukraine and as 

a humanitarian crisis developed. My work was focused on technical and humanitarian assistance, not the security aspects of the program. 

I will make some comments on the state of economic reforms and transition in 

Ukraine that our program is meant to support. 

I have past experience in economic transitions. I witnessed a successful transition 

in Eastern Europe in the early 1990s when I served in Prague during the Velvet 

Revolution and later worked in Washington implementing our Support for East 

European Democracy or SEED assistance program. Later in the 1990s I saw a failed 

transition when I worked at our Embassy in Moscow. 

What I have to say now is informed by this experience. It should not be viewed 

as criticism, but as a hardheaded approach to what needs to be done if Ukraine is 

to succeed in an economic transition to a well-functioning market economy. 

First off, the current Kiev government is the most reform-minded and technically 

most competent team in post-Soviet times, but its goals are not ambitious or radical 

enough, and the process of reform has only begun. There have been important successes: energy tariff rate increases and meeting other IMF conditions, the recent 

rollout of a new patrol police in Kiev, a reform now being repeated in other cities, 

and agreement on debt restructuring. 

But reformers face increasing resistance to change in key areas such as 

anticorruption. The Prosecutor General’s Office (or PGO) should be ground zero for 

the fight against corruption, but the PGO has yet to carry out a corruption prosecution against a senior Yanukovych-era figure. The PGO is divided between reformers 

who want to work with our FBI and DOJ advisors (and need full political support 

from the top), and an old guard that is frustrating and seeking to intimidate them. 

A new Anti-Corruption Bureau is being formed, which will rely on the PGO to 

prosecute any criminal investigations it concludes. But, as I said, the PGO is not 

doing its job. In the Health Ministry efforts to change corrupt procurement practices 

are being resisted by domestic pharmaceutical interests —even in the face of low 

levels of vaccination and immunization among Ukrainian children (a direct result 

of past corrupt practices) and the first outbreak of polio cases in western Ukraine. 

In some areas, such as privatization and de-regulation, reforms are only getting 

started. What the Ukrainian economy needs is fundamental liberalization and deregulation to include broad privatization of its approximately 2,200 State-owned 

Enterprises (SOEs). 

What economists call the factor markets of production in the economy for land, 

labor, and capital are simply not functioning because of structural impediments and 

rigidities built into the system or because of corruption, past and on going. This 

means an entrepreneur or SME finds it extremely difficult to buy the real estate 

(there is no market in farm land), raise capital (the banks are not lending) or hire 

the people he/she needs to start up or expand a business. 

LACK OF MACROECONOMIC COORDINATION

Importantly from a macroeconomic perspective, there is no overall coordinator of 

market reforms. Some ministers are out there doing important work, but there is 

no central figure overseeing and coordinating the process with a strategic vision in 

mind to pull the pieces together. 

In east European transition economies the senior Deputy Prime Minister who was 

usually double hatted as Finance Minister played this role. Poland’s Leszek 

Balcerowicz and the Czech Republic’s Vaclav Klaus were key to the success of economic reform in their countries. The Prime Minister and President need to empower 

an individual with real reform credentials to fill this function and step out of the 

way to let him or her get the job done. 

NEED FOR STRATEGIC COMMUNICATION

Part of the problem is also lack of understanding on the level of the general public 

and a lack of communication by political leaders of what a market economy is and 

how it should operate. Public surveys, such as a recent IRI poll, show that twothirds of citizens believe investment and job creation are the responsibility of the 

government. Less than 10 percent understand this should be the role of the private 

sector. 

FOCUS

Early cleanup of the business and investment climate was central to the success 

of the transitions in Eastern Europe. Poland focused on SME growth. This produced 

FOREI-MBP-19 with DISTILLER

25 

new businesses, jobs and investment, and gave government the political capital to 

move on to other reforms. 

The GoU is focused on meeting the conditions required by the IMF and other 

donors. These are hard conditions and meeting them is essential to get the money 

to pay the bills. It is not a substitute, however, for a growth strategy that gets out 

ahead of the IMF-demanded reform curve. Energy is an example of the problem. 

The GoU has done difficult things, like raising energy tariffs as the IMF required, 

but it has not fundamentally reformed the corrupt Ministry of Energy nor changed 

the sector, which is not a market, but a battleground of struggling interest groups. 

(This point was made at a recent Ukraine Foundation conference discussion of 

reforms.) 

MORE INTERNATIONAL ASSISTANCE

We need to work with reformers to build institutions, fight corruption and create 

conditions for growth. This will require a long-term assistance strategy coordinated 

with our partners and a commitment from Congress to multiyear funding and additional resources. 

Visiting congressional delegations repeatedly told us in Kiev that they are ready 

to consider a substantial expansion in assistance to Ukraine. They understand that 

our support to Ukraine is important, but is currently insufficient, particularly in 

comparison to our response to the Georgia crisis of 2008. 

Ukraine’s success is essential for the wider security of Europe and fulfilling the 

vision of a continent ‘‘whole, free, and at peace.’’ 

HOW WOULD WE USE ADDITIONAL MONEY?

We should consider new forms of macroeconomic support and link this to tougher, 

more market-oriented reforms. Our current use of loan guarantees is costly in terms 

of assistance dollars and is placing a heavy sovereign debt burden on Ukraine. 

We should look to the sorts of things done under the SEED Act in the early 1990s. 

It will be easier for Ukraine’s reformers to be more radical when they have a macroeconomic cushion for the economy. 

The government badly needs public sector and civil service reform. The current 

bloated and poorly paid bureaucracy is a brake on reform implementation, and a 

source of corruption. But this is an enormous and expensive task. 

It is not a task a single donor or the Ukrainian Government can assume alone. 

But with additional funding we could work with the EU and other donors to undertake widespread public sector reform. 

We also need to support a massive privatization effort with the advisors and technical assistance to do the due diligence to prepare hundreds of state-owned enterprises for transparent privatization process that will attract strategic investors. 

In addition to the conflict in the East and fighting for reform in Kiev, Ukraine 

faces a humanitarian crisis, largely overlooked in the West. This involves more than 

1.5 million displaced persons inside the country, more than a million refugees outside it and millions more trapped and vulnerable in the area of conflict. 

Neither we, nor our European allies are stepping up with an adequate response 

to the needs of these people, particularly as they face the onset of a second winter. 

In conclusion, Ukraine needs to redouble efforts at reform and adopt deeper, more 

radical market-oriented measures, particularly by cleaning up the business and 

investment environment. The U.S. and international community need to explain the 

stakes to their publics and think bigger and more strategically in terms of the level 

and types of assistance that can be made available. 

The CHAIRMAN. Thank you very much. 

Senator Menendez. 

Senator MENENDEZ. Well, thank you both for your testimony. 

Ambassador Dobriansky, your testimony is more forward leaning in 

terms of—and by that I mean Ambassador Bond is focused on the 

economics, so you had a whole different set of agendas, different 

than what we heard from Secretary Nuland, from my perspective, 

and you mentioned the Atlantic Council. 

So let me ask you about a couple of those things. Number one 

is as it relates to sanctions, is there a set of ideas that you all 

have? Is it about being prepared? If Minsk does not move forward 

FOREI-MBP-19 with DISTILLER

26 

fully enforced, is it before that? Is it proactive? What are you thinking about in that regard? 

Ambassador DOBRIANSKY. Earlier when you posed the question 

to the Assistant Secretary, it certainly caught my attention because 

the sanctions that had been imposed on Russia by the administration, although they have had an impact, the costs have not been 

that great to deter Russia from what it is doing, and not just in 

Europe, but also in Syria. And I think there is a concern in Europe 

about Russia’s next move. 

So to answer your question, it is now and later. It is looking at 

strengthened sanctions now. We need to focus on what we should 

be doing further because we are not operating and having discussions from a position of strength. In the discussions that we are 

having with Russia, we are not having the kind of influence and 

impact that we should. We have not deterred Russia, at least as 

I can see, in terms of their actions. So our focus is on now and beyond. 

Senator MENENDEZ. Let me ask you, I personally have been an 

advocate, as I think the majority of this committee has, of providing lethal weapons to the Ukrainians—lethal defensive weapons 

to the Ukrainians. It is great to provide night vision goggles so that 

you can see your enemy coming, but if you cannot stop it, it does 

not do you very good to see them coming. 

So the response to that is, well, that would only potentially create a greater provocation by Russia. It does not seem that Russia 

has needed much provocation to use its military might so far—Crimea, Eastern Ukraine, and now Syria. So I doubt provocation is 

really an answer. But it seems to me that the existence of 

Ukraine’s ability to defend itself and up the cost to Putin is part 

of an equation to try to both deter him from doing anything more, 

and maybe to get the implementation of Minsk as we would like 

to see. Do you support that view? 

Ambassador DOBRIANSKY. First, if I may—— 

Senator MENENDEZ. Sure. 

Ambassador DOBRIANSKY [continuing]. I was here in Congress 

when Ukraine’s President Poroshenko delivered his remarks before 

the joint session and said to the United States, thank you for the 

blankets, but blankets will not win wars. Ukraine needs serious 

military aid and assistance to be able to defend its territory and 

to push back against these Russia-backed separatists or terrorists, 

as the Ukrainians call them, and also to push back against Moscow. 

Our support militarily, not only would be in response to the request from Ukraine, but, significantly, I think it sends a very important and clear signal in terms of our concern about what is happening on the ground there. We were one of the signatories of the 

1994 Budapest Accords. We do have on obligation to fulfill it, and 

in that context, Ukrainians are saying, please help us, let us defend ourselves. It is not only a military issue for Ukraine’s self-defense, but a political one as well. I do not support the argument 

and concern about escalation. 

Putin is very concerned about Russian soldiers, dying. You know 

that former Russian Deputy Prime Minister Boris Nemtsov was 

murdered near the Kremlin. He was going to release a documenFOREI-MBP-19 with DISTILLER

27 

tary on Russia’s military in Ukraine. The Atlantic Council also has 

a report called ‘‘Hiding in Plain Sight,’’ which documents in detail 

the scale and scope of Russian involvement in Ukraine. And then 

third, there is just the political dimension here of what we are 

about and what we stand for. Not moving on providing military aid 

sends a very bad signal indeed. 

Senator MENENDEZ. The Budapest Agreement where we gave 

Ukraine security assurances if they gave up their nuclear weapons 

that we would protect their territorial integrity, that has not 

worked out too well for them. 

Ambassador DOBRIANSKY. That is correct. In fact, interestingly 

enough, when Russia illegally annexed Crimea, and then invaded 

Ukraine’s eastern territory, I remember reading in Japanese press 

about their concern about the credibility of U.S. extended deterrence in Asia. This also has ramifications for global nuclear proliferation given Moscow’s abrogation of those accords. It is not just 

about Ukraine. 

Senator MENENDEZ. Ambassador Bond, let me ask you a question. Your testimony has a lot of golden nuggets in there about 

things we can be doing and should be considering as we help 

Ukraine achieve an economy that can grow. But as a prerequisite 

to that or as a condition of success, how can they ultimately—if 

they did every reform that we could envision, can they really ultimately succeed when a part of the most robust economic part of the 

country, which is the eastern part, which the head of the IMF said 

was about 20 percent of their GDP. If that ends up being gone, just 

for argument sake, how successful can they be? 

Ambassador BOND. I think there is no question—— 

Senator MENENDEZ. If you can put your microphone—— 

Ambassador BOND. I think there is no question that they can be 

very successful. That eastern part is the old industrial base of the 

economy, so if—— 

Senator MENENDEZ. So if it is—— 

Ambassador BOND. It is a rust belt. 

Senator MENENDEZ. Okay. 

Ambassador BOND. Some have—some investors there, domestic 

investors, have upgraded those industries, but their future is in the 

knowledge economy. It is in agriculture. It is in energy efficiency, 

information technology. They have the base in the rest of Ukraine 

to succeed. 

Senator MENENDEZ. For all intents and purposes, not that they 

want to, but you are suggesting they could lose that 20 percent and 

still be successful. 

Ambassador BOND. Yes, I think the country could be economically successful. Of course, no one wants to see them lose the 

Donbass and the eastern parts of the country that are now occupied. It creates—being occupied, not being under the control of 

Ukraine means less tax revenue, less of a base to support the conflict that they need to support, less money to finance some reforms. 

But an argument I tried to make was that deregulation and liberalization may not actually be very costly. It is removing regulation, it is removing sources of corruption. And you hear it again 

and again from Ukraine business people when you talk to them. 

FOREI-MBP-19 with DISTILLER

28 

Senator MENENDEZ. If I may, one very final question, Mr. Chairman. So investment, investors. 

Ambassador BOND. Right. 

Senator MENENDEZ. External investors. So they see what is happening in Eastern Ukraine, and they say to themselves, I do not 

know how far this is going to go. I do not know what it is going 

to create as a ripple effect across the country. Does it undermine 

the opportunity to bring investment, or is your view that the reforms is what undermines investment? 

Ambassador BOND. Reforms, systemic reforms are undermining 

investment, particularly substantial strategic investors who might 

be interested in some of those state-owned enterprises that need to 

be privatized. There is a plant, the Odessa Portside Plant, which 

is the largest fertilizer factory in Europe. That is a state-owned enterprise which could be privatized if it was done correctly, transparently. With due diligence and the proper paperwork, it would 

attract strategic European and American investors. And there are 

other examples of that throughout the economy. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. Ambassador Bond, I happen to agree 

with the comments of the other Ambassador relative to our support 

of them defensively and in other ways, intelligence which we have 

been just incredibly remiss in not sharing. Do you share those 

thoughts relative to, again, defensive lethal weaponry? I know we 

are a little different stage of the evolution right now. 

Ambassador BOND. Right. As I said, that was not my lane in the 

Embassy, but I personally believed that lethal defensive weapons 

should be considered for Ukraine. We have seen the Minsk agreement signed when the body counts of fallen Russian soldiers has 

gone sharply up. I think it will create a deterrent. It will create a 

cost, but Putin does not see it right now. 

The CHAIRMAN. As far as the details of the Minsk II agreement 

relative to our sanctions relief for Russia, we put sanctions in place 

because of what they had done in Eastern Ukraine, and we also 

had sanctions relative to Crimea. Have you gone through those and 

looked at those and feel there is a balance, an appropriate balance 

there regarding the relief that is being given to them by simply 

agreeing to an accord after they have come in and destabilized the 

country the way they have? 

Ambassador BOND. Senator, I have not. That, again, was not 

part of my brief when I was working at the Embassy. My small 

part of following Minsk were the humanitarian aspects where there 

is a working group that is supposed to be finding ways to get humanitarian assistance into the conflict area for civilians. It has not 

been very successful. 

But, you know, we talk about the fight in the East and we talk 

about the reform fight in Kiev against corruption and everything 

else. There is a third struggle going on on the humanitarian front 

where, as Ambassador Dobriansky said, they have got $1.5 million 

displaced persons in the country, another million fled outside as 

refugees, and millions of other people who are trapped in this area 

of conflict and that we cannot get humanitarian supplies in to support them, particularly with the onset of a second winter for these 

people. 

FOREI-MBP-19 with DISTILLER

29 

The CHAIRMAN. Ambassador Dobriansky, have you seen those— 

have you examined the relief that is going to be given to Russia 

for somewhat fully implementing Minsk? 

Ambassador DOBRIANSKY. No, I cannot say that I have studied 

that in detail, but I will make two comments relative to the Minsk 

accords. I would have liked to have seen the United States at that 

table, quite frankly, as part of the discussions taking place. I think 

our European allies, Germany and France, are working very hard, 

but I think that the United States should be engaged there as well. 

We have a stake in the future of Europe. We are part of the transatlantic community. 

Secondly, I would just say that hearing Ukrainian officials speak 

about what is contained in the Minsk Accords, I think there is significant concern about certain interpretations of the text. Russian 

President Putin has stated very clearly his aspiration to see federalism established in Ukraine whereas the Ukrainians emphasize 

‘‘decentralization.’’ 

So my concern is politically what will unfold, and Russia’s actual 

influence already on the ground in Eastern Ukraine. And as Ambassador Bond pointed out, even just from the humanitarian side, 

OSCE is not able to bring in assistance, no less to be able to evaluate the political situation on the ground there. 

The CHAIRMAN. What is your sense, and I know there is no way 

for you to fully know, but what is your sense of the role that Syria 

is playing relative to Russia’s recent behavior in Ukraine? 

Ambassador DOBRIANSKY. Well, I will start with this, and if I 

may go back to the statement or question posed by Senator Menendez about our different testimonies. Actually I think our testimonies were very complementary in a way because Ambassador 

Bond got into a lot of detail, which I agree with. I wanted to explain to you why Ukraine matters, and why we must give different 

kinds of aid to Ukraine. 

With respect to Syria, Putin’s vision and his long-term goals and 

intentions, I think, have been very clearly stated and had not 

changed. At the Munich Security Conference in 2007 he stated very 

clearly that he rejected the international legal order, and would 

take steps to bring about a change. 

In the case of Syria, I see what is happening as threefold: first, 

to bolster Assad or a successor to Assad because they have a stake 

in Syria’s territory; secondly, to marginalize the United States and 

our role in the region; and thirdly, to divert attention from their 

aggression in Ukraine and to undertake action which would force 

other countries, in particular, Europe, to have to engage with them. 

And it puts the negotiations and the discussions about in Ukraine 

in a very different context as a result of Syria. 

I see all of these issues as interrelated. And what really does 

matter here and what has not changed, despite in these last weeks 

a slow down in fighting or cessation of fighting in Eastern Ukraine, 

is the fact that Putin’s goals and objectives have not changed. 

The CHAIRMAN. What, from your standpoint, of the NATO alliance—I know we had some—we had a leader of one of the Baltic 

countries in here recently, and the over flies and things that are 

taking place obviously are disconcerting. I know that, you know, article 5 is being looked at because of hybrid warfare, what does it 

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30 

mean for another country to be attacked, what is the definition of 

that. How do we come to their aid if it is over cyber, if it is something else? 

I have been increasingly concerned about our friends in Europe 

and their lack of commitment. I mean, let us face it, again Germany—we have numbers of NATO bases and others in Germany, 

and yet they do not come close to meeting their NATO commitments financially. And, by the way, why should they? I mean, they 

are so reinforced. How are the Eastern European countries feeling 

about Western Europeans’ commitment towards that region and towards real pushback relative to Russia? 

Ambassador DOBRIANSKY. I think that there are several factors 

that are on the table relative to NATO. The first is that NATO is 

being challenged by Putin both in terms of in area and also out of 

area. Secondly, I think you asked the question how does the East 

feel about the West. President Duda, the new President of Poland, 

made it very clear in his inaugural speech, that one of the steps 

that he would when the NATO summit will be held in Warsaw in 

2016 is to advance the forward permanent deployment of NATO 

troops. It will be part of the Warsaw NATO summit agenda. 

I am a proponent of that. I think that we have demonstrated previously, to the Russians and to Gorbachev when Gorbachev himself 

talked about Europe whole and free, that the nonforword deployment was part of that overall arrangement. But at this time, we 

are witnessing an aggression, and terms and circumstances have 

changed. So, the East European countries are acting on their stated goals. They want to see permanent, forward deployment of 

NATO troops on Polish territory and in the Baltic States. 

Thirdly, with regard to NATO’s budget, you raised a fair point. 

It is something that has concerned the United States. We would 

like to see greater burden-sharing. A number of the countries, since 

the aggression in Ukraine, have enhanced their budgets, but not 

all. And toward that end, it has to be a shared responsibility. There 

cannot be complacency. There has to be a transatlantic strategy as 

well here, which is lacking. 

The CHAIRMAN. Well, listen, thank you both. Do you have any 

further questions? I know we started late and you witnessed something that is rare in this committee. But one of the reasons we do 

not give some of the Deputy Secretaries and Under Secretaries a 

difficult time, candidly, you know, many of us are disappointed 

about what has, and has not, happened in Ukraine. We feel like 

it has been half-hearted support. 

It is difficult to give an Under Secretary a hard time when you 

are not even sure—you know, the policies are emanating from 

someone else, and I think in some cases it is somewhat difficult for 

them to really testify in a strong manner about what is happening. 

So that is what you may have witnessed with the last witness. 

We thank you for being here today and sharing your insights. I 

know we will be following up. There will be questions. Without objection, the record will remain open until the close of business tomorrow, and if you would answer expeditiously those questions, we 

would appreciate it. 

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31 

Thank you both for your service to our country, for being here 

today. And with that, the meeting is adjourned. 

[Whereupon, at 12:04 p.m., the hearing was adjourned.] 

Æ 

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